Conservation Pros, Asheville and all of Western North Carolina

The Profit Angle: Amory Lovins on how energy efficiency makes economic sense

March 9, 2009 on 2:05 pm | In General News | No Comments Carl Donovan

The problem, says Amory Lovins, the chief scientist at the Rocky Mountain Institute, is a simple one: energy inefficiency. If the U.S. could use existing energy more efficiently, he figures, the country could eliminate the need for about one-third of its existing electricity supply.

Mr. Lovins, who has advised the energy and other industries as well as the federal departments of Energy and Defense, talked to The Wall Street Journal’s Alan Murray. Here are edited excerpts of their discussion.

It Pays to Be Efficient

ALAN MURRAY: [You say efficiency is cheaper than fuel.] So if it’s profitable, why do we have a problem? Why doesn’t the profit incentive solve the problem for us?

AMORY LOVINS: Over time it does, and we are seeing the sheep and goats divide nicely between the companies that understand this is one of the highest-return/lowest-risk investments in the economy and those who don’t.

MR. MURRAY: You’ve been spreading this gospel for 30 years. Do you feel like the climate has dramatically changed today?

MR. LOVINS: Yes. High prices and security worries and climate concerns — all that stuff gets our attention. Price is not the only way of getting attention. Of course we should price carbon, but it’s not sufficient. If you get the prices right, but don’t enable people to respond to price, not much happens.

MR. MURRAY: I did want to ask you the difference between $140-a-barrel oil and $38-a-barrel oil in terms of incentives for energy efficiency.

MR. LOVINS: It doesn’t make any difference to the efficiency that we’re talking about, because it’s cheap. What it does is make stupid supply-side projects go away. That’s good.

And it helps take Putin and Ahmadinejad and Chavez off our payroll. That’s good. It keeps more of our treasure at home. That’s good.

MR. MURRAY: You talk about getting us entirely off of oil by 2040.

MR. LOVINS: 2040s

MR. MURRAY: 2040s. And that’s strictly on the efficiency side?

MR. LOVINS: No, it’s half efficiency. This is all in a study we did for the Pentagon called "Winning the Oil Endgame," which is free at OilEndgame.com. It shows how to redouble the efficiency of using oil, which we’ve already doubled since ’75. We can double it again at an average cost of $12 per saved barrel. The other half of the oil we can then replace for an average $18 a barrel — a little over half with natural gas and the rest of it with advanced biofuels.

MR. MURRAY: So you’re not counting wind, solar.

MR. LOVINS: That has essentially nothing to do with oil. There’s only a 2% connection between them. We could increase that in theory to 30-something percent with electrified vehicles. But that takes decades and it’s not cheap, although it can be very advantageous if you do it right.

We Can, but Will We?

MR. MURRAY: This is something you think we can do. Is it something you think we will do?

MR. LOVINS: I think so. In fact, we found that the transition beyond oil can/should/will be led by business for profit because the spread between the average cost of eliminating oil, $15 [a barrel], and whatever the price is, is profit for the solution providers.

MR. MURRAY: You don’t need a price on carbon. You don’t need…

MR. LOVINS: These things would be very helpful and appropriate, not essential, not sufficient. But I think the heavy lifting will be done by people for their own profit motive. And that’s fine with me. In other words, government should steer, not row. It’s nice if government steers in the right direction. But we found we would not actually need any new energy taxes, subsidies, mandates, federal laws or anything else either party doesn’t like or could mess up, because the business case is so compelling even without them.

MR. MURRAY: I still find it hard to understand why, if this is money laying on the street, there aren’t more people leaning over to pick it up, or haven’t been more people leaning over to pick it up before now.

MR. LOVINS: Well, have you noticed that in 2006, for example, U.S. use of oil and coal and energy went down? Well, it happened because we cut energy intensity faster than the economy grew. That was with 48 states rewarding utilities for selling you more energy and penalizing them for cutting your bill. That’s just as dumb as it sounds. We need to stop doing that.

