Energy efficiency can enable the use of cleaner energy resources, but there are some situations in which the interaction is more complex (as I noted earlier.) Let’s take a look at one instance in which they work together well, one instance in which policy alters this relationship, and one area that I’m starting to explore.
An example to light the way
Cleaner energy resources often appear to be more expensive than dirtier ones, due to the hidden subsidy of unpriced externalities. But even ignoring these externalities, the cost premium of cleaner energy resources per unit of energy input can be offset by efficiency. Efficiency reduces the energy inputs needed per unit of energy services provided, so the end-use energy service costs less.
Off-grid solar-battery systems with LED lights work in Africa because the highly efficient lighting enables use of a more expensive energy resource. These systems compete against, and replace, kerosene lamps.
Battery-backed small-scale photovoltaic (PV) electricity is more expensive per unit of energy input than kerosene; $1/liter kerosene is equivalent to $0.09/kWh electricity on the basis of thermodynamic energy content. But electricity can be used in highly-efficient light bulbs, offering over a thousand-fold increase in efficiency for turning energy into light compared to kerosene lamps (as discussed here for CFLs). Efficiency makes solar lanterns cost less per unit of light. Coupling energy efficiency with clean energy reduces emissions, saves money, and increases safety.
The realization that energy efficiency enables the use cleaner energy resources is not new. A hundred years ago in the U.S., electric lights displaced kerosene lamps and gaslights in part because their much greater efficiency allowed the use of a more expensive, but cleaner and safer, energy resource. Electricity in 1913 cost about $0.60/kWh in today’s money, roughly similar to battery-backed solar power today. Again, this was substantially more per unit of energy content than kerosene or gas, but less per unit of light.
The oddity of cap and trade
Energy efficiency and clean energy interact quite differently under a cap-and-trade program.
Years ago, I was reviewing computer models to estimate the emission reductions of energy efficiency programs. While energy savings usually led to emission reductions, in one region for certain years using less energy resulted in more local pollution. This was a consequence of how the model handled the 1990 Acid Rain Program. If more electricity was used, national emissions of sulfur dioxide would not increase. However, if less electricity was used, national emissions would not decrease either—emissions would always stay at the cap! (At least, according to this model.) A similar program existed in some regions for nitrogen oxide pollution.
In the “business as usual case,” the region’s power plants would install scrubbers to reduce pollution. With reduced power demand, the power plants wouldn’t need to run as often, and so it would be more cost-effective to purchase allowances. Another region would instead reduce emissions to free up these allowances for sale. National emissions wouldn’t change.
My goal was to estimate what the emission reductions would have been due to energy efficiency, claim allowances based on that calculation, and then retire the allowances. Only retiring the allowances would reduce emissions below the cap.
- Efficiency without retirements wouldn’t reduce emissions, but would reduce the cost of meeting the cap.
- Retirements without efficiency would reduce emissions, but would raise the cost of the remaining allowances.
- Coupling efficiency with allowance retirements was meant to be a “no net cost” way of cleaning up the grid.
Now, even energy efficiency that never retires any allowances still makes it politically easier to retain or strengthen an emissions cap, by lowering the cost of allowances. Had costs been higher, there might have been increased pressure to repeal or weaken the Acid Rain Program. But political effects are hard to include in computer models.
My research focuses on another intersection of clean energy and energy efficiency. I am looking at how renewable energy and electric vehicles (EVs) can support each other. As UCS research has found, EVs produce fewer greenhouse gas emissions than the average gasoline vehicle in the entire U.S., and fewer than the best gasoline vehicles for regions covering two-thirds of the population. Using cleaner electricity will increase this advantage even further. Many EV owners already recognize this, installing solar power on their homes to charge their vehicles.
Looking to prior examples, we can see that the greater efficiency of electric vehicles would allow owners to pay a small premium for cleaner electricity and still pay less to fuel their cars than using gasoline. In some cases they wouldn’t have to; there are circumstances in which clean electricity is already the least-cost option.
EVs can also support clean energy by being a flexible load. “Smart charging” includes a range of options for altering the timing or rate of charging the battery. If your car is plugged in at work for nine hours, but only needs two hours of charging, the charger can select the optimal times for low cost or low emissions. In California, this might be the late morning hours when the state’s solar arrays are generating power but air conditioner demand is not yet very high. Other projects utilize second-to-second variations in charging levels to help the grid account for short-term fluctuations in wind or solar power output.
EVs can serve as energy storage, providing power back to the grid when needed. This is technically possible, but only allowed in a few cases to date. Where it is, EVs provide economic value through a “vehicle-to-grid” (V2G) arrangement.
These technologies also intersect in the “spillover” of EV battery research and investments to provide stationary storage, as seen with Tesla’s Powerwall and Powerpack products. Or, old vehicle batteries that have lost some of their range might find a “second life” as grid batteries, as is done in pilot projects by BMW, Nissan, and others.
In future posts, I’ll talk more about this research project and what I’ve found.
- Energy Efficiency, Part 1: What’s the Point?
- What is the Rebound Effect? — Energy Efficiency, Part 2