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Energy Efficiency electricity efficiency

Published on June 26th, 2008 | by Sarah Lozanova

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Power Plant Efficiency Hasn’t Improved Since 1957

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June 26th, 2008 by
 
 
electricity efficiencyEditor’s Note: Today we are happy to bring to you a guest post from Sean Casten, CEO and President of Recycled Energy Development.

Americans have a habit of framing our scientific history as a series of Great Inventors, from Eli Whitney to Thomas Edison to Afrika Bambaataa.The history books say each was prodded by Adam Smith’s invisible hand to come up with the great technological advances that have made our country a home of innovation.

There’s a problem with this mythology: sometimes there’s no invisible hand.Sometimes short-sighted government regulations give preference to bad technologies over good ones — stifling innovation and blinding us to our own ability to make progress.

Nowhere is this mythology more evident than in our energy system, the most heavily regulated and subsidized industry in the country.A host of bad regulations have made this system grossly inefficient, contributing both to global warming and to high power costs.

The US today converts fossil fuel into electricity at 33% efficiency, throwing away two-thirds of every unit of fuel we burn in cooling towers and smoke stacks.That’s the same conversion efficiency we had last year.That’s the same efficiency we had in 1980.In fact, you have to go all the way back to 1957 to find a year when the electric sector wasted more energy than they do today.

During the same period, we’ve seen automobile fuel economy skyrocket (especially on a horsepower-adjusted basis).We’ve seen massive increases in the efficiency of our electric appliances.We’ve even seen boring old steam boiler efficiency increases with modern controls, recuperators and preheaters.And yet the efficiency of electricity generation is stagnant.

It’s not stagnant because we’ve hit any fundamental limit.Indeed, studies by the US Department of Energy and Environmental Protection Agency have identified a whopping 200,000 MW of potential (that’s 20% of the peak power demand of the US) for proven technologies that either recover waste energy from industrials and/or cogenerate heat and electricity from a single fuel source.

The worst of these technologies is twice as fuel efficient as the current electric grid.Fully deploying that potential would not only cut CO2 emissions by 20% — about the same as if we took every passenger car off the road — but would also cut our energy costs, simply by burning less fuel.And those are just the technologies we’ve taken the time to quantify.

So what’s holding these technologies back?Nothing more than our regulatory paradigm.

A couple of examples:

  1. Our century-old electric regulatory model pays utilities a return on their capital investment, but compels them to pass along all operating costs to consumers at zero mark-up.This creates a great incentive to build capital-intensive boondoggles.It completely isolates electric utilities from the economic principles that drive “normal” businesses, wherein capital and operating cost reductions are a route to greater profits.This has conspired to make our electric sector openly hostile to efficient power generation.It explains why their efficiency hasn’t moved since 1957, and why that sector now accounts for 42% of US CO2 emissions.
  2. The Clean Air Act mandates end-of-pipe pollution control technologies that universally imposeelectric grid additional parasitic loads on industrials and power plants to run baghouses, catalyst beds, electro-static precipitators and any number of other technologies.All these parasitic mandates have the perverse consequence that our environmental policy mandates reduction in criteria pollution and mandates increases in CO2 emissions. Worse, a facility that has the temerity to improve the energy efficiency of their process will almost certainly trigger New Source Review, under which they will have to come into compliance with new, more stringent permits than the one they currently operate under.These two features of the Clean Air Act conspire to make many industrials openly fearful many otherwise sensible steps to lower their greenhouse-gas signature (and lower their operating expense.)

None of this is to suggest that we should not continue to pursue technological revolutions, of course.But if those technologies bring about cheaper, cleaner, more efficient energy, they will find themselves blocked by precisely the same regulations that are keeping existing technologies out of the market.Technology is important — but regulatory reform to remove our barriers to energy efficiency is the critical path.

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About the Author

is passionate about the new green economy and renewable energy. Sarah's experience includes work with small-scale solar energy installations and utility-scale wind farms. She earned an MBA in sustainable management from the Presidio Graduate School and is a co-founder of Trees Across the Miles, an urban reforestation initiative. When she can escape the internet vortex, she enjoys playing in the forest, paddling down rivers, or twisting into yoga poses.



  • http://www.facebook.com/people/George-Antrobus/100002076777936 George Antrobus

    For anyone who (like me) finds this old article in a web search –

    33% is the limit of feasible efficiency for heat cycle power plants using water. This is based on fundamental physics, the very practical choice of water as material for the heat cycle, and the necessity of using Mother Earth as the heatsink.

    So coal/oil/nuclear power plant thermal efficiency hasn’t improved for a long time, because the plants of generations ago were so well engineered, that they already were at the limit of what was possible.

    At the same time conventional steam-cycle power plants were perfected, automotive engines were atrociously inefficient, operating far below their theoretical efficiency (which for a conventional Otto-cycle gasoline piston engine is poor to begin with). In recent generations, real progress has been made in moving them closer to their limit of efficiency.

    The author’s thesis, that the failure to make progress follows from the regulatory scheme, seems deeply misguided. Getting electricity out at 33% is as good as they can do. And if the operators could sell more revenue-generating power for a dollar of capital investment, I expect they would!

    It’s true that part of the 67% waste heat might be used for heating — but heating homes or offices by direct distribution is only practical in dense areas (urban centers), like the underground steam pipes in New York City, and the power plant must be very close to where the heat is needed. Steam power plants are most practical and cost-efficient at large scales. If you think you can site a 3000 MWt power plant (say, coal-oil or nuclear) in Manhattan, then I say go for it!

    Probably the best way to make use of waste heat would be to site factories that need lots of heat energy — but not high temperature (the waste heat isn’t available very hot) next door to big power plants. These factories would have to accommodate the need for their associated electric generating plants to change power levels or completely shut down due to scheduled maintenance, occasional mishaps, and variations in electric grid load.

    But there’s a bright side to all this (if you love fracking!). Natural gas plants, which are proliferating rapidly, use much higher temperatures in their heat cycles and so have higher limits of theoretical efficiency. They are currently claimed to operate as high as 60%.

    • georgevoll22

      33% sounds good to me.

  • Ray

    How our world can use 50% less electricity & save money:

    Double the alternating current’s frequency, then half-wave rectify it at
    the last distribution point before the consumer. The consumer will
    receive rapidly pulsed, turned on and off electricity. This on and off
    pulsing, of their electricity, uses 50% less electricity. This means
    that the electricity generation power plants can be running 50% less,
    which means less pollution. It should also mean a 50% smaller electric
    bill.

    There are several ways to convert alternating current to
    pulsed current, which will use 50% less electricity, and will cause much
    less pollution.

    There are three current types: direct current,
    alternating current, and pulsed current. Pulsed current uses 50% less
    electricity.

    This DOES NOT violate any conservation of energy laws of physics.

    It’s like turning a light switch
    on and off quickly. If it’s done quickly enough, you won’t see the
    light flicker, because of human vision.

    Verify the concept experimentally by using a variable frequency drive in
    series with a diode. Start the experiments on lights and report back on
    your results.

    If an electric clock is powered at twice its frequency, then it will run
    twice as fast. If the power is half-wave rectified, then it will run on
    time using half of the electricity.

  • randall stumler

    Deregulation worked well in California. Perhaps it should be implemented nation wide.

  • randall stumler

    Deregulation worked well in California. Perhaps it should be implemented nation wide.

  • asdf

    Of course, a moderator is going to delete my comment…

  • asdf

    Wow, nobody’s posted anything since July 11th of last year… of course, somebody’s going to find this in 2019 and say the same thing I did…

  • arslan rashid

    i think there is not much room left in terms of improvement of effecincy of steam power plants

  • arslan rashid

    i think there is not much room left in terms of improvement of effecincy of steam power plants

  • http://www.clrlight.org Tom Blakeslee

    An excellent and thought-provoking article. Cooling towers dispose of heat as though it is a nuisance, though it is really a valuable source of energy. Greenhouses, drying plants and fish farms are all good ways to use excess heat even in remote powerplant locations. There must be a way to change the laws to encourage this kind of development.

