First, a general primer on the relationship between Federal and state laws. Federal laws set baseline standards that must be meet nationwide. States can set standards that are higher than Federal standards, but cannot set lower standards.
Comprehensive Federal energy and climate change legislation is coming. It is not law yet, but is merely in the mid-stages of discussion. Therefore, the details of what a final comprehensive Federal law will look like is uncertain. However, views of how the law should look can be found in various proposals including the American Clean Energy and Security Act, American Clean Energy Leadership Act, and the Clean Energy Jobs and American Power Act.
Federal standards for energy consumption in buildings, transportation, and consumer products will have a wide reaching impact across the US - especially in states that currently lack up-to-date energy standards. Moreover, Federal climate change legislation will create standards where state standards are almost entirely lacking.
Regardless of the form it takes, Federal energy and climate change legislation will create energy and climate standards that must be met nationwide. Compliance with these standards will cost money. These costs will be passed on, in various forms, through every corporation, non-profit, and governmental unit to every US citizen. These costs are projected to range from hundreds of dollars per person per year to thousands of dollars per person per year, depending on a wide range of assumptions.
Critics of comprehensive energy and climate change legislation argue that the costss are unnecessary and unreasonable - especially because they would be passed on in the form of higher prices for consumer goods and services, yet consumers would not see any tangible day-to-day benefits to justify higher prices for the same basket of goods and services as before.
However, data-driven scientific analysis shows that the price of delayed action on energy and climate issues would be far more costly.
For example, a noted study on the global impacts of climate change suggests that the costs of continuing to waste energy, and continuing to rely on fossil fuels, could equal between 5% and 20% of global GDP each year. These costs are generally associated with changes in the availability of resources like water, land, food, trees, and air. In contrast, the cost of taking action now to avoid these impacts would be around 1% of global GPD. The weight of the evidence contained in the broad body of other scientific studies supports similar conclusions.
A rational organization will run an NPV analysis of the costs and benefits of compliance with Federal energy and climate laws as compared to the cost of lost business opportunies (which in the aggregate results in lower national and global GDP) in going forward without these laws. Among other things, it will also adjust for the value of having a brand that the public sees as socially responsible - a value which is difficult to quantify but that has unquestionable value.
Many companies have performed this analysis and determined that it is in their best interests to support Federal energy and climate legislation even though it will impose short term costs that pinch the bottom line.
For example, Dow Chemical Co., Entergy Corp., Nike Inc., and hundreds of other Fortune 500 companies showed their support for the legislation during a recent lobbying effort on Capitol Hill. Additionally, there is the widely publicized withdrawal of Apple, Excelon, PG&E, PNM Resources, and others - who arguably have little to gain from Federal legislation - from the US Chamber of Commerce which opposes this legislation.
How can an organization mitigate the increased costs of energy and climate legislation? It's first step must be to reevaluate the way it uses energy. What gets measured gets managed - therefore, energy benchmarking is key. Once an organization understands its energy use patterns - the electrity that powers its lights, the fuel that delivery trucks burn on their routes, the amount of unused water that goes straight down the drain - it can take action to reduce this waste.
By minimizing waste, an organization can minimize the costs it incurs in complying with impending Federal energy and climate legislation, and thereby minimize the associated costs that it has to pass on to its customers.
Tuesday, October 27, 2009
Monday, October 19, 2009
Energy Waste
An understanding of the wastefulness inherent in our energy habits and energy infrastructure is a critical starting point for understanding the magnitude of the opportunity presented by clean energy. This insight is crucial for the long term planning of any organization with substantial energy intensive capital assets. These organizations wil prosper only if they have the foresight to incorporate energy into their long term strategic plans.
America wastes half of the energy it generates. 50%. Sound extraordinary? It's true, and it's the "dirty" little secret of our fossil fuel consumption habits.
How can it be that losses of 50% are possible? The answer is that our energy habits and energy infrastructure are holdovers from a different time - a time when energy was very cheap, and environment was not a concern.
For example, our power plants use decades old technology, and vast amounts of heat that they generate are lost to the atmosphere instead of used to provide heat for other buildings.
Additionally, we lack energy storage capabilities. Power plants produce energy constantly regardless of demand. For example, plants continue to produce power at night, despite that there is minimal demand. We lack the ability to cost-effectively store this excess energy, so it is either never captured, or it is lost as heat.
Inadequacies in our distribution infrastructure (the substations and power lines that criss-cross the nation) and our failure to fully utilize energy at the point of use (in buildings, industrial equipment, electric motors, automobiles, etc) substantially further exacerbate the problem.
