It is awfully unfortunate that “begin with the end in mind” has been beaten to a cliché, because it is SO applicable to everything. In recent years, I have seen about 5,200 articles, blogs, emails, newscasts, gum wrappers, and fortune cookie messages that promote STEM (science, technology, engineering, and math). Perhaps I was a complete dork when I was a high school senior deciding what major to pursue in college, but it came down to three factors: what am I good at, what is the demand for the profession, and what is the pay for the gig?
Begin: Amusing, Worthwhile, Important, True Story
I went to one of those puny schools we see in rural America today: originally built in the 1920s, with a 1960s addition. Guidance/career counselor? Never heard of it. School nurse? Are you kidding me?
In grade school we played kickball on a concrete platform, maybe 50 feet by 100 feet. On both ends were basketball hoops mounted on two five inch steel pipes (no padding), each about four feet apart anchored in concrete – like I-beams but without dangerous sharp edges! On the middle of each side of this court was another such pipe – making a rectangular kickball diamond – two basketball hoops for home plate and second base, two side pipes for first and third.
This was near the end of the cold war, and I remember nuclear fallout instruction films featuring school children crawling under desks in case of attack. That kickball court was designed to withstand a direct attack by Soviet missiles. I’ve discovered why anything built by my 1970s vintage boss – bookshelf, table, picture frame, coat hanger, is built to withstand a nuclear blast.
Kickball worked like this: “pitcher” rolls the ball toward the “batter” who kicks the ball and if he/she makes it to first base (the five inch steel pipe with no padding) before being nailed with the ball by a fielder, safe at first base!
Mike Arp kicks a worm killer and sprints for first base. The pitcher takes the grounder and throws a laser hitting Mike in full sprint between one leg and the other, tying up his legs (tripping). He face plants on concrete directly into first base, with his head. We laid him out on a table inside with a half grapefruit bulge on his head. He’s ok. Nurse? Hell no. He may have been awarded the rest of the day off.
As a product of this rough and tumble school, I didn’t even know what engineering was, but my high school educated parents were plenty smart to insist we take all the math and science we could devour. By freshman year in college I had found my major – engineering. It met all criteria above: competence, demand, and high pay – gee, just like today!
Engineering still has top-of-the-chart salaries and demand. Any list of top careers is full of engineering and various healthcare slots. Example of engineering demand: at the depth of the “great recession”, what was the unemployment rate for engineers? Two percent. And believe me, there are PLENTY of crappy engineers, so this was/is amazing.
Promoting STEM: high pay and virtual guaranteed job. What else is there to know? I just don’t understand kids who go to college to major in African Art History, and then with graduation looming realize nobody needs this. This too was not made up. We met such a woman working a hotel front desk in Madison a year ago. Good grief man (or woman), think about the destination before you start the trip!
Resume: Energy Efficiency
Energy programs are similarly myopic, and this will come around to bite commodity programs that go through the motions like the infamous basket weaving major. A commodity program, as you would imagine, is most common, and their mission is pimping widgets – light bulbs, energy star this and that, and maybe some variable frequency drives if they are really progressive.
In the future, programs need to do more than throw money at customers. Programs need to HELP customers – provide valuable services to inform and guide them to the right choices. Audits and studies often take a beating by commodity seeking administrators. Why? Because the studies themselves are commodities and/or the program has major flaws that throw up barriers to participation.
Studies are not the end game. Implemented projects are the end game. Programs need to be designed with the end in mind, customer by customer.
I froth at the mouth when I listen to hand wringers hem and haw about “dry holes” – as in dry oil wells representing studies that get shelved and result in no action. This is bologna. The program is flawed – it doesn’t serve the customer well; it is overly burdensome; it throws up barriers; it takes too long; it’s too risky for the customer; or the providers are not qualified or sufficiently competent.
We don’t have this problem with detailed studies. Our studies almost always get implemented with 10-40% savings, but we can’t take full credit. The program and utility contributions actually make it easy, not hard for customers.
Design programs and hire providers to serve the interests of the customer, and the results will be there in the end.
 I kid you not, at all.
 Source: National Society of Professional Engineers
Alright Rant fans. You may want to don one of these to hold your skull together as your brain fills with more information than it can contain. This week we will cover the results of the Energy Rant survey. Thank you all (y’all) for participating.
The first question: How often do you read the energy rant? Essentially half the survey takers read it every week and the other half usually read it. A few cheesers must have been looking for prizes for taking surveys – as if we would have given them the prize.
Most are good with the current rant length. As a few people noted, I sometimes ramble, rumble, and stumble, but I correct most of that. You should see the rough draft sometimes. I watch the word count all the time and shoot for about 800 words, and now with a hard cap of 900 words. This is a reduction from the first couple years when they were in the 1300-1400 range. Why 800-900 words? That is the length of typical weekly opinion pieces published in archaic things known as newspapers. I figure they must know what they are doing, acknowledging that peoples’ attention spans are getting shorter than the typical three year old nowadays (no offense).
The next question concerned topics. Truthfully, these categories were developed after almost two hundred Energy Rants were published. We developed the categories by viewing the subject matter and kept the number of categories reasonably limited. Rant fans like the broad swath of topic areas. Incidentally, we are providing the topic shares of each category of Energy Rant in the exploded pie chart. For orientation, the three big pieces, red, green, and purple are federal policy, consumer behavior, and programs and evaluation. You can follow the rest around the rosy.
