Would you spend $520 to save $1,200? That’s the choice McKinsey & Co is offering to the U.S. about energy efficiency. In their new report on energy efficiency, released last week, McKinsey shows how the U.S. can reduce its non-transportation energy use by 23%, eliminate the emissions of 1.1 billion tons of greenhouse gases annually, and save $1,200 billion, for a cost of about $520 billion.
They do recognize that achieving these results requires some new thinking on our parts:
Such energy savings will be possible, however, only if the United States can overcome significant sets of barriers. These barriers are widespread and persistent, and will require an integrated set of solutions to overcome them – including information and education, incentives and financing, codes and standards, and deployment resources well beyond current levels.
The report not only provides the conclusions, but also the steps we can take to address barriers and achieve the desired results. They suggest an overarching strategy, including the key point that “energy efficiency is an important energy resource to help meet future energy needs…” and the need for an integrated portfolio of different approaches to unlock the full potential of energy efficiency.
According this this analysis, from New Energy World Network, within 15 years the cost of concentrating solar power will be less than the cost of “clean” coal, at least in Australia. The analysis is based on the rates of change in cost between the two energy sources. With the cost of coal increasing, relatively, and CSP decreasing, the cost lines eventually cross, leaving CSP cheaper.
In addition, the article mentions offhandedly that connecting the Queensland and South Australian electricity grids would “likely pay for itself quickly just in increased efficiencies brought to the existing grid.”
The average Australian household could pay up to 30 per cent more per year by 2025 for electricity generated from coal and nuclear power than from concentrating solar and hot dry rock geothermal power, according to clean energy organisation DESERTEC-Australia.
This idea illustrates the kind of synergies that we need to find throughout the energy economy.
I’m a big fan of the New Yorker, and read most issues cover to cover. Their politics usually align with mine, and I always enjoyed Hendrik Hertzberg sticking it to the Cheney administration. But I have to take issue with some of their economic opinions. In particular, David Owen’s Talk of Town, Economy Vs. Environment, in the March 20 issue got me hot and bothered.
Owen’s basic position seems to be that to be sustainable we can’t spend, and if we spend we’re not sustainable. Therefore, the stimulus package and a long term goal for sustainability are incompatible. (With the subtext, apparently, that stimulus is more important.)
I have several issues with Owen’s position. For example, Owens doesn’t say much about spending on sustainability – there $15 billion of that. Much of that, because it’s focused on energy efficiency, will result in improved productivity. It turns out you can get a lot of productivity from sustainability improvements. It’s one of the magic tricks – called the “triple bottom line” – you spend less or the same up front, you save more, and you’re healthier and more productive. In this case sustainability is actually directly improving the economy. Continue reading “Disagreeing With The New Yorker On Stimulus Vs. Sustainability”
One of the biggest problems for residential solar electricity generation is that it just costs too darn much to install those panels on your roof. Over the next five and ten years this will change significantly as new developments from the labs make it into large-scale production. Eventually houses will be generating all their own electricity using photovoltaics as a matter of course.
But is there a way to think about the cost today that makes the cost even seem reasonable?
Well, if you’re thinking about buying a new car, you should read on. Each year you don’t buy a new car and continue to drive the one that you’ve already paid for, you pays for another year of your solar panels. At the end of the loan period (seven years in my example below), you’re getting free electricity from a system that increases the value of your home and has another 20 years of life at the minimum. If you’d bought a car, in seven years you’d be driving a rapidly depreciating vehicle that you’d probably have to replace soon.
For my house, after rebates, putting up solar panels today would cost about $22,000. This would be a 4kw system, offsetting about 92% of my electric bill, according to the solar power calculator at Clean Power Estimator. With a $3,000 down payment, and using SunPower’s “Smart Financing” with a seven year term, my monthly net cost would be about $250, after subtracting out my electric bill.
So, $22,000 total cost, $3,000 down payment, $250 monthly – that sounds just about exactly like buying a new car, doesn’t it? In fact, if I go to carsdirect.com and price out a new Honda Accord EX, that comes out to $22,372. My current car, a 2000 Honda Accord, is worth $4,000. So I need to finance $18,000. With a four year loan, I’ll be paying about $420 per month.
Netting it out, for each year that I make the decision to buy solar panels versus a new car, I actually save about $170 per month. At the same time, according to the solar power calculator, I eliminate almost four tons of CO2 (worth an additional $320 at the currently accepted value of $80/ton). After seven years, all that electricity will be free to me, for at least the rated life of the panels. And I’ll get most or all of the cost of the panels back when I sell my house. When I sell the new Honda, I’ll get a lot less than I paid for it.
As an additional note, if you’re thinking about buying a new BMW, such as an M3. If you chose a BMW 335i with Sport Package instead, you could put up the solar panels with the difference in cost: 1 BMW M3 = 1 BMW 330i + Sport Package + solar panels. You’d get nearly the same performance – much more than you can effectively use anywhere in the U.S. except on a race track – and you’d offset all the CO2 you’d be generating with your new car.
Definitely let me know if I’ve convinced you to put up solar panels instead of buying a car this year! Or if you have any other comments on this topic – I’d love to hear from you.
