Bacon's Rebellion

Democracy Thrives in Sunlight

Conservation — Not Just for Tree Huggers Anymore

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by

James A. Bacon
in

I’ll admit, my perspective is skewed: My wife is CFO of a Richmond-based company, Tridium, that develops software that is widely used in major office and industrial facilities to manage HVAC, lighting and other energy costs, while my sister is an investment banker who finances renewable energy projects. It’s a truism in the Bacon household that there is vast, untapped potential in the American economy to conserve energy. That’s why I find it distressing that the words “conservation” and “energy efficiency” weren’t the words on legislators’ lips when they passed a bill to re-regulate Dominion and other electric power companies.

If signed by Gov. Timothy M. Kaine, the re-regulation bill would provide Dominion the assurances it needs to proceed with a massive expansion of its coal- and nuclear-powered generating capacity to meet projected growth in demand for electricity. There are no meaningful provisions in the bill, as currently written, to encourage Dominion to invest in energy efficiency (enabling more output from existing facilities) or to encourage residential, industrial or commercial customers to conserve electricity.

I’m all in favor of ensuring an adequate supply of electricity for Virginians. If that means building new power plants, then… let’s go build them. But it is folly to assume that building new power plants is the most cost-effective means of ensuring a reliable power supply. Dominion makes money by selling electricity. That doesn’t make Dominion evil — it just makes it a business. It does, however, make the General Assembly incredibly short sighted for passing legislation that would encourage building more power plants while overlooking conservation, energy efficiency and renewable fuels as paths to the same goal.

A January study underwritten by CERES, a national network of investors, environmentalists and public interest groups, argues that an $11 billion investment in conservation and energy efficiency in Texas could yield $50 billion in savings and other economic benefits over 15 years. Investments in conservation and energy efficiency would save energy at a cost of less than 2 cents per kilowatt-hour — compared to more than 7 cents per kilowatt-hour by securing electricity from existing power plants.

“The cheapest energy is energy you don’t have to produce and buy in the first place,” said Philip H. Mosenthal, founding partner of Optimal Energy and the report’s lead author. “Numerous technologies exist to dramatically reduce homeowner and business energy use economically, while providing greater comfort and productivity.”

This point needs to be hammered home: Conservation and energy efficiency is not just for tree huggers! It’s also good for electricity consumers!!

Virginia is one of the most backward states in the country when it comes to encouraging conservation and energy efficiency, says Diana Dascalu, staff attorney for the Chesapeake Climate Action Network. The bill passed by the General Assembly last month contains only token language promoting conservation and renewable fuels, emasculating a year’s worth of negotations on Renewable Portfolio Standards legislation. Now it’s up to Gov. Timothy M. Kaine to bring sanity back to Virginia energy policy.

I’ll have more to say about conservation and renewable energy in the next edition of the e-zine.

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12 responses to “Conservation — Not Just for Tree Huggers Anymore”

  1. E M Risse Avatar
    E M Risse

    Right on.

    Let us also not forget the True Conservatism is based on conservation and not Mass Over-Consumption and willy nilly capital expansion.

    More on that in our next column.

    EMR

  2. Ray Hyde Avatar
    Ray Hyde

    Fascinating. When I was studiying energy economics in gradualte school a gentleman came and gave us a lecture on his system for managing HVAC, maintenance, cooling etc. He may very well have been from Tridium.

    Anyway it was a great lecture and one that stuck with me. Most people have no idea how sophisticated some of this stuff is.

    Good post, good points.

    Larry asked what I meant when I said it wasn’t really conservation unless someone makes a profit. In your example quote the isssue is driven home. If the homeowner and business reduce costs and get greater comfort, then they have made a profit. If they reduce costs but they are freezing in the dark, then they have not made a profit, and it is no longer conseervation: it is just deprivation.

  3. Ray Hyde Avatar
    Ray Hyde

    I don’t know why this is so hard: it seems clear to me.

    We require that the power company use low sulfur coal, and we pay for this service in the form of higher electricity costs. Actually we are paying the same basic cost for electricity, and an additional charge to protect the finish on our cars and to protect our trees, etc.

