Tuesday, November 20, 2007

Putting Environmentalist’s Claims to the Test

When you hear claims made by the media’s darling enviro-zealots, don’t you wonder if they are true or not? Do you question whether nor not anyone has put them to the test? Here, the Energy Tribune’s Robert Bryce does just that! Filled with facts, you’ll wan to study this piece. Print it out so you can read it at your leisure. Then come back and add your comments. By then, there will be some new interesting item here on CARE’s Blog where you find Comments About Responsible Energy.

This is a long posting. It was virtually impossible to edit for brevity as it was all so good. And there’s more! The author did a Q & A with “America’s favorite advocate of ‘green’ energy” but it, too, is long. However, if you are truly interested in staying on top of energy news, you’ll want to check it out as well.

Green Energy Advocate Amory Lovins: Guru or Fakir?
In early August, it was announced that Amory Lovins had won the Volvo Environment Prize. Regarding Lovins’s selection, Volvo officials said, “He has developed a number of path-breaking technical, economic and policy concepts and succeeded in merging theory with a wide range of practical applications. His work is transforming the way we use energy worldwide.”

The Volvo Prize is just the latest in a string of high-profile awards garnered by Lovins, co-founder of the Rocky Mountain Institute, an energy think-tank in Colorado. He’s also received a “genius” grant from the MacArthur Foundation as well as numerous honorary degrees.

The mainstream media adores him. In a January profile, Elizabeth Kolbert of the New Yorker magazine wrote that Lovins “is routinely described, even by people who don’t particularly like or admire him, as a ‘genius.’” In 2004, the Associated Press called him “one of the nation’s most influential energy thinkers.” And in 1986, the Washington Post said Lovins has “the heart of an insurgent, but he has the mind of a scientist.”

Lovins is America’s most famous advocate of “green” energy. Over the past three decades, he has tirelessly advocated a “soft path” on energy – one that relies mainly on energy efficiency, small, decentralized power plants, and renewable energy. In doing so, Lovins has won widespread acclaim from environmentalists and the Left, and as one critic put it, is “a rock star.” His rock stardom is understandable: Lovins is a good public speaker who provides snappy sound-bites and appealing solutions. He’s personally engaging (I met him in the early 1990s in Minneapolis), and given his small stature, has a sort of Pillsbury Doughboy appeal. Aside from his low-key personality, all of his recommendations sound eminently doable. The only thing required, Lovins repeatedly declares, is society’s will to follow his energy solutions, which invariably include efficiency and still more efficiency. A classic example is in a short article he wrote in June, “Saving the climate for fun and profit,” in which he presented a variation on his efficiency-will-save-us mantra. Stopping the global-warming problem, he wrote, “will not cost you extra, it will save you money, because saving fuel costs less than buying fuel.” Or look at his 2004 book, Winning the Oil Endgame, written with several co-authors, in which the word “efficiency” appears 549 times.

What could be better than stopping climate change for fun and profit? As for efficiency, who could possibly be opposed? Doing more with less makes sense for a whole lot of reasons. As Lovins once put it, his efficiency prescriptions are “better than a free lunch, it’s a lunch you get paid to eat.” But amid all the sound-bites, prizes, speeches, and laudatory news articles, a few key questions are seldom posed: is he the real deal? Or put another way, how much of Lovins’s theology is rhetoric and how much is based in reality?

The facts plainly show that Lovins has been consistently wrong about the ability of renewables to take large amounts of market-share from fossil fuels. He’s been proven wrong about the long-term ability of efficiency to reduce overall energy consumption. And yet, despite being so wrong for so long, he keeps getting awards and prizes by the forklift-load. And the fact that the Lovins love-fest continues unabated causes no small bit of antipathy among some long-time energy watchers. One of them is Vaclav Smil, the polymath and distinguished professor of geography at the University of Manitoba who has written numerous books on energy. “Inexplicably,” Smil wrote recently, Lovins “retains his guru aura no matter how wrong he is.”