  • http://www.clrlight.org Tom Blakeslee

    An excellent and thought-provoking article. Cooling towers dispose of heat as though it is a nuisance, though it is really a valuable source of energy. Greenhouses, drying plants and fish farms are all good ways to use excess heat even in remote powerplant locations. There must be a way to change the laws to encourage this kind of development.

  • http://redgreenandblue.org Rod Adams

    Sean:

    Entire islands like Bermuda, Jamaica, Hawaii, Guam, etc. are completely dependent on oil burning power plants. Others have only natural gas.

    With niches like that, we think we have a good place to start. Of course, there is some competition in the space now. Hyperion Power Generation and NuScale have also recognized that there is a need for reliable power in somewhat remote places. I have been studying energy technology for nearly three decades and I only know one alternative to fossil fuel that will work.

    I am excited by the fact that it actually works a lot better. As a guy who has lived the high energy, off grid life that fission can provide, I just need to figure out how to get over the first unit hurdle.

  • http://redgreenandblue.org Rod Adams

    Sean:

    Entire islands like Bermuda, Jamaica, Hawaii, Guam, etc. are completely dependent on oil burning power plants. Others have only natural gas.

    With niches like that, we think we have a good place to start. Of course, there is some competition in the space now. Hyperion Power Generation and NuScale have also recognized that there is a need for reliable power in somewhat remote places. I have been studying energy technology for nearly three decades and I only know one alternative to fossil fuel that will work.

    I am excited by the fact that it actually works a lot better. As a guy who has lived the high energy, off grid life that fission can provide, I just need to figure out how to get over the first unit hurdle.

  • http://www.recycled-energy.com Sean Casten

    Rod,

    Yes, I’d agree with you that those economics work, but it’s a niche application. The efficiency & economics I’m doing really relate to grid-connected power supplies, whether centrally- or locally-sited that must compete against the relevant buss bar rate.

    To some degree, that is admittedly a matter of marketing strategy (e.g., entry markets vs. long term markets), but I would caution you that many an emerging technology – from fuel cells to solar – have looked at the off-grid space as an entry spot, with only mixed results. I am by no means an expert in those markets, but my understanding is that the challenge has been more one of inertia & infrastructure than fundamental economics. The odds are good that within 20 miles of an off-grid application, there’s someone who knows how to fix an engine, keeps a supply of spare spark plugs on hand and can spare some fuel oil if you’re in a pinch. Not so for other techs, for better or for worse. This has made those hard to crack, notwithstanding the competing economics.

    Anyway, that’s off topic here – just a word of caution.

  • http://www.recycled-energy.com Sean Casten

    Rod,

    Yes, I’d agree with you that those economics work, but it’s a niche application. The efficiency & economics I’m doing really relate to grid-connected power supplies, whether centrally- or locally-sited that must compete against the relevant buss bar rate.

    To some degree, that is admittedly a matter of marketing strategy (e.g., entry markets vs. long term markets), but I would caution you that many an emerging technology – from fuel cells to solar – have looked at the off-grid space as an entry spot, with only mixed results. I am by no means an expert in those markets, but my understanding is that the challenge has been more one of inertia & infrastructure than fundamental economics. The odds are good that within 20 miles of an off-grid application, there’s someone who knows how to fix an engine, keeps a supply of spare spark plugs on hand and can spare some fuel oil if you’re in a pinch. Not so for other techs, for better or for worse. This has made those hard to crack, notwithstanding the competing economics.

    Anyway, that’s off topic here – just a word of caution.

  • http://redgreenandblue.org Rod Adams

    Sean:

    It is a pleasure to enter into a discussion with someone who can actually run numbers. I have no quibbles with your figures, but I neglected to provide a few more details about the specific context of my discussion with the financial types. We were not talking about 1000 MWe or larger machines. As you have accurately pointed out, those machines are not appropriate for heat recovery systems.

    The power plants that are the right size to locate near heat customers are on the order of 5-50 MWe. They would not be remote, but close to customers in order to successfully transmit the waste heat.

    In that size range, we are not trying to compete against utility scale plants that have access to cheap fuel like mine mouth coal. Instead, we are aiming to supply power in place where it is useful but either supplied by a 5-50 MWe diesel engine or not available at all.

    At current prices for diesel fuel, assuming a very efficient machine with a heat rate of 8,000 BTU per kilowatt hour, the fuel cost alone is running at about 28 cents per kilowatt hour.

    Large diesel engines will cost at least $1000 and probably more like $3000 per KW new and they need regular maintenance by well trained people. Besides, they are notoriously dirty and CO2 emitting.

    I hope you can now see why we believe that the ROI might be high enough to attract private capital.

    BTW – I just read an interesting article in Fortune about Bill Gates and his plans after leaving Microsoft. Apparently he has already made an investment with a VC that is working on a nuclear energy project.

  • http://redgreenandblue.org Rod Adams

    Sean:

    It is a pleasure to enter into a discussion with someone who can actually run numbers. I have no quibbles with your figures, but I neglected to provide a few more details about the specific context of my discussion with the financial types. We were not talking about 1000 MWe or larger machines. As you have accurately pointed out, those machines are not appropriate for heat recovery systems.

    The power plants that are the right size to locate near heat customers are on the order of 5-50 MWe. They would not be remote, but close to customers in order to successfully transmit the waste heat.

    In that size range, we are not trying to compete against utility scale plants that have access to cheap fuel like mine mouth coal. Instead, we are aiming to supply power in place where it is useful but either supplied by a 5-50 MWe diesel engine or not available at all.

    At current prices for diesel fuel, assuming a very efficient machine with a heat rate of 8,000 BTU per kilowatt hour, the fuel cost alone is running at about 28 cents per kilowatt hour.

    Large diesel engines will cost at least $1000 and probably more like $3000 per KW new and they need regular maintenance by well trained people. Besides, they are notoriously dirty and CO2 emitting.

    I hope you can now see why we believe that the ROI might be high enough to attract private capital.

    BTW – I just read an interesting article in Fortune about Bill Gates and his plans after leaving Microsoft. Apparently he has already made an investment with a VC that is working on a nuclear energy project.

  • http://www.artformfunction.com Michael

    Not to contradict you, but a 1930′s Ford Model T gets 25mpg, which is nearly identical to todays average US car/suv. Overseas it is another story…

    Re the wasted heat from powerplants, in Europe (darn them crafty Europeans) powerplant’s waste heat is often used to heat the homes near the facility.

    In Germany and Denmark it is quite common for a community to own their own windfarm or powerplant cooperatively, so the motivation to have a clean efficient power source is high.

  • http://www.artformfunction.com Michael

    Not to contradict you, but a 1930′s Ford Model T gets 25mpg, which is nearly identical to todays average US car/suv. Overseas it is another story…

    Re the wasted heat from powerplants, in Europe (darn them crafty Europeans) powerplant’s waste heat is often used to heat the homes near the facility.

    In Germany and Denmark it is quite common for a community to own their own windfarm or powerplant cooperatively, so the motivation to have a clean efficient power source is high.

  • http://www.recycled-energy.com Sean Casten

    Rod,

    We’re in agreement on subs, but not on capital amortization. Let’s assume utility-scale capital amortization, @ 10% over 20 years. Nothing remotely like what the private sector wants, but consistent with what you’d get if those nuke plants were built in the old way, by traditional regulated utilities. $6400/kW requires an annuity of $751/kW/year at that amortization schedule. Given a current average nuclear fleet capacity factor of 90%, that amortization would go against 8760 x 90% = 7884 kWh/kW /year, yielding a cost of %751/7884 = 9.5 cents/kWh just to amortize the capital. Add in fuel costs, O&M, etc. and that hardly looks like a competitive investment given current average retail rates in the US of about 8.5 cents.

    (Note also that if this generation is built remotely, you need to add another $1300/kW – on average – for transmission and distribution, tacking another 3 cents or so onto the rate to get to the delivered cost.)

