September 11, 2008
Energy Efficiency Key to Independence
By Tapan Munroe
Energy independence is a national as well as an economic security problem.In recent months discussions about our energy future has ranged from offshore oil drilling, and generating electricity from nuclear, solar, wind, geothermal, to the use of biofuels for autos . We have also discussed heroic ideas such as giant satellites collecting sunlight and beaming the energy to earth as microwaves, and flying turbines capturing the wind from jet streams to generate electricity.
What has been absent is a discussion of energy efficiency. This is an obvious strategy for dealing with our energy crisis, which is not just a supply problem, but also a demand problem.
Prior to the 1970's ,the conventional wisdom was that energy and the economy always grew in lockstep. In the aftermath of the 1973- 74 oil price shock, this relationship was broken. This resulted from a cut back in oil and energy consumption and implementation of public policies that encouraged efficiency and conservation.
For several decades California has been the poster child of energy conservation . Today, the state consumes less energy on a per- person basis than any other state. Since 1974 the per-person consumption of energy in the state has remained unchanged, while for the U.S. it has increased by 50 percent in the same period.
The state has been able to accomplish this via a host of regulations and mandates. These include energy-efficient building and appliance-efficency standards. The market economy works. Higher energy prices have encouraged energy conservation in the state. They have also provided strong incentives for the development of renewable energy sources.
The important thing to note is that the state continues to be one of the most prosperous places in the U.S. even though we consume less energy on a per capita basis.
Amory Lovins, who heads the Rocky Mountain Institute and is the author of a book entitled "Winning the Oil Endgame," suggests that we should begin to wean ourselves from oil as a source of energy as soon as possible. This would help us transition into a safer and cleaner energy future.
He concludes that the U.S, could save half of its oil usage via efficiency measures. But energy efficiency alone will not eliminate our oil dependency. The remainder of our energy needs will be taken care of by the use of biofuels and natural gas.
The current global innovation boom plays a prominent role in Lovins' analysis. Unlike the clean-tech boom in the aftermath of the 1970's energy crisis, which was mostly fueled by government money, the current clean-tech boom is mostly funded by private money coming from venture capitalists and angel investors from places like Silicon Valley.
I suggest a modification of Lovins' prescription for our energy future. We certainly need to embrace efficiency as one of the important strategies in our energy portfolio which also includes supply-side options such as solar, wind, biofuels, nuclear energy, natural gas and clean coal. However, our prime concern at this time should be getting away from our dependency on foreign oil as rapidly as possible. This can be accomplished via the use of energy efficient technologies as well as the development domestic sources of energy with emphasis on renewables.
The problem is that even when options are available, implementing them is a challenge because they involve "change". Let me illustrate my point by an example of a car that is highly fuel efficient currently being manufactured by Ford Motor . This is a company that many think specializes in gas guzzlers. The sub-compact Ford Fiesta ECOnetic 2009 gives 65 miles per gallon, seats five, offers a navigation system and will be released in November 2008. This attractive car that will be highly competitive with Honda and Toyota, and will be sold only in Europe, according to Businessweek.
Why can't we sell it here ? --Because it runs on diesel.
So what? --Because we do not like diesel. It smells, and pollutes.
The reality is that today European diesel autos equipped with the latest anti-pollution technology are cleaner and a third more efficient than gasoline autos. More than 50 percent of autos sold in Europe today run on diesel. In the U.S. only 3 percent of cars run on diesel.
Mercedes Benz, Nissan and Honda plan to build diesel cars for the U.S. market in 2009 and 2010. So why can't Ford build and sell the ECOnetic in the US? Better yet why can't Ford build and sell a gasoline version of the car in the U.S.?
Tapan Munroe, an economist, is an affiliate of LECG,LLC, a worldwide consulting firm. The column reflects his opinions. The column runs every other Sunday. He can be reached at [email protected]
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