Program Evaluation: Nellie, You Are Toast
In the blah, blah, frufrah blogosphere there are plenty of rosy fables and opinions of energy efficiency and green energy. In a blatant marketing pitch, the Energy Rant is the only blog from the inside, critical of things in our industry. Our industry is not unlike any family, marriage, workplace, company, celebrity, elite athlete, pet, child, or even a normal person. It has faults. It has problems and failure. There is trouble. There is dishonesty (gasp!). Lots of money is wasted. There are problem children. There are competent reliable firms, and there are “yes ma’am” firms. This is what one learns in 17 years of energy studies, program evaluation, and implementation services.
Consider all of the above examples of people and institutions. Can you think of any one of them improving or being the best they can be if they aren’t critical of themselves and their institution? I’m not talking about masochism or being overly critical. There are few of those, but I avoid like the avian flu virus anyone who thinks or says they proverbially walk on water.
One of the most important things I’ve learned, and surprisingly have read a few times recently, is that people like genuineness, humility, along with confidence. An “I don’t know” here and there is a good thing. In fact, I am so arrogant, I say “I don’t know what I’m doing here [on a particular subject, e.g., social media]” and “I don’t know what the hell I’m doing” many times a week.
As mentioned a couple weeks ago in DoGooder Equity, as I was just explaining last week to a job candidate during an interview, the passion I have for this work is to use energy efficiency as a resource alternative to power plants, poles and wires. And it has to be cost effective.
Part of being cost effective is “being” in the first place – meaning are the savings there or not? Cue the Energy Rant. At Michaels, we call balls and strikes like we see em. If a buyer of services wants “yes ma’am” program evaluation, there are, unfortunately, firms who will take the money and provide “Yes ma’am, everything is wonderful with your program”. In fact, compiling reports that declare “everything is wonderful” is even less expensive to provide. Just change the cover. So what’s not to like?
I’ll tell you what’s not to like, the customers and the citizens are getting the shaft, and that isn’t going to end like Little House on the Prairie. What’s her name, Nellie, the merchant’s kid, is going to keep kicking the dickens out of Laura and getting away with it ad nauseam.
In my view and experience, utilities like to leverage energy efficiency programs as a customer service; good for public relations. In general, when they are first told by the regulators that they have to run EE programs, they don’t like it and really would just as soon not save energy because, hey, it erodes revenue and profit. This is understandable. Ameren Missouri and First Energy Ohio made headlines in the past year and made their cases to roll back their EE spending to their respective regulatory agencies, and they were both largely denied.
At some point the eureka light comes on and utilities realize it is a fact of life, and they embrace energy efficiency as being good for the company. How the math on that works, I have no idea. (note the humility)
Generally, by the time they embrace energy efficiency, they are open to making sure customers are getting impacts as advertised. I have experienced one transformation from an upper Midwest utility right under my nose. In my view, they switched from smokescreen programs to look good to the regulators and customers, to true believers, and this is fantastic to behold. They want the dirt. They want the truth. They want an actual read on their programs. Why? BECAUSE THAT IS HOW THINGS IMPROVE! We love working for clients like this. Newby utilities, in general, take program evaluation critique as a personal insult. This is unfortunate because they frequently have the most to gain from the evaluation process.
The other thing that comes with maturity of EE programs and utilities is the very subject of this post – they know everything is not wonderful in their organization, their portfolio, their processes, their tracking system, and their vendors. As stated numerous times in this blog in general, in order to be successful, one first has to know what failure looks like, accept it as reality, understand what happened, and fix it. A probing, honest, and thorough program evaluation to identify and quantify success and failure is essential for improvement.
Finally, to enable improvement, one has to engage the right person(s) and/or organization(s). In another overt pimping of this blog, that is what I do.
Call me crazy, but I think this is the way to win the big day. Be constructively critical. Acknowledge failure and fix from within.
DoGooder Equity
Upon reading some manager/principal/owner interviews in business publications, the publisher asks, “What keeps you awake at night?” My answer to that would be: Nothing. The reason for this is utilities are regulated monopolies and the energy efficiency program portfolios they run are cost effective. I.e., we, as an industry, are contributing to net wealth generation for consumers and not just redistributing it – it’s EE or power plants, poles and wires and either way, the consumer pays, and we are helping them pay less.
A major reason I am a huge advocate of EE programs is that they are cost effective, and what does that mean? – it typically means it is cheaper to run programs than build power plants and requisite transmission systems to pipe the electricity to points of use (distribution). I sleep knowing I’m contributing to a wealthier, more efficient society that also happens to burn less resources.
One such cost-effectiveness test is the ratepayer impact measure test or RIM test. The RIM test “measures what happens to customer bills or rates due to changes in utility revenues and operating costs caused by the program”[1]. Programs that pass the RIM test have a benefit to cost ratio greater than 1.0, indicating unit energy costs are reduced as a result of programs and therefore, programs benefit all customers whether or not they participate in programs.
So, I’m really liking this. Customers that choose to do nothing benefit, but participants benefit even more. However, like everything else, politics, do-gooderism, and waste seep into program portfolios.
Regulators generally frown upon and disallow utilities to make money on their programs. This needs to change, and I’ve discussed this in the past. The regulated utility business was created on a forever upward trend in demand and sales. This has ground to a halt, and in some cases reversing largely as a result of EE programs. Well by golly, whaddya say we let utilities in on the action in a cost effective manner where all B/Cs are >1.0? Not allowing this is kind of the mirror image of do-gooderism. Do-gooders don’t allow utilities to make money because they are obliged to give it away, apparently.
Small business programs are generally not cost effective but they exist often in the form of direct install (DI) programs for equity, as in fairness, reasons. Small businesses as a whole send millions of dollars in EE riders (EE charges, typically 1% of the bill) to fund programs, but they are very difficult to serve effectively for a whole raft of reasons that can be part of another rant. Rather than market to, and actually get small businesses to pay for projects like everyone else, it is less expensive from a program perspective to just give them stuff – replace lighting for example. I.e. cost of free < cost of laborious arm twisting. I understand this angle, but it is doesn’t make a lot of sense in the presence of a RIM B/C > 1.
