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"Energy Efficiency in the South" - An Alternative View

A recent study published by Dr. Marilyn Brown and others touts the effectiveness of energy efficiency in curbing the need for new power generation facilities in the Southern United States. This study is composed by several of the same people who had previously authored similar anti-coal and nuclear reports. This latest iteration builds upon those previously discredited documents and is more accurately described as a policy advocacy piece intended to persuade lawmakers rather than a useful business case for co-ops operating in today’s regulatory and business environment. As is consistent with past rhetoric from the report’s authors, they advocate "climate change" policies that will add significant cost burdens onto the power bills of families and businesses throughout the South.

POWER4Georgians is compelled to continue correcting reports such as this that make incredibly ambitious and unrealistic policy assumptions in order to draw a pre-determined conclusion that is then propagated through public presentations and media outlets. The following are notable points about "Energy Efficiency in the South" that are not readily apparent:

GENERAL
  • While the authors tout a "stakeholder’s committee" made up of electric utility employees, they fail to note that a large number of the original "stakeholder’s committee" withdrew their participation in the report due to the authors’ lack of willingness to incorporate their expertise on the electric utility industry. Rather, the authors continue to rely heavily on academics who, while having extensive classroom training, have little to no professional experience within the industry.
POLICY PERSPECTIVE
  • The authors themselves note, in the conclusion of the executive summary, that "[w]ithout supporting policies, this potential for energy efficiency improvement will not be realized." In other words, their conclusions are irrelevant within the policy and market frameworks in which utilities actually operate.
  • The authors claim that "[i]f utilized effectively, the Region’s substantial energy-efficiency resources could reverse the long-term trend of ever-expanding energy consumption" and point to a 29.5% reduction in CO2 emissions. This claim is ridiculous when compared to readily available market data on the impact of aggressive energy efficiency policies in places like New York and California where the growth of per capita consumption was slowed but total consumption continued to rise. When coupling this fact with the US Census Bureau’s projections for Georgia’s and the Southeastern United States as a whole, it is incredibly unlikely that these policies would reduce total energy consumption.
    • In fact, the authors’ data on their proposed energy efficiency initiatives does not reflect a reduction in CO2 emissions. In order to reach their desired conclusion, they also included a "Carbon Constrained Future" scenario, which they claimed "is considered likely." However, they placed extremely strict parameters upon their scenario – parameters that have proven to be untenable year after year in Congress. Not surprisingly, these unrealistic assumptions result in unrealistic conclusions. Not only is this conclusion unrealistic, it is also misleading. While the title of the study seems to be focused on energy efficiency, the majority of their emissions savings, in fact, come from the results of this politically infeasible "climate change" legislation.
  • POWER4Georgians constantly evaluates and updates future capacity decisions based upon, along with several other factors, changes in governmental policy. These capacity decisions are then made based upon the actual policy framework in which utilities operate – not upon unrealistic and expensive policy wishes of the academic ivory tower.

TECHNICAL PERSPECTIVE


General
  • When the study talks about energy usage, efficiency and savings in the three customer sectors, one does not know if the study is referring to all forms of energy in that class, including electricity, natural gas, fuel oil, propane, or just one specific type of energy.
  • It mixes TBtu (trillion BTU) with Quads (quadrillion BTU) with GW (gigawatts) and one cannot easily follow the mathematical logic, flow and conclusions.
  • It would be nice if the study did a better job of progressing the logic it used to get the results, especially as it relates to the estimated GW of generation savings.
Connect the Dots
  • The study talks about a number of energy efficiency policy initiatives but fails to connect the dots when it comes to quantifying the energy savings associated with the various initiatives and then translating the energy savings into its impact on the need for new power generation.
Modeling Methodology
  • While the study referred to EF-NEMS (National Energy Modeling System) and Global Insights macro-modeling as the tools used to reach their conclusions, not much detail was given on the assumptions used in the modeling or the conversion of the results to potential GW savings. Based on the authors’ unrealistic assumptions used in other parts of the study, it is plausible, if not likely, that their assumptions are incorrect and result in misleading conclusions.
Sources of Energy

When EIA forecasts quads of annual energy consumption for each sector, it covers all forms of energy, including ALL of the following.

