Mark Krebs: Digging Down on Energy Efficiency Claims (an interview)

By Robert Bradley Jr. -- June 16, 2016

“DOE and its environmental allies are trying their best bypass the adaptation of full fuel-cycle analyses through their jihad against carbon; which includes natural gas, or at least its direct use. Apparently, natural gas is still considered to be “clean,” but only if burned in electric power plants.”

MR:    Tell us about your interest in the energy efficiency debate from a natural gas perspective.

MEK: When I was a medic during Vietnam, I saw the crucial need for reliable and affordable energy in third-world countries I served in, such as vaccines for refrigeration.  So researched and became aware of the term “appropriate technologies,” and I began reading works by Dr. Ernst Friedrich “Fritz” Schumacher. One book was Small is Beautiful.

While Schumacher wasn’t exactly advocating free markets, his writings certainly endorsed free, locally directed, choices as opposed to the imposition of central government dictation of energy programs. The subtitle of this book was “a study of economics as if people mattered.”

And, as Alex Epstein would agree, people matter. But one size does not fit all. And that applies to energy infrastructure too.  Today, I think such top-down, big brother” tendencies are thriving within the United Nation’s climate change programs. Especially, “Deep Decarbonization.”

MR: Your interest was technology, and being remote, small was beautiful.

MEK: Right. At the time, and even now, an obvious alternative was relatively small engine-driven generators coupled with heat recovery to greatly boost efficiency. I also studied how recovering engine heat could be used to power absorption refrigeration cycles and other novel thermal processes; including desiccant dehumidification.

I was relatively agnostic regarding where the primary fuel for the engines came from. But I was aware that natural gas and methane were sources, with the latter having some potential for local production.

MR:    So then what happened? Where did you go from there? 

MEK: I was honorably discharged in 1975 and started using the G.I. Bill at the local junior college in Santa Rosa, California. That was during Governor Brown’s first administration when California wanted to train and deploy solar energy technicians at the nearby Sonoma State University. I applied and got in.

It was great! It felt like I had more disposable income back then than I do now. I was getting paid by California and the G.I. Bill, and all the coursework could be used towards further degrees.

So I continued going to school there. First I got a BA in energy management with a minor in environmental studies & planning.  Then I went for my Master’s.  I realized I needed some engineering, so I then  transferred to Sacramento State University.

Business Career in Energy

MR:    It was time to go into business full-time? 

MEK: Yes. I was hired by a west coast utility, San Diego Gas & Electric, to help develop their commercial and industrial energy auditing services. While at SDG&E, I found out that my attraction to engines and heat recovery had a name: cogeneration. And before that, it was called “total energy.” Now, it’s called distributed generation (DG), which has been hijacked by renewables.

The State of California endorsed cogeneration back then. Unfortunately, SDG&E didn’t. They determined that for every dollar they earned through increased gas revenue, they lost two dollars in electric revenue.  So I learned a hard lesson; some forms of energy efficiency are too good for our customers.

I left shortly thereafter to help develop natural gas markets for a gas utility, Southwest Gas, which had had just acquired the gas territories from Arizona Public Service. While there, I helped develop the cogeneration market and also started to assess the market for engine-driven refrigeration systems.

MR:    What came next? 

MEK: Then I was recruited by another West Coast gas utility, Northwest Natural Gas Company (NWN), headquartered in Portland, to run their cogeneration subsidiary for the Southwest.  It didn’t work out.  Their idea of cogeneration was large combustion turbine-driven “PURPA machines.”  Mine wasn’t.

MR:    A regulatory distortion? 

MEK: Yes, there idea was creating a nonregulated entity (PURPA machines) to sell power back to them at an “avoided cost,” which was above market rates. Mine was market-based.

For example, one project I was developing was a waste-to-energy plant for Turf Paradise; a horse racing tack in Phoenix.  They were paying well over a $1 million per year for disposing of horse manure at local landfills.  However, sufficiently dried, the same manure had a Btu value considerably higher than lignite. A small fluidized bed high-pressure boiler and steam turbine was proposed and the numbers looked promising.

As it turned out, NWN’s cogen subsidiary was shut down a few years after I left.

MR:    And you left Northwest Natural Gas?

MEK: Yes. Next, I took up a standing offer to work for the R&D Department of the local gas utility for Cleveland, East Ohio Gas; which is now a small part of an electric and gas conglomerate, Dominion.

One of my accomplishments resulted in a cogeneration patent (number 4,910,414). After a couple of years in Cleveland, I left to help an Austin, Texas based gas utility, Southern Union Gas (SUG).  This company since exited the gas utility business. After a few years in Austin, I left behind a healthy engine-driven chiller market and took a job with my present employer, a Midwestern-based gas utility holding company. I’ve been here since 1994.

MR:    That’s a lot of relocations.  What made you stay where you are now?

