Factoid: Jevons Paradox

Published to LA Confidential, Winter 2016

While 2015 marked the 150th anniversary of Alice in Wonderland, it also marked the anniversary of the Jevons Paradox.  William Stanley Jevons, an English economist, observed that the increased usage of coal was leading to critical shortages. He concluded that traditional sustainable energy sources such as wind, biomass, and hydro were not going to make a comeback due to scarceness and their relative unreliability. Many experts concluded that a type of demand side management in which coal processes became more efficient would enable the supply of coal to stretch further. However, Jevons Paradox, written in 1865, indicated otherwise.  He theorized that increased efficiency of coal as a fuel would lead to more opportunities to use coal and therefore increase consumption. Some environmental economists have applied this paradox to today’s energy issues, but I cannot discuss that now because, “I’m late, I’m late, for a very important date. No time to say hello, good-bye, I’m late, I’m late, I’m late.”


Down the Rabbit Hole: Is Carbon Sequestration a Dream or a Reality

Published to LA Confidential, Winter 2016

The opening chapter of Alice in Wonderland is aptly titled “Down the Rabbit Hole.” Alice’s adventures begin when she follows a rabbit down its hole and consumes items that cause her body to expand and contract. Alice’s journey has been a metaphor for mind altering experiences ever since.

Some say that the idea of carbon capture and sequestration (CCS) as a greenhouse gas solution is equally fraught with unrealistic concepts.  The CCS process captures CO2 produced by power plants and compresses it into a liquid. It is then transported to certain geologically receptive areas where it may be injected (or “sequestered”) in porous and permeable rock formations deep below the ground, a mile or more in some cases. Thick layers of dense rock above the porous areas prevent the CO2 from escaping to the atmosphere.

While the process seems straightforward, there are downsides. Primarily, the cost to compress and transport CO2 may be prohibitive. As reported by MIT Technology Review last year, the Boundary Dam project utilized a recently significant advance in CCS technology with the opening of its combined 110-megawatt coal plant in Saskatchewan. The CCS unit consumes 21 percent of the plant’s power, and at $7,300 per kW, the plant is among the most costly generators.

Other obstacles to CCS include the seismic damage and ground water pollution that may be caused by liquids being pumped underground in large quantities and at high pressure. The US Geological Survey (USGS) is in the process of studying environmental impacts and geologic storage capabilities in the United States.

Is sequestration realistic? Yes and no. On the scale necessary to have a serious impact, at present, it is more similar to the diminutive Alice who shrinks by drinking from the bottle labeled “Drink Me.” However, sequestration is one of many tools that may come out of a Mad Hatter tea party of suggestions for reducing greenhouse gasses.

Net Zero Energy Buildings (NZEB): Are They Painting Their Roses Red?

Published to LA Confidential, Winter 2016

When a building produces all the energy it consumes from renewable sources, it is referred to as a “net zero energy” or a “zero energy” building (NZEB or ZEB). Such facilities typically feature a combination of aggressive efficiency efforts (both passive and active) and a large on-site photovoltaic (PV) solar power generation system.

The architecture of such facilities may also involve solar orientation for daylighting, large triple-glazed windows, and extra building mass to retain solar heat. Together, such options may have to cut total energy use by 75% so that the remaining needs may be provided by on-site renewable sources. In the struggle to cut emissions and foster sustainability, are NZEBs the way to go for new buildings?

Primarily, it is important to clarify what a NZEB is not. A NZEB is not off-the-grid: it uses grid-based power and/or natural gas whenever its on-site systems do not produce enough energy. Their on-site systems later produce a temporary surplus to make up the difference. While many facilities that have solar panels at times produce more kilowatt-hours (kWh) than they are consuming, they are not automatically NZE unless their total annual energy use (including that used for heating, cooling, process loads, etc.) has been countered by their own systems. Some so-called “passive” houses are designed to capture and store solar heat to minimize, or avoid use of other energy sources for heating, but they too are not automatically NZEBs unless they produce on-site electricity. Finally, a building that secures renewable energy from off-site sources by buying “green” power from the grid is also not NZE, regardless of how much clean energy it buys.