    And of course, that’s just at crummy utility-scale returns – high as those numbers are, they’re not high enough to attract capital that isn’t backstopped by ratepayer guarantees. If you apply a more traditional 15% private equity cost of capital, the 9.5 cents becomes 13.

    Bottom line: there’s a good reason why no one’s building nuclear without first securing massive government subsidies and/or capital recovery guarantees. Because they don’t pencil out any other way.

  • http://www.recycled-energy.com Sean Casten

    Rod,

    We’re in agreement on subs, but not on capital amortization. Let’s assume utility-scale capital amortization, @ 10% over 20 years. Nothing remotely like what the private sector wants, but consistent with what you’d get if those nuke plants were built in the old way, by traditional regulated utilities. $6400/kW requires an annuity of $751/kW/year at that amortization schedule. Given a current average nuclear fleet capacity factor of 90%, that amortization would go against 8760 x 90% = 7884 kWh/kW /year, yielding a cost of %751/7884 = 9.5 cents/kWh just to amortize the capital. Add in fuel costs, O&M, etc. and that hardly looks like a competitive investment given current average retail rates in the US of about 8.5 cents.

    (Note also that if this generation is built remotely, you need to add another $1300/kW – on average – for transmission and distribution, tacking another 3 cents or so onto the rate to get to the delivered cost.)

    And of course, that’s just at crummy utility-scale returns – high as those numbers are, they’re not high enough to attract capital that isn’t backstopped by ratepayer guarantees. If you apply a more traditional 15% private equity cost of capital, the 9.5 cents becomes 13.

    Bottom line: there’s a good reason why no one’s building nuclear without first securing massive government subsidies and/or capital recovery guarantees. Because they don’t pencil out any other way.

  • http://www.recycled-energy.com Sean Casten

    Mr. Sinister,

    You misunderstand. There isn’t really much potential to increase the efficiency of existing power plants – they are too remote from thermal loads or opportunity fuel supplies. This isn’t an issue that society won’t tolerate that investment, but rather that the utilities were never motivated to make a better one. A more rational regulatory model would not have built those big remote plants in the first place, but rather allocated capital elsewhere.

    We’re seeing the same problem recurring now, as the grid exhausts the current capacity and we’re trying to figure out where to build the new stuff. We can either build really expensive, really inefficient coal- and gas-fired power, or we can build much cheaper local power, to the benefit of all of society. Unfortunately, absent regulatory reform, we will bulid the former.

  • http://www.recycled-energy.com Sean Casten

    Mr. Sinister,

    You misunderstand. There isn’t really much potential to increase the efficiency of existing power plants – they are too remote from thermal loads or opportunity fuel supplies. This isn’t an issue that society won’t tolerate that investment, but rather that the utilities were never motivated to make a better one. A more rational regulatory model would not have built those big remote plants in the first place, but rather allocated capital elsewhere.

    We’re seeing the same problem recurring now, as the grid exhausts the current capacity and we’re trying to figure out where to build the new stuff. We can either build really expensive, really inefficient coal- and gas-fired power, or we can build much cheaper local power, to the benefit of all of society. Unfortunately, absent regulatory reform, we will bulid the former.

  • Mr. Sinister

    Here we go again…let’s blame the big, bad government for everything. Does it occur to anyone out there that regulation is necessary in order to provide uniform standards for customer service and inter-operability? What happened when the chains were taken off of the airline industry? Price wars, dismal customer service, bankruptcies, etc. When companies are under pressure to turn a profit, they don’t do it by improving efficiency. That would be nice, but in the corporate world it just ain’t so. They do it by cutting…cutting staff, cutting capital expenditures, cutting corners on maintenance.

    I, for one, am relieved that something as vital as the electric grid isn’t left entirely to cut-throat free-market capitalism. I’m glad that there are crews on stand-by to restore power when it goes out in a storm. I’m glad that utilities can maintain and upgrade their equipment as needed without worrying that the capital expense will drive them into bankruptcy. I’m not always happy when the cost of those services shows up on my electric bill, but I believe that you get what you pay for.

    Sure, the technology is out there to improve the efficiency of existing power plants. But let’s be honest…it’s not the government that’s holding utilities back. It’s all of us consumers who will cry bloody murder when we have to foot the bill for retro-fitting these facilities. In much the same way that we are all in favor wind power until the turbine shows up in our back yard, we want clean power plants but we don’t want to pay for them. Oh, the hypocrisy.

  • Mr. Sinister

    Here we go again…let’s blame the big, bad government for everything. Does it occur to anyone out there that regulation is necessary in order to provide uniform standards for customer service and inter-operability? What happened when the chains were taken off of the airline industry? Price wars, dismal customer service, bankruptcies, etc. When companies are under pressure to turn a profit, they don’t do it by improving efficiency. That would be nice, but in the corporate world it just ain’t so. They do it by cutting…cutting staff, cutting capital expenditures, cutting corners on maintenance.

    I, for one, am relieved that something as vital as the electric grid isn’t left entirely to cut-throat free-market capitalism. I’m glad that there are crews on stand-by to restore power when it goes out in a storm. I’m glad that utilities can maintain and upgrade their equipment as needed without worrying that the capital expense will drive them into bankruptcy. I’m not always happy when the cost of those services shows up on my electric bill, but I believe that you get what you pay for.

    Sure, the technology is out there to improve the efficiency of existing power plants. But let’s be honest…it’s not the government that’s holding utilities back. It’s all of us consumers who will cry bloody murder when we have to foot the bill for retro-fitting these facilities. In much the same way that we are all in favor wind power until the turbine shows up in our back yard, we want clean power plants but we don’t want to pay for them. Oh, the hypocrisy.

  • Tim

    Part of the problem is that energy projects tend to be large-scale, probably because these projects attract better publicity. But in fact, smaller, more diversified modes of production greatly increase the efficiency of power plants. An article about small-scale efficiency in power plants: http://www.brightfuture.us/new.

  • http://redgreenandblue.org Rod Adams

    Andy:

    Feel free to live the way that you want. I happen to like being free to travel, to take hot showers, to leave my computer sleeping, ready for instant access. I like eating fresh vegetables year round, sleeping in a temperature controlled environment, and being able to have bright light at the flick of a switch.

    I have tried the low energy lifestyle and seen what it does to people when they have no other alternatives.

    My mission is to try to make access to energy widely available for all people, especially those in areas who have had to struggle for their entire lives to collect wood scraps or dung so they could heat their meager meals.

  • http://redgreenandblue.org Rod Adams

    Andy:

    Feel free to live the way that you want. I happen to like being free to travel, to take hot showers, to leave my computer sleeping, ready for instant access. I like eating fresh vegetables year round, sleeping in a temperature controlled environment, and being able to have bright light at the flick of a switch.

    I have tried the low energy lifestyle and seen what it does to people when they have no other alternatives.

    My mission is to try to make access to energy widely available for all people, especially those in areas who have had to struggle for their entire lives to collect wood scraps or dung so they could heat their meager meals.

  • Tim

    Part of the problem is that energy projects tend to be large-scale, probably because these projects attract better publicity. But in fact, smaller, more diversified modes of production greatly increase the efficiency of power plants. An article about small-scale efficiency in power plants: http://www.brightfuture.us/new.

  • Andy in San Diego

    Cheap energy only creates waste. Efficiency is good to make our resources last longer (but making energy cheap is counterproductive to society). Conserve energy. We don’t need to be driving and flying so much, buying and using three TVs per household, leaving computers running overnight, etc.

  • Andy in San Diego

    Cheap energy only creates waste. Efficiency is good to make our resources last longer (but making energy cheap is counterproductive to society). Conserve energy. We don’t need to be driving and flying so much, buying and using three TVs per household, leaving computers running overnight, etc.

  • http://www.atomicengines.com Rod Adams

    Sean:

    I am not agnostic. I can also do the math. In today’s market, $3000 per KW is really easy to amortize with fuel that costs 50 cents per million BTU – like commercial nuclear fuel does.

    Based on my last discussion with a very well qualified investment banker, the goal that he is seeking is anything less than $6400 per KW for a nuclear plant.

