Why we never need to build another polluting power plant

By Joseph Romm

July 28, 2008 | Suppose I paid you for every pound of pollution you generated and punished you for every pound you reduced. You would probably spend most of your time trying to figure out how to generate more pollution. And suppose that if you generated enough pollution, I had to pay you to build a new plant, no matter what the cost, and no matter how much cheaper it might be to not pollute in the first place.

Well, that's pretty much how we have run the U.S. electric grid for nearly a century. The more electricity a utility sells, the more money it makes. If it's able to boost electricity demand enough, the utility is allowed to build a new power plant with a guaranteed profit. The only way a typical utility can lose money is if demand drops. So the last thing most utilities want to do is seriously push strategies that save energy, strategies that do not pollute in the first place.

America is the Saudi Arabia of energy waste. A 2007 report from the international consulting firm McKinsey and Co. found that improving energy efficiency in buildings, appliances and factories could offset almost all of the projected demand for electricity in 2030 and largely negate the need for new coal-fired power plants. McKinsey estimates that one-third of the U.S. greenhouse gas reductions by 2030 could come from electricity efficiency and be achieved at negative marginal costs. In short, the cost of the efficient equipment would quickly pay for itself in energy savings.

While a few states have energy-efficiency strategies, none matches what California has done. In the past three decades, electricity consumption per capita grew 60 percent in the rest of the nation, while it stayed flat in high-tech, fast-growing California. If all Americans had the same per capita electricity demand as Californians currently do, we would cut electricity consumption 40 percent. If the entire nation had California's much cleaner electric grid, we would cut total U.S. global-warming pollution by more than a quarter without raising American electric bills. And if all of America adopted the same energy-efficiency policies that California is now putting in place, the country would never have to build another polluting power plant.

How did California do it? In part, a smart California Energy Commission has promoted strong building standards and the aggressive deployment of energy-efficient technologies and strategies -- and has done so with support of both Democratic and Republican leadership over three decades.

Many of the strategies are obvious: better insulation, energy-efficient lighting, heating and cooling. But some of the strategies were unexpected. The state found that the average residential air duct leaked 20 to 30 percent of the heated and cooled air it carried. It then required leakage rates below 6 percent, and every seventh new house is inspected. The state found that in outdoor lighting for parking lots and streets, about 15 percent of the light was directed up, illuminating nothing but the sky. The state required new outdoor lighting to cut that to below 6 percent. Flat roofs on commercial buildings must be white, which reflects the sunlight and keeps the buildings cooler, reducing air-conditioning energy demands. The state subsidized high-efficiency LED traffic lights for cities that lacked the money, ultimately converting the entire state.

Significantly, California adopted regulations so that utility company profits are not tied to how much electricity they sell. This is called "decoupling." It also allowed utilities to take a share of any energy savings they help consumers and businesses achieve. The bottom line is that California utilities can make money when their customers save money. That puts energy-efficiency investments on the same competitive playing field as generation from new power plants.

The cost of efficiency programs has averaged 2 to 3 cents per avoided kilowatt hour, which is about one-fifth the cost of electricity generated from new nuclear, coal and natural gas-fired plants. And, of course, energy efficiency does not require new power lines and does not generate greenhouse-gas emissions or long-lived radioactive waste. While California is far more efficient than the rest of the country, the state still thinks that with an even more aggressive effort, it can achieve as much additional electricity savings by 2020 as it has in the past three decades.

Serious energy efficiency is not a one-shot resource, where you pick the low-hanging fruit and you're done. In fact, the fruit grows back. The efficiency resource never gets exhausted because technology keeps improving and knowledge spreads to more people.

The best corporate example is Dow Chemical's Louisiana division, consisting of more than 20 plants. In 1982, the division's energy manager, Ken Nelson, began a yearly contest to identify and fund energy-saving projects. Some of the projects were simple, like more efficient compressors and motors, or better insulation for steam lines. Some involved more sophisticated thermodynamic "pinch" analysis, which allows engineers to figure out where to place heat exchangers to capture heat emitted in one part of a chemical process and transfer it to a different part of the process where heat is needed. His success was nothing short of astonishing.

The first year of the contest had 27 winners requiring a total capital investment of $1.7 million with an average annual return on investment of 173 percent. Many at Dow felt that there couldn't be others with such high returns. The skeptics were wrong. The 1983 contest had 32 winners requiring a total capital investment of $2.2 million and a 340 percent return -- a savings of $7.5 million in the first year and every year after that. Even as fuel prices declined in the mid-1980s, the savings kept growing. The average return to the 1989 contest was the highest ever, an astounding 470 percent in 1989 -- a payback of 11 weeks that saved the company $37 million a year.

