Federal Energy Efficiency Mandates: DOE’s End Run vs. the Public Interest (Part II)

By Mark Krebs and Tom Tanton -- January 31, 2017

“Perhaps most important is the self-fulfilling prophesy: if renewables are made to look more attractive, they’ll increase in actual use. As they increase in use, according to the EERE Guidance document but not reality, they look more favorable. Rinse and repeat.”

“The net effect of the “guidance” is to artificially discriminate against one of America’s most abundant and cleanest energy forms, natural gas.”

“… we believe DOE should rescind this report and any applications of it within Federal policies and regulations.”

Part 2 identifies some of the more egregious technical flaws in EERE’s “Accounting Conventions for Non-Combustible Renewable Energy Use.” Part I yesterday discussed process deficiencies.

Despite the innocuous appearance of an RFI, what EERE ultimately did was to issue a “Technical Report” which, in fact, is more far-reaching than just “guidance” and would impact a multitude of state and federal programs. The intent is for all to begin using this new (and highly debatable) “captured energy” metric as a basis when comparing the direct use of fossil fuels with “averaged” Btu of electricity.

This “captured energy” metric further appears to assume that averaged Btu’s in each kWh will continue to decline in some forecasted fashion, primarily due to a widespread shift towards renewable form of electric generation; perhaps attributable to a full implementation of the soon deceased “Clean Power Plan” and greater reliance on renewables for electricity (if that term can be accurately used with unreliable sources.)

Perhaps most important is the self-fulfilling prophesy: if renewables are made to look more attractive, they’ll increase in actual use. As they increase in use, according to the EERE Guidance document but not reality, they look more favorable. Rinse and repeat.

Additional flaws in the technical report include ignoring the fact that differing end uses can use differing forms of energy and that there is a fundamental difference between dispatchable and non-dispatchable electricity generation. By ignoring these truths, the report ignores the capital and energy used in backup and balancing the grid owing to the increased use of non-dispatchable technologies. The report also ignores crucial life cycle analysis parameters such as the energy and materials environmental impact of “rare earth” demands in renewable energy technologies.

Energy Values Ignored

Not all BTUs are created equal. BTUs of electricity (measured in kWh) are said to be of higher energy quality than BTUs from say burning natural gas or (even lower) contained in a pot of hot water or some hot air. Similarly, each application needs different quality of energy. This makes BTUs from some energy sources useful and useable for some applications but not others. Simply speaking, using electricity to, say, defrost your car’s windshield is a waste of that form’s higher energy quality.

But you would not be able to charge your cell phone using the BTUs in a stream of hot air. EERE ignored energy quality and assumed all BTUs are created equal. This results in a non-effective and inefficient use—a waste—of higher valued energy forms resulting from the energy requirements used in production. It can take several BTUs of lower quality forms (like fuel) to produce a BTU of high quality forms (like electricity) and creates waste when higher-than-needed quality is used. EERE should focus on end-use requirements for energy quality and less on intermediate forms that are ethereal.

Backup and Balancing For Renewables

To ensure electricity generation (supply) equals demand on a second-by-second basis, balancing authorities, also known as “independent system operators” (ISOs), increase and reduce generation as needed, often using automated generation control (AGC).

When demand increases (or other supplies become unavailable), the ISO directs a generating facility operator to “ramp up” their generation. When demand drops, the ISO directs a “ramp down” in generation. Prior to the advent of wind generation, these ramp ups and ramp downs reflected daily life and followed a predictable schedule that prevented the need for saw-tooth ramping to balance the second-by-second variation in wind generation connected to the grid.

When wind speed increases (but remains below the maximum speed allowed by the turbines), generation companies curtail generation from their intermediate load units sufficient to accommodate the wind power. Intermediate load units are usually natural gas powered generators, but, as discussed below, must on occasion be slow-to-respond coal-fired units. When the wind subsequently slows, generation from the intermediate load units is increased or otherwise brought back online as needed.

The process by which generation is ramped up and down at a plant due to wind or any other factor is called cycling. Integrating erratic and unpredictable wind resources with established generation resources requires the electricity generators to cycle their intermediate load coal and natural gas-fired units. This wind-energy-caused cycling results in significantly less efficient performance of fossil fuel facilities. The net result is increased emissions and fuel use.

This is referred to as balancing and is distinct from the concept of backup for when the wind isn’t blowing. Both have been described by Kent Hawkins here at Master Resource. Neither have been included in EERE’s new ‘captured energy’ metric. Backup and balancing increase fuel consumption and emissions (and capital requirements) faster than the growth in renewables—in other words they look worse, not better, with increasing use.

International Strategic Considerations Have Changed

As a result of the 1970s energy crisis, in August 1977 President Carter signed the U.S. Department of Energy (DOE) Organization Act (Public Law 95-91), centralizing the responsibilities of the Federal Energy Administration, the Energy Research and Development Administration, the Federal Power Commission and other energy-related government programs into a single presidential cabinet-level department.

The new Department was responsible for long-term, high-risk research and development of energy technology, federal power marketing, energy conservation, energy regulatory programs, a central energy data collection and analysis program, and nuclear weapons research, development and production. Today we’re are an energy exporting country, thanks largely to the technology of fracking. In the place of strategic concerns about energy are associated concerns about rare earths.

We’ve ‘traded’ the reliance on a cartel for reliance on a monopoly. Rare earths are used extensively in producing solar cells and wind turbines, and those two technologies are fundamentally dependent upon those materials. Thus, they are dependent upon the sources of those materials. Various estimates of the market dominance of Chinese producers of rare earths place the HHI, a measurement assessing supply risk, at more than 9,400.

Scores between 1,000 and 1,800 have been defined as benchmarks for moderate supply risk, scores above 1,800 are problematic, and scores below 1,000 are relaxed. In 2015, we imported over 75 percent of our rare earth consumption. They also require heavy, and often dirty, mining and energy to drive excavators and trucks and milling and refining.

The energy embedded in our rare earths and consequently in renewable energy equipment, compulsory precursors to renewables’ development, are missing from EERE’s guidance document. Pushing significant energy requirements to outside of the boundaries of analysis does not eliminate those energy requirements.

The net effect of the “guidance” is to artificially discriminate against one of America’s most abundant and cleanest energy forms, natural gas.

Considering the vast economic ramifications of EERE “guidance” can easily exceed over $100 million, this topic should not have taken the form of an Request for Information. Rather, it should have been issued as a Notice of Proposed Rulemaking (NOPR) if at all. Had it been issued as a NOPR, the affected stakeholders could at least appeal the “technical report” as a Final Rule under the Administrative Procedures Act.

Clearly, the elimination of natural gas direct use would have over $100 million in economic impacts. Accordingly, we believe DOE should rescind this report and any applications of it within Federal policies and regulations. If, after that, DOE wants to proceed legally and transparently, this subject can be revisited as a NOPR consistent with the President’s call for Regulatory freeze and review, and the President’s energy priorities. This should not be undertaken by a single Office within DOE.

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Mark Krebs, an engineer by training, has been involved with energy efficiency design and program evaluation for more than thirty years. He has served as an expert witness in dozens of energy-efficiency filings, which he summarized in a Public Utilities Fortnightly article, “It’s a War Out There: A Gas Man Questions Electric Efficiency”(December 1996).

Tom Tanton, Director with Energy and Environmental Legal Institute, has worked 40 years in energy and environmental policy, focused on enabling technology choice and economic development. Mr. Tanton has testified to numerous state Legislatures and Congress as an expert on energy policy. He formerly served as Principal Policy Advisor at the California Energy Commission.