    No details here, but we are very confident in our design.

    BTW – I hope you read my first comment carefully enough to recognize that I am pretty well versed with submarine designs and their use of waste heat. After 53 years of at sea operation, the technology is definitely ready for prime time.

    Rod Adams

  • http://www.atomicengines.com Rod Adams

    Sean:

    I am not agnostic. I can also do the math. In today’s market, $3000 per KW is really easy to amortize with fuel that costs 50 cents per million BTU – like commercial nuclear fuel does.

    Based on my last discussion with a very well qualified investment banker, the goal that he is seeking is anything less than $6400 per KW for a nuclear plant.

    No details here, but we are very confident in our design.

    BTW – I hope you read my first comment carefully enough to recognize that I am pretty well versed with submarine designs and their use of waste heat. After 53 years of at sea operation, the technology is definitely ready for prime time.

    Rod Adams

  • http://www.recycled-energy.com Sean Casten

    All:

    I should clarify the “deregulation” bogeyman, which has the potential to stir up so much emotion. Alfred Kahn, former regulator of the NY Public Service Commission, the Civil Aviation Authority and the Federal Communication has wonderful insights on deregulation, gleaned from the time he spent as a regulator during those times when gas, electricity, airlines and telecoms were deregulated. Kahn’s great insight is that the process of deregulation shifts the burden of the regulator from consumer protection (e.g., rate-setting) to anti-trust enforcement. In other words, deregulation does not equal anarchy – it simply means that the regulatory obligation shifts.

    What California (and by extention, Enron) got wrong was to allow new businesses to enter the electricity space, but didn’t then add anti-trust oversight. Note that the regulator deserves as much culpability for this failure as the regulated. Enron certainly didn’t ask for more regulation – but CA public-utility regulators didn’t raise their hand to ask for their jobs to be replaced by anti-trust enforcers either.

    But watch what this has done in the electric space. In most US industries, one makes money by conserving costs. In the electric sector, conserving costs isn’t worth bupkus, since those savings are all passed through. And the biggest operating expense in the utility sector is fuel. And the US electricity industry is responsible for 42% of total US GHG emissions. In other words, the single biggest source of US GHG emissions has no incentive to save their fuel.

    If there’s a better example of how central planning fails us, I haven’t found it. We need to give electric-sector participants the opportunity to make more money by conserving costs. And yes, we need to make sure that those participants don’t violate anti-trust rules. But by all means, let’s not paint the CA debacle as deregulation, just because that’s what the regulators called it. It was closer to anarchy than deregulation. We need the latter.

  • http://www.recycled-energy.com Sean Casten

    All:

    I should clarify the “deregulation” bogeyman, which has the potential to stir up so much emotion. Alfred Kahn, former regulator of the NY Public Service Commission, the Civil Aviation Authority and the Federal Communication has wonderful insights on deregulation, gleaned from the time he spent as a regulator during those times when gas, electricity, airlines and telecoms were deregulated. Kahn’s great insight is that the process of deregulation shifts the burden of the regulator from consumer protection (e.g., rate-setting) to anti-trust enforcement. In other words, deregulation does not equal anarchy – it simply means that the regulatory obligation shifts.

    What California (and by extention, Enron) got wrong was to allow new businesses to enter the electricity space, but didn’t then add anti-trust oversight. Note that the regulator deserves as much culpability for this failure as the regulated. Enron certainly didn’t ask for more regulation – but CA public-utility regulators didn’t raise their hand to ask for their jobs to be replaced by anti-trust enforcers either.

    But watch what this has done in the electric space. In most US industries, one makes money by conserving costs. In the electric sector, conserving costs isn’t worth bupkus, since those savings are all passed through. And the biggest operating expense in the utility sector is fuel. And the US electricity industry is responsible for 42% of total US GHG emissions. In other words, the single biggest source of US GHG emissions has no incentive to save their fuel.

    If there’s a better example of how central planning fails us, I haven’t found it. We need to give electric-sector participants the opportunity to make more money by conserving costs. And yes, we need to make sure that those participants don’t violate anti-trust rules. But by all means, let’s not paint the CA debacle as deregulation, just because that’s what the regulators called it. It was closer to anarchy than deregulation. We need the latter.

  • http://www.recycled-energy.com Sean Casten

    Rod,

    You’re right, in the sense that if small-scale nuclear power worked with local heat recovery, it makes a heck of a lot more sense than central station nuke. (Indeed, this is essentially what nuclear subs do, since they use their waste heat to heat the sub, and are in much closer proximity to energy users than is politically acceptable on land.)

    But there is still a valid question of what the capital cost would be of those facilities. $3000/kW power is hard to amortize, no matter how you slice it – and the potential for huge cost over-runs doesn’t make that risk profile any easier. Maybe it will come down, but – as a guy who is totally technologically agnostic, and happy to deploy any technology that will help us to meet our mission of profitable CO2 reduction – I have a hard time accepting that the capital/operating risk profile is much better than most renewables at present. Does it have potential? Sure – but it’s not ready for prime time yet.

  • http://www.recycled-energy.com Sean Casten

    Rod,

    You’re right, in the sense that if small-scale nuclear power worked with local heat recovery, it makes a heck of a lot more sense than central station nuke. (Indeed, this is essentially what nuclear subs do, since they use their waste heat to heat the sub, and are in much closer proximity to energy users than is politically acceptable on land.)

    But there is still a valid question of what the capital cost would be of those facilities. $3000/kW power is hard to amortize, no matter how you slice it – and the potential for huge cost over-runs doesn’t make that risk profile any easier. Maybe it will come down, but – as a guy who is totally technologically agnostic, and happy to deploy any technology that will help us to meet our mission of profitable CO2 reduction – I have a hard time accepting that the capital/operating risk profile is much better than most renewables at present. Does it have potential? Sure – but it’s not ready for prime time yet.

  • http://www.recycled-energy.com Sean Casten

    Re: the Clean Air Act

    I should be clear that reducing criteria pollutants was really important, and not something we want to roll back. But where some commenters have suggested that the choice between criteria pollution and CO2 is inevitable, I’d take serious issue.

    The Clean Air Act, and associated state-level policies are based on what is referred to in the trade as an “input based standard”, which is to say that the more fuel you burn (the input) the more you are allowed to pollute. This is inane. But it is inherent to any part-per-million (ppm) standard that sets emissions limits based on exhaust concentration. This is dumb. What we need is to reduce total pollution, not to reduce the concentration in individual stacks.

    But watch what this does. If you double the fuel efficiency of your power plant, you cut fuel use in half. You also cut air flow in half, since you only need half as much for combustion.

    So now let’s say that you cut fuel use in half, and NOx emission by 40%. Sounds like a great deal all around, right? Wrong. Because this has the effect of increasing ppm, and therefore falling afoul of your permit. Less fuel, less NOx… and yet blocked by environmental regs. It’s dumb, but it’s built into the laws.

    And so a plant that has to choose between higher energy efficiency and an efficiency-compromising end-of-pipe control is forced to favor the latter. We could do vastly better, but are limited by the CAA. So it is not innate to criteria pollution that their reduction must increase CO2 – it’s only innate to the way we’ve chosen to regulate them.

  • http://www.recycled-energy.com Sean Casten

    Re: the Clean Air Act

    I should be clear that reducing criteria pollutants was really important, and not something we want to roll back. But where some commenters have suggested that the choice between criteria pollution and CO2 is inevitable, I’d take serious issue.

    The Clean Air Act, and associated state-level policies are based on what is referred to in the trade as an “input based standard”, which is to say that the more fuel you burn (the input) the more you are allowed to pollute. This is inane. But it is inherent to any part-per-million (ppm) standard that sets emissions limits based on exhaust concentration. This is dumb. What we need is to reduce total pollution, not to reduce the concentration in individual stacks.

    But watch what this does. If you double the fuel efficiency of your power plant, you cut fuel use in half. You also cut air flow in half, since you only need half as much for combustion.

