Category Archives: Energy

Why Green Only Accounts for 6% of Electricity in the U.S.

A recent post over on the HBR Blog Network on the supposed decline of green energy did a good job when it noted that renewable energy production in the US has doubled in the past 4 years, and did a better job when it noted that it’s possible to get to almost 50% in a mere five years if a concerted effort is made (as Portugal went from 17% to 45% renewable in 5 years, and Germany generates over 25% of its electricity using renewable sources, to the point that it can generate up to 50% of its peak electricity needs on a good day), but fell short when it came to explain why the U.S. isn’t doing better.

Since I’m a cranky contrarian, I’ll tell you why. Because, collectively, the US, as with many other developed economies, is revelling in the seven deadly sins.

  • Lust
    We want the bigger TV. We want the margarita ville machine. We want the power hogs. So we have to crank up the energy production on the infrastructure we have in place as it takes time to build new infrastructure. And the need for more energy is only amplified by our
  • Envy
    for what our neighbours have. This is clear from the fact that the average American household debt is $117,951 and the average Canadian household debt is $112,329. We keep wanting more, and it requires energy, and we look the other way as production on the current infrastructure is cranked up to meet our demand.
  • Gluttony
    We want the temperature at a constant 21C. 23C? Better blast the air on full. Temperature drop to 19C? Crank up the electric furnace. The energy usage per person in North America is 4 times that of the global average! We absorb capacity as fast as we can add it and want more! And since we already have the infrastructure in place to burn coal and oil, it’s easier to just crank up the furnace even more.
  • Sloth
    Change the thermostat with a smart, programmable thermostat that won’t crank the heat until it drops to 17C or the air until it gets to 24C? That would require work! Walk around and open the windows or close them to manually regulate energy usage? That would also require work! Make sure we turn off the electronics when not using them? Why? When it comes to even doing the little things, we can’t be bothered.
    And then, we have the same problems in our plants and warehouses. Simple things, like timers and motion sensors to turn off lights, excess heat or cooling, etc. don’t get put in place and energy is wasted. Buildings aren’t properly insulated and heating or cooling will leak out almost as fast as the heat or cold air is produced.
    This is the real reason the pace of renewable expansion is being held back. Corporations, which exist for the sole purpose of generating profit for shareholders, are greedy, and investing in renewables takes a lot of up front investment. And while the math demonstrates considerable payoff over the long term, now that we barely think beyond the next quarter, no one wants to wait for the long term payoff anymore. Corporate shareholders want their return now, and taxing the current infrastructure is the quickest way to make a quick buck. Plus, the oil companies want their profits and the coal companies want their profits and the natural gas companies want their profits and, guess what, many shareholders of energy companies also hold shares in oil companies and coal companies and natural gas companies …
  • Wrath
    When the activists demand we do better, instead of taking a good, long look at ourselves, and the energy grid that was built as we passively looked the other way, we get angry that their protest slowed traffic and caused us to be late for work, because …
  • Pride
    We’re too proud to admit we’re wrong, that we haven’t been doing anything about it, and that we need to stand up and say I can make a difference, and, more importantly, I can force my nation to make a difference by spending my dollars on, and casting my votes for, green energy. We could be at 60% renewable energy on the grid by the end of the decade. But for that to happen, we have to really, really, really want it.

Why Gas Prices Are Too Damn High! recently created an interesting infographic that, after breaking down the cost, demonstrated that the underlying reason was global instability and how it affects the price of crude oil which accounts for about 75.5% of the cost of gas in the US. The second biggest cost component was, expectedly, taxes, which account for about 12.25%. A reduction in taxes would help, but even if taxes were chopped in half, you’d still only save $2.44 on a 10-gallon fill-up.

The problem in the US is that Wall Street has changed the formula in the U.S. for pricing gasoline. Until last April, gas prices hinged on the price of U.S. crude oil, set daily in a small town in Cushing, Oklahoma which hosts the largest oil-storage hub in the country. Today, gasoline prices instead track the price of a type of oil found in the North Sea called Brent crude which, today, happens to trade at a premium to U.S. oil by around $20 a barrel. Good for the US oil exporters adding Billions to their bottom lines, but bad for the average U.S. consumer. (Remember, just because a company drills in the U.S. doesn’t mean it has to sell in the U.S. So if you’re a protectionist, maybe you should be fighting for more wildlife preservations. It’s not like you’re going to get cheaper gas anytime soon.) [For more information, see this Fortune article on If the U.S. is now an oil exporter, why $4 gas?]