Another political thing that seeps in is workforce development and jobs. This torques me as it often adds to the cost and subtracts from the benefits to ratepayers. In our space (buzzword of the year, which means market), it takes years and years and years to gain expertise to look at a building and say, that was built in 1979[2], it has rooftop units[3], electric reheat[4], the comfort is terrible[5], and half the variable air volume boxes likely do not function properly[6], partitions (interior walls) have been erected and demolished four times over and the zoning is dorked – all information gathered by Google Earth and street views without even stepping foot in the building or even the state in which it resides. And so on and so forth for 20s buildings, 60s buildings, 80s buildings, 90s buildings. A person learns what to expect after having been in dozens of these buildings and simply looking at a satellite image, and a street view is a bonus.
Regulators, administrators, and possibly third-party program implementers in some jurisdictions expect to train contractors how to fix these buildings. Again, it’s do-gooderism over greater net wealth generation. I would hire business partners (subs) that are competent and highly qualified to deliver results, as needed and locally when it makes sense. I do not want to teach a 7th grade science class to set a broken femur – pins, rods, casts and all, which is essentially the equivalent of effectively indentifying and developing all cost effective measures that exist in a typical poorly-performing, wasteful facility or process. It takes years, not a couple days or week to develop these skills. Doing so is expensive, inefficient, ineffective, and bad for ratepayers.
We will create the need to hire people for our subs and ourselves. What difference does it make if Jimmy and Sue work on our team or someone else’s? That’s the way it works – the best for everyone involved. Does anyone expect Fluor to be forced to hire local schmucks to build its power plants? When it makes sense, such as buying concrete locally rather than trucking it from three states away, yes. For structural engineering, not so much.
[1] California Public Utilities Commission
[2] From the architecture – dark and depressing.
[3] Can see them on Google Earth.
[4] Because Jimmy Carter thought we were going to run out of natural gas – no kidding.
[5] Because they distributed heat from the ceiling and heat rises.
[6] Everyone on the perimeter has a 1500 Watt space heater at their work station.
Taxman, Yeah, I’m the Tax man
Taxman, Yeah, I’m the Taxman
Thank you American Council for an Energy Efficient Economy for clearing the decks to talk about tax policy and energy efficiency – enabling me with its Three Tax Reforms to Encourage Modernization of the Manufacturing Sector.
Allow me to divulge some truths about our confiscation, er I mean, federal tax policies. In five words: small business gets the shaft. Small businesses earn their profits in the US and they are pass-through entities, the profits from which are taxed at the 
owners’ personal tax rates far above typical effective corporate tax rates. The IRS extracts a pound of flesh for every three pounds produced. Corporations; not so much. (see the chart nearby). I can tell you why/how but that’s a story for beer time somewhere.
A case study in monetary and tax policy perversion of capital: Interest rates are nearly zero as the Ben Bernanke prints money to finance the deficit and debt[1]. Taxes (the “cliff”) are set to rise in a few days so what are corporations doing? Dumping cash to shareholders. Costco for one is borrowing $3.5 billion to pay a one time $3 billion special dividend to shareholders. The debt will be repaid by future earnings. And former CEO, Jim Sinegal wants the rest of us and in particular small business to pay higher taxes. Hypocrite.
In fact, as of last week reported special one-time corporate dividends totaled roughly $23 billion and note, Apple with $90 billion in cash is not included in this list.
Conclusion: taxes matter.
The first proposal by ACEEE is to lower the tax on repatriated money. ACEEE claims the cost to the treasury would be low. I disagree. The cost to the treasury will be negative. In other words, the treasury will increase its haul because the current 35% of $0 is $0. Ten percent of hundreds of billions of dollars is billions and billions of dollars – not even counting the ensuing corporate, income, property and all kinds of taxes business expansion in the US will deliver. I have no doubt the majority of lawmakers in Washington are clueless about these things. A confiscatory tax rate that can / will be / is avoided produces no revenue to the treasury. The result is a pre-cliff surge in tax revenue in 2012 on LOW taxes followed by a dearth next year. I’ll provide the data when it becomes available.
- Bottom line: I strongly agree with ACEEE that repatriated dollars should be taxed at a far lower rate, if taxed at all.
The second proposal is to use accelerated depreciation to get a near term tax benefit from energy efficiency projects. ACEEE claims this will not cost the treasury anything because it simply shifts the tax burden to out years. I too like this policy but I would want it across the board. Defining an energy efficiency project would be a mess. Trust me. We have seen many absurd claims in self-directed (customer directed) / opt-out (of EE programs) projects. Companies, let alone the IRS, do not know what energy efficiency is. For example, spending money to consolidate manufacturing to one facility, or from two shifts seven days a week to three shifts five days a week is NOT energy efficiency. But customers think it is.
- Bottom line: I agree with ACEEE but let’s use accelerated depreciation across the board for all types of investment.
The third proposal is a tax credit of 35% of the investment in EE to be repaid over 10 years. I understand the benefit but linking it to reality is a bit more complicated than the first two. If the project lowered energy consumption by the cost of implementation over 10 years (e.g., 10 year payback), this gives the customer a tax incentive in year one to be repaid over the 10 years. So it seems like financing the tax payments.
- Bottom line: This wouldn’t be attractive to me and like the second one, it is too burdensome and easily gamed.
Number four is Jeff Ihnen’s idea: lower the corporate tax rate across the board and nix all the perverting tax loopholes and credits. Let’s move from the highest corporate tax rate in the world to one of the lowest, say 10%. Eliminate the tax on repatriated capital. The treasury is getting nothing from it now and allowing those dollars to flow back will allow companies to expand here in the US, creating corporate income tax, jobs and associated personal income tax. A summary of enormous benefits:
- Jobs – Washington’s clueless fixation.
- Higher tax revenue.
- MORE energy efficiency[2].
- Insourcing jobs.
- Capital will flood into the most productive country in the world – ours.