Buildings that are significantly more efficient than average, but not NZE, may instead be called “high performing.” Many of them have been chronicled in High Performing Buildings, a free American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) publication is available at www.hpbmagazine.org.

The U.S. Department of Energy (DOE) maintains a database of NZEBs at http://zeb.buildinggreen.com/. Most are new structures and/or relatively small: the database lists none over 25,000 square feet, with most below 10,000 square feet. While most U.S. NZEBs are in California, many others are found across the world.

How realistic is net zero as a concept for urban areas, or as a general goal for cutting energy use? A study by a DOE lab found that, unless significant ground-based PV panels are in use, NZEBs may be limited to five stories in height. Any taller involves greater total building consumption than may be provided by renewable sources located within the building’s footprint. To reach that height, the entire roof (and perhaps an overhang) must be covered by PV panels to produce power. A geothermal energy system must be deployed to exchange heat with the earth for HVAC service. Daylight dimming control, plus high efficiency pumps, fans, lighting, and plug loads, are also essential in such facilities. Taller NZEBs require use of ground-based PV systems such as solar gardens or PV-covered parking areas in addition to those mounted on the building.

To achieve and maintain NZEB status also involves installing, commissioning, and successfully operating layers of controls to minimize energy use. As some NZEBs have found, failure to do so may make NZEB status as tough to catch as the famed White Rabbit.

In a 2009 New York City presentation by a DOE official, five ostensibly NZEBs were reviewed. In all cases, getting them to actually net out their entire energy usage was described as “quite challenging.” While the buildings provided comfortable working conditions, energy bills failed to drop to zero. The problems that almost turned the DOE guy into a Mad Hatter were mostly related to their sophisticated controls: heating and cooling systems sometimes fought each other, and automatic dimming systems did not work consistently (or occasionally not at all). In addition, plug loads which may account for 50% of total NZEB kWh use, remained stubbornly higher than projected. Many NZEBs depend heavily on occupant training and discipline to work as expected, and such behavior was often inconsistent.

All five had been commissioned prior to occupation but, over time and varying climate conditions, settings drifted or simply refused to work as planned. After many contractor callbacks, additional metering and monitoring, and a great deal of hard work, all eventually were close to, or achieved net zero. However, keeping them there involved a sustained presence by engineering staff who are not typically maintained on-site to manage buildings.

More recent accounts of the types of controls used in NZEBs also questioned how well they work over the long term. In a 2015 article in Lighting Design and Application, published by the Illuminating Engineering Society (IES), a survey of advanced lighting control installations, such as daylight dimming, by a specialist with Southern California Edison found that about 90% of the controls were inoperative “because there was no one on board skilled enough to maintain them.”

In late 2015, the Continental Automated Buildings Association (CABA) issued a report and presentation (both are available at http://www.caba.org/CABA/Research/Zero-Net-Energy-Buildings.aspx) that reviewed similar problems. While focused on ways to overcome them, the study found that, out of the NZEBs reviewed, only half (11 out of 23) actually attained that status. As the Red Queen told Alice, “it takes all the running you can do, to keep in the same place; if you want to get somewhere else, you must run at least twice as fast as that!” As for those building managers who did not meet the net zero goals, “Off with their heads!”

Aggregation’s Benefits: Some Bills May Be Large, and Some Bills May Be Small

Published to LA Confidential, Winter 2016

Utility deregulation for both natural gas and electricity is encouraging customers to form buying groups to seek cheaper energy through bulk energy purchasing. The first major group, the Northeast Ohio Public Energy Council (NOPEC), recently celebrated its 15th anniversary. It serves 174 communities across 10 counties, buying both gas and power at negotiated prices. Across the U.S., hundreds of such groups have formed, including for a time the entire city of Chicago.

Under enabling legislation in seven states, community choice aggregation (CCA) laws allow municipalities to create group purchasing programs under which all customers, businesses as well as residents, are automatically opted in, unless they specifically opt out. A good overview of CCA may be found at http://www.ncsl.org/research/energy/community-choice-aggregation.aspx. A Wikipedia page regarding community choice aggregation states that, according to one CCA advocate, over 1300 municipalities have pursued this option.

