Energy efficiency: What’s lean? What’s mean?
I’ve been thinking a lot about energy efficiency in buildings lately (in the BC context, anyway). About 11% of BC’s greenhouse gas emissions are attributed to residential and commercial buildings, so obviously efficiency has to come under the microscope as part of any GHG mitigation plan. Part of my reticence to look at this topic before is that there are few good primers. It is easy to say “energy efficiency” but if you are interested, you quickly get buried under metrics like gigajoules (GJ), kilowatt hours (kWh) and therms, and it is not always easy make comparisons from what you see online to what appears on your electricity or natural gas bill. I also take a hard GHG lens that seems to be slightly different discussion than energy efficiency per se.
Overall, British Columbians already emit one-third less than the per capita emissions for the country as a whole, largely on the back of abundant hydroelectricity. Alberta and Saskatchewan have much higher GHGs per capita because their electricity is largely created by burning coal, and this is true of much of the US, too. Ontario has coal in its mix as well but also some hydro and a lot of nuclear. The common denominator in all of these is that we need to spin a turbine somehow in order to generate electricity, either by getting water to run through it or by using coal or nuclear to boil water to get steam that drives it.
The source of one’s electricity makes a big difference in the interpretation of what energy efficiency means, in particular as it relates to natural gas. So there is a meme out there that switching to natural gas is more energy efficient, but it all depends. For predominantly coal-burning jurisdictions, the efficiency problem is that there is a large heat loss upon burning coal (and big time CO2 emissions) and smaller additional losses in the transmission to the end user, and finally, some efficiency loss in the appliance itself (heat loss from a hot water heater, for example). In these cases, switching to natural gas (either in your home, e.g. for a stove or hot water heater, or at a generating plant) is both more efficient and less CO2 intensive for producing the same amount of electricity.
In places like BC, with hydroelectricity as 90% of the total generation capacity, we do not want more people switching to natural gas as this will increase CO2 emissions. On some measure of efficiency, it might be more efficient to have a natural gas-burning furnace (for example) because it averts the transmission losses. Transmission losses aside, electrical appliances can actually be more efficient than natural gas-based ones (and in the case of heating, space heating the rooms you are using is more efficient than forced air furnaces). So I would prioritize the CO2 emission aspect, though in BC we should also count the 10% of electricity that comes from burning natural gas and other fossil fuels.
In BC, another issue is that less than half of homes are heated electrically; the remainder are gas customers. So not only do we not want more mode shifts to natural gas, we should be pushing for greater electrification of existing homes. But only if that can be met through green generation sources; ideally, from the existing hydro capacity. In effect, we want more energy efficient homes all around to free up hydroelectricity for conversions away from natural gas. (As an aside, it seems foolish to me for us to use natural gas for heating homes, because natural gas (aka methane) burns into carbon dioxide (bad) and hydrogen (good), and so down the road if we could burn it for one hit of energy, then capture the CO2, we could have hydrogen as a secondary fuel to be used for other applications. I’m not sure if the economics make sense here but the chemistry certainly does.)
Since there are costs associated with developing any new generation capacity (green or not), the case for a more efficient use of the existing hydro capacity is strong. In a report by John Calvert for the CCPA, he puts the cost of generating hydro power in BC at less than $6 per megawatt hour (MWh). This is cheap and green, and reflects investments made by the province in the 1950s and 1960s (that were at the time destructive environmentally). It also demonstrates the case for having a public utility since the cost of purchasing from independent power producers was eleven times that much, and BC Hydro (foolishly) was tendering for private power in 2006 at $88 per MWh. Interestingly, thermal plants using natural gas are even more expensive, at a cost of $141 per MWh (plus the associated GHGs). (These are just costs to BC Hydro for generation and do not include transmission and adminstrative costs.)
That is the backstory in terms of big picture electricity generation. In terms of improving home energy efficiency, there is a huge information gap because for a large share of homes, there are potential efficiency investments that would save households money, in many cases with a payback period of 4-6 years. People are simply not (in the words of McCloskey) “picking up a $500 bill lying on the ground”, largely because they are not looking. This is an important lesson for arguments that higher costs of electricity or carbon pricing will lead people to act in an economically rational manner!
To date, efforts on energy efficiency, federally and in BC have focused on providing information, and then subsidizing those who get the proverbial light-bulb turned on over their heads (compact flourescent, of course). We subsidize the provision of home energy audits, and then with the paperwork in place we subsidize aspects of retrofitting. Because BC’s hydro is not only green but so cheap, any incentives for investments in energy efficiency are reduced. While this is a good start, the uptake has been weak for these type of programs in general, like 2% of homes per year (the “best” programs get as much as 4%, which is still pretty small). Programs are also focused on retrofits rather than the periodic upgrades made by many families. This leads to concerns about free rider effects. That is, the subsidies go to people who were going to do the upgrade anyway, and so we have not really changed behaviour much but have expended public funds inefficiently.
One important implication of this is that, if public funds are limited, it is better to aim subsidies at low income households who are not going to be free riders because they cannot afford the upfront cost of making the efficiency investment, or because they are renters and do not have that responsibility. Subsidies will be likely be required further up the distribution, too. The reality is that the median family is not really saving much if anything, according to Roger Sauve’s most recent report so subsidies are probably not hurt by free rider impacts for at least half of households.
For everyone else, a much better solution would be to regulate minimum standards in the marketplace, so that when you need to purchase a new hot water heater it will be much more efficient than the old one, perhaps with subsidies to incentivize even more efficient options that may be more costly. So starting with EnergyStar standards (and they are rising over time) as a minimum for the marketplace would make more sense. This is based on the principle of capital stock replacement; that big changes can happen over the course of a couple decades as households and businesses replace and upgrade their equipment.
At the level of homes rather than appliances, ensuring higher standards for new buildings is part of the plan, and BC has implemented a greener building code. The shame is that the recent boom of construction did not have to adhere to that code. Capital stock replacement is obviously much slower for buildings, so some mandatory retrofitting should be required. I would start with older homes and work back, requiring an audit and whatever upgrades flow from that. There is a big improvement in buildings energy efficiency post-1980.
One way of making this affordable is to finance it through the hydro bill, which is what Manitoba Hydro is doing with some success: a loan for upgrades is paid back on the hydro bill, but energy savings are greater than the amortized loan, so the cost of the monthly bill actually goes down. A classic win-win situation.
This could also help to guard against another concern, rebound effects, whereby consumers use more electricity because they saved elsewhere. I’m not sure what the actual evidence is on this but it this seems to make more sense to me in the context of buying a Prius then driving more because you care less about emissions. In any event, given the scope of the problem, we should err on the side of doing too much even if there are free rider and rebound effects.
Ultimately, these issues have to do with how much public money we are willing to put at this and how quickly, which comes back to getting a meaningful green stimulus plan in place. And efficiency is about more than retrofitting existing stock. Greater density, for example, is inherently more green in a number of dimensions besides electricity.