You might think that after 10 years, and nearly 700 projects, the 2,000 Dow employees would be tapped out of ideas. Yet the contest in 1991, 1992 and 1993 each had in excess of 120 winners with an average return on investment of 300 percent. Total savings to Dow from just those projects exceeded $75 million a year.

When I worked at the Department of Energy in the mid-1990s, we hired Nelson, who had recently retired from Dow, to run a "return on investment" contest to reduce DOE's pollution. As they were at Dow, many DOE employees were skeptical such opportunities existed. Yet the first two contest rounds identified and funded 18 projects that cost $4.6 million and provided the department $10 million in savings every year, while avoiding more than 100 tons of low-level radioactive pollution and other kinds of waste. The DOE's regional operating officers ended up funding 260 projects costing $20 million that have been estimated to achieve annual savings of $90 million a year.

Economic models greatly overestimate the cost of carbon mitigation because economists simply don't believe that the economy has lots of high-return energy-efficiency opportunities. In their theory, the economy is always operating near efficiency. Reality is very different than economic models.

In my five years at DOE, working with companies to develop and deploy efficient and renewable technologies, and then in nearly a decade of consulting with companies in the private sector, I never saw a building or factory that couldn't cut electricity consumption or greenhouse-gas emissions 25 percent to 50 percent with rapid payback (under four years). My 1999 book, "Cool Companies," detailed some 100 case studies of companies that have done just that and made a great deal of money.

There are many reasons that most companies don't match what the best companies do. Until recently, saving energy has been a low priority for most of them. Most utilities, as noted, have little or no incentive to help companies save energy. Funding for government programs to help companies adopt energy-saving strategies has been cut under the Bush administration.

Government has a very important role in enabling energy savings. The office of Energy Efficiency and Renewable Energy at the U.S. Department of Energy has lots of (underfunded) programs that deliver savings every day. Consider, for instance, Chrysler's St. Louis complex, which recently received a DOE Save Energy Now energy assessment. Using DOE software, Chrysler identified a variety of energy-saving measures and saved the company $627,000 a year in energy costs -- for an upfront implementation cost of only $125,000.

The key point for policymakers now is that we have more than two decades of experience with successful state and federal energy-efficiency programs. We know what works. As California energy commissioner Art Rosenfeld -- a former DOE colleague and the godfather of energy efficiency -- put it in a recent conversation, "A lot of technology and strategies that are tried and true in California are waiting to be adopted by the rest of country."

So how do we overcome barriers and tap our nearly limitless efficiency resource? Obviously, the first thing would be to get all the states to embrace smarter utility regulations, which is a core strategy of Barack Obama's plan to reduce greenhouse gases. But how does the federal government get all the states to embrace efficiency?

We should establish a federal matching program to co-fund state-based efficiency programs, with a special incentive to encourage states without an efficiency program to start one. This was a key recommendation of the End-Use Efficiency Working Group to the Energy Future Coalition, a bipartisan effort to develop consensus policies, in which I participated. The first year should offer $1 billion in federal matching funds, then $2 billion, $3 billion, $4 billion, and finally stabilizing at $5 billion. This will give every state time to change their regulations and establish a learning curve for energy efficiency.

This program would cost $15 billion in the first five years, but save several times that amount in lower energy bills and reduced pollution. Since the next president will put in place a cap-and-trade system for greenhouse gases, the revenues from auctioning the emissions permits can ultimately be used to pay for the program.

We should restore a federal focus on the energy-intensive industries, such as pulp and paper, steel, aluminum, petroleum refining and chemicals. They account for 80 percent of energy consumed by U.S. manufacturers and 90 percent of the hazardous waste. They represent the best chance for increasing efficiency while cutting pollution. Many are major emitters of greenhouse gases other than carbon dioxide. A 1993 analysis for the DOE found that a 10 to 20 percent reduction in waste by American industry would generate a cumulative increase of $2 trillion in the gross domestic product from 1996 to 2010. By 2010, the improvements would be generating 2 million new jobs.

For these reasons, in the 1990s, the Energy Department began forming partnerships with energy-intensive industries to develop clean technologies. We worked with scientists and engineers to identify areas of joint research into technologies that would simultaneously save energy, reduce pollution and increase productivity. The Bush administration slashed funding for this program by 50 percent -- and keeps trying to shut it down entirely.

Indeed, conservatives in general have cut the funding or shut down entirely almost all federal programs aimed at deploying energy-efficient technologies. Conservatives simply have a blind spot when it comes to energy efficiency and conservation, seeing them as inconsequential "Jimmy Carter programs."

I recently testified at a Senate Environment and Public Works Committee hearing on nuclear power and spoke about how alternative technologies, particularly energy efficiency, were a much better bet for the country. Senator George Voinovich (R-Ohio) said this was "poppycock," and then asked all the pro-nuclear witnesses to address the question, "If nuclear power is so uncompetitive, why are so many utilities building reactors?"