Smil and others point out that Lovins has been wrong on numerous fronts. Four of Lovins’s claims are worth investigation.
1. Renewables will take huge swaths of the overall energy market. (1976)
2. Electricity consumption will fall. (1984)
3. Cellulosic ethanol will solve our oil import needs. (repeatedly)
4. Efficiency will lower consumption. (repeatedly)

Before delving into those issues, let’s take a quick look at Lovins’s history. He grew up in the East, moving among towns in Maryland, New York, New Jersey, and Massachusetts. His father was a designer of optical equipment. Lovins went to Harvard, where he studied physics and several other subjects. He dropped out of Harvard, moved to England, and attended Oxford, but quit before finishing his degree. In the early 1970s, he met David Brower, the famed environmentalist and founder of the Friends of the Earth. Lovins became a leading opponent of nuclear energy, arguing that the spread of nuclear power would inevitably result in proliferation.

Lovins’s anti-nuclear stance was one of his early claims to fame. And this was a key element of the article that catapulted him to fame: his 1976 piece for Foreign Affairs, published when he was just 28, called “Energy Strategy: The Road Not Taken?” In it Lovins argued that American energy policy was all wrong. What America needed was “soft” energy resources to replace the “hard” ones (namely fossil fuels and nuclear power plants), ones that are decentralized, small, and renewable.

In 1979, Lovins married L. Hunter Sheldon, a lawyer and social scientist. In 1982, the couple (who later divorced) founded the Rocky Mountain Institute, a think-tank focused on efficient resource and policy development. Today, Lovins is chairman and chief scientist at the Rocky Mountain Institute, which employs some 50 people and is based in Snowmass, just outside of Aspen, Colorado. The buildings that house the institute are reportedly so efficient that they need no outside heating, even during the winter, thanks to their passive solar design and the body heat of those who work inside them. Lovins himself lives in a super-efficient “bio-shelter” that uses some of the same passive solar techniques as the institute’s office space. His salary for running the think-tank, according to 2005 Internal Revenue Service filings, is $160,833.

The biography Lovins sent to me via e-mail from Tokyo says he has worked in over 50 countries, has been awarded the “Blue Planet, Volvo, Onassis, Nissan, Shingo, and Mitchell Prizes, the Benjamin Franklin and Happold Medals, nine honorary doctorates, honorary membership of the American Institute of Architects, Life Fellowship of the Royal Society of Arts, and the Heinz, Lindbergh, Time Hero for the Planet, and World Technology Awards.” He has written 28 books. His bio also states that he “advises industries and governments worldwide, and has briefed 19 heads of state,” and that the Rocky Mountain Institute has “served or been invited by more than 80 Fortune 500 firms and has included the recent energy-efficient redesign of $30 billion worth of facilities in 29 sectors.”

By any measure, his resume is impressive. But what about his record? That’s where things get hazy. Lovins has a number of critics, and among the most prominent is Paul Joskow, a professor at the Massachusetts Institute of Technology. “My rule of thumb,” Joskow wrote me in an e-mail, “is to double his cost estimate and divide his energy saving estimate in half to get something closer to reality.”

Indeed, a close look at the Foreign Affairs article points up the difference between Lovins’s rhetoric and reality. The piece predicted that if the U.S. were to embrace Lovins’s vision, by around 2005 more than a third of the country’s energy would be coming from “soft technologies,” which Lovins defined in part as relying “on renewable energy flows that are always there….such as sun and wind and vegetation.” Fossil fuels were not mentioned in any of his definitions of “soft” technologies.

So how did Lovins’s prediction turn out? This graphic from the Government Accountability Office provides a useful comparison, covering the period just before Lovins’s piece in Foreign Affairs, to 2004.

As shown, the only energy source that has displaced any fossil fuel is nuclear power. And yet, Lovins still claims that nuclear power “continues to die of an incurable attack of market forces.”

Electricity Demand “Ratcheting Downward”?
It’s clear that Lovins was wrong about renewable energy’s ability to displace fossil fuels. So let’s look at electricity demand. In 1984, Lovins told Business Week that “we see electricity demand ratcheting downward over the medium and long term. The long-term prospects for selling more electricity are dismal.” During the same interview he said, “We will never get, we suspect, to a high enough price to justify building centralized thermal power plants again. That era is over.” Except that it isn’t.

America’s electricity production has jumped by about 66 percent since Lovins made his declaration, rising from 2,400 billion kilowatt-hours in 1984 to just over 4,000 billion kilowatt-hours in 2005. And to meet that demand, utilities have built dozens of centralized thermal power plants.