Question 4 concerned guest bloggers. Eighty five percent of survey takers said they would be interested in guest bloggers. The Michaels’ marketing geniuses discussed how to approach this. Imagine yourself a parent of a fourth grader who asks to drive the family sports car to the convenience store for an ice cream. It may be fine, or it may be a disaster. Hell, growing up on the farm I was driving lots of stuff by sixth grade, and doing it well. The only substantial “accident” I’ve had in thousands of hours of driving tractor, lawnmower, combine, truck, backhoe, skid loader, pickup trucks, and automobiles was plopping a skid loader on its side – no harm no foul, no damage. Jeff is rambling.
Anyway, the answer: Desirous guest bloggers need to post comments to audition for the role. The other issue is, Jeff writes the rant as a hobby and form of entertainment and he enjoys the “fix”. Post some decent comments and we will see how it goes.
The next question: What do you like and dislike about the rant? This was one of the most important questions. Fortunately, people like it. Again, we categorized answers to this open-ended question into a limited number of bins. A solid majority of readers find the rant to be funny, informative, unvarnished, and true-to-life and “like it is”.
A number of folks found it to be too negative. To this I respond, this is the Energy Rant, not the Energy Glazed Donut or Energy Cream Puff. There are plenty of Kool Aid, rah, rah, bloggers in the vastness of cyberspace. A primary objective of the Rant is to be the antithesis of Kool Aiders. Not everything is wonderful. Not everything is true, accurate, correct, known, or settled.
The Energy Rant is a haven to spout off about things without the constraints of protecting the guilty, as is normally required. Take programmable thermostats as an example. I demonstrated in Oh Behave why only rarely they save energy, particularly for home owners. As energy program evaluators we are compelled to put a happy face on these execrable intruders, and we are pressured to revise outcomes. Fugetaboutit.
An overarching theme of the rant is, we can’t have it all. At Michaels, we do a lot of in-house training, and one of the first sessions for new employees is EE Programs 101, an early slide from which is presented next door. We can’t have all that. BANANA people, aka chimpanzees, have no credibility to me.
An alternative is Fresh Energy, a Minnesota based advocacy group that is virulently anti-coal, anti-carbon, and deathly concerned about climate change. I noticed recently in my email feed from them that they are pro-nuclear. This gives them enormous credibility in my view. They are tolerant of risk that is unavoidable in a modern, safe, civil society. Wind turbines, solar panels, and electric cars aren’t going to cut the mustard. They get it. I like it.
Closing, in last week’s post I discussed a new, albeit ignorant business model for utilities as demand for their product shrinks. What I didn’t mention is that obviously they are not counting on load building from electric cars, which would cause explosive growth never seen before. Meanwhile, in the past week, yet another electric car startup filed for Chapter 11 bankruptcy. It’s a matter of physics, folks. Maybe these venture capital firms, auto execs, battery makers, bureaucrats and Lenard DeCrapios should subscribe to the Energy Rant, or consult with a utility executive.
 Build absolutely nothing, anywhere, near anything.
If you haven’t seen Michaels’ recent self-indulgent video, you might want to do that now. It is many hours of video shooting reduced to a fine sauce, just under four minutes. My interview, for example, lasted maybe 45 minutes and maybe 30 seconds of it are included in the video. One line I’m pleased to have been captured and included was the statement that there is a limitless supply (and immense variety) of learning available in our industry. One thing I know little about is the guts of the utility business and cost recovery for energy efficiency programs. So why not write about that and see if I can avoid being a fool.
This post is brought to you by the report The Old Model Isn’t Working: Creating the Energy Utility for the 21st Century, by the American Council for an Energy Efficient Economy (ACEEE).
Since there are always new readers, I’ll say it for the 300th time, investor owned utilities are regulated monopolies. As ACEEE points out, just imagine how ridiculous it would be to have duplicative competitive delivery of power to your house. It wouldn’t work for a bunch of reasons but space is limited so I’m not going to explain any of that.
Rates are comprised of investor return on the rate base plus operating expenses. Consider the rate base to be long-term hard assets – power plants, transmission and distribution (T&D), and the opulent headquarters buildings downtown, complete with restaurants, Starbucks, and spas. The cost of owning this stuff is stock dividends, bond dividends/yields, and bank interest. Operating costs obviously include fuel, and I would guess trucks. And despite what they say, employees are an expense and not an asset , .
Take the cost of all that stuff, including profit for investor/banker, and divide by energy sales to arrive at the allowed cost of energy. Here I go out on a limb. Profits are very sensitive to economic activity. Since utilities are monopolies with not-quite-guaranteed profit, their profit margins are low. Sales growth is tiny, if anything. Return on investment for investors is primarily the dividend yield, which is protected like Fort Knox. The first thing I’m thinking is yields are 3-4% for major utilities in the US. It would seem very foolish to buy US bonds at a yield of 1.5% against this kind of return.
Energy efficiency programs are obviously at odds with the utility business model. It would be like Carl’s Jr. running ads: “Feeling a little chubby today? Get a clue: 67,000 calories in one of these babies.” I’m not sure why they erode the appeal with that slice of tomato.