Voinovich apparently has forgotten about the massive subsidies he himself voted to give the nuclear industry in 2005. He seems to be unaware that states like Florida allow utilities to sharply raise electric rates years in advance of a nuclear plant delivering even a single electron to customers. If you could do that same forward-pricing with energy efficiency, we would never need to build another polluting plant.

Although he is a senior member of the Senate and a powerful voice on energy and climate issues, Voinovich doesn't seem to know the first thing about the electricity business; namely, that a great many utilities have a huge profit incentive to build even the most expensive power plants, since they can pass all costs on to consumers while retaining a guaranteed profit. But they have a strong disincentive from investing in much less costly efforts to reduce electricity demand, since that would eat into their profits.

The next president must challenge the public service commission in every state to allow utilities to receive the same return on energy efficiency as they are allowed to receive on generation. That single step could lead the country the furthest in solving our ever-worsening climate and energy problems.

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Air Pollution Even Worse Than We Thought

By Robert Lalasz

Air pollution is substantially harming every major ecosystem type in the northeastern and mid-Atlantic United States — according to a new report co-written by experts from The Nature Conservancy and the Cary Institute of Ecosystem Studies.

And the report's co-authors say pollutants ranging from mercury to ground-level ozone are degrading the services nature provides us, too — resulting in smaller fish stocks, reduced agricultural production, and even a decline in honey bee populations.

"We have yet to fully understand all the impacts, but they're large," says Tim Tear, a Nature Conservancy scientist and co-author of the report. "The more we look, the more evidence we find, and the worse it seems to get."

But pollution deposition is neither adequately measured nor regulated, according to the report — which calls for new pollution limits and science-based policies to remedy this growing crisis.

Significant Environmental Problems in Air, Soil and Water

This report — based on a conference of 32 experts organized by the Conservancy and the Cary Institute — is the first effort to pull together all the research on how air pollution is affecting nature in the northeastern and mid-Atlantic states.

It finds that nitrogen, acid deposition, mercury and ground-level ozone not only contaminate the air we breathe — they're entering our soils and waters, causing significant environmental issues:

• High levels of deposited mercury are having negative impacts on wildlife — from salamander species in the Appalachian Mountains to loons in the Adirondacks and bald eagles in Maine.
• Ground-level ozone reduces plants' ability to harness sunlight for growth, reducing forest and crop production throughout the eastern United States.
• Excess nitrogen — in part from air pollution — is harming waterways, fish and shellfish from Rhode Island's Narrangansett Bay to Long Island Sound to Chesapeake Bay.
• Nitrogen also decreases the disease resistance of trees, leaving them more vulnerable to pests and pathogens.
• Acid rain is making sensitive lakes and streams uninhabitable by fish in the mountains of the Northeast and the Southern Appalachians. On land, it leaches important nutrients from foliage and soil, reducing the productivity of some forest trees.

And the impact on the services nature provides humans is also significant — from decreased timber production in acidified forests to mercury levels so high they have prompted restrictions on freshwater fishing.

"Air pollution is most often pitched as directly impacting humans through respiratory problems," says Tear.

"We want this report to raise awareness of the direct and indirect impacts on nature — and because we depend on nature, those impacts also affect humans."

Read this Q&A with Tear and report co-author Gary Lovett of the Cary Institute for more on the impact of air pollution on the services nature provides humans.

'Critical Loads' for Air Pollution and Ecosystems

The report calls for key changes in the way the United States regulates air pollution and evaluates its effects:

• Better regulations: The United States needs to establish what the critical air pollution loads are for ecosystem health — the precise levels that cause negative effects on ecosystems — and use these loads to refocus and expand air pollution regulation to address ecosystem effects.

Europe has used critical loads for regulating air pollution for over a decade, and some U.S. agencies have already established critical loads for particular landscapes. But these initiatives need to be scaled up dramatically, according to the Cary Institute's Lovett.

“We need a new way of thinking about how to regulate air pollution to protect ecosystems,” says Lovett. “Critical loads provide a way of measuring pollution that is more relevant to wildlife and natural habitats.”

• Better monitoring: Current programs for monitoring air pollution and its effects are fragmented, underfunded and have serious gaps, according to the report. The authors maintain that the nation should develop a more integrated monitoring approach that includes air, water, forests, soils and wildlife.

"We can't get a sense of the impacts on ecosystems and biological diversity without this information," says Lovett.

Air Pollution Doesn't Respect Boundaries

“Everyone has a role to play,” Tear says. “Congress should direct the Environmental Protection Agency to develop and implement critical loads, while the EPA should use the best available science to establish these loading levels."