Lovins refuses to admit that his forecast was flat wrong. In an e-mail, Lovins said he couldn’t verify the quote and that the Business Week piece was “widely misquoted.” In his initial response to the question, he said that “the general sentiment is correct in its historical context.” What that means, I have no idea. A few days later, after I sent him the full text of the Business Week story, Lovins sent another response, in which he again declared that the magazine had misquoted him and that “Cost and climate pressures and revolutionary efficiency techniques will ultimately make electricity demand stabilize and then decline in most states as it has begun to do in some. Most electricity is now wasted, and eventually economics wins. New central plants are uncompetitive and getting more so.”

Despite Lovins’s insistence that efficiency will lessen demand, electric consumption continues to rise. Between 1994 and 2005, according to the Energy Information Administration, electricity generation in the U.S. grew by an average of 2 percent per year. And in the hot summer of 2005, generation jumped by 6 percent compared to the year-earlier period. If electricity consumption rates continue growing at 2 percent per year, in about 35 years electricity consumption in the U.S. will have doubled. Electricity demand is growing so rapidly that in late 2006 the North American Electric Reliability Council warned that the U.S. could face a shortfall of 81,000 megawatts of generating capacity by 2015.

Cellulosic Ethanol And Biofuels
Lovins has consistently hyped the potential for biofuels to replace oil. And once again, he’s been proven wrong. Lovins has been advocating biofuels since his 1976 Foreign Affairs piece, in which he wrote that there are “exciting developments in the conversion of agricultural, forestry and urban wastes to methanol and other liquid and gaseous fuels.” He went on, saying that those fuels “now offer practical, economically interesting technologies sufficient to run an efficient U.S. transport sector.” Except that they don’t.

Some 31 years after Lovins said that biofuels “now offer” the ability to run the entire transport sector, corn ethanol provides just 1 percent of America’s oil needs. And that ethanol production requires the consumption of some 14 percent of America’s corn crop.

Those facts have not prevented Lovins from continuing his hype.

In his 2004 book Winning the Oil Endgame, Lovins declared that advances in biotechnology will make cellulosic ethanol viable and that replacing hydrocarbons with carbohydrates “will strengthen rural America, boost net farm income by tens of billions of dollars a year, and create more than 750,000 new jobs.” In his 2006 testimony before the U.S. Senate, Lovins declared that the U.S. could dramatically cut its oil consumption by using more natural gas “and advanced biofuels (chiefly cellulosic ethanol) for the remaining oil at an average cost of $18 per barrel.”

By nearly any measure, Lovins’s estimate is absurdly low. Producing ethanol for $18 per barrel implies production costs of just $0.43 per gallon. That’s about one-fourth the cost of producing gasoline in mid-2007 at a major oil refinery on the Houston Ship Channel.

Of course, plenty of other people are hyping the potential for cellulosic ethanol to make a major breakthrough.

After his 2006 movie An Inconvenient Truth was released, former vice president Al Gore promised that cellulosic ethanol would “be a huge new source of energy, particularly for the transportation sector. You’re going to see it all over the place. You’re going to see a lot more flex-fuel vehicles. You’re going to see new processes that utilize waste as the source of energy, so there’s no petroleum consumed in the process.” Gore’s former boss, Bill Clinton, loves cellulosic ethanol, too. While promoting Proposition 87 in California in 2006, he declared, “These things are not expensive. We have this kind of biomass to make cellulosic ethanol all over America. It would increase income in rural America. It would increase income in rural California. It would stabilize the environment and improve our national security.”

Despite the hype, the commercial viability of cellulosic ethanol remains remarkably similar to the Tooth Fairy: it’s an entity that many people believe in but no one ever actually sees. And according to a recent report from the U.S. Department of Agriculture, cellulosic ethanol remains years away from viability. In September, the agency’s Economic Research Service reported that while cellulose-based fuels hold “some longer-term promise, much research is needed to make it commercially economical and expand beyond the 250-million-gallon minimum specified for 2013 in the Energy Policy Act of 2005.”

Just for the sake of argument, let’s assume the USDA is wrong. And let’s further assume that given enough federal subsidies, cellulosic ethanol has a big technical breakthrough and expands at the same rate as what we’ve seen with corn-based ethanol. It took more than two decades of fat subsidies before the corn ethanol sector was able to produce 5 billion gallons of ethanol per year, equivalent to 1 percent of America’s oil needs. If cellulosic ethanol follows that same trajectory, it will be 2030 or so before it too will be able to supply just 1 percent of America’s oil needs.

