Spring 2009 : Achieving Economic Prosperity And
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C LIMATE A LERT A Publication of the Climate Institute | Protecting the balance between climate and life on Earth ACHIEVING ECONOMIC PROSPERITY Volume 19, Volume 2 No. AND LIMATE ROTECTION C P — Spring 2009 FEATURED: Does a Big Economy Need Big Power Plants? Amory Lovins Output-Based Allowances for Efficient Greenhouse Gas Reductions Tom Casten Green Building Doug Gatlin The Smart Grid Bill Nitze ALSO IN THIS ISSUE: A Practical Roadmap for Efficient Vehicles Green Provisions in the U.S. Stimulus Bill Case Studies: The Race to Carbon Neutrality Spring 2009 Climate Institute News from Mexico and DC Volume 19, No. 2 Climate Alert A MESSAGE FROM THE PRESIDENT GOOD ECONOMICS: A STRATEGY THAT MIGHT SAVE THE CLIMATE Commentary by John C. Topping, Jr. Climate protection and clean energy nomic sense may be the only hope of transformation are, as Max Jerneck’s enacting legislation to move the US to article indicates, a prominent feature of decisive action and help ensure success the recently enacted economic stimulus of international agreements before we package. As Bill Nitze points out, the pass climate tipping points. Least cost stimulus legislation contains a sizable approaches to greenhouse gas reduc- his issue of the Climate Alert investment toward a Smart Grid that tions may be the only way to assemble highlights the need to integrate T should enhance both the efficiency and the bipartisan coalition needed for climate protection strategy into efforts reliability of the US power system. Doug climate action. The US can realize siz- to catalyze economic recovery in the Gatlin indicates that dramatic increases able emissions reductions at annual US and the globe after the worst buf- in building sector efficiency can, over savings in the tens of billions of dollars feting in generations. Just as evidence time, greatly reduce greenhouse emis- by striking down restrictions in state grows that a mounting concentration sions and save businesses and home laws against resale of power gleaned of greenhouse gases driven by indus- owners large sums. Already some cities from waste heat to non-utility buyers, trial and agricultural activity is acceler- and entire nations are, as Heidi Heller and by changing transmission pricing ating us toward tipping points that, shows, going further and implementing rules that are tilted against local gen- once passed, might ultimately doom plans to become carbon neutral. eration by failing to factor in reduced our coastal cities and imperil our sup- line loss and lesser need for backup plies of food and fish, confidence is Yet before anyone cracks champagne, generation. shaken that our children and grandchil- there is some very hard slogging ahead. dren can look to an economic future It has become quite clear that major Even with these impediments, Amory brighter than their parents could antici- climate legislation will require sixty af- Lovins shows dramatic movement is pate. firmative votes in the Senate. A carbon underway toward a more decentralized tax favored by many economists and and supple electric grid. The Output President Obama has acted decisively analysts does not appear to command Based Allowances proposed by Tom to move climate change and clean en- even a half dozen votes in the Senate. Casten would go far to achieve least ergy transformation atop his agenda At this point there may be as many as cost greenhouse reductions in the heat alongside economic recovery and fifty affirmative votes for some form of and power sectors. Also by avoiding health care reform. His appointments cap and trade, but despite sizable flow of revenues through government in areas of climate and energy policy - spending by environmental groups on coffers, Casten’s plan minimizes Steven Chu, Cathy Zoi and David San- media ads, the leading cap and trade chances for political pork and does not dalow at Department of Energy, Carol approaches seem well short of garner- feed fears of energy policy building a Browner as White House climate and ing sixty votes. The biggest reason is the Leviathan state. Mike MacCracken has energy lead, John Holdren to head the widespread perception that their enact- set out a similar framework for the Office of Science and Technology Pol- ment would bring burdensome costs to transportation sector that could icy, Nancy Sutley to head CEQ, Jane consumers and industry already achieve reductions quickly and Lubchenco to lead NOAA, and Lisa crimped by the economic downturn. cheaply, giving auto companies both Jackson and Lisa Heiserling at EPA - all Added to that is a growing public fatigue greater flexibility and incentive than enjoy high respect in the climate pro- with the mounting deficits and debt through command and control. Per- tection community. Todd Stern, the obligations associated with the bailouts haps combined with the feebates de- Special Envoy for Climate Change, will of financial institutions and auto compa- scribed in Danny Reed’s article, this