    Same with the efficient light bulbs. what we pay is the cost of the lowest price bulb, the rest is what we pay the bulb company for the additional benefit of using less electricity. Effectively the bulb company is competing with the electric company.

    No problem.

    In the case of superfund cleanup,those companiesoperted under the rules and practices in effect at the time. By requiring usperfund cleanups,we are reaching back in time to collect a service we never paid for. In addition, cleanup now costs more than prevention would have then. Overall the result is that some of these companies have gone bankrupt.

    This profits no one.

    The reason we don’t have NEW superfund sites is that we ARE paying them not to pollute.

    Conservation, on the other hand reduces pollution whether there are anti pollution rules in effect or not.

    Even with conservation,there are costs and limits. If we reduce electricity use to the point that heating and cooling is affected, then old people start to die. If we effect that conservation through better construction and insulation, then there are costs involved.

    Money is a close proxy for resources, so if more money is involved,youneed to follow the money to find out where the energy and pollution moved to. If you find out that the lifetime costs of improved construction are greater than the lifetime costs of the enrgy saved, then there is likely to be no conservation bcause the energy involved in providing the materials and services is greater than the energy saved.

    If, on the other hand, the contractors profits come out of the savings of the homeowner, and the homeowner is still warm and spends less overall, then you have real conservation.

    Consider the power plant. We pay them to emit less sulphur, but how do they do it? If they haul coal from out west they use high value petroleum to do it, and pollute in the process. Otherwise they wash the coal and the stacks and then clean up the water, and they still have to dispose of the residue. If we only measure the reduction at the stack, then it appears that we are getting a greater benefit than we actually are. Since we are using energy to recieve this reduction, we may be polluting more but of a different type. And we still have to dispose of the residue. Real conservation either does not have this problem, or recognizes it in the cost and benefit analysis and compensates accordingly.

    One moe example. A guy runs kiddie horse shows on his farm. His neighbor across the way is accustomed to “his” view of a nice emptyfield. He is distressed at the view of trucks and horse trailers attending the events, so he files a complaint about excess traffic and the shows are shut down. The show operator pays for roads, as do those that operate the trucks. The end result is that the show operator and competitors are denied the use of what they have paid for. (Whether they have paid enough is another issue.)

    The show operator is now in the business of providing scenery for his neighbor. The neighbor gets what he wants (less traffic pollution, which we call congestion) and pays nothing. I claim this is false conservation.

    This example might be right or wrong. If it is right, and we can prevent people from having the use of their investment, then why can’t we do the same thing to those that own all those office buildings downtown that cause congestion?

    Why bill the poor schmuck who is drawn to this “attractive nuisance”?

    We’ll just declare it a superfund site and require the owners to clean up the mess they caused by imposing new rules that provide us benefits we don’t have to pay for. Never mind that the mess was caused by adhering to the rules and planning we put in place at the time.

    If we don’t have the right to reduce urban congestion that way, then we need to put that horse show operator back in business. Or, the neighbor across the way can reimburse everyone for the road use they are disallowed. Or the participants can pay the complainant to shut up, that is they can pay for the right to create traffic pollution. The problem with that is that they have already paid (maybe not enough).

    Besides, I don’t think we really want to make a precedent out of getting paid just for making a complaint that we are losing something that wasn’t ours to begin with. There can’t possibly be any profit in that.

    Yet, it seems to me that is exactly what is happening. We build x amount of roads to serve y amount of space. Everyone that lives there is happy. They collect taxes from those that own the space and don’t live there. But,when they show up to actually live there and use the roads they have been paying for,the others complain that they are somehow lising something that wasn’t theirs to begin with.

    It is a new claim of ownership, without compenwation, just as requiring superfund cleanup is a new claim of ownership for services from the past that were never paid for at the time.

    Conservation can be profitable, and so can reduction of pollution, which I view as an entirely different thing. But both conservation and reduction of pollution have costs and those costs change over time.

    As conservationists, if we want to have a successful program, we need to recognize these things. We need to evaluate our claims as a total system, and over the full life cycle, otherwise we may be kidding ourselves and cheating others to no good avail.