- Greenhouse gas reduction – think of that! China is building coal plants willy nilly. The US is shutting them down ON TOP of being more energy efficient and more productive.
Everyone except perhaps our foreign competitors and Washington wins here. However, there remains one mammoth obstacle: ignorance and/or lust for power in Washington. Lowering and flattening the tax code while getting rid of deductions and credits takes away power, manipulation, and ability to divide the electorate to win or buy the next election.
[1] Home owners may think this is good but there is no free lunch and I can explain that another day.
[2] Energy efficiency builds the bottom line and taking less in taxes makes it more attractive.
Dude- Cheap Cookies
Taking a suggestion from an anonymous rant reader [doesn’t want to get fired], I purchased and have been reading a book called Predictably Irrational. Figuring out peoples’ decision-making process is my job – to win proposals, design programs that people want, and how to attract and keep the best workforce. Process evaluation of EE programs contributes a great deal to this as well.
Now, I ask you to find a calm state of mind, such as lying in bed on Saturday morning. Relax. Hang with me till I explain this. For worse and better, engineers are more rational than non-engineers. Why? Because they like to calculate stuff and put numbers on everything[1]. This can make a lot of sense when putting a major league baseball team together, or determining whether “icing the kicker” with a timeout works – just look at the numbers and statistics and do the math, but numbers don’t do anything for emotional or socially acceptable decisions. There are always discrete exceptions to this. There are always socially clueless people in every crowd.
One of many examples the book explains is selling stuff at any price, even a very low price versus giving it away. Selling stuff involves market forces – supply and demand. Giving stuff away involves social forces – a sense of thinking kindly about your fellow homo sapiens.
Good cookies go for roughly a dollar from a grocer’s bakery (I think – maybe?). Prices are set by market forces, and I suppose they make decent profit selling them at this price. If you purchase these, or make equivalent cookies, and sell them in the lobby of your workplace for some dirt cheap price, but not unbelievably low, say a quarter, some guy may have no compunction and snap them all up to take home to his ravenous kids. “Dude, they’re a buck in the store! What a deal! I bought em fair and square.”
In the second scenario, the cookies are free. Again, there are always discrete social zeros (persons) in the world, but chances are the first person to take a cookie is not going to pull out a grocery bag and swipe them all and walk away. Presumably, he will consider his fellow office dwellers and the fact that they may want a cookie gift as well. There is also the pressure to control oneself to not feel like a cheap stingy ____ in the case of taking them all. Again, there are always exceptions, but people generally weigh these social issues to control their actions. Which reminds me, people who drain the coffee decanter at 9:00 in the morning and don’t set it to brew another pot are kind of socially deficient, wouldn’t you say?
These issues intersect with energy efficiency in interesting ways. One example is the energy audit. Lore says end users must have some skin in the game for an energy audit or they will do nothing – implement nothing. Anything for an investment by the customer – say “$50 is much better than nothing” is the fable.
My conclusion: the only thing $50 does is stops 90% of audits from happening. This isn’t like shelling out a quarter for a cookie, which is easy for an individual. Fifty dollars is a huge barrier because the money has to be approved by bean counters. Consider this: in a big company, everything has a cost associated with it. They know what it costs to process a payment and cut a check, and that is in the $40 range. Really. Suddenly spending $40 to pay a $50 fee while consuming several hundred, if not several, thousand dollars of peoples’ time starts to look ridiculous – even if the fee were $500 rather than $50. But by god, they’ll sure as hell do something since they invested the $50. Not.
The ignorant person may think the customers’ perspective is, “Wow, what a deal. My utility is selling audits at 90% off. I love my utility.” No. The vast majority of cases would sound more like this – “I pay those guys $50,000 a year and they want ME to shell out $50 for an audit. Drop dead.” This is the social consequence, a customer relationship issue, ON TOP of huge time and expense to process payment for a paltry amount of money.
On the flip side, the customer, once the audit is complete, is likely to take action based on market forces and return on investment. They are not likely to think, “My utility paid for this audit so I’d better throw them a bone and implement this thing with the return of a 10 year federal treasury note” – that would be about 1.5% nowadays.
We have found that an excellent approach to “skin in the game” goes like this: We will provide ___ services for free if you, the customer, agree to implement identified measures meeting ___ criteria. Here you have a serious offer; a generous offer; a partnering and low risk offer. I believe the generous and partner aspects add a social commitment, as well as a market commitment to energy efficiency for customers; and that even in this scenario, sticking the customer with even a small portion of the service cost wipes out the social aspects of the contract that push it over the top.
I’m at the word limit but I just want to add a couple more optional takes from this.
First, some customers, huge customers, want everything for free from the utility, and I mean everything, including the entire cost of measure implementation. These customers unfortunately are not worth approaching, other than for show. That’s just the way it is. Don’t shoot the messenger.
Second, if the audits aren’t worth a damn, the program won’t be successful regardless of zero cost. Actually, in some markets for some utilities, paying the 20% has become the accepted market and social norm because of the reputation for the deliverables.
[1] This can get quite graphic when nerds go on vacation or when they need to determine the best approach for acquiring a power tool. Symptom: spreadsheets. Look out.
Bait and Switch
The day after last week’s election, the headlines included discussions about the “fiscal cliff” coming on January 1, 2013, when the “Bush” tax cuts expire and substantial automatic spending cuts kick in. I guarantee this will not come and go without high drama. First thing after the election comes the ceremonial token olive branches, and five minutes later both sides return to sharpening their heals and digging in.
I would say energy efficiency has it’s own version of the fiscal cliff coming, and that is the end of the gravy train – lighting retrofits – the so-called low hanging fruit, a term I adore as much as the end of the day. Actually, it will be more of a descent into Death Valley as mandates phase out old-fashioned T12 and incandescent light bulbs. So what is the solution to the Death Valley Spiral? Vampire loads! This I read recently on a blog post or email. Going after vampire loads would be like making car radios use less power to improve gas mileage. Vampire loads don’t amount to squat, and I mentioned this in a blog a long time ago, but I just reran my own home tests.