    So now let’s say that you cut fuel use in half, and NOx emission by 40%. Sounds like a great deal all around, right? Wrong. Because this has the effect of increasing ppm, and therefore falling afoul of your permit. Less fuel, less NOx… and yet blocked by environmental regs. It’s dumb, but it’s built into the laws.

    And so a plant that has to choose between higher energy efficiency and an efficiency-compromising end-of-pipe control is forced to favor the latter. We could do vastly better, but are limited by the CAA. So it is not innate to criteria pollution that their reduction must increase CO2 – it’s only innate to the way we’ve chosen to regulate them.

  • http://www.recycled-energy.com Sean Casten

    Jim Whipple,

    You may have enhanced at your plant, but the national data doesn’t lie – no increase in efficiency since 1957.

    It bears noting that there are Carnot limits on central power stations and so in your role, no matter how hard you try, there’s not much you can do. The big gains in efficiency come from location power plants close to the load, where they can take advantage of locally-available opportunity fuels (waste heat, etc.) and/or recover exhaust heat to displace on-site boilers. These are the approaches included in the 200 GW DOE and EPA data I cited. But they require deployment of new capital under different models.

    This isn’t to suggest that you are doing your best as a power plant operator – simply that under a different regulatory model, your employer might not have spent the money to build the plant you currently operate. (I am presuming that you are employed by an investor-owned utility, as they are the ones bound by this model – other generator owners are generally under much more socially rational/responsible regulatory models.)

    Sean

  • http://www.recycled-energy.com Sean Casten

    Jim Whipple,

    You may have enhanced at your plant, but the national data doesn’t lie – no increase in efficiency since 1957.

    It bears noting that there are Carnot limits on central power stations and so in your role, no matter how hard you try, there’s not much you can do. The big gains in efficiency come from location power plants close to the load, where they can take advantage of locally-available opportunity fuels (waste heat, etc.) and/or recover exhaust heat to displace on-site boilers. These are the approaches included in the 200 GW DOE and EPA data I cited. But they require deployment of new capital under different models.

    This isn’t to suggest that you are doing your best as a power plant operator – simply that under a different regulatory model, your employer might not have spent the money to build the plant you currently operate. (I am presuming that you are employed by an investor-owned utility, as they are the ones bound by this model – other generator owners are generally under much more socially rational/responsible regulatory models.)

    Sean

  • http://sunnybeachrealestate.net sunny beach

    Not efficiency improvements in 51 years… wow! Good argument for cap-and-trade here vs. government picking technologies

  • http://sunnybeachrealestate.net sunny beach

    Not efficiency improvements in 51 years… wow! Good argument for cap-and-trade here vs. government picking technologies

  • http://redgreenandblue.org Rod Adams

    John Mohr – thanks for the compliment. It has been a busy day, so it took me a while before I could do my daily reading. When I got here, there were already 20 comments to read through.

    Mr. Casten – you have some reasonably good ideas, but your logic regarding nuclear power economics needs some improvement. As you rightly deduced with regard to fossil fuel plants, utility rate regulation is skewed in the direction of building very large, central station plants with lots of extras that can be rolled into the rate base to earn a rate of return.

    The very same rate of return regulations apply to utility nuclear plants, so they exhibit some of the same characteristics. They are enormous, centralized and stuffed with many extras that have been rolled into the rate base to earn a rate of return. Many of them were “required” by regulators, but those regulations were often written by employees of equipment suppliers or utilities on loan to the regulatory agencies.

    There is nothing inherently large scale about nuclear power. The plants I learned to operate would fit pretty comfortably in a fire station in a downtown area. They would be safe enough to be placed where heat is needed – I used to live for months at a time within 200 feet of those power plants and I assure you – I care deeply about my own safety.

    There is no reason at all why Recycled Energy Development systems cannot be applied to nuclear power projects, especially if they are on the scale that is being financed by venture capitalists in the United States for companies like Hyperion, NuScale, and perhaps one day soon, Adams Atomic Engines, Inc.

    Rod Adams

    Founder, Adams Atomic Engines, Inc.

  • http://redgreenandblue.org Rod Adams

    John Mohr – thanks for the compliment. It has been a busy day, so it took me a while before I could do my daily reading. When I got here, there were already 20 comments to read through.

    Mr. Casten – you have some reasonably good ideas, but your logic regarding nuclear power economics needs some improvement. As you rightly deduced with regard to fossil fuel plants, utility rate regulation is skewed in the direction of building very large, central station plants with lots of extras that can be rolled into the rate base to earn a rate of return.

    The very same rate of return regulations apply to utility nuclear plants, so they exhibit some of the same characteristics. They are enormous, centralized and stuffed with many extras that have been rolled into the rate base to earn a rate of return. Many of them were “required” by regulators, but those regulations were often written by employees of equipment suppliers or utilities on loan to the regulatory agencies.

    There is nothing inherently large scale about nuclear power. The plants I learned to operate would fit pretty comfortably in a fire station in a downtown area. They would be safe enough to be placed where heat is needed – I used to live for months at a time within 200 feet of those power plants and I assure you – I care deeply about my own safety.

    There is no reason at all why Recycled Energy Development systems cannot be applied to nuclear power projects, especially if they are on the scale that is being financed by venture capitalists in the United States for companies like Hyperion, NuScale, and perhaps one day soon, Adams Atomic Engines, Inc.

    Rod Adams

    Founder, Adams Atomic Engines, Inc.

  • lee

    Lozanova’s and Grave’s remarks really put the blinders on the issue, and it’s time we take them off.

    First, Lozanova laments (correctly) than the Clean Air Act needs reform, and that the utility industry market model is upside down. The Clean Air Act may need to be reformed to get us a modern version of what we want- clean air. That means a graduated schedule for improvements that drives the industry to implement state of the art technology to meet OUR- that’s us the public’s- desires for air quality. We all breathe the air, and we all have a right to say what goes into it. That being said, the Clean Air Act prevents a lot of crud from getting into the air that was bad…that was why it was passed, folks- not because of some mass anti-capitalist bender in the 70′s. Lozanova’s implication that we need to defer silly clean air legislation to the primacy of CO2 controls assumes we have all been duped into believing the size of the problems with fossil fuel have not grown, but merely supplanted by more modern problems.

    Graves, on the other hand, believes in a happy nuclear future. Unfortunately, the nuke crowd refuses to talk about any of the economics of mitigating the problems with nuclear energy. First, the production issue. Mining and refining uranium is incredibly polluting, and the pollution does not go away. The fact that we have not done a huge amount of it in the US in a long time is a testament to the historical record of the uranium mining industry and the misery it has purveyed in the US and elsewhere in the quieter, abandoned corners of our nation. While I am a firm believer that these issues can be mitigated completely, I also know we will never see these come to pass with our current political and industrial climate. I say this based on the experience of watching energy, forestry, agricultural, chemical and petroleum industries keep any mitigation efforts at arms length unless forced at gunpoint, and this rarely happens. The other tall tree in the nuclear quagmire is the waste issue. We lack both the political will and the technology to guarantee a safe future for the nuclear waste yet to come or a context for the abhorrent past we left behind. Breeder reactors, deposition schemes, etc., have all either failed, been too inherently costly to make sense for the foreseeable future, or been a mere piss in the wind of probabilities of failure and cost/benefit analyses.

    The idea that buying into these problems as the only problems we are allowed to choose from is crazy. We are willing to invest so much more money into ever more expensive forms of energy- nuclear, more expensive coal, more expensive petroleum resources, etc. Any economist that can keep a straight face in a room of peers knows this scarcity game will end in tears eventually. The truth is there are enormous economic substitutions for our current choices. The problem is they are incredibly boring to the bloated American way of life. The answer is efficiency. It’s simple economics. Instead of spending twice as much money on 20% more energy, spend twice as much money on capitalization to use less than half the energy. It’s not nuclear, it’s not sexy, but this can be done- and we can see returns in years, not decades or generations. Continuing our search for additional wormholes in the scarcity game make us more sensitive to energy as a factor of production, not less. Efficiency breaks that cycle. If every household in the country were 30% more efficient (a numbingly easy target to achieve in 10 years), it would crush even the most wild-eyed estimates of new energy sources out there today.