The programs cost the utility money to run (reduced earnings), erode sales (reduced earnings), and provide no ROI on the dollars spent (no earnings). Cost recovery for energy efficiency programs gets all the hype. I’m going to run out on a limb again at the risk of revealing my ignorance of this subject.
What does DSM stand for? Demand side management. (I’m firmly on the ground hugging the tree trunk still; not out on a limb yet) By what measure are goals set for energy efficiency programs? Energy, NOT demand. Now I’m on the branch ready to go out on a limb.
What if we incentivized utilities for energy savings by allowing them to hike demand charges while decreasing energy prices somewhat?
To get higher return on assets for investors, one way to do it is use the stuff more. It’s obvious. There are lots of megawatts of generating capacity that get used a couple hours, a day, or few days a year. Charging more for demand will increase investor ROI and incentivize customers to squish their annual peak demand lower, but get more full load hours from the rate base.
Unfair for large power users? Not really. It is like lowering and flattening tax rates while removing deductions. Taxpayers would squeal that their health insurance, mortgage, property tax, kid, this that and the other expenses will no longer be written off, and they will pay more taxes. NO! Cut the rates so by the end of the year, the same dollars are paid. Ditto for tariffs. Increase demand charges, cut energy charges, and pay the same by the end of the year.
Let’s see. Return comes from the assets. The operating costs are a pass through. Well, let’s heap some of the pass through cost onto return on assets for investors. But this will not make utilities whole for their operating expenses. Good! Therefore, they will have an incentive to reduce their operating expenses/losses – a huge one of which is fuel, coal, natural gas, all producing CO2. This would reward energy efficiency, pressure end users to reduce peak and run flatter, and get more operating hours and revenue from utility assets.
What is the problem here? I don’t get it.
 It all boils down to this – you always need to be a step smarter than the software developer who is continuously developing software to replace you with a server in a data center in Singapore. Never forget.
 If this offends you, take it up with the regulators.
 Just pointing out, not advising.
Last week I was reading a couple regulatory dockets; one by a citizen and another by an intervener. They made some good points, including a situation of being locked out of the market in one’s own state, to which I replied, “Welcome to the party.” Both dockets had a ring of “market transformation”.
Our friends at the American Council for an Energy Efficient Economy (ACEEE) define market transformation as, “The strategic process of intervening in a market to create lasting change in market behavior by removing identified barriers or exploiting opportunities to accelerate the adoption of all cost-effective energy efficiency as a matter of standard practice.” I think I am correct in saying that behavior in this sentence includes consumers choosing CFLs over incandescent as one example, and in a broad sense, consumer choices.
Some market transformation, per my definition, has been very successful, including the CFL example mentioned previously. ENERGY STAR® appliances, including refrigerators, have been another one, to the point that some programs are dropping refrigerators from their portfolios. Another odd one is ground source heat pumps. In certain spheres, ground source heat pumps have taken on a cult-like following, and to say ground source heat pumps don’t make the meter spin backwards in every application is blasphemy. After beatings from “trade allies” for a heat pump study Michaels completed a few years back, I found last winter that MidAmerican Energy is dropping them from their energy efficiency plan going forward due to lack of cost effectiveness. Touché.
Aside from equipment choice, market transformation to its advocates includes training the masses to be energy experts – contractors, controls companies, architect and engineering (design) firms, and so on. This sort of market transformation is never going to happen. Why? It is easy to teach people to care for their lawn. It isn’t easy or cheap to teach people how to successfully replace four knee joints per day. Have you ever seen a knee surgery performed? To an ignoramus it looks easy – like carpentry, cobbling, and seamster rolled into one.
Barrier number one, therefore, is time and money. It reminds me of a manufacturer one time that wanted us to show them in a day or two how to be do-it-yourselfer energy efficiency experts. That would be like satiating a couple thousand ravenous souls with two croissants and a few mackerel. That is, give “us” the equivalent of an engineering degree and 10-20 years’ experience in a couple days. If only it could be reproduced and stored on a micro SD chip placed under the tongue, dissolved into the bloodstream, and stored permanently in the brain.
Barrier number two: Few capable of sawing lumber and wielding a hammer and chisel are interested in becoming an orthopedic surgeon. Nor does the orthopedic surgeon really want to become a neurosurgeon or dermatologist. The core building blocks of the MD profession, as they are with engineering, are similar. Energy efficiency, particularly for large commercial and industrial systems and process optimization, requires highly trained and experienced talent. Even converting a commissioning agent to retrocommissioning (RCx) agent is no small feat because they are substantially different services. In the former, the professional is ensuring the systems are built and operating as intended, while the latter only cares about the design intent for purposes of understanding how it is supposed to work. Any RCx agent worth paying is going to go far beyond the design intent to capture savings in addition to recognizing design flaws or mistakes that result in waste – and how to fix it.
Like consumer choice, markets can be transformed and are transformed on the demand side of the equation. While buyers obviously don’t understand the details of RCx, or they would do it themselves, they love the benefits and the word spreads to propagate the service/program – transforming the market.
