One family's energy budget

Anne and I have been trying to live more sustainably for some years. We have a ground-source heat pump for heating and cooling which uses much less energy than our high-efficiency gas furnace, even if you count the inefficiency of power plants and transmission infrastructure. We also have a modern wood-burning stove in my office, so some of the "heat" comes from making firewood, especially since all the wood must be hauled uphill. We have some gasoline-powered tools, like a chain saw and lawn mower, but we are far behind our neighbors in that department.

We have almost entirely switched over to LED lighting. We have about 10 kW of solar panels installed. We grow quite a bit of our own food. We drive Diesel cars. So how well are we doing, really? Is it enough?

Here's a rough breakdown of our annual energy budget:

13 MWh of electricity, of which 4.5 MWh is heating and hot water.
2 MWh of gas, for supplemental heat in the coldest weather.
14 MWh of Diesel fuel for our cars.
11.3 MWh for air travel, one round trip to Europe (MSP-AMS).
0.2 MWh gasoline, for all the power tools.

That's about 40 MWh annually, or about 2.31 kW/person for the whole year. In addition, there's
-14 MWh of solar production.

That gets us down to 26 MWh annually, which is about what we consume for transportation. It's also about 1.51 kW/person, or about 2 horsepower per person continuously. If we had to do it with actual horses, how many would we need, and how much land to grow fodder?

Eliminating the air travel and switching to electric vehicles would cut out roughly 20 MWh, bringing our net to roughly 350 Watts/person, under 1 hp for the two of us. We could probably cut out another MWh/year by tightening up the house and replacing some of the older windows, but what's the rest of the electricity used for? Cooking, dishwashing, laundry, computers, television, and the rest of daily life. Moving to a condo in the city might save a fair amount, but we like it here.

Maintaining Grid Reliability with Renewables

The sun doesn’t always shine, the wind doesn’t always blow. Can we really rely on renewable energy? There are four basic ways to maintain reliable energy supply using renewables:

1. Limit the amount of variable renewables to the amount of conventional supply that can be turned on or off to compensate for the variability of solar and wind resources. Very few areas in the world are close to this limit.
2. Add fast-response supply resources, like gas turbines or slightly slower gas combined-cycle plants that can keep up with the variability of the renewables. Over time, the combination of renewables and gas can completely displace the slower-response coal and nuclear plants.
3. Add storage capacity, in the form of batteries, compressed air, flywheels, pumped hydro, or some other clever contraption.
4. Get energy users to adapt their energy usage to the availability of energy.

The first two are what has been happening in most of the developed world so far. California has mandated a significant investment in storage capacity over the next six years. The fourth is Demand Response, and is already starting to happen among large industrial and commercial energy users who stand to save significantly by adjusting their usage.

Depending on Coal

St. Croix Electric gets most of its energy from Dairyland, a production cooperative owned jointly by a number of distribution cooperatives in Wisconsin and surrounding states, including St. Croix Electric. Dairyland gets almost 90% its energy from coal. This has been a source of problems for Dairyland — they recently settled a major lawsuit with the EPA and Sierra Club. The settlement requires them to pay a large fine and invest in renewable energy. For folks living near Dairyland’s plants, this settlement was a long time coming.

St. Croix Electric is a member of the Wisconsin Electric Cooperative Association and the National Rural Electric Cooperative Association. Both organizations are heavily invested in lobbying against any further regulation of coal mining or coal-related pollution, and would like to see existing regulations watered down or removed. As a result, a portion of our electric bill goes to pro-coal lobbying efforts, regardless of whether we as individuals agree. I think this is wrong.

What’s the alternative?

Regardless of what you think of the science of climate change, depending on coal for such a large portion of our energy supply is risky — it’s a monoculture. I am very concerned that our cooperative has severely undervalued that risk. It’s true that coal prices are currently depressed, partly as a result of competition from natural gas. But the longer-term outlook suggests rising prices, even without new emission limits.

In the past, it made sense in this part of the country to depend on coal — it has been inexpensive, more readily available than hydro power, and until recently, much cheaper than natural gas. In addition, Federal loan guarantees were available to rural cooperatives to build power generating capacity on the condition that it use coal. One can easily imagine the back-room deals that brought that about.