MR. MURRAY: So that would be one of the top things on your agenda — decoupling.

MR. LOVINS: Decoupling and shared savings. It is the biggest lever for saving electricity and gas.

MR. MURRAY: Can you name three or four other things that, in your mind, are as significant as that in advancing the cause of energy efficiency and getting us to your 2040s goal?

MR. LOVINS: A very important one would be to pay our architects and engineers for what they save, not what they spend. This is called performance-based design fees.

MR. MURRAY: But there is a short-term, long-term issue here.

MR. LOVINS: No. There is no correlation whatever between the efficiency of buildings and their price. The paybacks we see on new buildings are essentially all negative. That is, if we’re doing a new class A office, we’ll save 80% or 90% of the energy and it’ll work better and look better and you’ll feel better, healthier and more productive, but it’ll cost 3% to 5% less to build.

MR. MURRAY: So you see there are no trade-offs here?

  MR. LOVINS: No. 

 

Packing Heat: The Firepower of the Lowly Caulk Gun

March 6, 2009 on 5:06 pm | In General News | No Comments Carl Donovan

From Jeffrey Ball @ The Wall Street Journal

 

Syracuse, N.Y.– Like a lot of Americans, moving-company owner Art Delaney has been trying to curb his energy use to help the planet and pinch pennies. First he got serious about recycling. Then he traded in his SUV for a Toyota Prius. Now he’s trying to tame an energy hog so obvious it was somehow easy to overlook: his leaky house.

The 30-year-old Delaney home here in frigid upstate New York is heated by fuel oil. It burns through some 1,000 gallons in a typical year. Mr. Delaney and his wife didn’t think much about that burn rate until last year when they built a new vacation house in the Adirondacks that’s much more energy-efficient. Suddenly, their old house seemed like a sieve.

So, this winter, the Delaneys hired a specialist to ferret out fossil-fuel waste. After more than two hours of climbing through the house on a recent morning, the house doctor found cracks everywhere: around the fireplace, beside bookshelves, under windows.

"We might as well be sleeping in a tent," Mr. Delaney said.

Marketers, politicians and consumers like to imagine a world of solar panels, wind turbines and cars fueled by wood chips. But none of that gadgetry packs the here-and-now punch of a decades-old option: plugging leaky homes with a caulk gun.

In the drive to curb the growth in fossil-fuel use and greenhouse-gas emissions, "it’s the leaky holes that matter," says Hal Harvey, chief executive of the ClimateWorks Foundation, a San Francisco-based nonprofit. Backed by more than $1 billion in pledges, the foundation supports renewable energy but is working to persuade governments first to implement tougher energy-efficiency standards. The goal, Mr. Harvey says, is "systematic ways of plugging those leaks."

By 2030, improving the energy efficiency of buildings could limit greenhouse-gas emissions more than ramping up either wind or solar power, according to a new study by consultant McKinsey & Co. and funded in part by the ClimateWorks Foundation. And that energy-efficiency push would save more money than it costs, the McKinsey study says, while the renewable-energy alternatives would cost more than they save.

Homes are embarrassingly inefficient. They consume 21% of all energy used in the U.S., according to federal figures. That’s more than cars, or planes, or offices. Yet studies say U.S. homes commonly waste 30% of the energy they use. About one-third of that energy loss could be stopped by such simple moves as caulking and insulating.

Building new houses that are more energy-efficient would make sense. But the bigger problem is the houses that exist today. Some 115 million homes exist in the U.S., and less than one million more are built every year. The federal government says that existing homes consume about 90% of the amount of energy that will be used by the country’s housing stock in 2030.

If energy efficiency makes such sense in theory, why doesn’t it happen more in practice? Although energy-efficiency upgrades typically pay for themselves in reduced fuel costs over time, they still require a high up-front investment — one many homeowners, who might soon sell their houses, are loath to make.

One answer is for the government to pony up incentives to bridge that gap. In much of the country, incentives for renewable energy exceed those for energy efficiency, reflecting an infatuation with the high-tech over the ho-hum.