report directly to Secretary of State nies. could be an engine for rapid reduction. Hillary Clinton, who has already made Such out of the box thinking may en- climate protection a key part of her We may be at one of those rare junc- able us to give our children some hope. discussions with world leaders. tures where doing what makes eco- Page 2 Climate Institute | www.climate.org Volume 19, No. 2 DOES A BIG ECONOMY NEED BIG POWER PLANTS? Amory B. Lovins, Climate Institute Board of Advisors and Rocky Mountain Institute Cofounder, Chairman, and Chief Scientist f I told you, “Many people need com- the grid. Thus the original architecture is Meanwhile, generators thousands or I puting services, so we’d better build raising, not lowering, costs and failure tens of thousands of times smaller — more mainframe computer centers rates: cheap and reliable power must now microturbines, solar cells, fuel cells, where you can come run your comput- be made at or near customers. wind turbines — started to become seri- ing task,” you’d probably reply, “We did ous competitors, often enabled by IT that in the 1960’s, but now we use net- The world is shifting decisively and telecoms. The restructured industry worked PC’s.” Or if I said, “Many people to micropower: cogeneration exposed previously sheltered power- make phone calls, so we’d better build plus renewables. plant builders to brutal market disci- more big telephone exchanges full of pline. Competition from a swarm of relays and copper wires,” you’d exclaim, Power plants also got irrationally big, up- smaller electrical sources and savings “Where have you been? We use distrib- wards of a million kilowatts. Buildings use created financial risks far beyond the uted packet-switching.” about 70 percent of U.S. electricity, but capital markets’ appetite. Moreover, the three-fourths of residential and commer- 2008 Defense Science Board report Yet if I said, “Many people need to run cial customers use no more than 1.5 and “More Fight, Less Fuel” advised U.S. lights and motors, Wii’s, and air condi- 12 average kilowatts respectively. Re- military bases to make their own power tioners, so we’d better build more giant sources better matched to the kilowatt onsite, preferably from renewables, power plants,” you’d probably say, “Of scale of most customers’ needs, or to the because the grid is vulnerable to long course! That’s the only way to power tens-of-thousands-of-kilowatts scale of and vast disruptions. America.” typical distribution substations, or to an intermediate “microgrid” scale, actually Central thermal stations Thermal power stations burn fuel or offer 207 hidden economic advantages have become like Victo- fission atoms to boil water to turn tur- over the giant plants (see rian steam locomotives: bines that spin generators, making 92 www.smallisprofitable.org). These magnificent technological percent of U.S. electricity. Over a cen- “distributed benefits” often boost eco- achievements that served tury, local combined-heat-and-power nomic value by about tenfold. The biggest plants serving neighborhoods evolved come from financial economics: for exam- us well until something into huge, remote, electricity-only gen- ple, small, fast, modular units are less risky better came along. erators serving whole regions. Electrons to build than big, slow, lumpy ones, and were dispatched hundreds of miles from renewable energy sources avoid the risks Big thermal plants’ disappointing cost, central stations to dispersed users of volatile fuel prices. Moreover, a diversi- efficiency, risk, and reliability were lead- through a grid that the National Acad- fied portfolio of many small, distributed ing their orders to collapse even before emy of Engineering ranked as its profes- units can be more reliable than a few big restructuring began to create new mar- sion’s greatest achievement of the 20th units. ket entrants, unbundled prices, and in- century. creased opportunities for competition Bigger power plants’ hoped-for economies at all scales. By now, the world is shift- Cheap and reliable of scale were overwhelmed by disecono- ing decisively to “micropower” — The power must now be made mies of scale. Central thermal power Economist’s term for cogeneration at or near customers. plants stopped getting more efficient in (making electricity and useful heat to- the 1960’s, bigger in the 1970’s, cheaper gether in factories or buildings) plus This evolution made sense at first, be- in the 1980’s, and bought in the 1990’s. renewables (except big hydroelectric cause power stations were costlier and Smaller units offered greater economies dams). less reliable than the grid, so by backing from mass production than big ones could each other up through the grid and gain through unit size. In the 1990’s, the The U.S. lags with only about 6 percent melding customers’ diverse loads, they cost differences between giant nuclear micropower: its special rules favor in- could save capacity and achieve reliabil- plants — gigantism’s last gasp — and rail- cumbents and gigantism.