Rebound Effect

(N.B. Obviously there is the excellent UKERC report on the rebound effect but don't tell anyone that I actually haven't read it fully, so I might just be repeating what they've said.)

While looking at MacKay's book, one point of discussion that came up was what would be the level of demand in the future. MacKay considered efficiency improvements in electrifying transport and heating, as well as having no electricity conversion losses, bringing demand from 125kWh per day per person down to 68.

Certainly this is possible, however we all know that improvements in energy efficiency can be cancelled out to some degree by increases in energy usage (the rebound effect). So I was thinking whether this would mean 68kWh/d/p is realistically possible and to what extent the rebound effect might reach.

Considering the direct rebound effect (e.g. engine efficiency improvements lead to driving more), I wonder if there are limits to it. For example:

• Insulating your house means you use and spend less on keeping your home warm. However if your home is already at 20 degrees before insulation you're not going to want more heat, so the rebound effect would be small (e.g. only from those in fuel poverty, who don't already have their homes at a comfortable temperature).
  
• Using electric cars rather than internal combustion may bring large energy savings. Although more people would be able to commute further or go on leisure trips more often, there is a limit to how much more driving people need, want or can do. People would obviously tire of 3 hour commutes, have only so much free time for other activities such as shopping and the average occupancy can only drop from 1.6 to 1.
  
• More efficient light bulbs means using and spending less on lighting. There is a limit to how much more lighting someone could want (lighting on all day in every room) and as most people don't currently go around in darkness, the rebound effect would probably also be quite small.
• and so on.

UKERC does estimate that these direct rebound effects might reach only 10-30% so obviously the question shifts to indirect rebound effects (e.g. money saved from fuel costs goes on a transatlantic flight).

Indirect rebound effects are harder to predict because of the multitude of economy-wide effects on different levels, so I'll just say to go read the UKERC report, and that they estimate it can often be over 50% of the reduction or even greater than 100%.

So this suggests that - in a developed country - reductions of energy use in the major categories: transport (domestic at least) and heating, could well reach the estimate of MacKay. However economic growth and the indirect rebound effect could see other sectors, I'd guess most likely electrical goods, would struggle and may well increase.

Considering that energy use (globally or otherwise) has only fallen noticably during recessions (and then by only a few percent) it does seem difficult to see a self-imposed drop from 125kWh/d/p to 100 let alone 68.

Although never say never.

Cough up?

"Energy bills 'too low' to combat climate change" is sure to be a headline that will provoke a lot of anger from many people, and for the 3 million plus in fuel poverty it's understandable. However, as the article mentions, the price of energy has been artifically low due to not including the cost of carbon. Similarly, the Government considered the extra £4 billion a year due to financial regulation changes was a product of a more efficient market/better regulations, rather than an unsustainable model (imagine being on a desert island: chopping down the trees provided you with shelter but later on you'd have no food)

It reminds you of the phrase: a bird in the hand is worth two in the bush, people have gotten used to cheaper energy, effectively subsidised by future generations, and view a return to normal levels as a cost increase. It's a hard thing to say to the public, but it is required and so measures to help those in fuel poverty should be stepped up (I'm not a fan of the Winter Fuel Allowance, I'd rather the money was spent on improving the energy efficiency of peoples homes but that's for another blog)

A lot of what was said in the article is good stuff but doesn't seem to be anything new, I'd guess that's down to a seeming lack of government action more than anything else, however, I should of course have a look at the study itself.

The Guardian is often frustrating in that regard, as it rarely has links for its content. I've spent several hours trying to find the one mentioned here for example, UCL mentions it while the closest I could get was this (incidentally that Claverton site has a lot of interesting stuff on supergrids which I'll probably mention when I get round to it.)

So yeah, expect angry radio phone-ins and letters to the Daily Mail, but the reality of the situation needs to be accepted for solutions to be created.

Coal vs Nuclear

This is something I've been thinking since I started studying energy policy and it's one I'm still not sure about.

It's hoped - but increasingly not expected - that renewables will contribute significantly towards electricity generation by 2020 (target of 15% of energy, meaning around 30-40% of electricity). This still leaves the majority of electricity to come from other sources. Bearing in mind the lifespan of conventional plants (40-60 years depending on the type) and the need to reduce energy use emissions by 80% by 2050, these sources are going to need to be as low carbon as possible - ideally now, definitely then.

Gas (anyone else think very little has been said about gas recently, except for a little bit when Milford Haven LNG imports started in march?) is likely to continue to be a major source, but as we depend on imports more and more, it seems unwise to continue having it as the primary source of generation when its supply will probably be minimal as we near 2050. Fusion shouldn't be part of any plans, considering it has not been proved viable on a large scale yet - absolutely research and investment should continue, just it shouldn't be the basis of any sort of plan while it's nowhere near completion. Which leaves nuclear (fission) and coal (with CCS)

It's something that seems as a "lesser of two evils" kind of problem, and my preference has switched on more than one occasion as you learn more about each.