President Barack Obama’s stimulus package would inject billions of dollars to patch leaks in homes of low-income Americans. How much it would do depends on how intelligently the home repairs are made.

The state of New York has some of the juiciest incentives for energy efficiency in the nation because cold winters here make using energy wisely a no-brainer. In New York, consumers can get rebates as high as $5,000 for adding insulation and caulk — repairs that can cost many thousands of dollars more.

Money, though, isn’t the only hurdle. The U.S. may not have enough people trained to roll out cost-effective efficiency upgrades as quickly as the Obama administration is proposing. Besides being dirty and sweaty, the process is often devilishly delicate.

One recent afternoon in Syracuse, workers in white protective suits were sealing up the leaks in Barbara Martinez’s house. Built early in the last century, the 1,600-square-foot house lacks insulation, which explains why Ms. Martinez’s combined natural-gas and electric bills for a single month this winter totaled $536 — more than her monthly mortgage payment.

Adding insulation now would require first ripping out the old wiring and replacing it with fire-resistant wiring. That could cost several thousand dollars — money Ms. Martinez, a translator for the Syracuse school system, said she can’t spare.

So the workers were doing what they could: plugging up holes in the attic and basement with foam and caulk. Zero Draft of Central New York Inc., the firm doing the work, estimates it could shave $100 off Ms. Martinez’s monthly gas and electric bill. Because Ms. Martinez’s income is low enough, incentive money from a local utility company will fully fund the job, which cost about $1,600. Grants for new wiring are available in New York, but Ms. Martinez didn’t get one.

Mr. Delaney, 50, earns too much to qualify for that large a state subsidy. But he needs no convincing about the wisdom of investing in energy efficiency himself. His company’s moving vans average about seven miles per gallon. That explains why he recently traded in his own Toyota 4Runner.

"I burn enough fuel in my trucks," he said. "I don’t need to burn it at home."

That’s also why, this winter, after his Adirondacks house was finished, Mr. Delaney signed up his main house for a "home energy audit." In the attic, the technician from Syracuse-based house-doctor company GreenHomes America snapped photos of daylight around pipes. In the living area, he pointed a $7,000 infrared gun at the walls and ceilings to ferret out hot and cold spots invisible to the naked eye.

Then he fitted a giant suction fan inside the frame of the house’s front door. After turning on the fan, which sucks air out of the house to make leaks easier to spot, he walked around the house with a hand-held stick that spews smoke. When he held the stick up to a bathroom light, the smoke was blown downward by air pouring in from leaky seals.

By the end of the morning, Mr. Delaney had grabbed the infrared gun himself and was firing its red beam with abandon, his arms outstretched and locked, shooting-range-style.

Appalled by evidence of the house’s leaky frame, Mr. Delaney inquired about tapping renewable energy — installing a geothermal system to pull natural heat from deep below the ground. Michael Rogers, GreenHomes America’s senior vice president, advised against it. "We would still recommend efficiency first," he told his customer.

So Mr. Delaney ordered up about $8,000 of improvements — mostly insulation and caulk. The high-tech toys will have to wait. Now, "if you put in the renewables," he said, "you’re still dealing with an inefficient home." 

Can You Afford NOT to Save Energy?

March 5, 2009 on 6:39 pm | In General News | No Comments Carl Donovan

"To put it another way, each of us has a small oil, gas, or electric ‘well’ right in our house, one that can be tapped fairly cheaply. In fact, such investments offer some of the highest rates of return available in the entire economy. "

These two sentences—from this issue’s Plowboy Interview with Amory and Hunter Lovins—make a whole lot of financial sense. No standard investment, whether it be money market certificate, bond, stock, or collectible, is likely to pay you as much for a small outlay as a good home energy improvement. The money you save this way is also the equivalent of tax-free income. Why, it’s often even better than that: In many cases, you can claim federal—and possibly state—tax credits for the work. The Internal Revenue Service currently allows you to deduct 15% of the cost of conservation measures (and 40% of active solar systems) straight from the bill you pay Uncle Sam.