    With one difference.

    We would also pass on what is left to the future through sheer brilliance and foresight- a priceless gift, and one that our ancestors have generally not chosen to do very well themselves.

  • lee

    Lozanova’s and Grave’s remarks really put the blinders on the issue, and it’s time we take them off.

    First, Lozanova laments (correctly) than the Clean Air Act needs reform, and that the utility industry market model is upside down. The Clean Air Act may need to be reformed to get us a modern version of what we want- clean air. That means a graduated schedule for improvements that drives the industry to implement state of the art technology to meet OUR- that’s us the public’s- desires for air quality. We all breathe the air, and we all have a right to say what goes into it. That being said, the Clean Air Act prevents a lot of crud from getting into the air that was bad…that was why it was passed, folks- not because of some mass anti-capitalist bender in the 70′s. Lozanova’s implication that we need to defer silly clean air legislation to the primacy of CO2 controls assumes we have all been duped into believing the size of the problems with fossil fuel have not grown, but merely supplanted by more modern problems.

    Graves, on the other hand, believes in a happy nuclear future. Unfortunately, the nuke crowd refuses to talk about any of the economics of mitigating the problems with nuclear energy. First, the production issue. Mining and refining uranium is incredibly polluting, and the pollution does not go away. The fact that we have not done a huge amount of it in the US in a long time is a testament to the historical record of the uranium mining industry and the misery it has purveyed in the US and elsewhere in the quieter, abandoned corners of our nation. While I am a firm believer that these issues can be mitigated completely, I also know we will never see these come to pass with our current political and industrial climate. I say this based on the experience of watching energy, forestry, agricultural, chemical and petroleum industries keep any mitigation efforts at arms length unless forced at gunpoint, and this rarely happens. The other tall tree in the nuclear quagmire is the waste issue. We lack both the political will and the technology to guarantee a safe future for the nuclear waste yet to come or a context for the abhorrent past we left behind. Breeder reactors, deposition schemes, etc., have all either failed, been too inherently costly to make sense for the foreseeable future, or been a mere piss in the wind of probabilities of failure and cost/benefit analyses.

    The idea that buying into these problems as the only problems we are allowed to choose from is crazy. We are willing to invest so much more money into ever more expensive forms of energy- nuclear, more expensive coal, more expensive petroleum resources, etc. Any economist that can keep a straight face in a room of peers knows this scarcity game will end in tears eventually. The truth is there are enormous economic substitutions for our current choices. The problem is they are incredibly boring to the bloated American way of life. The answer is efficiency. It’s simple economics. Instead of spending twice as much money on 20% more energy, spend twice as much money on capitalization to use less than half the energy. It’s not nuclear, it’s not sexy, but this can be done- and we can see returns in years, not decades or generations. Continuing our search for additional wormholes in the scarcity game make us more sensitive to energy as a factor of production, not less. Efficiency breaks that cycle. If every household in the country were 30% more efficient (a numbingly easy target to achieve in 10 years), it would crush even the most wild-eyed estimates of new energy sources out there today.

    With one difference.

    We would also pass on what is left to the future through sheer brilliance and foresight- a priceless gift, and one that our ancestors have generally not chosen to do very well themselves.

  • Jan

    Uncle B the reason that you have the huge cooling towers is so that you can quickly cool the steam back to water so that you can use it to generate more electricity. If you didn’t have them they would be much more inefficient. further more do you want to live within a mile of that power plant ? no well then whoes houses could you heat. By the time you pipe it over to your house it would be cold. Also how much to pump all that water? more or less than the electricity to heat the same house? Industry is too short term to benefit from some warm water. As for snow removal what happens in the summer. Frankly these ideas are so simple compared to the grid balancing optimisation or the physics profs who designed these powerstations. It think most of these views are somewhat naive.

  • Jan

    Uncle B the reason that you have the huge cooling towers is so that you can quickly cool the steam back to water so that you can use it to generate more electricity. If you didn’t have them they would be much more inefficient. further more do you want to live within a mile of that power plant ? no well then whoes houses could you heat. By the time you pipe it over to your house it would be cold. Also how much to pump all that water? more or less than the electricity to heat the same house? Industry is too short term to benefit from some warm water. As for snow removal what happens in the summer. Frankly these ideas are so simple compared to the grid balancing optimisation or the physics profs who designed these powerstations. It think most of these views are somewhat naive.

  • Brent A

    The author of this article needs to hit the economics books again. Adam Smith favored deregulation, not regulations. The idea of the invisible hand is that a competitive free market economy (unregulated) would automatically correct problems in the economy and inspire people to come up with new ideas and innovations. Also, saying that fuel economies in automobiles have skyrocketed over the last 50 years is a huge stretch. Improved? Yes. Skyrocketed? Not even close.

  • Brent A

    The author of this article needs to hit the economics books again. Adam Smith favored deregulation, not regulations. The idea of the invisible hand is that a competitive free market economy (unregulated) would automatically correct problems in the economy and inspire people to come up with new ideas and innovations. Also, saying that fuel economies in automobiles have skyrocketed over the last 50 years is a huge stretch. Improved? Yes. Skyrocketed? Not even close.

  • Fordo

    One word: Enron.

    Thanks for playing, but deregulation was tried, and it failed miserably.

  • Fordo

    One word: Enron.

    Thanks for playing, but deregulation was tried, and it failed miserably.

  • Mr. Tang

    I live in Texas and we have deregulated power. All it has brought us is higher costs and more pollution. All the for-profit power companies want to build coal fired power plants in order to maximize profits. Deregulation is not the answer. We need all power companies to be not-for-profit. Then reinvestment into better technologies, rather than share-holders, could occur.

  • Mr. Tang

    I live in Texas and we have deregulated power. All it has brought us is higher costs and more pollution. All the for-profit power companies want to build coal fired power plants in order to maximize profits. Deregulation is not the answer. We need all power companies to be not-for-profit. Then reinvestment into better technologies, rather than share-holders, could occur.

  • Pingback: Power Plant Efficiency Hasn’t Improved Since 1957 | LumoSolar.com - Solar Power & Energy Information

  • David in AK

    Yes, deregulating energy is all we need to do to generate great efficiencies. Just ask Enron.

  • David in AK

    Yes, deregulating energy is all we need to do to generate great efficiencies. Just ask Enron.

  • John

    That’s the same rhetoric conservatives have been feeding you the last 200 years.

    Wake up. Smith was a shill for the reach and elite.

    The problem is not government regulation, which a smoke screen, it’s that so many of your representatives are heavily invested in oil, and the profits made from it. Between that and their speculating friends, record breaking profits are stuffed into the hands of a few, while the vast majority of us suffer outrageous prices, and greatly hampered advances in technology, which, had they been pursued in the 1970′s like we should have, we would not be dependent on foreign oil / energy today.

    The proper solution mature as a race and a civilization. is to Nationalize all infrastructure related resources. The alleged “bureaucrat waste” could not nearly exceed the ungodly profits and waste of energy futures speculation.

    Marx was much more accurate. You government owns your media and you economy, the “liberal media” is not liberal at all. It is owned by 5 ultra conservative corporations, and is basically one big advertisement set up to make you consume, and believe that your government is not truly fascist.

    Take it form me. I was a misguided republican for many years. Selfish, purposefully ignorant and mean. It’s the only way a person can live that duality.

  • John

    That’s the same rhetoric conservatives have been feeding you the last 200 years.

    Wake up. Smith was a shill for the reach and elite.

    The problem is not government regulation, which a smoke screen, it’s that so many of your representatives are heavily invested in oil, and the profits made from it. Between that and their speculating friends, record breaking profits are stuffed into the hands of a few, while the vast majority of us suffer outrageous prices, and greatly hampered advances in technology, which, had they been pursued in the 1970′s like we should have, we would not be dependent on foreign oil / energy today.