First, what is a vampire load – energy consumed when a device is turned off. Leaving things on – like stereo and home entertainment equipment is not a vampire load. Here is my vampire load study:
The cable box DVR takes about 15 minutes to boot up, and it seems to not really have a power off mode, but if one likes to wait 15 minutes three times a day to save $20 in a year, go for it. Granted, this could certainly come with better not-in-use power characteristics. Nevertheless, this IS NOT a phantom/vampire load anyway. The VCR/DVD player burns a stunning 1 Watt, most likely to burn the digital clock on the display.
What is one frontier you never read or hear about? Stupid use of expensive fuel, and the most expensive fuel is electricity. If the country wants to take giant steps toward reducing energy consumption, why not promote fuel switching from dumb uses of electricity to natural gas wherever possible.
Last March or so, I bought a retractable clothesline for $12.95 at Menards. Simple payback: about 7.5 weeks (5kW, half hour per load, load per day, 10 cents/kWh). With the deck and clothesline on the north side of the house and winter coming, the “efficiency” of the clothesline is not so grand, so I’m staring at my 5 kW electric dryer.
Why do I have an electric dryer? Because in the La Crosse area, the standard apartment lease comes with “hookups” for washer and dryer but no washer and dryer. So, the hookups of course include electric-only energy sources for clothes dryers. Our choice, therefore, when moving here was electric dryer or the thrill of the Laundromat.
These hookups without appliances are as commonsensical as the Wisconsin bubbler.[1] Tenants have to buy and lug washers and dryers from place to place? Why not refrigerators and stoves too?
The mom and pop stores around here, where I prefer to shop because service to me is king, do not even carry gas dryers. Electric water heaters are another travesty. Using electricity to dry clothes and heat water is the same as buying a Husqvarna 5kW generator that burns gasoline to make toast in the morning.
In a triple or quadruple irony, it reminds me of the Nissan Leaf commercial. Speaking of double ironies, you have to sit through an ad to watch the Leaf ad on YouTube. Electricity is actually a smart fuel for cars, just as wind is for power generation, but there are about 46 physical limitations and barriers for making it a decent full blown alternative to liquid or gaseous fueled transportation.
Some barriers to smart fuel switching include old school energy program thought. Without an exhaustive investigation, I am not aware of any programs that provide incentives to switch from expensive, and from a resource perspective, more wasteful electricity to less expensive natural gas.
The fuel switching is a matter of cross-subsidization where, for example, an electric customer gets a rebate from the electric utility for switching to natural gas. The electric rate payers are benefiting the gas customers. If you stop and think about this a little bit, it is entirely foolish. When the electric utility throws money at a customer for installing more efficient lighting, it benefits the light bulb manufacturers – in CHINA! What is the difference to the electric rate payers OR the electric utility? Electric rate payer money via EE programs is used to reduce demand and sales of electricity while benefiting others customers and other retail sellers of stuff. What difference does it make whether the stuff is light bulbs, insulation, windows, automatic controls, or natural gas?
And consider this, nearly all the new electrical generating capacity is produced by natural gas. We pay to build natural gas plants, poles and wires to produce electricity at perhaps 70% efficiency (roughly for combined cycle plants) to power water heaters, clothes dryers, stoves and other stuff. Therefore, we use more natural gas, not less. As a result, we require more infrastructure for both natural gas and electricity delivery.
Not promoting fuel switching costs consumers at every turn. What is the problem here? Figure it out. Let’s go.
[1] Not knowing what a bubbler is is about as shameful as not knowing the name of a character on an HBO drama series, or the third string center for the Packers – from the 1988 squad.
Is This the Real Life? Is This Just Fantasy?
When I was a kid, I liked to play games; board games, cards, video games, pinball, racing with an electric racetrack, and even golf with clubs on grass outdoors! BTW, these things kick butt over any video game, any day. 
Somewhere between the ages of 12 and 14, I lost interest in this crap. Why? Because life is enough game for me. It’s all about competition, and I’d rather beat others on the court, field, or classroom doing real things with my own skills. And now, it is business in which I compete.
When I go to conferences or seminars, aside from networking, I want to learn. I want to learn what others are doing so I can compare and contrast, and I may even learn something I didn’t know, or learn more about something I knew little about. I don’t want to play dopey games that have no consequences.
For example, last week I attended the E Source Forum in Denver. I ignorantly sauntered into a session called Optimizing DSM (demand side management, aka energy efficiency) Programs. Tell me something I don’t know, or at least give me something to laugh at, whether it’s humor or a laughably mediocre/poor performing program that is sold as the greatest thing since squeezable cheese whiz – like a new personal transportation device developed in a bubble, ignorant of other programs (cars). As an example, metaphorically 
speaking, if the program were a car, it would be the Wayne’s World AMC Pacer. Isn’t it fantastic?! Uh, yeah sure.
In a triple flip of fate, it just so happens the theme song with the Pacer is Queen’s Bohemian Rhapsody; “Is this the real life? Is this just fantasy?…”
Back to the real life, upon sitting down for the session, I quickly learned this was a trap – It was a fantasy of: you have a crappy program, design a new one in twenty minutes after reading everything you need to know on two sheets of paper. The prisoners at our table (our team) each played one of six or eight characters like market analyst, program designer, marketing guy, evaluator, implementer, etc.
We were a municipal utility with 300,000 customers, all of which hated us. Our goals would increase five fold over three years. The current program consists almost entirely of lighting (this is actually realistic), and the sector at hand is small business. All the trade allies hate us because we have gyrating incentives depending on the season and which way the wind is blowing. Our budget was $16. Go.
Thank goodness some people like to do this stuff. My inclination was to get away from lighting – the training wheels of EE programs. The Forum featured numerous sessions on the latest and greatest training wheels, and I successfully avoided them all. The one thing I like about lighting is lack of it – spaces that are either daylit or dimly lit. Anyway, nobody at our table was going for my divergence from training wheels. We did the usual status quo act, and I was fine with that. Let’s just get out of here.