  1. Liquefied Petroleum Gases
  2. Motor Gasoline
  3. Distillate Fuel Oil
  4. Residual Fuel Oil
  5. Petrochemical Feedstocks
  6. Other Petroleum
  7. Natural Gas
  8. Natural-Gas-to-Liquids Heat and Power
  9. Lease and Plant Fuel
  10. Metallurgical Coal
  11. Other Industrial Coal
  12. Coal-to-Liquids Heat and Power
  13. Net Coal Coke Imports
  14. Coal Subtotal
  15. Biofuels Heat and Co-products
  16. Renewable Energy
  17. Electricity
  18. Electricity Losses includes conversion efficiencies at the power plant as well as T&D losses delivering the electricity to the customer.
  • When the Dr. Brown study examined nine policies on the three sectors that use up to 17 different types of delivered energy, it is unclear how the study determined which delivered energy source was impacted by which policy that resulted in the 5.6 quads of potential savings.
  • For instance, reducing a quad of natural gas or LPG or fuel oil will not significantly impact the amount of electricity a customer uses, unless fuel substitution enters the picture.
Connect the Dots on Proposed Policy vs. Consumption
  • When the study talks about the effects of aggressively implementing energy efficiency policies, it would have been nice to have seen how each of these actions would have impacted the delivered energy consumption estimates for each customer sector from 2010 to 2030.
Energy Efficiency Policies Studied
Residential (4) Commercial (2) Industrial (3)
  1. Building Codes with Third-Party Verification
  2. Appliance Incentives and Standards
  3. Expanded Weatherization Assistance Program
  4. Residential Retrofit and Equipment Standards Combined Policies
  1. Tighter Commercial Appliance Standards
  2. Commercial Retrofit Incentives Combined Policies
  1. Industrial Plant Utility Upgrades
  2. Industrial Process Improvement Policy
  3. Combined Heat and Power Incentives Combined Policies
  • Depending on the energy characteristics of a sector, a proposed action could affect the energy consumptions of any of the 17 energy sources listed above. It is not readily apparent how this was handled in the study.
Energy See-Saw
  • If the result of a policy involved fuel substitution, then one energy type could increase while the other could decrease.
  • In the residential sector, the study advocates a policy of increasing the saturation of electric water heating while decreasing the saturation of natural gas water heating.
2020 2030
End Use Equipment Class Ref Policy Ref Policy
Cooling Central A/C – SEER 52% 53% 50% 57%
Electric heat pumps 18% 43% 22% 41%
Geothermal heat pumps 0% 2% 0% 2%
Heating Electric heat pumps 27% 44% 33% 49%
Geothermal heat pumps 0% 2% 1% 2%
Water heating Electric water heating 58% 70% 58% 71%
Natural Gas water heating 40% 26% 39% 26%
  • Under this scenario, this would increase the amount of delivered electric energy while decreasing the amount of delivered natural gas.
  • This policy would most probably increase the load of most utilities, which will require new generation capacity to meet this load if it were not offset by a corresponding load reduction.
  • This phenomenon can hold true in the commercial and industrial sectors as well and it is not clear how it was handled in the study.
Level Playing Field
  • The study acknowledges that "energy is required to extract, process, and bring an end user consumable energy" - aka "delivered energy" as expressed in the EIA data.
  • The study uses a numerical electricity additive to compensate for this effect, but the study did not use such additives for any other fuels.
  • It would have been useful to "level the playing field" and consider additives to other major fuels in the study.
Energy Intensive Lifestyle

The Study talks about the relatively high energy use in the South by the end-use sectors. In addition to the factors suggested in the study, there may be a number of other logical reasons for this increase that should also be recognized and considered.

  • The climate in the South is much different than the rest of the country. The South has a much longer and more humid cooling season and shorter heating season than most other regions.
  • Space conditioning tends to drive residential energy usage in the South.
  • According to EIA, in 2005, the South had the highest saturation of homes with central air conditioning systems with 83%, followed by the Midwest with 67%, the West with 37%, and the Northeast with 31%.
  • In 2005, the South had the lowest saturation of homes without A/C at 2%, followed by Midwest with 10%, the Northeast with 19% and the West with 48%
  • According to EIA, in 2005, the South had the highest saturation of homes with electric space heating systems with 54%, followed by the West with 27%, the Midwest with 14%, and the Northeast with 8%.
  • Behind the HVAC system, the second most energy intensive load in a home is the water heater. According to EIA, the South leads the nation in the saturation of electric water heating at 63%, which is more than double that of any other region, followed by the Midwest with 29%, the West with 25% and the Northeast with 20%.
  • Population Growth – One reason for the projected growth in energy usage from 2010 to 2030 is that the South is growing faster than the remainder of the country. Between 2000 and 2030, four southern states (GA, FL, TX, and NC) are projected to be among the top ten states in terms of percentage growth.
Questionable Labor Benefits
  • Comparing manpower required to operate an electric utility (5.3 jobs per $1 million spent) to that of the construction (13.3 jobs) and manufacturing (8.3 jobs) industry is comparing apples, oranges, and grapefruits. The study assumes lowering the growth curve of the electric utility sector (through energy efficiency policy) would increase the growth curve of the construction and manufacturing sectors (making and installing energy efficiency measures) for a relatively short period of time.
  • By focusing on the much smaller picture of the presumed effects of energy efficiency policy on these three sectors, the study misses a much broader, bigger and more beneficial picture.
  • An alternative and stronger argument could be made that a strong and competitive electric utility sector will help grow the construction and manufacturing sectors by helping to attract new industries and businesses that would not have otherwise chosen to locate here. These industries and businesses would have a much longer shelf life and benefit to the local communities than that of making and installing energy efficiency measures.
  • It could be argued that Georgia’s vibrant energy sector helped attract the $1.2 billion Kia Automobile Manufacturing Plant and its 2500 jobs. That facility, in turn, stimulated strong growth in many other sectors locally, regionally and nationally (i.e. construction, manufacturing, distribution, homebuilding, retail, office, etc.)
Planning
  • The Study acknowledges that it did not examine the impact of energy-efficiency on peak demand.
  • Any policy that impacts a system load shape and load duration curve is critical to electric power planners.
  • The types, magnitudes, and seasonality of loads impacted by the EE policies in this study will directly impact the type and size of power generation supplying this load and the related energy costs.
  • The TRC cost-benefit structure of impacting one GW of base load unit will be much different than that of an intermediate or peaking power unit.
  • The study did not examine utility driven and implemented programs that may impact a power generation mix such as demand-response or load-management programs aimed at peak clipping or peak shifting.
Proposed EE Policies will Impact Different Utilities Differently
  • As stated in the study the greatest opportunity for cost effective energy efficiency is located in the industrial (plant utility upgrades and process improvements) and commercial (tighter appliance standards and retrofit incentives) sectors with the residential sector being a distant third.
  • Utilities that have a heavy residential base – such as P4G co-ops – may not see the degree of potential energy savings as a utility that has a large C/I base.
  • The customer base of Georgia’s EMCs is much different than that of the state’s investor-owned and municipal power systems.
  • The EMCs primarily serve the historically rural areas of the state and are heavy residential with a small mix of commercial and very little industrial.
  • Residential customers make up approximately 90 percent of all EMC customers.