Both coal and nuclear are parts of a centralised system, whereas (most) renewables can be centralised or decentralised. While decentralised is potentially the preferable option (in some ways greater energy security, individuals more likely to be energy aware - helping demand reduction and other efforts) it is not a crucial aspect, e.g. consumers want cheapest energy and governments want secure supplies regardless of centralisation.

Coal:

There are large deposits of coal in many developing countries, providing them with a cheap, secure and long term source of energy with which to develop, which is why many countries are planning an expansion in their coal generation. But coal is one of the most carbon intense fuels around and so a huge contributor to climate change. These countries see solving poverty/hunger/disease etc as more important than the environment and that increased energy use - coal or not - will let them mitigate and adapt to climate change better than otherwise. I'm not sure I agree
with the strategy of making the problem worse before you fix it (as well as the assumption it can be fixed later on) but regardless, there is a moral obligation of sorts for the developed countries to help developing ones, as not only does it benefit the progression of their society, but reduces the danger of climate change to everyone, including the developed countries.

This help obviously takes the form of carbon capture and storage, simply capturing the carbon dioxide and piping it into holes deep in the ground (usually). Trouble is, it hasn't been fully demonstrated yet, it's likely to cost a fair amount (the government is spending billions on full scale tests), it reduces the efficiency of a plant, it doesn't capture all of the carbon dioxide, and then there's the whole legal, technical and ethical minefield of storage. Some sites may cross national boundaries; how secure is it; how is it monitored; who is responsible if it leaks after 30 years etc. But humans are rather ingenious and could likely solve many of these problems, some might not get solved as well as hoped, but nothing is perfect and considering the threat of climate change, perhaps it's needed regardless of the drawbacks.

Which brings me onto nuclear.

There are a lot of people who dislike of nuclear, and that's because there's a lot to dislike, Chernobyl, nuclear weapons and so on, but there are some misconceptions for and against nuclear to be wary of. Historically coal has been more deadly and environmentally damaging than nuclear due to mountaintop removal mining, local pollution problems, heavy metals, ash tailings and so on. Nuclear is not 100% full proof but nor is it ready to blow at any second. It is however expensive, barely a week goes by without mention of the new plant in Finland costing twice the estimate and years late, or how the industry. It is currently intrinsically linked with nuclear weapons.

Require baseload?
Need infrastructure as well in developing countries? e.g. straight to mobile phones in africa, no landlines
Proliferation risk comes from enrichment/reprocessing - use world nuclear fuel bank when exporting tech?
Capital costs greater than coal/gas, difficulty getting finance, premium on finance because of risk/delays - http://blogs.wsj.com/environmentalcapital/2009/05/20/nuclear-revival-still-on-hold-mit-study-says/
http://www.guardian.co.uk/business/2009/jun/19/eon-chief-paul-golby-interview smart man, various interesting arguments to cover
CCS costs more than cost of carbon - http://www.publications.parliament.uk/pa/cm200708/cmselect/cmenvaud/654/654.pdf

So just like coal it's a question of is it needed so bad that it's worth the drawbacks. I'd have say yes, but I would still much rather see more renewables instead. If you want a nuclear dominated future, you're going to need tens of gigawatts of energy storage solutions because of the day to day variation in demand. But if you're building so much energy storage then that takes away one of the biggest problems of renewables.

To be finished and references put in asap

Performance based regulation

We students are helping set up a little conference down in Falmouth in a months' time and as part of that we are coming up with content to help promote the conference. I've taken this opportunity (or kick up the backside) to write about something mentioned a few weeks ago but that hadn't yet looked into: Performance based regulation. A guest lecturer from the USA said it how effective it has been on occasions (for example, utilities go down street by street with new fridges and swap them then and there if people bring out their old one). We had discussions about the ramifications of this, namely placing no emphasis on individuals to do anything about their energy use (but currently do they understand the problem/have the money/ability to change, is climate change such a problem that taking control from people is necessary/allowable?) So anyway, here's what I wrote:


The UK has set itself some rather challenging targets with respect to climate change and energy use. But while it is set to meet its Kyoto target, it is failing at others, from renewable electricity generation to eliminating fuel poverty. Current policies seem to either not be working fast enough or just not working, so is a change of focus required? From the Low Carbon Buildings Programme to the Act on CO2 advertisements, emphasis is placed on the individual to change and reduce their energy use. Getting information to people and persuading them to take action is notoriously difficult, so is there another way?

Take for example the electricity market. Currently in the UK, electricity is sold per unit (a kWh). Perversely the first batch of units cost more than subsequent units as the utilities also look to make a return on those who consume relatively little. This has several problems:

• There is no disincentive for the consumer not to use more energy when costs don’t progressively increase.
• There is no incentive for utilities to sell less or energy efficiency to the consumer, as they make more money the more units they sell.
• Cost cutting in a competitive market can mean reductions in operating and maintenance budgets, with resulting impacts on network safety and performance. The difference between 1 blackout a year and none is disproportionately large and as consumers suffer the effects of blackouts while utilities pay the cost of maintenance, it is sometimes not in their best interests to be 100% reliable.
• The most profitable course of action is not related to what is the most socially beneficial or acceptable one. For example, users of pay as you go meters tend to be those on low incomes and use smaller amounts of energy, but they pay more per unit than standard users.