In other words, can you afford not to save energy?

In order to put some meat on these fine sounding statements, we offer you a simple formula for calculating the payback of an energy conservation investment. There are, of course, more sophisticated—and meaningful—ways to make financial judgments, but the following approach will give you a general idea of whether a particular conservation step is economical.

In the following savings and payback formula, we’ve used some symbols to keep the equations from appearing too cluttered. Here’s what they mean:

RO: Old R-value, the existing R-value of the area to be improved

RN: New R-value, the new R-value of the area after it’s improved

DD: Degree-Days, the heating degree-days at your location (check a solar energy book or call your local weather service to find this out)

SE: Saved Energy, in units of 1,000 Btu per square foot per year (kBtu/ft. 2 /yr.)

A: Area, total area of the retrofit in square feet

CE: Cost of Energy, your energy cost per 1,000 Btu in dollars (see the energy cost chart below)

SY: Savings per Year, the amount of money the improvement will save you each year in energy costs

CI: Cost of Improvement, total amount spent on the improvement

P: Payback, the payback period in years

Ready? First you calculate SE, the annual energy savings per square foot of the retrofit improvement:

SE = (1/RO-1/RN) X DD X 24/1,000

Multiply that product by the area of the improvement and by the cost of energy to get the total annual savings, like this:

SY = SE X A X CE

Now, it’s a cinch to work out the payback:

P = CI/SY

Let’s look at a few examples. For starters, let’s determine the payback for upgrading 1,000 square feet of wall from no insulation (R-3) to R-11. Our sample house is located in Asheville, North Carolina—which has 4,200 heating degree-days—and at present the owner pays $1.25 per gallon for fuel oil to heat the building. The per-square-foot cost of the blow-in insulation is about 20¢, including the fee for renting the blower, and the owner supplies the labor. (This job might sound intimidating, but it’s really not difficult.)

Annual Energy Savings

SE =(1/3-1/11) X 4,200 X 24/1,000

=24.44 kBtu/ft. 2 /yr.

Annual Money Savings

SY = 24.44 X 1,000 X .015 = $366.60

Payback

P = $200/$366.60 = 0.55 yr.

In other words, that $200 investment will pay for itself in just over half a year. From then on, it will earn you $366.60 extra income annually! Beat that, stock market!

Now, let’s see what would happen if that Asheville house already had blown-in insulation and you were thinking about upgrading that R-11 to R-19 by removing the siding, adding rigid board insulation, and replacing the siding. The cost of this owner-installed retrofit would be about 35¢ per square foot or materials.

Annual Energy Savings

SE = (1/11-1/19) X 4,200 X 24/1,000

Annual Money Savings

SY = 3.86 X 1,000 X .015. = $57.90

Payback

P = $350/$57.90 = 6.0 yr.

This time it’s going to take six years to earn that $350 back. From then on, you’ll be saving an extra $57.90 per year. While not as all-out glorious as the first investment, that’s still nothing to sneeze at. (What else pays 16.5% interest in the first year?)

Lest you assume that every investment in energy efficiency is a great one, let’s look at one more possibility. Using the last example as a basis, let’s calculate the payback if the owner decides to pay someone else to install that rigid board insulation. Removing siding and then furring out the walls is fairly laborious. It might add another 55¢ per square foot to the price of the job, bringing the cost up to 90¢ /ft. 2 … or a total of $900.

Well, the annual energy and money savings will be the same as they were above, but look what that total cost of the improvement does to the payback:

P = $900/$57.90 = 15.5 yr.

Whoops! Now, it’s going to be 15-1/2years before you earn your money back. Not so good, eh? (Well, it could be worse. Your investment will be earning interest at a 5.7% rate that first year … and increasing the resale value of your house.)

The difference, of course, between the first two shining examples and the last, more mundane one is labor. To make the typical energy-efficiency improvement really pay off, you have to do it yourself.

But that’s what this magazine’s all about, isn’t it?