Tuesday, December 23, 2008

Random Thoughts, v3

First of all, happy holidays to all my readers! I'll be taking a break in the coming weeks to celebrate, but will be back in January.

Technologies to help us get to net-zero
Getting to net-zero in buildings will require more efficiency and more on-site renewable power, and these new technologies will help:

Energy-generating revolving door
GreenBiz reports that Royal Boon Edam recently installed the first energy-generating revolving door at a railway station in Holland.

BYD unveils first mass-market plug-in hybrid electric vehicle (PHEV)
BYD finally released their mass-market PHEV, known as the F3DM. The car will sell for $22,000. The F3DM will be a barometer for uptake of PHEV's and EV's more generally in China. EV's and the associated energy storage capacity of the battery will likely play a central role in the distributed energy network of the future. Climate Progress has good analysis on the importance of this announcement.

High-efficiency elevator

Earth2Tech reports that Finland's Kone will produce a new elevator that incorporates regenerative braking and LEDs, resulting in 50% energy savings versus a standard elevator. This is important, since according to a 2005 report (PDF), elevators generally account for about 5% of a building's energy consumption.

Construction begins on 166 MW solar plant in Yunnan
New Energy Finance reports that construction recently began on a $1.32 bn solar PV demo plant in Yunnan province in southern China. China currently has 100 MW of installed PV power, but the government is aiming for 300 MW by 2010, and 1.8 GW by 2020. For comparison, Germany led the world in installed solar power capacity at the end of 2007, with 3830 MW providing about 1% of Germany's total power demand.

FYI, China is the world's second largest producer of solar PV panels, accounting for 22% of world sales in 2007. 95% of these solar panels were exported in 2005, according to Julia Wu of New Energy Finance.

Sunday, December 21, 2008

Thermal comfort in China

Walk into almost any building in Beijing and you will notice that thermal comfort standards are not as high as they are in the West. While wearing a jacket inside in the winter (or short sleeves in the winter) is not necessarily comfortable, it is energy efficient. And it also raises a key issue of whether growth of America's LEED green building standard in China is a good thing or a bad thing.

What are thermal comfort standards like in America?
Thermal comfort standards are designed to ensure that buildings occupants are comfortable while indoors, which is important since Americans spend 90% of their time indoors. Thermal comfort standards in America are set largely by ASHRAE Standard 55-2004. According to ASHRAE,
the standard specifies the combinations of indoor thermal environmental factors and personal factors that will produce thermal environmental conditions acceptable to a majority of the occupants within the space. Environmental factors include temperature, thermal radiation, humidity and air speed, while personal factors are activity and clothing.
According to Stephen Turner, PE, of CTG Energetics and a key contributor to ASHRAE Standard 55-2004:
[ASHRAE 55-2004] is based on chamber studies and results in a range of temperatures over which conditions are predicted to result in an acceptably low percent [generally 20%] of people who would express dissatisfaction with thermal conditions in the space.
So using the ASHRAE standard, you will arrive with a range of acceptable temperatures that looks like this:
This is a pretty tightly controlled range, and generally ensures you won't have to wear your Christmas sweater indoors. Increased occupant comfort also generally increases productivity. So this is a good thing. But unfortunately, there is also an energy cost associated with keeping the temperature in such a tight set range. This is why Jimmy Carter suggested that we turn down our thermostats and wear sweaters to save energy.

But as Carter's failed attempt to get people to turn down the thermostat showed, Americans are unwilling to give up their thermal comfort. So in America, the goal has shifted from expanding the range of acceptable occupancy temperatures. As codified in the LEED rating system (which has 3 ASHRAE Standard 55-2004 related credits), the new goal is to maintain the same thermal comfort standards but keep the associated energy cost as low as possible.

But as Carter's failed attempt to get people to turn down the thermostat showed, Americans are unwilling to give up their high thermal comfort standards. Rather, the new goal is to maintain the same thermal comfort standards but keep the associated energy cost as low as possible. In fact, even the LEED green building rating system codifies this high thermal comfort standard by including 3 credits related to ASHRAE Standard 55-2004.

And China?
Ostensibly, thermal comfort in Chinese buildings conforms to ASHRAE 55 or other international standards. But as with most standards in China, few buildings actually meet these standards. For example, a recent study of buildings in central southern China found that during the summer 52% of buildings had temperatures outside of the acceptable ASHRAE 55 range. But surprisingly, most building occupants still reported satisfaction with thermal comfort, with fully 87% reporting that the thermal comfort conditions were acceptable! This suggests that Chinese people are comfortable, or at least okay with, occupying buildings with temperature ranges well outside of what the ASHRAE 55 standard would require.

Thermal comfort expert Professor Zhu Yingxin of Tsinghua University fully agrees with this finding. Her research has shown that Chinese people can be comfortable at temperatures significantly warmer than ASHRAE 55 would allow, even up to 30* C (86* F). The upshot of this is that Chinese may be willing to accept a higher variation in indoor temperature, which would require less cooling and heating energy.