There were about eight teams; four on our scenario and about four on a residential program fantasy. The winning team/program gets a chocolate bar and deserved ridicule. My colleague’s (who shall remain un-ID’d) team won and true to form, there were no boundaries to their fantasy – money, physics, geography, time – don’t let these petty issues get in the way. Every trade ally gets a free iPad. Every participating customer gets an all-expense paid, two-week vacation in sunny Damascus. The judges went for that. Ok. It’s all yours. Enjoy your day in the fantasyland sun but once you walk out the door, it’s time to leave it all behind and face the truth, little silhouetto of a man.
Otherwise, it was a great conference, pretty much. We were able to spend a lot of quality time with clients and meet and greet new people, aka networking.
In other news, the most overused buzzword of 2012 and/or possibly 2013 is “space”, as in market. Used in a sentence, “We operate in the large C&I space.” I would suggest a drinking game, where for every time the word space is muttered, everyone takes a shot of tequila. After 10 minutes in an EE conference social hour, no one would be left standing. The entire city would be out of booze. Yes indeed, at the end of the day, after kicking the can down the road, I’d like to throw space, paradigmatic synergisms, and the entire middle class, under the bus.
The Smoking Gleick
Last week I described a hypothetical, unethical scam to achieve a desired outcome, which leads up to this week’s rant, which I didn’t have space for last week.
I first came across this in The Wall Street Journal editorial page. The Heartland institute, which I had never heard of, or at best I forgot about, is a global-warming-crisis skeptic. From the horse’s mouth, they believe global warming is real, that man contributes, but they are skeptics of the alarmism and the magnitude of man’s impacts.
They are a privately funded non-profit and yes, they get money from big oil just like I do. I get a $20,000 per month stipend from the petroleum institute to write this stuff.
Actually, that’s a fat lie. I don’t get a damn thing from anyone, other than applause to write this stuff. On a side note, the empire howls that Heartland is funded by big oil. Well golly. The empire is funded almost entirely by state (universities), federal (DOE, DOC, EPA, NASA), and foreign governments (UN) around the globe with marketing (activism) by other non-profits. Hey – I’m just telling it like it is, man.
The WSJ piece above talks about the tiny budget of the rebels compared to the marketing arms of the empire, the International Panel on Climate Change. It is interesting but not so much a scandal. Here is the major scandal that is almost totally unreported:
In order to get dirt on the Heartland Institute, a guy named Peter Gleick, one of the “peer reviewers” and most outspoken guy on global warming, PhD, distinguished scholar, blah, blah, blah, (PUKE), impersonated a board member from the Heartland Institute.
He made his way to a receptionist at the institute and in a moment of weakness, the receptionist forwarded a bunch of internal documents in hopes that Gleick would find the smoking gun. There was none.
Here, he completely loses it, like going postal all over the internet. He writes a two-page memo in the name of a board member, otherwise known as forgery, and “leaks” it to the press. The press goes wild on the smoking gun forged by the despicable Gleick. The guy is a PhD dunce and apparently doesn’t know smart people can use electronic fingerprints on a document to determine its origin and the neon arrows all point to Gleick’s computer.
Where is the outrage? TIME reports “Cheating Hurts Climate Science”. ABC reports “Why The Heartland Scandal Doesn’t Matter”. Give me a break, man. This wasn’t a no-name, know-nothing hack in junior high doing this for fun. This is like the Watergate scandal times a thousand because it wasn’t just the impersonating the opposition and hacking his way in, it was fabricating documents (lying) and “leaking” them to the press.
You can draw your own conclusions, but a leader of the empire hacks his way into the rebel network (bad enough) finding nothing, he lies and forges documents and sends them to the press. When a formerly respected leader of the empire breaks in, can’t find anything, and fabricates a scandal, it paints a pretty clear picture. An apology would be a joke. Resigning from his quackery and operating a rickshaw in Cambodia for the rest of his life would be more appropriate.
If the empire has any credibility, they will tar, feather, and excommunicate Gleick. If his name shows up on anything for the cause going forward, it will clearly demonstrate there are no standards. Put another way, if we have to make things up to demonstrate EE programs are cost effective for ratepayers, I’m out of here.
Tidbits
In the uh-oh, I told you so category, General Motors is idling 1300 from their Volt manufacturing line. Uh huh. That’s what candidates say right before they drop out and what GM said a few weeks before bankruptcy.
Also in the news, plug-in delivery van maker Bright Automotive is shutting down, as is Aptera Motors, a California three-wheeled electric vehicle maker.
This one is really good – in the name of our children, let’s all sing kumbaya, set the climate wars aside and save the world. That’s the headline. Then in the article, Friedman knees all those on the one side of the “war” in the groin: “If you are so reckless as to dismiss all climate science as a hoax, and do not accept the data that our planet is getting hotter and the oceans rising, I can’t help you. That’s between you and your beach house – and your children, whose future you’re imperiling.”
Now there’s a truce If I’ve ever seen one.
Efficiency, Politics, Policy, and Economy
Recently, the American Council for an Energy Efficient Economy (ACEEE) released its annual state rankings for energy efficiency. We noticed Wisconsin slipped a few pegs to 16 while Iowa remains near the top at 11. The top states for EE programs include the usual suspects: California, Massachusetts, Vermont, and New York.
As we discussed the rankings in house, my comment was, you probably don’t want to be in the top 10 on this list because those states are on the business-unfriendly end of the spectrum. They have big EE spending congruent with heavy regulation.
So you guessed it; this rant analyzes economic performance, politics, and business friendliness along with the ACEEE rankings.
I did some digging to see what sort of correlations there were between state energy policy, political leanings, and economic growth. One can make all sorts of arguments; my favorite including “if it weren’t for xyz, it would be much worse.” But I never buy that bologna. Likewise, I don’t buy excuses for why savings aren’t being accrued as estimated, unless something radical has changed – like half the occupants left the building and turned out the lights. This is why we look at savings on energy bills and don’t bother with weather normalization or other excuses. Nobody can argue with meter reads from billing data.