How can it be that loses of 50% are acceptable? They are acceptable only because the price of energy is low enough to not incent consumers to care much.
Prices of fossil fuels continue to be low today because of subsidies and tax breaks that petroleum producers and distributors receive. And, by the way, even though people complain about special treatment for oil companies, they fail to realize the extent of their dependence on cheap fuel. For example, every time the price of gas goes up by a dime, people are up in arms. Oil company subsidies cannot be removed because people would revolt.
In short, our country is conditioned to waste excessive energy, and feels entitled to artificially low energy prices.
Clearly, this is unsustainable. And it is all about to change.
The price of energy is about to rise dramatically, which will reward those organizations that take action now, but potentially decmiate organizations that fail to recognize the coming reality of energy 'true cost pricing'.
Next: Pending Federal climate change and energy legislation, 'true cost pricing' of energy, why energy prices are set to rise dramatically, and how organizations can position themselves today to soften the blow of price increases tomorrow.
America wastes half of the energy it generates. 50%. Sound extraordinary? It's true, and it's the "dirty" little secret of our fossil fuel consumption habits.
How can it be that losses of 50% are possible? The answer is that our energy habits and energy infrastructure are holdovers from a different time - a time when energy was very cheap, and environment was not a concern.
For example, our power plants use decades old technology, and vast amounts of heat that they generate are lost to the atmosphere instead of used to provide heat for other buildings.
Additionally, we lack energy storage capabilities. Power plants produce energy constantly regardless of demand. For example, plants continue to produce power at night, despite that there is minimal demand. We lack the ability to cost-effectively store this excess energy, so it is either never captured, or it is lost as heat.
Inadequacies in our distribution infrastructure (the substations and power lines that criss-cross the nation) and our failure to fully utilize energy at the point of use (in buildings, industrial equipment, electric motors, automobiles, etc) substantially further exacerbate the problem.
How can it be that loses of 50% are acceptable? They are acceptable only because the price of energy is low enough to not incent consumers to care much.
Prices of fossil fuels continue to be low today because of subsidies and tax breaks that petroleum producers and distributors receive. And, by the way, even though people complain about special treatment for oil companies, they fail to realize the extent of their dependence on cheap fuel. For example, every time the price of gas goes up by a dime, people are up in arms. Oil company subsidies cannot be removed because people would revolt.
In short, our country is conditioned to waste excessive energy, and feels entitled to artificially low energy prices.
Clearly, this is unsustainable. And it is all about to change.
The price of energy is about to rise dramatically, which will reward those organizations that take action now, but potentially decmiate organizations that fail to recognize the coming reality of energy 'true cost pricing'.
Next: Pending Federal climate change and energy legislation, 'true cost pricing' of energy, why energy prices are set to rise dramatically, and how organizations can position themselves today to soften the blow of price increases tomorrow.
Monday, October 12, 2009
Overview
A tidal wave of economic change is coming, in the form of a clean energy economy.
To survive, let alone to prosper, organizations must take action to position themselves for this change.
Economic expansions are characterized by dramatic increases in productivity. The industrial revolution and heavy machinery. Utilization of excess capacity in US militarty infrastructure following WWII. The Wall Street 1980s fueled by mergers and acquisitions. The internet age and access to limitless data.
The clean energy economy will be the next revolution. It will be characterized by decreases in the amount of energy that we waste - and corresponding increases in the productivity of the remaining energy that we use.
A perfect storm of social forces have converged to power this economic transformation. These forces demand one or more of the three main benefits that a clean energy economy will provide:
Economic security
Going forward, each of these topics will be explored in depth, and from various interconnected perspectives.
The objective of this exploration will be to identify strategies that organizations should consider today in order to position themselves for the change that is coming -- the change that is already here.
To survive, let alone to prosper, organizations must take action to position themselves for this change.
Economic expansions are characterized by dramatic increases in productivity. The industrial revolution and heavy machinery. Utilization of excess capacity in US militarty infrastructure following WWII. The Wall Street 1980s fueled by mergers and acquisitions. The internet age and access to limitless data.
The clean energy economy will be the next revolution. It will be characterized by decreases in the amount of energy that we waste - and corresponding increases in the productivity of the remaining energy that we use.
A perfect storm of social forces have converged to power this economic transformation. These forces demand one or more of the three main benefits that a clean energy economy will provide:
Economic security
Energy security
Environmental securityGoing forward, each of these topics will be explored in depth, and from various interconnected perspectives.
The objective of this exploration will be to identify strategies that organizations should consider today in order to position themselves for the change that is coming -- the change that is already here.
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