    Conservation and pollution reduction is expensive. We need to recognize that and be prepared to pay for what it is we get, otherwise we will get a lot less of what we want.

    Conversely, if we arrange things falsely, such that what we get is free, then we face the dilemma that we will be confronted with our own truisms. If road use is free then people will use them too much. If conservation is “free” then we will use that too much also.

  4. Ray Hyde Avatar
    Ray Hyde

    Obviously, where this gets screwed up is when we deal with unpriced or non market goods and services. We make the mistake of assuming that because something ws formerly free, that it belongs to all of us. Then we make an unwarranted claim for community ownership.

    Air at the gas station used to be free, now we pay for it, but it was never free to begin with, and it wasn’t our then and isn’t now.

    To me it seems an obvious ethical and rational dead end to claim that because we now recognize something as valuable and call it valuable and agree that it is valuable and then claim we shouldn’t have to pay for it.

    If you are going to make a new claim of ownership then you should expect that there may be a boundary dispute. As a society we have just shown up at the gas station with a flat tire, and we are claiming that air is free.

    Maybe we should have planned things a little better. maybe we shouod change the rules. Or, we can play by the rules and pay for what we want.

  5. Larry Gross Avatar
    Larry Gross

    “The reason we don’t have NEW superfund sites is that we ARE paying them not to pollute.”

    Ray – you’re confusing laws that ban the use of harmful materials with a willingness of consumers to pay companies to NOT use such materials.

    The price did go up – but not because people were willing to make it “profitable” for the company to reduce pollution.

    The price went up because we forced the company to stop using harmful materials in it’s products and in doing so, it increased the price of the product.

    If we took away the bans on harmful materials, the companies would likely go back and start using them again – as they currently do in other countries especially countries that are economically disadvantaged.

    And if you want to use this country – try mountaintop removal to get at coal seams.

    This is a much cheaper way to get at the coal seams that tunnel mining but it has a price and no one is willing to pay the coal companies MORE for the coal to NOT do mountaintop mining.

    The only way this will stop is when the Feds and the States REQUIRE the companies doing this to be financially responsible for the collatoral costs to the environment.

    I have to scratch my head with your reasoning on this.

    People never willingly pay more for less pollution.

    If that was the case, everyone would buy compact flourescents which are better for the environment in almost every way AND they are cheaper in the long run BUT they are more expensive initially.

    This is the same deal with Solar Power for homes. In many cases, it will pay off the costs over time but most folks will not spend the 30K up front to install.

    and the “rules” you cite are quite simple. Companies do what they will do to make a profit even if they offer some products for “free”, they make it up on other products.

    Governments, on the other hand, represent citizens’s interests and when companies engage in activities that are deemed harmful to the public – laws are passed and regs implemented.

    Businesses don’t stop polluting because people voluntarily are willing to pay them not to pollute.

  6. Ray Hyde Avatar
    Ray Hyde

    See today’s articles in the post about switching from command and control conservation efforts to market based efforts.

    Maybe it is true that businesses don’t stop polluting because people pay them not to pollute, but they do stop conducting business if people don’t pay them enough to cover their costs.

    I think you are splitting hairs.

    Your example on solar panels shows why. Just because the solar panel might pay off eventually doesn’t mean that it is the best return on investment avaialble for the same money. It is a question of both the rate of return and the time horizon. If you are eighty years old you probably won’t invest in solar cells.

    Until both of those issues are within reasonable ranges, reasonable people will choose other options.

    As for compact fluorescents, they suffered an initial bad reception because they were strange curly shapes, didn’t fit all lamps, and had what waspercieved as a bad or unflattering color.

    Plus the price. Price will always deter those who have no other options. Everyone else recognizes that you pay X for the bulb and Y for the energy savings it produces, plus it lasts longer. As a result of improvements and better marketing, you now see far more displays and sales of these products, yet there is no law that says you must buy them.

    I submit that the laws were passed at the behest of people who recognized that the laws would cost them more and therefore the laws show that people ARE willing to pay, otherwise they would have opposed the laws.