Lastly, when it comes to market transformation, supply cannot be dictated. The market, like every other, gravitates to the best products and services. A layperson example of this is farming. Many today would like the family farm of the 1950s – the ones that include 25 head of swine, a dozen dairy cows, a few beef cattle, seven egg-laying chickens, a collie, and three cats to take care of the mice. That doesn’t work anymore. Why? Because the market calls for cheap food, and that’s why prices for many items have remained the same or even fallen in the past 25 years – for sure when adjusted for inflation.
A prosperous market serving these advanced programs consists of few firms that really know what they are doing. Spreading it around isn’t cost effective, nor will it last; i.e., transform the market. Market transformation agents want the 1950s farm with today’s cheap food. They cannot both be had.
 Locked out of the market means other firms provide program funded services to end users, free or massively subsidized by the program.
 Ground source heat pump systems work great for many applications and have many strong attributes, but like everything else, they are not the best in all applications, particularly for residential when competing against natural gas. Refer to the referenced report.
This week, while reviewing my long list of potential topics, I came across this year-old blog post regarding the “ethical grid” and business ethics in general. The author talks about three ways of doing business: immoral, amoral (insouciant), and moral. He states that the immoral business operates under purely selfish reasons. I disagree. I argue that prosperity and moral business practice almost always involve selfishness, what’s best for me and the company.
I will start with a simple example to pivot your brain. Probably in just about any line of business, people deal with difficult customers and clients. The inclination, especially among the younger and less experienced folk (I was there once), is to snap back, argue, or retaliate in some way. This is very, very unwise. Instead, consider what is best for me and the organization I represent. Selfishness. What is best for me may include biting my tongue, smiling, being nice and working with difficult/annoying personalities.
Another inclination may be finger pointing mud fights when things go to hell in the midst of a project. This is not productive, but stupid. Selfishness suggests you leave train wrecks behind and find another train and keep going. Come back and clean up lessons learned from the train wreck another day – after the project is complete.
Consider three business models / tactics that could be considered selfish but are actually self-destructive.
Performance contracting evolved before my time, probably in the 1980s. The concept: implement projects that pay for themselves through operating cost savings – primarily energy, maintenance, and associated labor cost reductions. All this is guaranteed in the contract. In the early days, there were shenanigans. In many cases they would include obscenely priced long-term maintenance contracts. Shortly after implementation, many buyers’ response was “get me out of here”.
This poisoned the well for a long time. This wasn’t selfish. It was stupid. Heavily regulated utilities can provide performance contracting, on the up and up with all cards on the table. A few years ago we were trying to sell such a concept to an investor owned utility and the message was, “We (utility) are intrigued with the concept, but don’t call it performance contracting.” What an attractive brand the pioneers of performance contracting must have developed – the two words shan’t be chained together and uttered aloud in a sentence that includes our brand.
Performance contractors never, to my knowledge, operate in the utility energy efficiency arena. Why? Likely because projects are usually huge and would certainly come under review of program evaluators. Is it any wonder that performance contractors work almost exclusively for state and federal governments – other peoples’ money?
Another example is design/build firms, as opposed to the design/bid/build process. In design/build, the owner contracts with one firm to design a facility and then build it. It’s a one-stop shop. There is no cat herding of multiple organizations. The design/bid/build process consists of an independent design team that generates documents suitable for bidding the largest cost of the project by far: construction. The competition for design/build, if there is any, occurs at the outset with hand waving, sexy renderings, and dog and pony shows. Same for design/bid/build, but the owner has an impartial advocate maintain honest bidding and management of construction, which accounts for 90% of the project cost.
With design/build, floor plans and cost caps are promised at the outset. There are unlimited ways to cut corners and cost from there. The joke, which happens to be true, goes that at the end of every design/build project, the proud new owner gets a check from the design/builder since the project came in under budget, by $17,000. Every time!
Buying new buildings is like buying professional services. To think the same deliverables can be purchased from one firm at a much lower price than another is incredibly naïve. Or the seller is naïve and misses the barn when pricing a project and gets financially clobbered. Been there, did that. But again in this case, what is best for me and my organization. Eat crow with a smile.
Lastly, while the statement, “it doesn’t hurt to ask” is almost always harmless, it does hurt sometimes to ask more than once or try an end around on the regulators. When the regulators control the livelihood of utilities, they best take no for an answer and move on. They can either be selfish, acting in their best interest and go along with energy efficiency policies, or stupid and fight them. Or they can triple down and convince their largest customers it is a waste of money and have them lobby their representatives. Not, not, not, smart.
Certainly there are service industries where “me first” is bad for everyone else. These would include organized crime and politics. Come to think of it, what’s the difference?
Provide a chimpanzee with a computer loaded with MS Word and some sort of reward for pounding on the keyboard, and sooner or later it will produce a sentence, probably consisting of two words: subject, verb. Provide a workbook with a one-trick-pony energy calculation to an unqualified user who applies it to a scenario it doesn’t represent whatsoever, and they may return the “right” answer, once in a while. Allow 536 mostly clueless individuals to craft laws and policies, and sooner or later by unintended consequences, they may achieve an objective. And so it goes with automobile fuel economy standards, also knows as CAFE standards, for corporate average fuel economy.
But first, as the energy BS whistleblower, allow me to dispose of some political BS regarding fuel efficiency for automobiles.
