The case for fuel-agnostic efficiency

Those of us who care about energy and environmental policy have a bad habit: the lazy but rhetorically convenient tendency to refer to energy issues as if they were fuel issues. From solar to coal to uranium, we have developed a shorthand that uses these words to describe a whole fuel-chain, from raw fuel extraction/recovery to end-use consumption. But the language is dangerous. What matters is efficiency — true, fuel-agnostic efficiency, applied equally to every possible fuel-chain we know. Not because efficiency is an alternative to any given fuel, but because any other energy policy is ultimately unsustainable, in every sense of the word.

The first point to recognize is that every fuel is finite — even renewables. There is a finite number of dams we can build. There is a finite volume of biomass that can be regeneratively harvested each year. There is a finite amount of solar energy that hits the globe each year. In all cases, we cannot exceed these practical limits.

As such, it is irresponsible to pursue any policy that treats those fuels as infinite. Yet so much of our current energy and environmental policy does exactly that.

Three choices

Pick any energy or environmental concern. Any policy approach taken to alleviate that concern will fall into one of the following three buckets:

1. Reductions in quality of life. We can buy smaller cars, keep our homes 5 degrees less comfortable, stop buying any leather and/or petroleum-derived products, etc.
2. Fuel switching. Replace coal with nuclear to alleviate global warming. Replace natural gas with nuclear to avoid waste-disposal. Replace natural gas with wind to eliminate LNG terminals. Replace wind with solar to stop killing bats. Replace solar with coal to keep the costs down. (Repeat.)
3. Increased conversion efficiency. This final bucket describes any policy that increases the efficiency with which we convert raw fuel (of any type) into useful energy. The inputs are, in and of themselves, largely useless (think crude oil locked in shale, or uranium). The outputs are wonderful (think cold beer). Anything that increases the output/input ratio falls into this bucket.

Each of these policies has its place. But it bears noting that efficiency is the only policy that drives down energy costs, decreases resource utilization, and increases the quality of life for the maximum number of people. As such, it ought to be step one in any responsible energy policy.

Money: It’s all about the efficiency

With all due respect to Spike Lee, most of us know this. We like electric vehicles not because we think electricity from a plug has no emissions, but because we know that on a well-to-forward-motion basis, the U.S. grid mix-EV fuel chain uses a tad less total energy than a petroleum-ICE fuel chain. Similarly, the debate about corn-based ethanol isn’t about the inherent virtue (or lack thereof) of biomass — it’s about making sure the fossil fuel inputs from fertilizer production and corn-milling are factored into the calculus.

But just as it makes no sense to frame the pro-EV crowd as pro-coal, or to frame the anti-corn ethanol crowd as anti-biomass, it also makes no sense to be categorically anti-coal, categorically pro-solar, or categorically in favor of any specific fuel independent of its overall fuel-chain efficiency. While it may be rhetorically convenient to use fuel as a shorthand, it is lazy and potentially counter-productive. (Yes, feel free to pillory me as a guy in a glass-house throwing stones. Sorry.)

What it means to be pro-efficiency

Theolonius Monk supposedly said, “if you make a mistake, play it again, louder.” It’s a great line and — if you’ve ever had the pleasure to improvise with a group of musicians — not without a kernel of truth. But it has absolutely no bearing on energy policy, and should not be used as a guideline for any energy or environmental regulator. The central problem with much of U.S. energy and environmental policy is that it keeps making the same mistake, louder, and louder each time.

Given the three choices above, and given that the efficiency option ought to be the first option deployed … we consistently get it wrong. Massively wrong. Much like Monk found when he banged out a hard D-flat over a C-major harmony, we’ve made these mistakes so loudly, and so often that the conventional wisdom just assumes they’re correct. (But with much less aesthetically pleasing results.) A few examples:

1. Our century-old electric regulatory model explicitly disincents utilities from conserving fuel. This is the biggest single industry in the country on a revenue basis, and it is responsible for 42 percent of our annual CO2 emissions. If there is one industry that ought to have a financial incentive to conserve fuel, it’s this one.
2. The Clean Air Act mandates pollution control technologies that universally drive up our CO2 emissions and — coupled with New Source Review — provide massive obstacles to any industry or utility that has a creative way to get more useful stuff out of less input energy. Some perspective: the Clean Air Act is the second biggest piece of legislation in Washington. It is exceeded in number of pages only by the tax code. Again, it’s not like we’re only ignoring efficiency in the tiny, tucked-away corners of our energy policy.
3. The “clean” energy space isn’t absolved of blame either. The German model for feed-in tariffs (perhaps the biggest solar program in the world) sets rates for power to deliver an acceptable rate of return to solar technologies, effectively providing a disincentive to lower the capital costs of photovoltaic technology, since to do so would lower the total annual dividend to photovoltaic company shareholders. To the extent that cost reductions are achieved by generating more watts per square meter of photovoltaics, that regulation is also an anti-efficiency measure.

Meanwhile, there are surprisingly few policies that actually stimulate energy efficiency. Yes, there are demand-side-management programs run by local utilities and utility regulators. Yes, there are federally-mandated appliance standards. Yes, we do have corporate average fuel economy standards (even if they have been frozen for a tad too long). And yes, there are moves afoot to work efficiency measures more explicitly into regulation with output-based pollution standards. But these examples are few and far between — and they invariably face challenges from smart looking dudes who assure us that efficiency makes such economic sense that the market will take care of it without any government intervention … as if our current anti-efficiency energy and environmental policy would allow that to happen.

Be pro-efficiency. Try not to be pro or anti any specific fuel. Because regardless of which fuel resource we like — be it coal, wind, gas, nuclear, geothermal, oil, or or chicken turds — it ought not be wasted.