    As I see it we have gotten fuzzy about this, and we have also passed laws which benefit those who are unwilling to pay, or which shift the burden of cost to some other location.

    Bottom line is that any environmental regulation that imposes costs without a cash flow to cover the costs will likely fail one way or another.

    It seems perfectly clear to me, I don’t see why it is so hard, unless you are taking the position that you have a right to demand something for nothing based on the idea that there is a higher principle involved.

  7. Larry Gross Avatar
    Larry Gross

    “Bottom line is that any environmental regulation that imposes costs without a cash flow to cover the costs will likely fail one way or another.”

    Ray… do you remember leaded gasoline?

    How about the price of electricity before they passed laws mandating pollution controls?

    How about cars before seat belts?

    All of these things were mandated by law not demanded by the marketplace.

    In fact, almost every new law that is comptemplated is now analyzed for the higher costs that it will impose.

    Notice the word “impose”.

    People do not willingly pay for less pollution.

    If they did – we would not have to tax people to clean up the Chesapeake Bay – they’d just tally up the costs and we’ll all voluntarily send a check.

    This is not “splitting hairs”.

    This is fundamentally how economics works in the marketplace.

  8. Ray Hyde Avatar
    Ray Hyde

    I have absolutely no problem with any of the examples you have mentioned. Those are laws that we demanded and we paid the costs for them as consumers.

    No problem whatsoever.

    But consider also the national 55 MPH speed limit. We ultimately decided (right or wrong) that we did not wish to pay the costs.

    I have a problem with four things:

    1) When the benefit is sold under false pretenses such that it is grossly oversold, even to the point of false advertising. “My proposed new regulation will reduce flyash by 85%” Without pointing out it will increase toxic slag which needs disposal by 85%.

    2) When a regulation is posing as an environmental reg when it is really something else entirely.

    3) When an environmental reg or is used for something entirely unrelated. “OK, we caught you making illegal drainage on this little portion of field, but we will agree not to try to get a huge fine if you will agree to put your entire property under conservation easement.”

    4) When a regulation is imposed without any cash stream to cover the costs it causes. “We found an owl on your property so it now effectively belongs to us.”

    One way or another, each of these boils down to overzealousness or worse, dishonesty. Neither one really furthers our cause.

    It isn’t a question of whther people pay willingly. The point is that they do pay, and those are the laws that are most successful. It’s the ones where they don’t pay that cause big problems, not to mention backlash.

    Almost every new law that is contemplated is now analyzed for the higher costs it will impose. True enough. Where I have a problem is the almost part. The other place I have a problem is in the quality of the analysis. I’d suggest the current post on the Warrenton Landfill is a case in point.

    I don’t know whether it will work or not, and I hope it will. Alexandria has a plant that creates energy from garbage, but they have a lot more garbage. I’d just hate to see it get oversold and get stuck holding the bag as a taxpayer.

    That is NOT how free enterprise or cost effective environmentalism is supposed to work.

  9. Larry Gross Avatar
    Larry Gross

    We actually agree on the points you make.

    I think these kinds of things are not only a disservice to environmentalism per se but they undercut the credibility of legitimate efforts.

    Further, environmentalism must recognize the equity issue as you have pointed out.

    but I disagree that there has to be “profit” in environmental regs for them to succeed.

    The problems, longstanding, is that there is MORE profit if you can pollute and less profit if you are required to not pollute.

    Whether you’re talking about a factory that dumps kepone/dioxin from a manufacturing process or a farmer who uses deadly pesticides that run off into waterways – both can cause tremendous harm and both will make the argument – and have for decades – that if they are forced to not pollute that it will drive them out of business.

    We still essentially have a mentality that we all have a “right to pollute” because “we always have” …. and it’s wrong to peanalize people today – because we did not force people to stop polluting before.

    I find this rather bizarre logic because if we followed it across the board – absolutely nothing that we orginally thought was fine but turned out to be deadly .. .could we stop…

    We’d still have lead in paint, PCBs in electric transformers, raw sewage in our waterways, etc, etc.