Fuel efficient automobiles are less safe than gas guzzling behemoths. In that case, we should demand military cargo trucks with an optional turret mounted marine with a fully loaded automatic machine gun. This is ridiculous. Smaller fuel efficient vehicles are less safe than a larger vehicle when crashing with a large vehicle, all else equal. Extremely rapid deceleration of mass (human body) causes injury or death. Each driver of a car or a truck plowing into a rock wall at 60 mph will suffer similar consequences. Persons in an efficient car plowing into a Tahoe will suffer greater injury, all else equal. But hey, if you want to be safe plowing into the Tahoe, I suggest the military cargo truck. Bottom line: if all vehicles are smaller and more efficient, there will be little, if any, degradation in safety.
Fuel efficient cars will cost more. This is really a load of crap, and I cannot figure out why the auto makers are going along with the aggressive CAFE standards. Fuel efficient vehicle buyers fall into two categories: wealthy and not wealthy. The wealthy buy hybrids and electric vehicles, and the not wealthy buy tiny cheap vehicles like the Ford Fiesta, Hyundai Accent, or Toyota Yaris – plain Jane, no frills, lowest total cost, low profit vehicles – the tin can class.
The auto makers cut a deal with the president in 2011 to raise the target auto fuel economy to 55 miles per gallon by 2025. The auto makers are out of their gourds unless something crazy happens like gasoline prices rise to $20 (not out of the question). The tin-can class is where the money is when it comes to hitting these targets; but the tin can class is barely at 35 mpg today. Why do I think the auto execs are fools about this? There is no profit in the tin can class (they say) and the demand for the hybrids and electrics is puny. Hybrids feature complexity, expensive controls/electronics/powertrain and thus have a bit of a price floor. The small cars have no pricing power because the market (people) is cheap, and they want low cost. Good for them. Bad for car makers. In order to meet the aggressive CAFE standards, car makers will have to practically give away hybrids and tin cans while losing money doing so. Or perhaps the auto makers believe the electric car will be their white night. Sorry, the frivolous novelty will still be a frivolous novelty 12 short years from now. Bottom line: When big business gets in bed with the federal government to make policy, they always contract disease, if you know what I mean.
So how can the 536 mostly clueless in-duh-viduals achieve such lofty goals? If they do, it will be with a combination happenstance of unintended consequences and underlying political agendas. One unintended consequence is high gasoline prices driving demand for efficiency caused by contagious, globalized currency devaluation. This is a consequence of massive government debt and money printing. But inflation is only 2%? Not for dollar-denominated oil on the world market – up over 100% since the latest easy money flood began five years ago. Not so with natural gas which is not an international commodity (yet). Meanwhile, domestic petrol production is up as sharply as natural gas, but unlike natural gas prices, petrol prices cannot escape the weak dollar.
The US is exporting inflation around the world. As the Ben Bernanke prints money, our currency falls against others’. Their import costs drop and their export costs rise putting them at a trade disadvantage. What to do? Fight fire with fire and devalue the currency. Last week Japan joined the Bernanke’s monetary punch bowl.
Don’t expect this to end any time soon. The Bernanke plans to keep the presses going 24/7/365 until employment numbers improve. It isn’t working. Hello? After five (5) years of this, last week’s labor report for March included 88,000 new jobs while a whopping 500,000 people left the labor market. So gasoline prices could hit $20 by gosh / by golly.
Lastly in the non-disclosed agenda, we starve ourselves of energy and that isn’t bad for sustainability reasons. But Keystone pipeline is an environmental hazard? Give me a break. The real agenda is constrain supply. Can we just be honest? Answer: no, because the masses already broadly favor its construction. I appreciate self restraint and sustainability but truth in advertising would be nice.
 100 senators, 435 congress people, 1 president. Thousands of aids, advisors, and lobbyists not included.
 Not enough to keep up with population growth.
 The San Bruno CA natural gas pipeline explosion leveled about 40 homes and killed eight people, but I don’t recall any talk of moratoriums on gas pipelines nor do I recall any deaths due to an oil pipeline leak. And we have thousands of miles of pipelines of all ages and suddenly we don’t know how to do it safely? Laugh test score: F.
For many years of my adult life I thought, “courts and judges: who cares?” I’ve learned that I do, big time. Why? Because courts can bend and twist laws and essentially rewrite them to the point that we might as well send legislators home, which in and of itself sounds like a good idea. The danger is the courts are the backstop to protect us from unconstitutional law, and if they are creating law by fiat, there is no backstop. There is no accountability. They have the final say. Energy efficiency impact evaluation is much the same, as evaluators declare what programs have actually accomplished. There are parallels, especially with the final judgment.
One of the jobs of the evaluator is to understand the rules of program for eligibility, baselines, and a raft of other issues. We have experienced evaluators injecting their own opinion into the evaluation process. For example, Wal-Mart builds all their box stores with certain features. “No savings for you” declared one evaluator – because this stuff would have been implemented anyway! This is like the first amendment. Vile ogres have the same right to petition government ogres as does everyone else. We can’t pick and choose. Evaluators can’t make their own laws either.