So are there alternatives?

In parts of the US, they moved to performance based regulation after privatisation of the gas and electricity sector. This regulation revolves around regulators setting a base rate for each utility to charge consumers, with performance based targets giving those companies the chance to make their profits (or losses) and governments the partial ability to aid social goals. Targets might include employee safety, system reliability, customer satisfaction, lower pollution etc. The benefits of this system include:

• Cheaper and more stable electricity prices to the consumer. The base rate shouldn’t include the utilities profit margin, as profits would come from the bonuses awarded by governments for meeting or exceeding performance targets, so electricity would be cheaper. Potentially the overall cost through bills and taxes might be similar if targets are met, but if so, society should still have benefited due to the nature of the targets.
• By not restricting the methods companies choose to reach the targets, innovation is less restrained which potentially results in cheaper methods of supply.
• Switching the focus of energy efficiency measures away from individuals to utilities could take advantage of utilities larger capital reserves and greater buying power to speed up deployment of these measures
• The issue where a landlord pays for energy efficiency measures but the tenant gets the cost savings is avoided if the utilities take charge.

Performance based regulation does have its own downsides as well.

• The effectiveness is very dependent on the quality of the targets, too lax and companies can make excess profits (as has happened on occasion in California) or not well thought out enough, resulting in targets being met in undesirable ways or being contradictory.
• The cost of regulation is higher due to the effort in creating base rates and targets and overseeing the authenticity of utilities actions.
• The need for individual action or even awareness of climate change and energy use is greatly reduced. In the long term does the lack of connection mean you don’t take care of the solar panels on your roof or stop conservation measures after a few months or would it inspire you to go further?
• Does it place too much importance on the role of utilities in society, if they supply our energy and also decide for themselves how best to meet certain social goals?
• Does it permit a culture where governments see fit to take a more authoritarian role? (like ID cards etc)

This alternative viewpoint does promote interesting thoughts, but considering we have already gone down a different regulatory path post-privatisation, realistically is it possible to change? And although in theory it might be a better option, in practise how effective would it be? Parallels can be drawn to the EU Emissions Trading Scheme which is in theory the most cost efficient manner to reduce emissions in industry, but the structure of the scheme and other external factors have meant the actual reductions are questionable. Therefore would it be better to take certain parts of performance based regulation, for example more schemes in the idea of the existing Carbon Emission Reduction Target and combine it with changing the existing system to charge units more progressively?

*After showing this to Catherine and Bridget they say that the current system in the UK does have a lot in common with PBR, with CERT and EEC before it, and various transmission and distribution performances among others, but that they are limited in scope. So you learn something new everyday.

Inequality

You know when you're browsing through the TV channels and you find something interesting on BBC Parliament (I know, always), well today there was coverage of the House of Lords second reading on the companies remuneration reports bill (caps on chief executive salaries, fairness in society, that sort of thing, the text of it is well worth a read). Although it's not hugely relevant to energy policy, there were some rather interesting arguments involved, one of the main ones being that relative inequality in society holds a strong correlation to its problems. There was a review in the Guardian (12th March) on a book called The Spirit Level: Why More Equal Societies Almost Always Do Better which was very interesting because of its fundamental analysis and now it's been mentioned further I might go rash and buy it.

Some of the highlights are details of the relative earnings between CEOs and average earners. Decades ago it was in the ball park of 10-1 and in Scandinavian countries (ranking top in Unicef wellbeing tables) the current figure is very similar, likewise Japan. Whereas USA, UK etc. that figure, in some cases, is in the several hundreds (interestingly the UK armed forces has a much better ratio). The idea has been that bright, creative people should be paid the market rate for their services, otherwise they would go elsewhere and society and that company would suffer.

The discussion really seems to highlight institutional problems in society. For me there seems to be three philosophies that need looking at:

• Living within your means. Your outgoings shouldn't be more than your income but probably because of cheap credit, many people on the street bought and consumed more with little long term thought. Companies too seemed to get greedy with derivatives this and short selling that.
• No-one wants to leave the gravy train. Primarily to do with companies/markets, that while the going is good, no-one wants to be the spoilsport. Companies fear they would lose ground to competitors and risk losing more money or getting taken over. Governments make more money when the going is good, enjoy the publicity of a healthy economy and fear the public backlash if it's found their regulations have caused this. In effect, jumping off a cliff holding hands.
• That society can effectively be dragged along on the tailcoats of the rich. This has been a fundamental Government philosophy for some time now, that the successful few provide extra crumbs for the rest of society to feed off. I'd guess it's why Governments have been so reluctant to sort out tax havens etc, in the belief that if they are taxed the same as the rest of the population, they will go elsewhere and everyone loses a little.
  

But this recession and in the statistics mentioned in Spirit level, appear to have proven that these beliefs are mostly a fallacy, based on greed, irresponsible risk taking and short-termism.

I really do recommend reading the transcript linked above, it's much better written than this blog if nothing else.