So, unless OPEC decides to try and regulate prices, or the US produces more oil and passes laws mandating that such oil is kept it on its own soil for domestic use and reduces the cost of acquisition for domestic use (possibly by legislating how oil is to be priced in the U.S.), it looks like gas prices are going to be too damn high for a while.

Click the image below to see the full graphic.

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Can You Detect Greenwashing?

Can you detect when a supplier is Greenwashing their product or service? Are you sure? Did you take part in Earth Hour? You did? Guess what! You probably can’t detect greenwashing!

Earth Hour, another stupid marketing gimmick supposedly designed to get the message out about responsible energy usage, actually encourages the exact opposite by telling everyone to stop using power — at the same time — for one hour. Then, at the end of the hour, everyone — at the same time — turns their lights, tvs, and washing machines back on. This is the kind of action that can bring down a power grid, and, guess what, cost more energy then is saved in some cases. (Very little energy is actually saved, by the way. Less than an hour’s worth of lights or TV. You know why? When the hour is over, people are still going to do their laundry. They are still going to cook in their ovens. And they are still going to use whatever power hungry toys they have in their house.)

If you were a power engineer, you’d know that grids are designed to work where energy requirements are at rather constant levels. Basically, in laymen’s terms, whatever is put on to the grid has to be taken off, or the grid will blow. Similarly, if too much energy is taken off too fast, the grid can blow too. If power usage all of a sudden drops 50%, sometimes entire plants have to be rapidly taken off-line. (Which can be a problem if you have a nuclear plant in the mix. You just can’t shut one of those down on a whim!) This wouldn’t be a problem if it wasn’t for the fact that it takes a lot of time and energy to start up certain types of power plants. Water may turn turbines on its own when they are placed in a waterfall thanks to gravity, but sometimes a kick is needed to start a wind turbine. And coal burning plants don’t start up at the flick of a switch. It takes thousands of households turning off tvs and lights to equal the power required to start a small power plant. Imagine the power wasted shutting down and starting up a large power plant in one hour.

But I digress. As per the Sins of Greenwashing, maintained by TerraChoice, only 4.5% of products in 2010 were sin-free. Only 4.5%! The average claim is stretched so far from the truth that it’s only basis in reality is that the words used to describe it are part of the English language (most of the time). This is important to keep in mind with Earth Day coming up in two weeks and marketing folks getting ever more keen to tap into all the hoop-la that it entails. (Not that Earth Day is bad — just the marketers who try to sell non-green products and services as green.)

So how do you detect greenwashing? Familiarize yourself with the “10 Signs of Greenwash” developed by Futera and documented in this guide on Understanding and Preventing Greenwash co-developed with BSR. In brief, they are:

  1. Fluffy Language
  2. “Dirty Company”
  3. Suggestive Pictures
  4. Irrelevant Claims
  5. Best in Class
  6. Just Not Credible
  7. Jargon
  8. “Imaginary Friends”
  9. No Proof
  10. Out-Right Lying

Risk Mitigation 2012: Economic

In our last post, we covered some potential mitigations for each of the top three geopolitical risks that we identified in our Risk 2011 series. In this post, we are going to cover some potential mitigations for each of the top three economic risks as we continue our series of posts inspired by the World Economic Forum‘s recently released 6th annual Global Risks report, 2011 edition.

03: Asset Price Collapse

Most of an organization’s capital is tied up in two things — its people and its assets. This includes its buildings, its inventory, and the raw materials that will be used to create future inventory. If all of a sudden the value of each of these assets drops 50% over night, the organization loses 50% of the value of these assets — and will likely sustain additional losses when it has to sell its inventory at a deep discount.

While asset price collapses can’t be prevented if a market is flooded, or a market is cornered, or asset prices are artificially inflated by collusion and then drop rapidly when the inflation cannot be maintained, it is often the case that impending asset price collapse can be predicted in advance. Asset prices rise and fall, and they always fall if they get to high. While the exact time, and degree, of collapse cannot always be predicted accurately, it’s often possible to predict an approximate time of collapse, and an approximate degree. If a price collapse is coming, the organization can reduce buys to minimal levels, sell off unnecessary assets in a controlled manner, or, if possible, hold onto them until such time as asset prices return to reasonable levels.