As I have blasted in this blog many times, I insist that programs be cost effective and serve as a net benefit to customers and a cheaper alternative to adding supply, transmission, and distribution systems. Who’s going to do it? You, Weinberg? I have more responsibility than you can possibly fathom. To answer the question (I’ll answer the question, truthfully even), it’s program evaluators.
Evaluators are the supremes of energy efficiency programs and program evaluation is the court case. Like the supremes, evaluators can interpret and report on reality (the law) or they can generate their own reality, in which case everyone loses, except “special interests”, which may include the utility or the program implementers.
The Dumb Down Low Ball
My fear in this isn’t so much intentional misrepresentation but lack of depth of investigation and digging and technical competence/expertise on impacts. Furthermore, what really concerns me is the Wal-Mart-ization of this critical element of energy efficiency programs. Selecting a program evaluation team is like house shopping from the curb. Evaluation service buyers can be juked into “buying” a fake town like the bad guys on Blazing Saddles. The pretty façade can resemble a proposal and eventually the report itself. Prop up a nice façade in front of a 1972 leaky trailer home and call it a Frank Lloyd Wright modern contemporary masterpiece.
As Wal-Mart learned, somebody will always undercut you. Refer to Dollar General. However, buying program evaluation is not the same as buying a box of Lucky Charms, which has been proven in blind taste tests to taste the same from Dollar General as it tastes out of Safeway.
Decent impact evaluation, particularly for commercial and industrial programs, requires substantial expense. Does the evaluation buyer really want to know what’s going on, or do they want a report to show the regulators / legislature, er I mean the court, that everything is hunky dory? I promise you, hunky dory is cheaper than even Dollar General.
Getting it Right Costs Money
Dollar General isn’t going to cut it. It costs money, in some cases quite a bit, to do a decent job on impact evaluation for C&I programs. The energy calculations performed by the program can be lousy and disheveled or may hardly exist. A new building automation system that affects a half-million square feet of office space may receive a $100,000 incentive. Evaluating this project and estimating the savings in the first place is a bit more complicated than doing the same for the Dollar General light bulb. If the savings aren’t there, why are they not there? This is a difficult and costly question to answer but if it isn’t answered correctly, send the legislature home and skip the evaluation altogether, because what is the point? The point is (1) get the right answer and (2) improve the program and that may mean switch to a consultant that knows how to do custom calculations.
Getting Wrong to be Right Costs More Money
And another thing: programs with lousy impact estimates cost more to evaluate. It takes longer to figure things out. It takes more digging on site, more data collection, more interviews, and more analysis. Then finally when it’s all pulled together, it may take several rounds with the utility/implementers to hash out the adjustments. The hunky dory report is met with no resistance.
Suggestion: Selecting an evaluation team should be based on qualifications, and the fee should be negotiated after selection based on needs and priorities. Typical fees are 2-5% of total energy efficiency portfolio spending – a higher percentage for smaller portfolios and lower percentage for huge ones.
Look, someone will always sell cheaper plastic cutlery. If buyers desire to pay $59 for Motel 6 and delude themselves to believe sitting on a stained chair at a Formica table with Canada Dry in a plastic cup with ice is the same as lounging with a Bombay martini at a Hilton lounge, you go man.
 That is correct – a Colonel Jessup rant.
 Supreme Court justices.
To win people over and get them to join your cause, it is best to not clobber them over the head as the beginning of this article for the top five measures for industrial energy efficiency does. The first paragraph reads like a senator’s stump speech with selective facts that deliver a distorted message. To wit, “the United States ranks first in energy wastefulness among developed nations”. Presumably, China is not a developed nation. Moreover, is waste measured in energy consumption, waste, or either of those per unit of economic output?
The next statement is that industry is responsible for 30% of greenhouse gas emissions, [paraphrasing] therefore, industry is bad. Bad. Bad. Bad. More efficient buildings would reduce our dependence on foreign oil, it says. That one is good for a laugh because less than 1% of electricity produced comes from petrol, which is overwhelmingly used for transportation and also as a feedstock for some industries.
Moving on. I agree there is massive savings potential with supporting “utilities” within an industrial plant. These include compressed air, fans, pumps, blowers, cooling and chilled water systems, steam, and refrigeration. He is correct again that staff is stretched membrane thin.
I disagree that aging equipment is a bane to industrial energy efficiency. Poor system design and control sequences waste an order of magnitude more energy than the incremental disadvantage old equipment has over newer, more modern equipment. For example, air compressors produce about 22 standard cubic feet of compressed air per 100 brake horsepower at full load. (Is this a dumb metric? Yes. But I didn’t develop it.) This hasn’t changed greatly for decades. Similarly, industrial boilers operate at 80-85% efficiency. No change for decades. Fans and pumps operate at around 70% efficiency.
Technology has improved to greatly improve part load efficiencies. The key to industrial energy efficiency and everything else is efficiency at typical operating conditions, which is not full capacity. Components like variable frequency drives have assisted this greatly. However, they are often controlled far less effectively than one would like to see.
I am in complete agreement that the three needs of many plant managers include a prioritized list of cost effective measures (knowledge), a business case for it (risk aversion), and source of dough (capital). A vast majority of energy efficiency portfolios throughout the country lack effective delivery of developed measures for customer decision making AND provide assistance between the prioritized list development and implementation. This is where many projects go in the ditch.