So, just to recap, Lovins insisted back in 1976 that biofuels were capable of powering the entire transport sector. Three decades have passed. And it may be another two decades (or more) before biofuels can provide more than a small percentage of America’s oil needs.

The Jevons Paradox (for more information on this topic see CARE's Blog posting The Evolution of Fuel)
The final – and most important – area in which Lovins has been consistently wrong is his claim that efficiency lowers energy consumption. And when it comes to arguing the merits of energy efficiency, Lovins’s prime nemesis is a dead guy – William Stanley Jevons – a British economist who in 1865 determined that increased efficiency won’t cut energy use, it will raise it. “It is wholly a confusion of ideas to suppose that the economical use of fuels is equivalent to a diminished consumption. The very contrary is the truth.” And in the 142 years since Jevons put forth that thesis, now commonly known as the Jevons Paradox, he’s yet to be proven wrong.
While it’s true that improvements in energy efficiency on a microeconomic level – like replacing an old inefficient air conditioner with a newer high efficiency one – will cut consumption for that one location, when that same effort is spread over a macro scale the overall energy savings are usually swamped by overall increases in consumption. Thus the installation of more efficient air conditioners across an entire city or state, or country, allows people to use their air conditioners more and, since the cost of cooling suddenly becomes more affordable, more people install air conditioning.

In 1865 Jevons published what would become his most famous work, The Coal Question. Jevons’s book was the beginning of what is now known as the field of energy economics. After studying coal consumption patterns in Britain, he assumed that his country’s coal deposits would soon be exhausted. (He was wrong, of course.) And looking forward, he wondered what Britain would do to replace coal. He considered renewable energy.

“The wind,” he wrote, “is wholly inapplicable to a system of machine labour, for during a calm season the whole business of the country would be thrown out of gear.” He looked at water power, but concluded, “In very few places do we find water power free from occasional failure by drought.” As for biomass, he wrote, “We cannot revert to timber fuel…for nearly the entire surface of our island would be required to grow timber sufficient for the consumption of the iron manufacture alone.” He similarly dismissed geothermal, saying that the “heat of the earth…presents an immense store of force, but, being manifested only in the hot-spring, the volcano, or the warm mine, it is evidently not available.”

Over the past few years, numerous energy economists have looked at the Jevons Paradox. Among the best studies is a 1998 analysis by Horace Herring from Britain’s Open University. Herring surveyed numerous studies and reports, including a book by British economic historian B.W. Clapp, who in 1994 wrote that “it is a regrettable fact that efficiency is never so complete as to lessen consumption. Economists from Jevons onwards have noted with perverse satisfaction that as economy cheapens, that cheapness extends the market, and that measures of conservation or economy therefore increase, or at least do not diminish, the consumption of energy.”

(The line on the top left shows that the amount of energyneeded to produce goods and services has been on asteady downward trend. In 1950, it took about 19,000 Btusto produce one dollar of gross domestic product. By 2010or so, the U.S. will only need about 9,000 Btus to producea similar amount of output. Also, note that a “quad” isa common energy measurement. One quadrillion Btus isequal to about 172 million barrels of crude oil. This graphicis courtesy of Huber and Mills, The Bottomless Well, Basic Books, and www.digitalpowergroup.com.)

Herring, after providing a survey of the literature on the matter, concluded that “economists of all persuasions, whether pro environmentalist or otherwise, seem united in their conviction that improving energy efficiency through technological means, will by lowering the implicit price, result in increased, not decreased, energy use.”

Numerous other analysts have come to the same conclusion. In their provocative 2005 book, The Bottomless Well, Peter Huber and Mark Mills wrote that “efficiency doesn’t lower demand, it raises it.” They explain that the pursuit of energy efficiency has been the “one completely consistent and bipartisan cornerstone of national energy policy since the 1970s.” And yet, even though overall energy efficiency has increased dramatically since that time, “demand has risen apace.” This passage explains why energy demand will almost surely continue rising:
Efficiency may curtail demand in the short term, for the specific task at hand. But its long-term impact is just the opposite. When steam-powered plants, jet turbines, car engines, light bulbs, electric motors, air conditioners, and computers were much less efficient than today, they also consumed much less energy. The more efficient they grew, the more of them we built, and the more we used them – and the more energy they consumed overall. Per unit of energy used, the United States produces more than twice as much GDP today as it did in 1950 – and total energy consumption in the United States has also risen three-fold….Efficiency fails to curb demand because it lets more people do more, and do it faster – and more/more/faster invariably swamps all the efficiency gains.