In States where utilities have been deregulated, many private associations of building owners have also created energy aggregation organizations. These “affinity groups” share either a mission such as municipal associations, or a commercial/industrial interest like pharmaceutical plants. Some groups have found that they acquire better pricing when their kWh volumes are combined. One large aggregator realized that such benefits were indeed helpful for aggregations of at least 50 MW. Others have found savings for total loads as low as 25 MW.

Joining an aggregation group is an easy way to outsource an individual’s or firm’s energy procurement efforts. Doing so, however, may carry with it some of the same baggage as joining any association. The ability to customize contracts, services, and other options may be limited. Cooperation, and possibly sharing sensitive information with an intermediary, may be necessary. Many buying groups also act as typical energy brokers: bidding out customer energy use to multiple suppliers, with the winner providing a cut of the revenue (in mills/kWh) to the association. Since the customer never sees a bill for such brokering, the service may appear to be free which makes membership look like a no-brainer. Customers that have multiple accounts such as housing authorities or retail chains may group them onto one contract, creating a de facto aggregation. To avoid complicated terms, a simple fixed price may be sought for all the accounts. While this is an acceptable choice within an existing company with clear internal accounting rules, this strategy may be counterproductive within a buying group of otherwise disparate (and possibly competing) customers. In one case, a large (8 MW peak load) media production company that ran 24/7 all year was about to join a local group of industrials, most of whom were assumed to have similar usage patterns.  This combination would be expected to provide relatively low power rates. But investigation by the company’s energy consultant found that was not the case. In the end, the company received better pricing on its own than by joining the group.

Depending on when power is consumed (both hourly and monthly), one customer may also be able to acquire better pricing than another, regardless of kWh volume. Here is a slightly exaggerated example. A religious institution was considering aggregating with an associated office building. Each consumed about 1,000,000 kWh a year and had an annual peak load of about 250 kW. Both assumed that their combined kWh volume would elicit better pricing than either could acquire on its own.

The simulated, combined monthly profile was indeed much flatter than either separate profile. From the supplier’s standpoint, pricing for such a consistent combined load may be easier to hedge. The larger volume may attract more competitive pricing. Also, securing and serving one new customer is always easier (and maybe cheaper) than dealing with two.

However, unlike Tweedledee and Tweedledum, these two customers differed in one important way: the annual distribution of their monthly consumption. The office building’s usage peaked in the summer months when grid-wide power demand may be greatest, and wholesale power pricing highest. Meanwhile, the religious facility’s use dropped during the summer: its school is closed and its church is not air conditioned. It uses more power in the non-summer seasons when grid power is generally cheaper.

Marrying the two into one aggregation may therefore cause the religious facility to unknowingly subsidize the office building. The religious institution may see an even lower price, despite its lower volume, due to how it uses power relative to the monthly pricing variations seen at the wholesale market (referred to as, the forward curve).

One way to be sure that subsidizing does not occur is to secure both separate and aggregated pricing quotes for all group members at the same time. If one participant’s separate pricing came out lower than the group’s aggregate price, it should seek its own power contract instead of combining with others. A smart consultant will always request such pricing on behalf of its clients.

Another important factor that plays into pricing is credit risk. Suppliers will evaluate each entity separately for credit; and, therefore, the entity in a better credit position will receive a lower price than it could as part of an aggregation. Aggregating in this situation will result in the entity with the higher credit rating subsidizing the cost for the other poorer rated entity. Viability of the group management agent may also be a concern. In northern NJ, the firm managing an aggregation group of municipalities and schools went bankrupt, forcing the group to disband, throwing its customers back onto utility service.

Where forward pricing is available from a utility (an option fast disappearing as markets and utilities become more sophisticated), it should also be checked against pricing offered by the aggregation group. As Chicago learned after only two years of CCA, its utility’s fixed forward pricing dropped below that offered by its group, thus the entire city switched back to utility service. For others stuck with higher aggregated pricing, their expected savings – like the Cheshire Cat – disappeared, but with no customers left grinning.