    The proper solution mature as a race and a civilization. is to Nationalize all infrastructure related resources. The alleged “bureaucrat waste” could not nearly exceed the ungodly profits and waste of energy futures speculation.

    Marx was much more accurate. You government owns your media and you economy, the “liberal media” is not liberal at all. It is owned by 5 ultra conservative corporations, and is basically one big advertisement set up to make you consume, and believe that your government is not truly fascist.

    Take it form me. I was a misguided republican for many years. Selfish, purposefully ignorant and mean. It’s the only way a person can live that duality.

  • John

    with all due respect to mister graves, there isnt really a ban, and oil companies are only drilling in 17% of the feilds they own. the rest is “stockpilled” I mean why would they be in such a big hurry to sell it all off? they just want to control the oil so that they can sell it at optimum prices for as long as possible. besides theirs more oil held up in trading than is currently in the strategic reserve. and as for nuclear, well urainium has to be mined as much as oil has to be pumped. the only difference is that nuclear energy is probly better for everybody.

  • John

    with all due respect to mister graves, there isnt really a ban, and oil companies are only drilling in 17% of the feilds they own. the rest is “stockpilled” I mean why would they be in such a big hurry to sell it all off? they just want to control the oil so that they can sell it at optimum prices for as long as possible. besides theirs more oil held up in trading than is currently in the strategic reserve. and as for nuclear, well urainium has to be mined as much as oil has to be pumped. the only difference is that nuclear energy is probly better for everybody.

  • John

    This is exactly the sort of thing that neocons like to hear. regulation is important, its how you dont end up looking like china, and how you keep speculators from driving up the price of gas. however it must be done wisely. surely theirs a balance that can be met between progress and public health and saftey.

  • John

    This is exactly the sort of thing that neocons like to hear. regulation is important, its how you dont end up looking like china, and how you keep speculators from driving up the price of gas. however it must be done wisely. surely theirs a balance that can be met between progress and public health and saftey.

  • Jeremy P

    Wow, Mr. Graves hit it right on the nose me-thinks.

    Right on!

  • Jeremy P

    Wow, Mr. Graves hit it right on the nose me-thinks.

    Right on!

  • Jim Whipple

    As a power plant operator I can say that efficiency is considered every day. Every operator continually comes up with more efficient ways to do his work and passes it on to others.

    Every engineer who designs a product considers efficiency in his equations.

    efficiency has vastly improved since 1957 and improves every day.

  • Jim Whipple

    As a power plant operator I can say that efficiency is considered every day. Every operator continually comes up with more efficient ways to do his work and passes it on to others.

    Every engineer who designs a product considers efficiency in his equations.

    efficiency has vastly improved since 1957 and improves every day.

  • Andrew

    The slash-and-burn economic policy of capitalism is what got us into our current climate crisis, more ‘free’-market policies won’t get us out.

  • Andrew

    The slash-and-burn economic policy of capitalism is what got us into our current climate crisis, more ‘free’-market policies won’t get us out.

  • http://www.recycled-energy.com Sean Casten

    Uncle B,

    Great question. And it goes to the crux of our utility regulatory model. Utilities get their rates set to earn a revenue stream that provides them with a stipulate rate of return, typically on the order of 10 – 13%. Operating costs are passed through without markup. The theory is that this ensures that (a) they cannot charge monopoly rents on their commodity and (b) they can’t increase revenues simply by raising their salaries.

    That seems sensible enough, but look how it subverts the logic of your question. If I build a power plant to recover heat and sell steam to a greenhouse, I’m now getting revenue from an unregulated commodity. Which means that any $ I receive gets passed along 100% to my customers. (So too if I build a greenhouse and grow tomatoes – another unregulated commodity!) All that effort for nothing. Meanwhile, if I replace my cooling tower with a much cheaper thermal pipe to sell heat to the cooling tower, I’ve reduced my capital basis in the plant. Which means that at a fixed return on equity, I now get fewer total $/year in dividends for my shareholders.

    In other words, the regulation conspires to make utilities prefer to build expensive, inefficient plants. Utility managers aren’t bad guys – but they do have an obligation to their investors, and under these rules, the only way they can fulfill that obligation is to act in a way that is counter to society’s interest. Fix those regulations and we will unleash a flood of existing proven technologies – like the greenhouses you mention, and others. But if we keep those regulations in place, we simply retain obstacles to any new technology that would produce cheaper power with less capital. Dumb!

  • http://www.recycled-energy.com Sean Casten

    Uncle B,

    Great question. And it goes to the crux of our utility regulatory model. Utilities get their rates set to earn a revenue stream that provides them with a stipulate rate of return, typically on the order of 10 – 13%. Operating costs are passed through without markup. The theory is that this ensures that (a) they cannot charge monopoly rents on their commodity and (b) they can’t increase revenues simply by raising their salaries.

    That seems sensible enough, but look how it subverts the logic of your question. If I build a power plant to recover heat and sell steam to a greenhouse, I’m now getting revenue from an unregulated commodity. Which means that any $ I receive gets passed along 100% to my customers. (So too if I build a greenhouse and grow tomatoes – another unregulated commodity!) All that effort for nothing. Meanwhile, if I replace my cooling tower with a much cheaper thermal pipe to sell heat to the cooling tower, I’ve reduced my capital basis in the plant. Which means that at a fixed return on equity, I now get fewer total $/year in dividends for my shareholders.

    In other words, the regulation conspires to make utilities prefer to build expensive, inefficient plants. Utility managers aren’t bad guys – but they do have an obligation to their investors, and under these rules, the only way they can fulfill that obligation is to act in a way that is counter to society’s interest. Fix those regulations and we will unleash a flood of existing proven technologies – like the greenhouses you mention, and others. But if we keep those regulations in place, we simply retain obstacles to any new technology that would produce cheaper power with less capital. Dumb!

  • http://justanyone.com Kevin J. Rice

    Policy recommendations for a single “Clean Energy Bill”

    1. Rewrite Clean Air Act to impose either permit-fees or taxes on mercury, sulfur dioxide, nitrogen dioxide, and other emissions. Stairstep these taxes in over 4 years, 25% of the total taxation/permit-fee each year.

    2. Drop clean air act emissions restrictions entirely subsituted by the above fee structures.

    3. Emissions testing must be performed by 3 outside accredited auditors. Organizations found to be ‘cheating’ will be fined 10 times the cost of the permit/tax, creating a strong incentive to come in well under the permitted amount.

    4. Executives found to knowingly cheat are criminally liable per day of the occurrence.

    5. Reporting of emissions must be made at least weekly with no more than a one-week delay from the original time of sensing. More frequent sensing and reporting makes it much harder to cheat.

    This solves many of the clean air act problems.

  • http://justanyone.com Kevin J. Rice

    Policy recommendations for a single “Clean Energy Bill”

    1. Rewrite Clean Air Act to impose either permit-fees or taxes on mercury, sulfur dioxide, nitrogen dioxide, and other emissions. Stairstep these taxes in over 4 years, 25% of the total taxation/permit-fee each year.

    2. Drop clean air act emissions restrictions entirely subsituted by the above fee structures.

    3. Emissions testing must be performed by 3 outside accredited auditors. Organizations found to be ‘cheating’ will be fined 10 times the cost of the permit/tax, creating a strong incentive to come in well under the permitted amount.

    4. Executives found to knowingly cheat are criminally liable per day of the occurrence.

    5. Reporting of emissions must be made at least weekly with no more than a one-week delay from the original time of sensing. More frequent sensing and reporting makes it much harder to cheat.

    This solves many of the clean air act problems.

  • http://justanyone.com Kevin J. Rice

    Policy recommendations for a single “Clean Energy Bill”

    1. Rewrite Clean Air Act to impose either permit-fees or taxes on mercury, sulfur dioxide, nitrogen dioxide, and other emissions. Stairstep these taxes in over 4 years, 25% of the total taxation/permit-fee each year.