I used growth in gross state product for the past 10 years as a metric for economic vibrancy. I used the average percentage of votes for Democratic candidates for president over the past four elections as a measure of state political leanings and simply ranked those from low to high. Finally, ChiefExecutive.net ranks states for business friendliness with a survey of about 550 CEOs. The CEO rankings include considerations of tax and regulation, workforce quality, and living environment.
The rankings for all categories are shown in the data at the bottom of this blog so you can peel it off and do whatever you want with it. FYI – I left out District of Columbia because that is a whacked out, in more than one way, “state”. Therefore, you will see some 51s in the scatter plots.
Plots are worth a thousand words so I plotted ACEEE ranking against political leanings and ACEEE ranking against economic vibrancy. There is a strong correlation between energy efficiency policy and the states politics. Liberal states dominate the high end of the ACEEE rankings as shown in the chart below. Bear in mind that low numbers are high rankings. For example, see the first dot in the lower left corner of the plot. That represents Massachusetts, which was ranked number one by ACEEE and the state has the most liberal record in presidential elections.
It is interesting to point out the outliers. The most conservative state is Utah and they have an ACEEE ranking of 17. Idaho, the third most conservative state is ranked in the middle at 26 by ACEEE. On the other end is Delaware, the 10th most liberal state with an ACEEE ranking of 31. Delaware, however is the size of my back yard and has almost no Interstate highway so anything is possible there.
To my surprise, there is a very weak correlation between energy efficiency and economic growth. It’s actually better than I thought because big states like California and Michigan have good EE rankings and horrible economies. Generally speaking however, higher EE rankings have less economic growth. This is what I was referring to regarding not making excuses. But..but…but… I don’t care. It is what it is and you can send your excuses to your senator where it can be ignored with the rest of the correspondence he/she gets.
See the first point on the left in the chart below? That’s Massachusetts, which had the third worst economic growth over the 2000-2010 period. Yeow! That crappy growth was a bit of a surprise to me. California was 34th in economic growth – actually considerably better than I would have guessed. Subtract Apple from the state’s GSP and it would probably be 45th place. Subtract the rest of Silicon Valley and it would be 50th I would bet.
Washington (the state) has the best combination of energy efficiency and economy. Missouri appears to be a convincing dead last in this combination.
Actually, when I said the second quintile is probably where you want to be from an EE perspective, I was correct, somewhat. The second quintile of states for high EE ranking have the second worst economies, but better than the first quintile, bogged down by rust belt states of Michigan, Wisconsin, Illinois, and New Jersey. Actually, the states with the worst EE rankings have the best economies, so I was right in that sense, unfortunately.
Finally, I roll it all together: energy efficiency, CEO business friendliness, economic growth, and political leanings. Once again, I remind you that large numbers are low rankings.
First a few comments on business friendliness. Texas is top ranked by CEOs as the best place to do business. California is dead last. In a post a few months ago, I pointed out the hilarious fact that Gavin Newsom, California’s Lieutenant Governor, with several legislators in tow visited Texas to see why Texas was sucking jobs out of California like a Hoover vacuum cleaner. What a dope. Maybe he should discover this thing called the internet.
When considering workforce quality and living environment have to be sky high for California, you know their tax and regulatory climate is hell on earth. Steve Jobs apparently alluded to this in his recent biography by Walter Isaacson, saying “it is almost impossible to do so [build a factory] these days in America, largely because of regulations and unnecessary costs.” For examples, Google “delta smelt” to see how “saving” this minnow ruined farmers in California, or check out this recent article to “save” a sucker (a fish that is) in Southern California. There are a plethora of states that would be happy to export some Asian carp to replace this bottom feeder if that’s what they want.
But on with the comprehensive results shown in the chart below – Based on trailing economic performance and current energy efficiency and CEO rankings representing future potential, it appears that the fourth quintile of states ranked by ACEEE is the optimal place to be. These states include Indiana, Texas, Virginia, Montana, Georgia, Kentucky, Alaska, Arkansas, Louisiana, and Nebraska. These states are ramping up EE programs. The average CEO rank for future business development of top EE states is almost 40. That is terrible! These states include Massachusetts, California, New York, Oregon, Rhode Island, Vermont, Washington, Connecticut, Minnesota, and Maryland.
But…but…but – I don’t care. As my basketball coach used to say, “If ifs and buts were candy and nuts what a wonderful world it would be.”
State by state data are provided below.
GSP Rank = ranking in growth of gross state product from 2000 to 2010, constant dollars.
CEO Rank = ChiefExecutive.net survey results of 550 chief executives for business friendly states considering taxes, regulation, workforce, and livability.
Democrat Rank = Ranking of states by percent of votes for the democratic candidates in general presidential elections for the trailing four cycles.
Obviously, many states have tied scores for ACEEE. However, I have no idea how they have four tied for 17th place, a 19th and a 21st. You can probably find out in the full report.
Tidbits
Hey, if you are a highly ranked energy efficiency individual, and if you still take showers, you might consider one of these LED shower-powered lights for your shower. Does two things: saves lighting energy and water flow. Good luck! I came across this on the Sylvania website where I was visiting to vociferously complain about the expensive headlights on my car that simultaneously burned out after a measly 8 months surrounding summer use (very little). This was the second pair (the other a different brand) of high output headlights that failed early. Avoid them, especially if changing the head lamp is like threading a needle in a soda can – sharp edges and all.
TGTBT You Can Believe In
In 1984 was not like 1984, I talked about greeting change with gusto to win the future but with few specifics. This post will cover one such “innovative” way for all stakeholders to benefit from energy efficiency.
The typical utility-sponsored energy efficiency portfolio works like this:
- A small percentage of billed energy consumption, aka a rider is paid by customers to fund EE programs.
- Programs provide incentives for energy efficient equipment and in some cases services such as studies.
- Evaluators determine impacts attributable to programs and make recommendations for improvement.
- Regulators oversee it all to help ensure consumers aren’t being ripped off – a primary role of government.
- Consumer advocacy groups, some of which are in business solely to bash utilities and add no constructive value whatsoever, object to everything. Other advocacy groups can be great as they understand the utility business and that it is not a charity like The Salvation Army.