Portfolios will need to move in the direction of knowledge and information based programs in order to hit aggressive energy saving targets, and this is already in gear for a number of utilities – and I’m lovin it, not to be confused with McDonald’s, although I would throw in a pitch for the cheap and crappy McDonald’s hamburger, which I like very much. Michaels rolled out such a program several years ago. Twelve month savings data are just beginning to pile in showing 15-40% savings and even greater in some cases. In some jurisdictions, the whole shebang is also known as “strategic energy management” (SEM) programs.
Strategic energy management programs can be great because they are comprehensive, facility wide, and not just changing out light bulbs and installing a new, but not systemically integrated, boiler or variable frequency driver here and there. It includes benchmarking, investigation, measurement development, planning, implementation assistance (also known as the “magic middle” or the ditch as noted above), and constant monitoring of performance metrics.
Now for the “top five” industrial energy efficiency measures from the above article.
- Reduce peak demand. The article states peak demand is “impossible to determine by looking at the utility bill.” Wha? Does he mean in real time? I don’t get it. Anyway, many times comprehensive energy efficiency implementation will bring down peak demand proportionally with energy savings. Note, I said comprehensive – which means rolling a bunch of measures together. The article also states demand charges often equal 30% of the dollars billed. Actually, it’s closer to 50% and sometimes even higher. Some electrical tariffs practically give energy away but charge like crazy for demand.
- Reduce weekend energy use. This is slightly more sophisticated than changing light bulbs. Turn stuff off at night and on the weekends. I got it already.
- Set stuff back at night. See number 2.
- Avoid startup spikes. Myth alert! Myth alert. “Startup spikes result when voltage jumps because multiple mechanical systems are turned on simultaneously.” Talk about going in the ditch! Inrush current when slamming things on causes voltage to droop. The myth is that inrush currents and power spikes increase demand charges. Not true. Demand is measured over 15 minute intervals – either sliding or discrete intervals depending on the utility. Therefore, a split second spike in power draw will have very little impact on demand or demand charges. It’s like throwing a little ice cube in a vat of hot oil. It may cause problems and I wouldn’t advise it if you know what’s good for you, but it isn’t going to noticeably affect the oil temperature.
- Save with compressed air. It is certainly true that compressed air systems can waste gobs of energy, but compressed air has been targeted by programs for a long time. However, there is still a lot that can be done, particularly with compressor sequencing for multiple-compressor plants – as discussed above for actual operational efficiency, not full load only. He does hit this one on the head near the end of the article.
I’ll have to generate my own top five at some point.
Last week this commentary regarding energy efficiency mandates from the Heritage Foundation showed up in my Google news feed, and it made for an interesting read. I hold the same view when it comes to shoving products down the gullets of people like the goose in preparation of foie gras, a disgusting practice. That is not a way to make friends for desired lasting results. E.g., we’re going to unplug the water cooler to save energy and you will like the warm water. Besides, the feng shui will improve and bring better karma because that cold stuff throws your system out of whack. I would expect responses of “feng shui you!, cheap _____!”
The author, Nicolas Loris (Nick), states the argument for mandates is consumers and businesses reduce energy use, save money, and their kids use 50% less foul language. Nick goes on to say consumers are already incentivized by the free market to conserve, without mandates. This is true but here is the rub: consumers (the masses) are irrational and businesses are considerably more rational, but yet, still plenty irrational.
Let’s talk a smidge about mandates before moving on to decision-making by end users. There are energy efficiency mandates for light bulbs, auto fleets, toilets, refrigerators, air conditioners, and I’m sure there are others that I’m not aware of.
More or Less Equal Mandates
Not all energy efficiency mandates are equal. More equal mandates are better. What are more equal mandates? Ones that do not have any perceptible degradation of performance or a long-term price premium. Which energy efficiency mandates fall into this category? Refrigerators and air conditioners, and for the most part, toilets, although there were problems in the early days- a whole other topic. Cars and light bulbs have clear performance and consumer preference issues. People love their cars, man. Myself included. Don’t screw with my car. 
Nick states in his article that Secretary of Energy, Chu, once quipped that energy efficiency mandates are needed because people “aren’t acting in a way that they should act.” There is some red meat for the opposition, but I have to agree that smacks of unplugging the water cooler and telling people it’s for their own good.
Moving on to consumer / end-user choices, Nick says consumers are smart enough to choose for themselves and are doing so. From a mass market perspective, I disagree. Mass market consumers, excluding most people reading this rant, are awfully irrational. Consider the beloved compact fluorescent light bulb, which provides a fascinating case study (hang with me).
Fifteen years ago these things cost over $10 a piece. They didn’t fit fixtures because the ballast (base) was about 3 inches long and the entire light bulb was about 10 inches long just begging to be whacked off, spilling toxic mercury everywhere. Doing a simple life cycle cost analysis (shown to the right) for the 10,000 hour lifetime of a CFL, a consumer would have to be crazy not to buy these and fill their house with these things.
I would claim that since that time energy efficiency programs, not mandates, have driven the technology to vastly improve and the price to plummet to the point where consumers would have to be really, really nuts to not buy CFLs, but for a few fixtures that aren’t used often. The price is now at least 80% lower. The lamps are more efficient and come in colors (temperatures) other than cold mortuary gray.