02: Extreme Energy Price Volatility

Today’s organizations are ultimately dependent upon three things – people, raw materials, and the energy required to transform the raw materials into the product the organization will sell. If oil doubles in price, that could make the difference between being able to produce the goods in China and import them into the US for sale at a profit and having to import them into the US for sale at a loss (or risk losing the entire inventory).

Energy price volatility is not going to go away. An organization has two options, try to predict the volatility and ride it out as best as it can, or try to restructure its operations such that it is not (as) dependent on volatile energy sources. There are two ways it can achieve this goal. First of all, it can focus on streamlining its operations to make them as lean as possible. Reducing the energy required is the first step. Secondly, it can invest in creating its own green energy sources to minimize its dependence on external sources. This will go a long way to not only stabilizing its energy costs, but to preventing energy spikes in the future.

01: Fiscal Crisis

The fiscal crisis can lead to many things — currency volatility, a credit crunch, and overall infrastructure fragility. Weakening currencies can cause costs to skyrocket. A credit crunch can severely restrict cash flow and make it almost impossible for an organization to temporarily borrow the cash it needs to secure the inventory required to produce the goods it plans to sell to create revenue and, eventually, generate profit. And infrastructure fragility, which weakens every time there is insufficient cash to invest in necessary maintenance, can result in transportation lanes, power plants, and basic utilities becoming unavailable overnight.

If the organization is a global multi-national, currency volatility can be mitigated by keeping keeping cash in multiple currencies. If a credit crunch is likely, the organization can reduce its expansion and investment plans to maintain enough cash on hand to continue operations without interruption. And if the infrastructure is becoming fragile, the organization can invest in infrastructure improvements. If the government will take loans (by selling bonds) to finance improvements, the organization can invest to insure continued availability of necessary public infrastructure. If not, the organization can invest in its own infrastructure to the greatest extent possible or relocate operations to where the infrastructure is strong and expected to stay strong.

Remember, Energy Efficiency is the First Step in Energy Conservation!

If you’re a buyer of computers, electronics, machinery, automobiles, buildings, or anything else that requires power, the first thing that should still be on your mind these days, with petroleum and oil prices about to go through the roof again, is energy. It now costs more to power an average desktop workstation for its expected life-span than it does to buy it, just as it does to power and cool your average server. Getting 40% off MSRP on a pick-up truck that only gets 15 mpg isn’t a great deal anymore if it’s going to be driven 30,000 miles per year, because, at current fuel costs, you’ll be spending 45,000+ in fuel costs over 5 years … over two times what you’ll be paying for the truck!

That’s why it needs to be said again that energy-efficiency technologies can reduce energy consumption by 25% or more, as per the results of a McKinsey study from 2008 that also found that improved energy efficiency can cut energy requirements by 25% in many developed countries, as I noted in my post on Cutting Carbon Footprints on the Country Level.

And remember the 2008 The Industry Week article on Growing the Energy Efficiency Market that focussed on a 2008 ACEEE (American Council for an Energy-Efficient Economy) report on The Size of the U.S. Energy Efficiency Market: Generating a More Complete Picture. The report, which was supported by the Civil Society Institute, the Kendall Foundation, and the North American Insulation Manufacturer’s Association, found that:

  • The U.S. has the potential to reduce energy consumption by an additional 25% to 30% through strategic use of energy efficient technologies
  • Energy-Efficiency has met about three-fourths of the demand of new energy related services since 1970, proving that it works
  • Investments in more energy-efficient technologies could result in an efficiency market worth more than 700 Billion by 2030

So do what you can to drive for energy efficiency. The operating cost reductions to your Supply Management organization that will follow will be well worth it.

Editor’s Note: This is an edited reposting of a 2008 SI blog post on how Energy Efficiency is the First Step in Energy Conservation. It’s a good message to remember at this time of year when many people put up those energy-inefficient holiday lights and displays from ten and twenty years ago without thinking that can, when overdone, create quite a strain on the grid.