Many utilities have, at some point, added financing to their portfolios with dismal results and no wonder. Customers can typically get lower interest rates on the market or with banks and other lending institutions. Why waste time with the utility or program?
The chair of New Jersey’s Board of Public Utilities wants to “look into cutting the subsidized rebates, saving the average residential customer more than $2 a month”. (don’t spend that all on one place) He wants to look at creating a revolving loan program over time, rather than collecting money from everyone on their energy bills and paying it out to some customers in the form of rebates or other services described above.
Of course, as described in the 1984 post, this was met with angst and resistance by a variety of stakeholders. A chump from the Sierra Club says residential customers won’t use the program for purchasing an efficient furnace, for example. And this is based on???? It would probably take care of some free riders for people like me who would buy the efficient thing anyway and why not take the $100 rebate from the program I have been paying into? I wouldn’t do the financing because I hate monthly payments and it’s more hassle than the 39 cents saved. Other people, it seems, will finance a new 16 oz claw hammer from The Home Depot if given a chance. They are probably the same people who write a check at the convenience store for a soda and two hot dogs.
The American Council for an Energy Efficient Economy declares finance programs are used by only 1% of consumers and that for one program, when given the choice between financing and incentives, 90% of respondents choose incentives. This is grapes and cantaloupes. The time-strapped reader like me would read 1% of respondents like financing and 90% like incentives. Nice try.
What’s the problem with financing programs and lousy participation? They suck. They generally offer nothing a person can’t get from the bank or selling bonds for large end users. They provide no other services, such as cost/benefit analysis for customers. How to make financing attractive: lose the rigidness, forget the no-benefit program that ran for five years with three participants, and break with the status quo that most utilities cling to at all cost.
Stakeholders need to change their mindset and actually consider EE as a resource – a replacement for power plants and infrastructure. From the customer perspective it is a replacement for paying for therms and kWh. Combine this with the usual demand side management funds and utilities could create a vibrant and active financing program. It could be marketed by something jazzy like TGTBT – to good to be true. Looks like a bridge doesn’t it? I can see it now.
Gimmicks aside, the first thing that would help a ton is adding the payments to the monthly bill. Energy efficiency is a resource delivered to customers so why not pay for it rather than paying for kWh and therms? I have heard from more than one utility that their software, SAP or similar, cannot handle on-bill financing. You have got to be kidding me. That’s like saying a smart phone can’t make phone calls. The answer to any question involving ability for computation on a computer is, yes it can.
On-bill financing makes it easier for customers to make projects happen. Depending on the corporate bean counter, this may allow for treating the project as a lease rather than a capital purchase that requires approval from God. Once the credit risk has been cleared, customers with more than one facility can implement projects in multiple facilities.
From a utility perspective, why not earn the same return on capital as is used for power plants and infrastructure? This is blasphemous to some regulators but especially consumer advocacy groups because this means utilities would make profit on EE projects. Egad. Well heeyaah!
Having watched utilities for years, I have to wonder whether some really want to reduce their customers’ energy consumption through EE programs. Many, for sure those running programs, do but it seems some are given instructions from the board room to just make it look good. Thoughtful executives and boards know what is good for their customers is good for the utility because prosperity results in expansion and … more consumption! And vibrant programs are good for public relations making it easier get what is wanted through rate cases, and they surely are good for the Eco Devo department for luring new big customers.
Returning from that digression, wouldn’t it be a good thing to grant the same profit on selling EE as utilities make selling energy? This should make the executives and the board much happier than collecting money from their customers and distributing it to others driving down consumption, presumably. Regulatory and consumer advocacy agencies need to get on board with profit driven EE programs. As long as the program is as cost effective for the customer, what’s wrong with making money on it?
Another pillar in TGTBT is a savings or cash flow guarantee. This typically triggers a stampede for the exits among utility folks. I have not seen a study on this but guarantees are definitely a critical piece of doing an EE project for some customers. Transparency is something desirable for these contracts as well. Customers see how much the project actually costs and what the finance charges and fees are. They could even competitively bid the project to help ensure good pricing. This all allows for a much more desirable proposition than the typical performance contract which essentially is a contract that says, “trust us, we are not ripping you off.”
Putting all these elements together isn’t absent challenges, including credit ratings of customers. Such a program may not work well for residential customers, particularly those who don’t own their residence. The administrative costs may be prohibitive. Default rates would be higher among residential customers because people move from residence to residence, and out of utility territory, much more easily than businesses, schools, factories, and institutional buildings can. Indeed, for C&I customers such programs have been very successful with negligible savings challenges and puny default rates.
Recapping, key elements include: granting normal return on capital for utilities, very low finance rates for customers, and guaranteed performance. On-bill financing makes things easier for customers but isn’t absolutely essential. The other three pieces are.
Tidbits
I read more hype regarding the Fukushima nuclear plants last week in The Wall Street Journal. It was a bit like the ACEEE statement above. Paraphrasing, “trace amounts of dangerous plutonium was found within a 30 mile radius of the plant.” I’m sure I have trace amounts of some fried cheese balls I ate in high school – plated out on an artery somewhere too. They also detect strontium, iodine, cesium, this, that and the other – some with half lives of 30 to 90 years. OMG! We’re all going to die.
I would say that 99% of the population has no idea what a half life even is. It is the point at which half a particular isotope has decayed to a lower energy state – I.e. half the gammas, alphas, neutrons have been puked out. So all else equal, the longer the half life, the less intense the radiation, but 99% probably think it will be lethal for that long.
How many people have died from the reactor accidents? I haven’t heard of any yet. Zero.
The Rogue Choir Boy
I spent last week at the International Energy Program Evaluation Conference, IEPEC, as in, I-E-P-E-C to hard core evaluators or I-Peck for the rest of us.
Ninety-five percent of the conference including content and networking was great. Of course with this being the Energy Rant, I will beat on the remaining 5%.