Bulk electric power can be obtained in three ways:

1. An organization like Dairyland or Xcel can build large power plants to burn coal, or natural gas, or they could build large-scale wind or solar plants. Smaller plants sometimes burn solid waste, biomass (usually wood chips) or gas from landfills or manure digesters.
2. Dairyland can enter into long-term Power Purchase Agreements with owners of  production capacity. Many wind farms are financed and built by third parties, who sell their energy through such agreements. These only work if there is sufficient transmission capacity between the source and destination of the power.
3. Dairyland and other “Load-Serving Entities” can buy energy in hour-long blocks in the day-ahead and intra-day wholesale markets run by MISO, the Mid-Continent Independent Service Organization.

In addition to bulk power, individual distribution cooperatives like St. Croix Electric can generate energy locally, using solar arrays, wind turbines, or manure digesters. So far, a few members have installed solar arrays, but many do not have good locations for solar installations, and current cooperative policy discourages all but the smallest member-owned installations. The Sunflower 1 shared array is an alternative.

As a result of the EPA/Sierra Club settlement, Dairyland is obligated to invest in solar production. One project is near Westby, WI; another is near Rochester, MN.

Energy Storage on Rails

Wind and solar energy have huge advantages. Fuel costs are zero. Their pollution footprint is miniscule compared to fossil fuels. Wind turbines and solar panels are significantly more reliable than large coal or nuclear plants, in the sense that they very rarely fail to produce power when the wind blows or the sun shines. On the other hand, they do not necessarily produce power when we want to use power. Their output is variable, and not entirely predictable.

Unlike most products we consume, almost all the electric power we consume must be pushed into the wires somewhere at the same time we are drawing it out. Exceptions are battery-powered devices. Our electric grid would be much more robust if we could connect batteries to it in strategic places on the grid. Currently, a number of hydroelectric facilities, especially in Norway, store energy by pumping water back uphill when surplus energy is available.

California has mandated a large increase in grid-tied energy storage by 2020, and much of the renewable energy is coming from solar plants in the desert, far away from hydroelectric plants that could be used for pumped-storage. So one startup company has figured out a way store energy by trundling rocks uphill on railcars to absorb surplus energy, and letting the cars trundle back down when energy is needed. The overall efficiency of this scheme appears better than pumped hydro.

Promise and Problems with Electric Vehicles

What’s the big deal with electric vehicles, like the Tesla or the Leaf or the Chevy Volt? On the plus side, they use a lot less energy to drive a mile than a comparable fuel-powered vehicle. On the minus side, they are expensive, they don’t go very far on a “tank” of kWh, and they take a long time to charge.

Let’s start with efficiency. According to the U.S. DOE, gasoline engines deliver at most 25% of the energy in the fuel to the wheels. A more typical number is around 20% (diesels are slightly better). Most of the loss is “thermodynamic” loss as determined by the second law of thermodynamics. Part of the loss comes from driving the complex machinery of pistons, cranks, and gears that get energy from the burning fuel to the wheels. Hybrids do a little better because they typically have smaller engines and they can recover much of the energy lost from braking. Electric vehicles have little thermal loss and use regenerative braking, so they can get over 60% of the energy in the battery to the wheels, roughly 3 times better than what a gasoline engine can do.

What about CO2 emissions? When you burn gasoline, you release about 9 kg of CO2 for every gallon burned, so a car that gets 30 mpg releases about 0.3 kg/mile, and costs $.10 / mile at $3/gallon. A Tesla S goes about 100 miles on 33 kWh, or 3 mi/kWh, and costs about $.03/mile at $.10/kWh. When we make electricity from coal, we emit about .95 kg of CO2 for every kWh produced. If all your electricity comes from burning coal (it does not), then the Tesla is “responsible” for about the same level of CO2 emission as the gasoline car. But the overall average CO2 emission for electricity generation in the U.S. is below .7 kg/kWh and dropping, so the Tesla comes out ahead. Of course you can charge it with your solar panels and get to zero.

Why does it take so long to recharge an electric vehicle? You can put enough fuel in your tank to go over 300 miles in under 2 minutes. That’s 9000 miles of range in an hour, if your tank was big enough. The standard 40 amp, 240 volt charging setup for a Tesla gives you 29 miles of range in an hour. The gasoline vehicle “charges” 300 times faster. That’s because the fuel is coming from a local tank, and the hose is delivering energy to the car at a rate of nearly 10 MW, while the charging setup for the Tesla delivers energy 1000 times slower at the rate of 10 kW. Most modern houses in the U.S. have electric grid hookups that can deliver at most 44 kW (200-amp service), and have no appliances that can use more than 5 kW.

