Thursday 16 May 2013

This is the text of the speech I made at the International Energy Research Centre’s 2013 Conference in an enjoyable debate over whether we should commit public and private resources to energy supply or energy efficiency. Needless to say I argued in favour of energy efficiency.


Good afternoon everybody. I am here to make the case for investing in energy efficiency over energy supply.


The first thing I want to cover is just how big the efficiency resource really is – and we do need to think of it as a resource like any other.


The University of Cambridge a few years back came up with these numbers:

  • We use 475 Exajoules of primary energy, that’s oil, coal, gas, solar, nuclear, and out of that we get a 55 Exajoules of useful energy services, so that is heat, cold, motion and sound.
  • That is 11% efficiency – with all of our advanced technologies we get an overall efficiency of 11%, which means we waste 89% of all that primary energy, even after allowing for some of that we can never use, it is still pretty pathetic.
  • Out of the 6 trillion or so dollars we spend on energy, something like 5 trillion is wasted. By the way, is my blog – so now I have the commercial out of the way!


So, now we are talking about money we’re going to look at some big numbers. I don’t see many £50 notes but interestingly enough they have Boulton and Watt on who made their fame and fortune by selling energy efficiency in the form of long-term shared-savings contracts. Most people think James Watt invented the steam engine, he didn’t – he invented a more efficient steam energy and sold them on the basis of energy savings.


So let’s compare renewables with efficiency. In the power game the common denominator is Levelized Cost of Energy (LCOE). Let’s look at LCOEs for renewable technologies using some numbers from the Fraunhofer Institute which is pro-renewables.


The LCOE for the existing grid – that is fossil fuels and nuclear – is in the range 30 to 75 euros per megawatt hour, so that is the bench mark.


First, we look at onshore wind. Fraunhofer says the LCOE is 60 to 75 euros per megawatt hour.


Large scale solar PV has a LCOE of 110 to 140 euros per megawatt hour.


Small scale solar PV has a LCOE of 125 to 250 euros per megawatt hour.


Now offshore wind, which the UK is putting an awfully large bet on, has a LCOE of 125 to 175 euros per megawatt hour.


The UK says that the cost of offshore wind can be reduced to 100 pounds per megawatt hour compared to a wholesale electricity price of 50 pounds per megawatt hour. That is if everything goes to plan and the industry can deliver 100 pounds per megawatt hour, and many people think that is a very big ‘if’, the cost will still be twice the current wholesale price.


Finally let’s look at tidal power which has huge potential. Now if the cost-down curve for tidal is achieved, the LCOE is 250 to 350 euros per megawatt hour.


So now let’s look at energy efficiency. By the way, one of the other problems with energy efficiency is that it isn’t photogenic!


Work by the American Council for an Energy Efficient Economy looking at all the energy efficiency programmes supported by American utilities came up with a LCOE of 20 to 45 euros per megawatt hour.


Now I have thrown a lot of numbers out so let’s summarise here:


  • Fossil fuel/nuclear – €30 to €75/MWh
  • On-shore wind – €60 to €75/MWh
  • Large scale PV – €110 to €140/MWh
  • Small scale PV – €125 to €250/MWh
  • Off-shore wind – €125 to €175/MWh
  • Tidal stream – €250 to €350/MWh
  • Energy efficiency – €20 to €45/MWh


We can see that efficiency, which we saw at the beginning is a huge resource, is also by far the cheapest resource.


Now let’s look at a very famous building which is now an icon for energy efficiency: the Empire State Building. As has been well reported some clever holistic engineering as part of a major refurbishment led to 38% savings with a three year payback period on the incremental capital. Tony Malkin, who owns the Empire State Building is an environmentalist but he is also first and foremost a New York property magnate. He only invests if there is a three year payback period and he forced his supply chain to do it right and because of the financial results now every other New York property owner wants to do energy efficiency, and it doesn’t matter if they believe in climate change or not. So energy efficiency is an environmental activity that isn’t controversial. And of course it does not need any subsidies whatsoever.


And now another thing: the LCOEs we quoted before don’t take account of the additional costs that low-carbon generation impose on the grid. I am not going to go through the numbers from this research by OECD but you can see that, depending on the degree of market penetration achieved, the additional costs on the grid for wind and solar can range from 20 to 80 dollars a megawatt hour, that’s on top of the LCOE numbers we have already looked at.


On the other hand, energy efficiency brings with it additional benefits rather than additional costs. This work by ConEd in New York shows the additional benefits that come from a commercial lighting retrofit in terms of reduced need for investment in transmission and distribution, avoided line losses and capacity savings. Even excluding the energy savings and the environmental benefit, a kilowatt of lighting retrofits can save 1400 dollars.


Now let’s talk about jobs, a critical subject everywhere but particularly in Ireland. Work by ACEEE has shown that energy efficiency generates 21 jobs per million dollars compared to 10 in the energy generation industry and 17 in the general economy. So if you take one million dollars revenue out of the energy industry by saving a million dollars you lose 10 jobs but you generate 17 jobs in the economy as a whole and if you spent a million dollars on energy efficiency you generate 21 jobs.


Two more points: one looking forward and one looking back. Looking forward, decarbonisation through renewables just does not look plausible. This chart from a recent report by Liberum Capital shows the scale of growth we need in renewables in the UK to meet our targets. Quite frankly, these growth rates in wind and nuclear are just not plausible. Doubling the amount of nuclear power in 17 years, 2013 to 2030, is quite frankly a joke when it takes years and years just to get to a decision and every comparable nuclear project everywhere is way behind schedule and over budget.


Now if we look back at the last 40 years, and this chart shows US data but the same is true everywhere, we see something really quite interesting. The top lines show what energy use would have been if we had stayed at the same level of efficiency the US had in 1970. The total would have been 203 to 210 Quads but in reality the US now uses about 100 Quads. So if you look back at the last 40 years, energy efficiency has delivered more energy services than any other source of energy, coal, gas, nuclear, renewables, by a very long way. And we did that without trying except for a 10-year period between the mid-1970s and the mid-1980s.


So to sum up:

  • Energy efficiency delivers much lower cost per megawatt hour than any other energy resource.
  • It is a very large resource.
  • It does not require subsidies.
  • It brings with it additional system benefits in the electricity network unlike renewables which bring additional costs.
  • It generates more jobs per million dollars than energy generation and the economy as a whole.
  • Decarbonisation through renewables is not plausible.
  • Over the last 40 years energy efficiency has delivered far more energy services than any other source of energy – without really trying.


So just think about what we can do if we really try!


Thank you to all at the IERC for inviting me to speak and organising such a great conference. Thanks also to my fellow debaters on both side of the argument and to the audience for their contributions.

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Dr Steven Fawkes

Welcome to my blog on energy efficiency and energy efficiency financing. The first question people ask is why my blog is called 'only eleven percent' - the answer is here. I look forward to engaging with you!

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