In 2003, Vaclav Smil published an excellent book, Energy at the Crossroads, which provides readers with a comprehensive understanding of the history of energy consumption, the problems with forecasting energy use, and the challenges facing any transition away from fossil fuels. When it comes to energy efficiency, Smil – like Huber, Mills, and Jevons – concludes that Lovins’s arguments about efficiency are simply wrong. In his book Smil writes that history is “replete with examples demonstrating that substantial gains in conversion (or material use) efficiencies stimulated increases of fuel and electricity (or additional material) use that were far higher than the savings brought by these innovations.”

Despite the evidence stacked against him, Lovins insists that Jevons – and Smil, and especially Mills – are wrong. In an e-mail response to my question of whether Jevons was wrong, Lovins replied, “Broadly, yes.” He goes on to try to turn the point into a non sequitur by saying, that if his thesis were true, if we wanted to save energy, “we should mandate inefficient equipment.”

Of course, that’s not going to happen. Engineers are always seeking more efficient methods and machinery. That’s their job. But by throwing out a remark that reduces the issue to absurdity, Lovins avoids answering the critical, big-picture question about the ultimate effects of increasing energy efficiency.

One of the main problems with efficiency arguments like those put forward by Lovins is that engineering efficiency doesn’t necessarily equal economic efficiency. That is, while it might save lots of energy if everyone in the U.S. purchased a slick new super-efficient refrigerator, many people have no incentive – in fact they have a financial disincentive – to discard their existing refrigerator and replace it with a new one, particularly if the payback (in the form of avoided energy costs) takes several years. Many of Lovins’s arguments assume consumers will act with efficiency as their foremost consideration. They don’t. Jesse Ausubel, the director of the Program for the Human Environment at Rockefeller University, says that while he admires Lovins, “his ideas fail to diffuse in practice because people are not rational in ways he hopes. People make choices based on basic instincts about time budgets and social status, for example. And efficiency is not a goal in general for individuals and households. People do not acquire the efficient amount of shoes or soda or shrubbery.”

Ausubel’s point is demonstrably true. While many consumers pay homage to the Toyota Prius and other super-efficient hybrid cars, they are still buying SUVs and pickups that use lots of fuel. In 2005, the number of hybrid vehicles sold in America doubled to about 200,000. That same year, hybrids were outsold by SUVs by a ratio of 23 to 1. In 2006, hybrid sales continued their upward trend, with sales increasing by 28 percent over the year-earlier numbers. But even with that increase, hybrids still only accounted for about 1.5 percent of all the cars sold in America. Those sales numbers show that American drivers love the concept of energy independence and hate the fact that the U.S. buys foreign oil. But when it comes time to strap on their seatbelts, they aren’t as interested in efficiency as they are in the comfort, size, and convenience offered by larger vehicles.

Americans just like big. They like big vehicles, big houses, and Big Macs. And those big appetites have resulted in increased per-capita energy use even while the amount of energy used per dollar of GDP has fallen. Since the early 1980s, the amount of energy used per capita in the U.S. has risen. And the Energy Information Administration expects per capita consumption to continue rising, albeit slowly, through 2030.

None of this is offered to imply that efficiency is bad. Efficiency is a wonderful by-product of human ingenuity. It is an essential part of America’s ever-evolving economy. It is part and parcel of the free-market economy working independently of government-mandated efficiency programs. It makes sense to wring more work out of each unit of energy. Energy efficiency conserves capital. It is good for the environment. It is good for rich and poor alike. Efficiency helps reduce the impact of energy price volatility and possible oil price hikes.

But when it comes down to brass tacks, energy efficiency doesn’t necessarily mean less energy use, it usually means more energy use. And that usually means more carbon dioxide emissions. Thus, the idea of “saving the climate for fun and profit” may be just a bit more complicated than Lovins claims.

But those complications – and Lovins’s faulty predictions – don’t seem to count for too much. On November 1, Lovins was in Stockholm to collect the Volvo Prize. With it came a cash award of 1.5 million Swedish kroner – about $234,000.

No comments: