Thursday, November 29, 2007

Tax energy wastage - not carbon dioxide

That's the headline of the short paper below.
One of the conundrums of encouraging energy efficiency is that, at any given price, less unit volume means lower revenue to the supplier. This acts as a financial disincentive to the supplier/producer, and leads to what amounts to lip-service for the concept of conservation.

In the case of electricity, it would probably be easier to implement what just about everyone agrees is a societal good, energy efficiency, if the utility is owned by the municipality.

This type of ownership has been fought tooth-and-nail in the U.S. by GE, Enron and the investor-owned utility industry since the 1890's, with some good arguments (and some lousy, self-serving ones as well) made for each approach.

Here's an idea that I use as a thought problem rather than a solution to the conundrum.
From COSPP via Blogactiv:

A global tax on wasted energy - especially the heat discarded by thermal, power-only generation plants -would be a powerful incentive for generators to begin to replace inefficient plant with CHP stations.

Aleksandar Kovacevic makes the case for such a tax and outlines its likely effects. The least efficient sources of energy today are those that are centralized. The waste heat they produce is simply released into the environment. Although the direct contribution of released heat to global warming is negligible, these sources have the side effect of low energy efficiency - a major contributor to climate change.

On a global scale, burning coal and oil to generate electricity produces more than 8000 TWh of electricity a year while releasing over 13,000 TWh of waste heat into the environment. If that waste energy were eventually used, it could produce the electricity equivalent of 2200 TWh of useful energy or increase power generation capacity today by almost one quarter for the same level of emissions.

Taking into account all fossil fuel plants (coal, oil and natural gas), Greenpeace1 argues that only 38.5% of fuel energy is converted into electricity, while 3.5% is lost through transmission and distribution (T&D), and about 13% through inefficient end use. But these are average figures. In many developing countries, energy systems are even less efficient. The International Energy Agency’s recently published World Energy Investment Outlook argues that almost half of available energy assets will be replaced by 2030, while total electricity generation capacity needs to be almost doubled by that time. Investments over the next decade will lock in technology that will remain in use for the next 60 years.

In 2003 more people were living in urban areas than rural. By 2030, 60% of people will be urban dwellers. Their need for energy services is a driving force behind energy investment. Infrastructure investment expenditure could amount to 9% of the GDP of low-income countries and to over 5% of (the larger) GDPs of wealthier countries.

Urban infrastructure is the most difficult to refurbish, restructure or replace. Solutions for urban transport, housing and energy supply are likely to be locked in for decades to come.2 In its World Energy Outlook in 2002, the IEA warned that under business-as-usual, CO2 emissions would grow by 69% by 2030 - at a rate faster than the growth of energy supply. Fast growing developing countries would burn more carbon-intensive fuels to support economic growth. Despite the higher efficiency of modern technologies, delayed investments and the prolonged life of existing facilities could create an even more difficult situation than projected.

Sir Nicholas Stern, in his Review: The Economics of Climate Change, warns: ‘Using the results rom formal economic models, the Review estimates that if we don’t act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more. In contrast, the costs of action - reducing greenhouse gas emissions to avoid the worst impacts of climate change - can be limited to around 1% of global GDP each year.

The investment that takes place in the next 10-20 years will have a profound effect on the climate in the second half of this century and in the next. Our actions now and over the coming decades could create risks of major disruption to economic and social activity, on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century. And it will be difficult or impossible to reverse these changes.’

The IEA’s World Energy Outlook 2006, the latest, contrasts the alternative policy scenario with the reference scenario, which is roughly the development of ongoing trends. The alternative policy scenario comprises hundreds of measures that are already under consideration by governments and international institutions....

5 page PDF