    In each case, it cost money to stop the practice and it had to be done by law and rule – not by offering additional “profits” to not pollute.

  10. Ray Hyde Avatar
    Ray Hyde

    There is only more profit in polluting if people are willing to buy from you while knowing that you are poisoning them.

    Say what you like, what we did was pass a law that allowed polluters to make more money by not polluting and sending the bill for the additional work to us.

    It does cost money to stop the practice, and the bill is being sent to us, because we demanded that it stop. Where we will fail is when we demand that it stop and don’t come up with the money to pay the bill.

    I’m glad to see that you understand the point about doing a disservice to the cause. Frequently when I try to make that case I simply get attacked as someone who is an environmental luddite or someone who favors the industrial money grubbing filthspewers over the oure at heart.

    I have a plot line for Godfather IV in which The godfathers grandson becomes a Senator and enedeavors to bring the family garbage collestion business upscale by converting it to and environmental services company. He suckers the incipient green party and others into lobbying for new rules that will make his family’s company rich, but he is found out by a beautiful and wily investigative reporter.

    In spite of herself she fall s in love with our smoky Latin protagonist. She eventually gets murdered at the end, but I haven’t decided whether she gets mrdered by a member of the family because she is a danger to the business, or whether she gets murdered by one of the greens fo rsetting back the environment by exposing the fraudulent excess costs accumulating to the Family.

  11. Larry Gross Avatar
    Larry Gross

    re: environmentalism

    If one is TRULY interested in less harm to the environment, one has to realize that tough choices that impose burdens on all of us are required.

    It’s a no brainer in some respects with regard to .. say paying more to not have lead in drinking water but there are always impacts and laws that required more expensive water treatement can result in folks not getting drinking water any longer because the cost of the plant is too high for them to afford.

    ditto coal, nukes, you name it.

    so in my mind TRUE environmentalists are also pragmatic and reality-based when they advocate changes – AND most important – they understand that money is a primary ingredient of any dynamic and cannot be ignored.

    Those who would outlaw coal-powered plants and also oppose nukes have the bottoms exposed in my mind… though I will admit – there ARE environmentalists that live OFF THE GRID and they prove every day that if you’re willing to pay the extra bucks and utilize appropriate electric-powered machines that it can be done.

    But most environmentalists who sit down in front of a computer to send out an email urging outlawing coal-powered plants – is using a computer that is energized by coal and nukes .. and they would not be sending out any messages if society did what they were urging.

  12. Larry Gross Avatar
    Larry Gross

    “allowed polluters to make more money by not polluting and sending the bill for the additional work to us.”

    no.. no .. NO

    you’ve got this screwed up big time Ray.

    we did not “allow” polluters to make more money by not polluting.

    we FORCED them to do so.

    No self-respecting company in a competitive environment is going to pay more to reduce pollution if their competitors choose not to do that and offer lower priced products that do not include the added costs of less pollution.

    Let me repeat. NO COMPANY takes any actions that will render it less competitive in the marketplace because that decision is tantamount to agreeing to going out of business.

    The only way we get less pollution is when we REQUIRE ALL OF THEM to reduce pollution.

    This would NEVER HAPPEN in a true free market as long as “free” means the ability to produce harmful substances onsite that go offsite into water and air.

    This is why.. traditionalists claim that companies have always had the “right to pollute” and that it is “unfair” to force them to ADD TO THEIR COSTS and make them less competitive.

    This is a fundamental issue.

    It used to be that we worried about one state implementing stricter standards than an adjacent state -and indeed industry would move to the less restrictive state…

    but now.. the problem is a world economy and jobs don’t move from one state to another.. they move from this country to other countries with lower standards – and LOWER PRICES.

    When you buy that cheap TV from WalMart – you’re polluting an Asian River somewhere… instead of the Ohio River.

    No US company can produce less polluting TV’s on the banks of the Ohio because.. people will not pay MORE for a “greener” TV set.

    this is simple economics..

    when I see environmentalists refusing to buy computers whose components are made in Asia… because of pollution… I’ll buy your theory.

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