A mandate is not required or warranted for CFLs. The market has been transformed with relatively great speed. The non-energy impacts are, in some instances, greater than the energy impacts. Speaking for labor and the cost of man-hours to keep replacing bulbs every 1000 hours varies from a nice feature, to a massive advantage, depending on the consumer.
Consumers are still too irrational for the modern CFL in many cases. They need gimmicks and games, trinkets, brownie points. This is what behavioral programs are all about for residential customers.
See a better approach to geese (consumers) – lure and educate them rather than force feeding. These consumers are wary and are probably used to fresh croissants rather than the stale crust this guy is peddling. The screen-left goose is thinking, this guy is a moron. I’m out of here.
I’m running low on space but moving on to commercial and industrial end users, the barriers are much different. They are much more willing to do things that improve their financial situation. In many cases, they don’t know or realize where their cost effective opportunities are, they don’t have the time to deal with it, and in some cases they lack capital or the presentation to the bean counters to convince energy efficiency is a wise investment versus a new lawn mower or snow plow. Mandates are not going to affect these customers, but they really, really need expertise, services, and sound information.
 The latter is a slight embellishment on my part.
 The Wall Street Journal reports that people who like their cars and keep them a long time garden, hang out in coffee shops, and do more DIY home repair. I would add they despise shopping malls as well and prefer downtown.
I remind and inform people from time to time that my career in this industry consists of three distinct eras. In the first era, lasting about five years, I was running, climbing, crawling, and digging around in commercial and industrial facilities for comprehensive energy assessments and studies. This included gobs of energy analyses, simulations, and fairly complex cost estimating. The second era included essentially mentoring others to do the same, plus reviewing thousands of calculations and hundreds of reports. The third includes business development, program development, implementation, and evaluation – with a much grander view of the industry. In the process, I have had the fantastic experience of getting to know other energy efficiency professionals and more about what they do. The challenge is daunting but who wants it any other way?
Energy efficiency professionals comprise an enormous range of academic and career backgrounds when one considers program managers, administrators, process and impact evaluators, regulators, field staff, and technical support. Unfortunately, there is often bias and cynicism and misunderstanding between one pedigree of professionals and another, and this, in general, is the result of ignorance, as in lack of knowledge, not stupidity.
Starry Eyed Engineer
Consider engineering. Engineers coming out of school, probably like non-engineers, have stereotypes of what engineers do. They design cars, airplanes, and bridges. They test things until they fail. The fact is, very few engineers actually do those things and my saying for new grads: They don’t know what they want to do anyway, even if they think they do. That was my experience, and I have observed it many times interviewing these youngsters. “You want to design an air conditioning unit?” No. You will be stuck designing a mount for a compressor in a crappy rooftop unit and that will take months – designing a stupid stamped out piece of metal. Thankfully, this gives some people a great thrill.
Zeroing in to engineers serving the energy efficiency industry: this is my definition of engineering: if the task at hand requires an engineer to do the job, it is engineering. Many times the task at hand may seem boring or trivial but is as important and requires similar expertise, just in an unrelated track. For example, consider energy efficiency consulting for the design of a major ammonia refrigeration retrofit project versus review of a technical reference manual. I am guessing the typical engineer in a firm like ours with dozens of engineers would think, “Dude, the ammonia project is cool and the technical reference manual is for wimps”. Let me put that statement into layperson terms, “We play real football in the US compared to your wimpy brand in Spain, Italy, Brazil, et al.”
For the engineer, both require engineering and attention to detail. One requires more in-depth technical expertise and the other requires broader technical expertise, as well as applicability to other stakeholders – like strength versus endurance. Like American football versus world football: strength and speed versus endurance and a broader skill set. Moreover, like world football, technical reference manuals appeal to and are of much greater interest to a much larger swath of energy efficiency professionals. What people like and consider “real” depends on their perspective.
Stepping outside the relatively small engineering aspects of energy efficiency, we have marketing, outreach, integration with supply-side markets, process evaluation, and planning to name a few. I have experienced many times the treating of the other guys’ job as needless, a nuisance, not worth it or even worthless.
For example, some program implementers don’t like evaluators. I was attending a conference session one time while an executive from a large program implementation company was giving an evaluator on his panel the jazz. Everyone knows of instances where a guy leads on as if he’s joking, but not really. Between the chuckles and grins there is a serious punch in the gut.
The Machine Moves; Parts Alone Do Not
The fact is, there are many critical moving parts to the energy efficiency industry and many, if not most, stakeholders naturally think their piece is the most important because that is what they understand and generally have a passion for. But consider:
- Without engineering, impacts are unknown and many times un or under-realized
- Without marketing, nothing happens
- Without evaluation, things would veer into the world of Alice in Wonderland tomorrow
- Without regulation, there would be no programs to drive energy efficiency as a viable alternative to adding supply in willy nilly fashion
- Without programs, there would be no free riders; there would be
no riders at all
 Technical reference manuals contain, calculations, sources of information, assumptions, measure descriptions and thorough documentation of mass market energy efficiency measures.
 This is really difficult for me because I’m soooo out of touch with pop culture – a nerd.
 A google search of fat football players predominately features Green Bay Packers. Why is that?