Finding the Balance

Electricity is not like other commodities, partly because, at least in our part of the world, it is very expensive to store it. There are no warehouses or tanks full of electricity ready and waiting for someone to switch on a light. As a result, the entire grid has to respond when you switch on your light, all the way back to the generating plants. Automated equipment handles small fluctuations, but generators must be started up or shut down to handle larger changes in demand.

The situation is different with natural gas. The U.S. stores large quantities of natural gas in tanks and caverns — roughly a 2-month supply in the summer, down to about 20 days in the winter. This past winter the inventory got down to around 10 days a couple of times.

If you have natural gas service, you have both a meter and a pressure regulator between your house and the gas line. This allows the pressure in the line to vary over a considerable range, while keeping the pressure for your stove and furnace fairly constant. There’s also a meter on the side of your house to measure your electricity use, but there’s no regulator. It is up to the grid operators to keep the voltage and frequency within very tight tolerances at all times. Relatively small deviations are not only a problem for your clocks and light bulbs; they can cause considerable damage to transformers and other parts of the electricity infrastructure.

In our part of the country, electrical demand can vary over a 3-to-1 range across the year and sometimes over just a day or two. The highest demand is typically on hot summer days, while the lowest is late at night in mild weather. The efficiency and cost of running a large power plant is lowest when it is either producing at full capacity, or not running at all. Summer demand peaks typically last a few hours at most, while large coal plants take several hours to start up and shut down. Nuclear plants take much longer – often a few days. In order to handle the large variation in demand, there are several different types of generators connected to the grid. Large nuclear and coal plants are generally the lowest cost (along with wind, more on that later), but cannot be started up and shut down quickly. At the other end of the spectrum are gas-turbine “peaking plants” that can be started up and shut down in a few minutes. Because they are not used very often and are relatively inefficient, they produce energy at a much higher cost than the large “baseload” plants.

Renewable energy

What about wind turbines and solar panels? Fuel cost is zero, and carbon emissions and other pollution related to constructing them is minimal. The cost of wind power has come down over the last ten years, and is now competitive with coal and natural gas; the cost of solar is competitive in desert areas, and it is dropping fast. However, wind turbines produce energy when the wind blows and solar panels produce when the sun shines. They cannot be turned on and off to meet demand. They are somewhat predictable in the short term, but over longer periods they are about as predictable as the weather. Variability is reduced by spreading them across the countryside, reducing the impact of local weather variations.

Of course, there are renewable energy sources that can run continuously, just as coal and nuclear plants do. These include geothermal and hydropower, along with biogas (methane digesters on dairy farms and sewage plants, for example) and biomass (crop waste, wood chips, etc.). Norway and Iceland are largely powered by hydro and geothermal plants, respectively.

If renewables are to become a major component of our energy mix, we must find ways to manage them that preserves the stability and reliability of the grid we all depend on. One way is to match them up with natural gas plants that can be turned up or down much more quickly than coal or nuclear plants. If there is enough wind and/or solar to at least sometimes supply the total demand, then it can become almost impossible to use large coal or nuclear plants, because they cannot react quickly enough to “fill in the gaps”. This situation is fast approaching in California, and is already happening at times in Denmark. The solution in Denmark has been to partner with Norway and Sweden, both of whom get most of their energy from hydropower. When the wind is blowing in Denmark, they ship the surplus up to Norway and Sweden, who then slow down their hydro production and let the reservoirs build up, or in some cases even pump water back uphill. When the wind slows down, Denmark imports hydro power from Norway and Sweden.

Another solution, of course, is to add batteries of one sort or another. California has mandated a significant buildup of electrical storage capacity over the next six years. Currently, batteries cost around $400/kWh, making them more expensive than gas-powered reserve capacity, but the cost is expected to drop quickly over the next few years as electric vehicles become more popular and new battery technologies come online.

Demand Response

Why, you might ask, can we not adjust demand to match the available supply, instead of adjusting supply to meet demand? Part of the answer is that there is lots of opportunity to adjust demand, but we lack the infrastructure for managing it in a way that is acceptable to energy users. Our existing electric grid was designed and built over the last 100 years with the assumption that a few large power plants (the supply side) would supply power for large numbers of mostly small customers (the demand side), and that there was no practical way to adjust demand to meet supply. When  we measure usage over months rather than hours, it is not possible to ask people to pay more when demand is high, and existing “off-peak” rates primarily avoid buying high-cost energy during demand peaks, rather than adjusting demand directly to offset the need for expensive peaking power. Our current measurement and control mechanisms are simply not adequate to manage demand in the same way we can manage power plants.