MEK: Basically, I got my fill of relocations, coupled with the realization that I needed to make a stand somewhere. So why not the Midwest? I’m beginning to get some job satisfaction and It’s a good place for my family and hobbies.

Political Economy

MR:    What ‘political economy’ insights have you learned first-hand through all of this? 

MEK: Plenty! Some of these have been captured in what several of my close colleagues like to refer to as “Krebsianisms.” Some of these (or variants thereof), I’ve used before in Master Resource and include these shown below (followed by my interpretation):

• Big dogs eat first: A reflection on social Darwinism.
• If you’re not at the table, you’re probably on the menu: An explanation how stakeholder consensus/collaboration processes actually work most of the time.
  • Ignorance and greed can never be regulated out of existence but can easily be regulated into existence: A generalization about how legislation processes frequently work.
  • A thin line separates paranoia from an acute understanding of reality: My psychological profile.
  • People often say “the grass is greener on the other side of the fence.” However, a thin film of algae floating over a sewage pond is also green: Another way to say that you have to make a stand somewhere.
  • America has the best regulations that money can buy: No interpretation needed (hopefully).
  • While ‘movers and shakers’ is often considered a highly admirable trait in the business world, it could indicate an underlying neurological disorder.

MR:    How has your involvement made a difference, or is that difference to come? 

MEK: I think I’ve been making a difference, but change takes time and is usually controversial. This is especially true in my industry; which, in honesty, is extremely dysfunctional.

Most gas utilities have now merged with electric utilities. In all but two cases of such “combination utilities”, it is the electric utility side that is almost always calling the shots. It was the same back at SDG&E and it remains the same now. Why? To quote Willie Sutton: “Because that’s where the money is.”

At present, some combination utilities seem to think their gas side is a liability. And Federal energy policies seem intent on insuring such liabilities continue to escalate.  Even for those few combination utilities where their natural gas division isn’t a bastard stepchild, Federal “clean energy” polices are pushing their fiduciary duty towards natural gas via electric wires versus natural gas direct use.

MR:    You aren’t discouraged, are you? 

MEK: Well, I just hope that people read and think about what I write. But I really don’t know what effect, if any, this has on anybody. You can lead a horse to water, but you can’t prevent that horse from urinating in it (another Krebsism). 

In the late 1990s I think I made a difference as a Secretary appointed advisor on the Department of Energy’s (DOE) Advisory Committee on Appliance Energy Efficiency Standards. Specifically, I think I caused DOE to disband it. 

MR:    That’s a real victory!

MEK:  It wasn’t my intention to get this committee abolished. I was asked to be on the committee to represent the American Gas Association (AGA), its members’ and the customers’ of its members. I took that to mean to insure that any “energy efficiency improvements” actually benefitted real customers. 

I quickly determined that DOE was forcing its very uneconomic will upon consumers. And we could either litigate or capitulate. I recommended litigation. The latter path was taken.

A few years later this committee re-emerged as DOE’s Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC). But now its members are chosen by DOE and no gas industry representatives are on it.

Around that time, I led an effort to reestablish advocacy within my industry regarding full fuel-cycles for better accounting of energy efficiency metrics as opposed to metrics that are site-based and still prevalent. However, DOE and its environmental allies are trying their best bypass the adaptation of full fuel-cycle analyses through their jihad against carbon; which includes natural gas, or at least its direct use. Apparently, natural gas is still considered to be “clean,” but only if burned in electric power plants.

MR:    And currently? 

MEK: I think I’m making a difference where I am. My company is beginning to realize our acquisitions must be defended from regulatory “energy efficiency” and “clean energy” threats.  I hope it spreads. Time will tell; along with a different Presidential Administration.

MR:   So what drew you to publish with Master Resource? 

MEK: Master Resource is energy non-denominational. You address energy cronyism and its variants wherever it is. That makes you unique.

MR:    What else occupies your time and energy outside of work? 

MEK: I’m way beyond being an avid gardener. I usually raise a thousand or so tomato and pepper plants on my property (amongst other fruits and vegetables). Lots of it ends up as salsa to be shared with my friends, neighbors and work colleagues.

I’m also a registered Master Gardener and participate with my local chapter where we operate a several acre demonstration garden and greenhouse. Every year, we donate a ton or more of fresh produce to our local food pantries. This makes us their main (if not only) source of fresh produce.

I’m also into “slow food,” by way of BBQ. I don’t compete, or anything like that, but I’ve usually got something in the smoker while I’m out working in the garden. I consider it redneck multitasking.

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Editor’s note: From time to time, MasterResource interviews scholars and business practitioners interested in free-market energy/environmental policy. This is our fourth interview after Ken Green, Tom Tanton and Tom Stacy. Mr. Krebs, whose work on energy efficiency mandates (conservationism) provides a rare free-market perspective, has authored a series of post MasterResource.