"Federal land management agencies and conservation organizations need to work together with research scientists," Tear adds. "They should offer their lands and waters to advance critical loads research.”

And people in other parts of the country shouldn't take comfort from the report's focus on an eastern U.S. region, says Lovett.

"Other regions of the United States such as the Rocky Mountains and California are also quite concerned about these effects in their backyards," says Lovett. "Air pollution doesn't recognize regional boundaries — we need a national solution."

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Texas to Tel Aviv

By THOMAS L. FRIEDMAN

What would happen if you cross-bred J. R. Ewing of “Dallas” and Carl Pope, the head of the Sierra Club? You’d get T. Boone Pickens. What would happen if you cross-bred Henry Ford and Yitzhak Rabin? You’d get Shai Agassi. And what would happen if you put together T. Boone Pickens, the green billionaire Texas oilman now obsessed with wind power, and Shai Agassi, the Jewish Henry Ford now obsessed with making Israel the world’s leader in electric cars?

Fred R. Conrad/The New York Times

Thomas L. Friedman

You’d have the start of an energy revolution.

The only good thing to come from soaring oil prices is that they have spurred innovator/investors, successful in other fields, to move into clean energy with a mad-as-hell, can-do ambition to replace oil with renewable power. Two of the most interesting of these new clean electron wildcatters are Boone and Shai.

Agassi, age 40, is an Israeli software whiz kid who rose to the senior ranks of the German software giant SAP. He gave it all up in 2007 to help make Israel a model of how an entire country can get off gasoline and onto electric cars. He figured no country has a bigger interest in diminishing the value of Middle Eastern oil than Israel. On a visit to Israel in May, I took a spin in a parking lot on the Tel Aviv beachfront in Agassi’s prototype electric car, while his sister watched out for the cops because it is not yet licensed for Israeli roads.

Agassi’s plan, backed by Israel’s government, is to create a complete electric car “system” that will work much like a mobile-phone service “system,” only customers sign up for so many monthly miles, instead of minutes. Every subscriber will get a car, a battery and access to a national network of recharging outlets all across Israel — as well as garages that will swap your dead battery for a fresh one whenever needed.

His company, Better Place, and its impressive team would run the smart grid that charges the cars and is also contracting for enough new solar energy from Israeli companies — 2 gigawatts over 10 years — to power the whole fleet. “Israel will have the world’s first virtual oilfield in the Negev Desert,” said Agassi. His first 500 electric cars, built by Renault, will hit Israel’s roads next year.

Agassi is a passionate salesman for his vision. He could sell camels to Saudi Arabia. “Today in Europe, you pay $600 a month for gasoline,” he explained to me. “We have an electric car that will cost you $600 a month” — with all the electric fuel you need and when you don’t want the car any longer, just give it back. No extra charges and no CO2 emissions.

His goal, said Agassi, is to make his electric car “so cheap, so trivial, that you won’t even think of buying a gasoline car.” Once that happens, he added, your oil addiction will be over forever. You’ll be “off heroin,” he says, and “addicted to milk.”

T. Boone Pickens is 80. He’s already made billions in oil. He was involved in some ugly mischief in funding the “Swift-boating” of John Kerry. But now he’s opting for a different legacy: breaking America’s oil habit by pushing for a massive buildup of wind power in the U.S. and converting our abundant natural gas supplies — now being used to make electricity — into transportation fuel to replace foreign oil in our cars, buses and trucks.

Pickens is motivated by American nationalism. Because of all the money we are shipping abroad to pay for our oil addiction, he says, “we are on the verge of losing our superpower status.” His vision is summed up on his Web site: “We import 70 percent of our oil at a cost of $700 billion a year ... I have been an oil man all my life, but this is one emergency we can’t drill our way out of. If we create a renewable energy network, we can break our addiction to foreign oil.”

Pickens made clear to me over breakfast last week that he was tired of waiting for Washington to produce a serious energy plan. So his company, Mesa Power, is now building the world’s largest wind farm in the Texas Panhandle, where he’s spent $2 billion buying land and 700 wind turbines from General Electric — the largest single turbine order ever. The U.S. could secure 20 percent of its electricity needs from wind alone.

But Pickens knows he’s unique. Unless, he says, “Congress adopts clear, predictable policies” — with long-term tax incentives and infrastructure — so thousands of investors can jump into clean power, we’ll never get the scale we need to break our addiction. For a year, Senate Republicans have been blocking such incentives for wind and solar energy. They vote again next week.

If only we had a Congress and president who, instead of chasing crazy schemes like offshore drilling and releasing oil from our strategic reserve, just sat down with Boone and Shai and asked one question: “What laws do we need to enact to foster 1,000 more like you?” Then just do it, and get out of the way.

Nicholas D. Kristof is off today.

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