There is considerable work going on to adapt energy demand to supply. One promising approach is to treat thermal energy storage devices, like water heaters, as though they were batteries. Cold-storage warehouses can also be used as batteries.

Of course, if people start buying electric cars, there will be lots of batteries plugged into the grid that can not only run the cars but also respond to the availability of energy in the grid.

Energy productivity

Of course, we have to balance our energy supply with our energy needs over periods of years, not just minutes and hours. Traditional power plants can take 10 years or more to plan, permit, build, and bring online. They represent major capital commitments, and they are expected to produce and sell power for 40 years or more. Companies (or cooperatives) who make such investments can be in trouble if the demand does not materialize. Some companies in Europe are in big trouble because they have invested heavily in new capacity that will probably never be profitable. Partly this is because during the 10-year plan-build cycle, a lot of solar and wind came online and changed the dynamics of the market dramatically. But partly it’s because the European economy has become more energy-efficient in the meantime.

Conventional wisdom says that a higher standard of living is directly tied to using more energy, but actually the relationship between energy consumption and economic growth or standard of living is indirect at best. What we want is better lives, and when we see the soaring price of filling our tanks, or involvement in the Middle East because that’s where the oil is, it sure looks like we have an energy problem. But according to McKinsey, there is plenty of room for economic growth without consuming more energy; in many cases, we would be better off investing in energy productivity than in new energy sources. Indeed, the U.S. Department of Energy says we can double our energy productivity by 2030, and do it in ways that actually contribute to economic growth. In other words, Negawatts are cheaper than Megawatts.

Achieving sustainability

In the long run, we have to find a way to support our civilization on energy that does not involve digging up increasingly limited supplies of fossil carbon or destroying our planet. It seems clear that a combination of renewable energy, storage, demand response, and improved energy productivity can meet all our needs, although in the near future this will be easier in the U.S. than in Europe. In the short term, we may need additional gas-fired capacity that can fill in the gaps when solar and wind are in short supply. In the much longer term, we may learn how to harness fusion energy, but that promise has stubbornly stayed 50 years away for at least the last 50 years. Does this mean it’s time to stop building coal plants? I believe the answer is “Yes.” It’s very hard to believe that a new coal plant today could ever pay back its investment, and it’s clear that once we start accounting for the external costs of mining and burning coal, the cost will be higher than the combination of solar, wind, geothermal, biogas, biomass, storage, and demand response. Meanwhile, the cost of wind, solar, and storage continues to fall. This is the future.

Free Markets and External Costs

A market is a way to distribute goods and resources that does not require a central authority to make decisions about prices, or about quantities and quality of goods being traded. An ideal market does this in a way that is “fair” to all the parties involved – in fact, it makes all the parties better off. This is Adam Smith’s “Invisible Hand.”

Can a market really be “free?” Only if all participants have the same information about goods and their availability, have the same influence on prices in the market, and if participants don’t cheat. Many markets in the modern world are highly asymmetric – a few large sellers have the power to set prices, and buyers have little or no influence. In the case of agricultural products, many markets are exactly the opposite – a few large buyers have the power to set prices for many small producers.

Without rules and enforcement, there are many ways to cheat – to subvert the intent of a market. They range from simple thuggery — preventing competitors from participating — to fraud and collusion. The original idea behind standardized weights and measures back in the middle ages was to prevent fraud. The ultimate in collusion is to buy up competitors and gain monopoly power. Much “white-collar” crime involves some sort of cheating in a market.

Another way to cheat is to externalize costs, which simply means that someone else pays for the goods you sell. Obvious examples are simple theft — stealing the gold your competitor has mined and selling it, or slavery — stealing labor from people who lack the power to resist and using it to undercut competitors.

Lacking rules and enforcement, theft of one type or another can make it impossible for an honest market participant to compete. A very common example of theft that happens every day is environmental degradation, which amounts to stealing from neighbors and from our children and grandchildren. Obvious examples are pollution, large-scale deforestation, and overfishing.

Some resources are “free for the taking,” like fish in the ocean. In other words, they are not “owned” by an individual or institution who can demand payment. The result is a kind of external cost called the Tragedy of the Commons. For example, individual commercial fishing enterprises have no incentive to preserve the stocks, because that would cut their incomes without protecting the fish. The only way to preserve the fish stocks is if everyone agrees on limits, and nobody cheats. This is why we have licenses and bag limits for recreational hunting and fishing, and why it takes international treaties and enforcement to manage ocean fish stocks. In the short term, of course, this raises the price of fish.