    2. Drop clean air act emissions restrictions entirely subsituted by the above fee structures.

    3. Emissions testing must be performed by 3 outside accredited auditors. Organizations found to be ‘cheating’ will be fined 10 times the cost of the permit/tax, creating a strong incentive to come in well under the permitted amount.

    4. Executives found to knowingly cheat are criminally liable per day of the occurrence.

    5. Reporting of emissions must be made at least weekly with no more than a one-week delay from the original time of sensing. More frequent sensing and reporting makes it much harder to cheat.

    This solves many of the clean air act problems.

  • http://www.recycled-energy.com Sean Casten

    Mr. Graves,

    Careful on nuclear. Regardless of what one thinks about the environmental risks, the truth is that a nuclear facility doesn’t make any economic sense. Yes, they’re cheap to run, but they are massively expensive to build. It is not coincidental that the nuclear fleet we have today was built almost exclusively by regulated utilities who had guaranteed cost-recovery in their rates. Without those guarantees, you simply can’t justify the expense. (In other words, you can get a much higher return on your money elsewhere.)

    So yes – nuclear is really cheap if we’re willing to mandate that equity investors “take a bath” and simply sell power at the variable price. But I’m not aware of any equity investors who get really jazzed up about that kind of offer. You might want to look here for a more detailed look. Coal and nuclear appear cheap – and yet no one is placing equity bets on either. Either equity investors are stupid, or else they aren’t as cheap as they look. My money is on the latter.

  • http://www.recycled-energy.com Sean Casten

    Mr. Graves,

    Careful on nuclear. Regardless of what one thinks about the environmental risks, the truth is that a nuclear facility doesn’t make any economic sense. Yes, they’re cheap to run, but they are massively expensive to build. It is not coincidental that the nuclear fleet we have today was built almost exclusively by regulated utilities who had guaranteed cost-recovery in their rates. Without those guarantees, you simply can’t justify the expense. (In other words, you can get a much higher return on your money elsewhere.)

    So yes – nuclear is really cheap if we’re willing to mandate that equity investors “take a bath” and simply sell power at the variable price. But I’m not aware of any equity investors who get really jazzed up about that kind of offer. You might want to look here for a more detailed look. Coal and nuclear appear cheap – and yet no one is placing equity bets on either. Either equity investors are stupid, or else they aren’t as cheap as they look. My money is on the latter.

  • http://www.recycled-energy.com Sean Casten

    Mr. Graves,

    Careful on nuclear. Regardless of what one thinks about the environmental risks, the truth is that a nuclear facility doesn’t make any economic sense. Yes, they’re cheap to run, but they are massively expensive to build. It is not coincidental that the nuclear fleet we have today was built almost exclusively by regulated utilities who had guaranteed cost-recovery in their rates. Without those guarantees, you simply can’t justify the expense. (In other words, you can get a much higher return on your money elsewhere.)

    So yes – nuclear is really cheap if we’re willing to mandate that equity investors “take a bath” and simply sell power at the variable price. But I’m not aware of any equity investors who get really jazzed up about that kind of offer. You might want to look here for a more detailed look. Coal and nuclear appear cheap – and yet no one is placing equity bets on either. Either equity investors are stupid, or else they aren’t as cheap as they look. My money is on the latter.

  • Colin

    Finally an article that is at least headed in the right direction. We don’t need more regulations, we need less. This is true for every industry. For every single regulation the government comes up with, they have to create two more to fix all the things they screwed up with the first. This goes on and on until everything is so messed up that Adam Smith’s invisible hand no longer exists.

    McCain and Obama won’t fix these problems because at both of their cores they love the state. They are just big central planners. Kind of sucks but things will just get worse.

  • Colin

    Finally an article that is at least headed in the right direction. We don’t need more regulations, we need less. This is true for every industry. For every single regulation the government comes up with, they have to create two more to fix all the things they screwed up with the first. This goes on and on until everything is so messed up that Adam Smith’s invisible hand no longer exists.

    McCain and Obama won’t fix these problems because at both of their cores they love the state. They are just big central planners. Kind of sucks but things will just get worse.

  • Colin

    Finally an article that is at least headed in the right direction. We don’t need more regulations, we need less. This is true for every industry. For every single regulation the government comes up with, they have to create two more to fix all the things they screwed up with the first. This goes on and on until everything is so messed up that Adam Smith’s invisible hand no longer exists.

    McCain and Obama won’t fix these problems because at both of their cores they love the state. They are just big central planners. Kind of sucks but things will just get worse.

  • Uncle B

    Why cooling towers for power plants? Why not huge greenhouses? Why not pipe the heat as hot water to nearby houses for winter heating? Why not pump heat beneath streets for winter snow removal the easy way? Why not pump heat for sale to nearby industries? Why waste, are we really that rich?

  • Uncle B

    Why cooling towers for power plants? Why not huge greenhouses? Why not pipe the heat as hot water to nearby houses for winter heating? Why not pump heat beneath streets for winter snow removal the easy way? Why not pump heat for sale to nearby industries? Why waste, are we really that rich?

  • Uncle B

    Why cooling towers for power plants? Why not huge greenhouses? Why not pipe the heat as hot water to nearby houses for winter heating? Why not pump heat beneath streets for winter snow removal the easy way? Why not pump heat for sale to nearby industries? Why waste, are we really that rich?

    • Lee Bell

      What you just described is actually done in many places. Many larger companies, colleges around the country have been doing that for some years now. Large buildings such as malls are switching over to that setup also.

  • Jim

    Typical efficiency for a modern gasoline engine is only 25%. At maximum efficiency it may achieve 34% efficiency. Diesel engines can average around 35% efficiency and can get a peak efficiency of around 42%.

  • Jim

    Typical efficiency for a modern gasoline engine is only 25%. At maximum efficiency it may achieve 34% efficiency. Diesel engines can average around 35% efficiency and can get a peak efficiency of around 42%.

  • http://www.damonclifford.com/blog/ Damon Clifford

    Removing the barriers to energy efficiency will be one of the biggest challenges for the next White House administration.

  • http://www.damonclifford.com/blog/ Damon Clifford

    Removing the barriers to energy efficiency will be one of the biggest challenges for the next White House administration.

  • Mr. Graves

    Also, there are some other regulations that are certainly holding back enormous amounts of potential energy, and thus price reduction. Among the most important is the fact that no nuclear plants have been constructed for many, many years. That alone would provide an enormous amount of cheap energy, and for those who are believers of global warming, the nuclear facilities release no CO2 other than that released by workers. Also, the strict ban of oil drilling in this country is borderline insane, considering we are sitting upon a copious amount of our OWN oil. So, if we drilled it, we would not have to deal with as much of the oil “lords” in the middle east. Thus we would reduce prices, and also increase our national income which would result in a strong boost to our economy. But, the government says we cant. It is odd however, considering the government is simply an extension of the people and its sole job is to defend our rights of “life, liberty, and the pursuit of happiness”. So, please tell how building nuclear facilities or drilling our own oil would intrude on these rights? Especially when it would overall provide enormous benefits.

  • Mr. Graves

    Also, there are some other regulations that are certainly holding back enormous amounts of potential energy, and thus price reduction. Among the most important is the fact that no nuclear plants have been constructed for many, many years. That alone would provide an enormous amount of cheap energy, and for those who are believers of global warming, the nuclear facilities release no CO2 other than that released by workers. Also, the strict ban of oil drilling in this country is borderline insane, considering we are sitting upon a copious amount of our OWN oil. So, if we drilled it, we would not have to deal with as much of the oil “lords” in the middle east. Thus we would reduce prices, and also increase our national income which would result in a strong boost to our economy. But, the government says we cant. It is odd however, considering the government is simply an extension of the people and its sole job is to defend our rights of “life, liberty, and the pursuit of happiness”. So, please tell how building nuclear facilities or drilling our own oil would intrude on these rights? Especially when it would overall provide enormous benefits.

  • Joe Mohr

    I’m predicting a Rod Adams comment very soon :)

    I look forward to reading it…

  • Joe Mohr

    I’m predicting a Rod Adams comment very soon :)

    I look forward to reading it…

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