Recapping, there are generally two portions of program evaluation: impact and process. Impact evaluation, which is what we at Michaels do, involves the assessment of savings (impacts) programs achieve, including what the measure actually saves (gross savings) and what impact the program had on the savings (net savings). For example, my mother started buying LED Christmas lights and practically replaced her Las Vegas scale lighting system with LEDs in one year. She then showed me forms she could submit to get cash back from the utility. Mom loves the lights. The cash was just a handout. Gross savings may have been decent for a residential end user. Net savings were zero because she already bought them without knowledge of the incentives or program.
Per the California Evaluation Framework, 2004, process evaluation is a systematic assessment of an energy efficiency program for the purposes of (1) documenting program operations at the time of the examination, and (2) identifying and recommending improvements that can be made to the program to increase the program’s efficiency or effectiveness for acquiring energy resources while maintaining high levels of participant satisfaction. The term “program’s efficiency and effectiveness” refers to dollars spent on programs. Are they achieving real impacts or just handing out money?
The conference is dominated by process evaluators and their counterparts on the utility and government (state and federal) side of things. Many (10-30%?) of these people I think have orbited a little too far from earth and spun off to other galaxies. They live in a galaxy far away and they argue about things like Zeno’s Paradox, except more obtuse, nebulous, and alien than our pal, Zeno. From here on I’ll refer to life forms as ETs, as in extraterrestrials.
I’m sending out a call to program implementers – utilities and third party implementers – you need to get involved with these evaluation conferences because I think you might be surprised at what you hear. For example, the keynote speaker Naomi Oreskes, a professor of history and science, talked; well let’s just say the title of her book is “Merchants of Doubt” (about global warming). Her message involved the history of deniers going back to the end of the cold war, later risks of tobacco, and so on up to global warming. It was interesting but as you know, I have doubts about significant human derived global warming and the conference itself perpetuates the basis of my doubts. I believe the reason it isn’t getting traction is people do not perceive any climate changes or adverse effects. Change is normal. On the other hand in the tobacco fight, black rotten lungs and people dying a heinous cancerous death are clearly eye openers.
Like climate science, the conference is supposed to be based on engineering, science, social behavior, decision making processes and the like. But in a large sense, to some it has turned into an advocacy group for policies to mitigate climate change and the philosophy of evaluation is starting to look like the philosophy of climate change as presented by the ETs. Papers for the conference have the same “peer review” process that the climate scientists supposedly have. In fact, as moderator, I peer reviewed three papers for my session and those papers focused on subjects relative to program evaluation, including how do customer perceptions of their lighting hours match reality as determined by logged data. What are the market effects of high bay lighting in California relative to a control group of states with no programs? This was interesting stuff and the papers were informative. I learned a lot and even referenced some of the findings already in proposals. To be sure, other sessions presented much pertinent useful information.
However, some latter sessions were really whacko fringe stuff that had nothing whatsoever to do with program evaluation. I attended one session that I swear to my maker was a doomsday cult session. People were pounding away on their smart phones during the session, possibly to book flights to Guyana?? In fact, I was thinking of shooting off an email to my loved ones saying that it’s been great knowing you and thank you for everything, Mom. The presenter was talking about how megatons of methane locked up in silt from a Siberian river flowing into the arctic ocean was going to be released and temperatures would rise 20 degrees or so in 20 years and a billion people would die from drought and famine. No kidding! Sounds like the makings of a Superman IIX movie. And this guy was absolutely convinced this is about to happen and absolutely sure what the precise effects would be. He spoke factually and in reading his paper he speaks of certain things to come – i.e., he was not saying,” could”, “may”, or “worst case” – it was “will” for all claims.
The only “will” there is about the future is, I will die, and I will pay taxes.
At the same conference there were panels of ETs who would debate things for which I could not understand whatsoever. When a guy (me) who’s been in the business for 16 years doesn’t understand the message, the message is miserably and hopelessly off course. The ring leader would say, “so and so is a contrarian and the other three panelists are believers” [in something?]. I don’t know what. They are so far out in left field you have to remember the seven time zones difference to ask them a question so you wake them up in the middle of the night. Finally, one woman in the session – an implementer – stood up and commented that we need to start talking the language of ISOs (independent system operators that control the grid), power suppliers and utilities or we will lose relevance not only for EE and policy, but for evaluation as well. I was about to give her a standing-O right there for COMMON SENSE. The first words out of one of the panelists mouth was, “I disagree.” Boooooooooo! What is wrong with these ETs?
The day before this there was a panel of mostly ETs to discuss politics of evaluation, which turned into politics of global warming of course. Note that probably most old timers still inhabit our planet and they are clear thinking people with their eye on the ball, which is improving programs. They didn’t all arrive at Boston Harbor in the starship lollipop. Moving on, each of the panelists gave their sermons and then it was turned over to ETs in the audience voice their proposed chapters to the holy book. I actually had to leave before it was over. The typical rant would start with, “I just have a couple quick comments.” Five minutes later they were talking about chicken farming on a nickel a day in Kenya. They would babble incoherently like someone who had been dropped on their head and doped up on maximum doses of morphine prescribed by their doctor. Anyone home? Is there a question in there somewhere? Perhaps a comment regarding our industry? Have you ever been introduced to concise?
Many ETs argue that we cannot quantify the true impacts of EE programs so just fuggedaboutit. We cannot treat EE or demand response as a resource so fuggedaboutit. What the? Then why have these programs? They know for sure that they need plane tickets to Guyana but we can’t even come close on program impacts? See what I mean? Does this make sense? The juxtaposition with program evaluation and climate change seems to be, believe. We can’t really measure it. We know neither the day nor the hour. It is going to kill us and these programs are cost effective. Just keep the money coming.
As it turns out, I was not the only flat earther in attendance. Numerous other heretics including one who had been away from these conferences for 10 years said the same thing, unsolicited. “It has become a religion,” one elder statesperson said. Well, heeeyah!
Let’s get rid of the underlying stealth agenda and crap papers and refill with good stuff and save the ET rants for the lollipop ride back to planet Koozebane.
written by Jeffrey L. Ihnen, P.E., LEED AP
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