Moore’s Law depended (and still depends) on a constant flow of breakthrough technologies, processes, scale, and designs. You can’t necessarily predict how Moore’s Law will continue to hold two years from now, or five years from now, but you can be confident that through some combination of technologies, processes, and designs, the price/performance of IT will continue to decline at an exponential rate.
The top five green energy stories of 2008 give an indication that the same types of forces are at play in the green energy world. Numbers 1, 2, and 3 each represent a potential 10x reduction in the cost of the most expensive part of a particular energy flow. For number 4, Gore used the bully pulpit of a Nobel Prize and Oscar (and, oh yeah, he was nearly president) in a most constructive way. And number 5 illustrates that green energy technologies are on a growth rate of doubling about every 18 months.
Did these stories excite you as much as they did me? Were there other green energy stories in August that you feel are more important?
The short answer is: while 100% is probably unrealistic, it’s not unreasonable to expect to be able to get pretty close to that number (say, in the 50-90% range) in that timeframe, and it is very likely that it makes a LOT of sense economically.
As you’ll notice Jerome has made somewhat different assumptions from mine, particular in regard to the total electricity demand. As I mentioned, I plan to drill down more into my analysis and take it from the “zero-order” to “first-order”. I’ll also revisit my assumptions to make sure we’re comparing apples to apples.
In his galvanizing speech a few weeks ago Academy Award and Nobel Prize-winner Al Gore exhorted the United States to “produce all electricity from “carbon-free sources” by 2018.” This is a pretty abstract goal, in those terms – Gore (appropriately) didn’t go into great detail about how this should be done or even what it means in specific practical steps. Depending on your point of view and background knowledge about energy, the goal may seem easy or incredibly difficult, or even impossible, especially without further analysis.
So I thought it would be interesting to run some numbers on the goal. The idea is not to define how it should be done, but to look at some very simple scenarios for how it could be done to get a sense of the scale involved. The calculation is based on the Topaz Solar Farm project, which California’s PG&E utility just contracted for – a 550 megawatt solar generating station.
My initial calculations makes some gigantic simplifying assumptions, so it’s not “correct” – but it should be the right order of magnitude. For details of the calculation, see the analysis below. The conclusion is as follows:
As a very rough estimate, we would need about 800 Topaz-sized plants, total cost about $1 trillion, to meet the U.S. electricity demand. And it would require about 8,000 square miles of sunny land.
1 gigawatt: Generating capacity for a “large” coal-fired generating plant
50 GW: California’s typical peak energy demand
24%: portion of PG&E’s currently contracted generating capacity that is renewable
For the purposes of this analysis, I’m making a few simplifying assumptions. These make the analysis “invalid” from a technical sense, but allow us to quickly see the big picture:
Electricity demand will stay constant: This may or may not happen – in California energy intensity (the energy used per person) is going down, and this summer absolute energy use went down. Amory Lovins of the Rocky Mountain Institute believes we can cut energy intensity by 50% via efficiency, which would definitely cut energy use. On the other hand, most scenarios dealing with energy use assume it will continue to grow.
Disregard base load issues: The sun don’t shine at night, but people still use electricity then. This is called “base load.” You often hear that “solar can’t provide base load,” which may or may not be true in the future, depending on storage technologies that might be developed. In any case, I’m not considering it in this analysis – I’m assuming “a megawatt is a megawatt.”
Disregard transmission issues: We’ll assume that if the energy is generated somewhere in the U.S., it can be used anywhere else it’s needed.
Disregard technology improvements – this calculation is based on the technology planned for the Topaz Solar Farm
We now have enough data to make the most simplistic conceivable analysis. How many Topaz Solar Farm equivalents (TSFs) would we need to supply total U.S. energy demand (given the assumptions above)?
Conclusion: In our simplified energy world, we’d need about 800 Topaz-sized plants, total cost about $1 trillion, to meet the U.S. electricity demand. And it would require about 8,000 square miles of sunny land.
Now, there are many ways that this analysis is “wrong” – since my assumptions simplify the world quite a bit. So it could easy be off by a factor of 50% or more. But, because the assumptions also tend to cancel each other out, it’s not off by a factor of five, say. For example, I’m not considering base load (which solar PV today can’t provide effectively), but on the other hand, solar PV is the most expensive energy source. We will probably need more than 800 plants, but a lot of them will be cheaper, per megawatt, than the Topaz Solar Farm.
In future posts I will expand this model to make it less simplistic and more realistic, and to take into account technology improvements, base load requirements, the ability of energy efficiency to change the demand line, and lots of other details that are just dropped on the floor for this analysis.
I’m very interested to hear your comments on this analysis. In particular, I hope for some constructive guidance on the next steps for making it more realistic. I want a simple model that’s easy for the layperson to understand, but which doesn’t over-simplify too much (as this model does). I’d consider this a “zero-order” approximation – the next one should be a “first-order” approximation.
The New York Times’ Dot Earth blog posted the text of Gore’s speech and allowed commenters to annotate it – interesting reading if you have a few hours to get through all the comments!