This suggests that applying both ASHRAE 55, and by extension, LEED, standards to China could result in unnecessarily high uses of energy for heating and cooling spaces to such tight temperature ranges. Professor Zhu agrees, and thinks it’s critical for China to create their own thermal comfort standards that effectively reflect the uniqueness of Chinese characteristics.

What about productivity?
By extension then, the widespread adoption of LEED (which again, gives 3 credits for buildings that comply with ASHRAE 55) in China may have the perverse affect of driving China to use more energy than it otherwise would have.

But on the other hand, much research related to green buildings in America has shown that green buildings can increase occupant productivity. For example, a 2005 LBNL-University of Helsinki study (PDF) suggested that the performance of office workers is best between 21-22* C and declines as temperatures rise. This temperature is within the ASHRAE 55 temperature range and suggests that adopting the ASHRAE standard could boost productivity.

So by not adopting these standards, are workers in Chinese buildings less productive? Maybe. The LBNL study concluded that at 30* C, productivity declines by 9%. But again, these results were based on American office workers. More study is needed on how Chinese worker productivity responds to temperatures.

The inevitable climb
In my view, although Professor Zhu’s research shows that the Chinese can accept warm temperatures, they don’t necessarily prefer them. For example, a Beijinger could theoretically accept public transportation, but in practice, many buy Audis. So are we to expect that as Chinese building occupants continue to increase their standards of living, they won’t aspire to the American level of thermal comfort standards? Let’s just hope that the Chinese do it in the most energy-efficient way possible.

In fact, Professor Zhu’s research will hopefully help do just that: she has found that proper natural ventilation in building spaces can make Chinese people feel much more comfortable at relatively higher temperatures. And Stephen Turner hinted that ASHRAE would think incorporating this type of research into the next Standard 55.

Wednesday, December 17, 2008

Beijing Energy Network talk on Integrated Design

Here are the slides from my presentation last night at the Beijing Energy Network event:

Thanks to all those who attended. Hopefully it was an interesting talk.

Tuesday, December 16, 2008

Beijing Energy Network talk tonight by yours truly

I am giving a short talk tonight at the Beijing Energy Network Beijing Energy & Environment Roundtable (BEER) at 8pm at the Blue Frog in the Sanlitun Village.

The title of my walk will be "Green Building Design in China: Developing Whole Systems Approaches" and will focus on the importance of integrated design to deliver cost-effective energy savings in the built environment.

If you're in Beijing, feel free to come check it out. Otherwise stay tuned to this channel as I'll post the slides tonight after my talk.

Monday, December 15, 2008

Clean Development Mechanism Ignoring Cheapest Source of Carbon Reduction: Building Energy Efficiency

According to a recent UNEP report, of the 3000+ Clean Development Mechanism (CDM) projects in the pipeline as of May 2008, only 6 projects dealt with energy efficiency! This is a real shame, because buildings are both the largest and cheapest source of reductions of carbon emissions. We need to focus on building energy efficiency now, especially as China continues to build new real estate, because the long life of buildings means that decisions made today will affect carbon emissions for the next 50 years. Hopefully negotiations for the post-Kyoto successor will result in a more effective CDM that funnels investment to the vast, cheap sources of carbon emission reductions in the built environment.

Huge Missed Opportunity
As shown in the chart below, the potential for GHG mitigation through building energy efficiency is both massive and low-cost.
Source: IPCC Scientist Diana Ürge-Vorsatz presentation (PDF)

To put this 2.5 gigatons of carbon saving potential from buildings in the developing world into perspective, this is more than China's ENTIRE EMISSIONS of carbon in 2006, which were a "mere" 1.48 gigatons.

But a look around almost any construction site in Beijing should make it clear that many of these GHG reduction measures are not being implemented, even though the CDM could theoretically be used to help fund the investment.

So what are the barriers to using the CDM for building energy efficiency?

1) The benefits of the CDM credits are outweighed by the transaction cost of applying for the CDM credits. Since building energy efficiency projects are generally small and use a variety of technologies in tandem, they are not well-suited to the CDM process. The CDM methodologies would require validation of every single technology in every single building, a time- and capital- consuming process that reduces incentives to go through the CDM process.

2) The lack of reference cases. Especially for new construction, how can we know say how much energy the building saved? What is the proper baseline building for comparison? The existing CDM methodology is unclear on this point.

3) Additionality. In many of these cases, the overall economics work without credits, and the only thing holding the project back is a misalignment of incentives thanks to the fragmented building market. It's not clear to me that just throwing money at this situation in the form of carbon credits is the answer, but I'm not sure. It probably would help some buildings make extra steps toward building efficiency, but might be spent more effectively elsewhere. The additionality issues are also very much still a work in progress at the UN review process, creating uncertainty and discouraging building projects from applying for credits.

How can we fix it?
UNEP suggested several straight-forward policy fixed to make the CDM work for building energy efficiency projects:

1) Adopt more statistical management tools to measure reductions- i.e. increase sampling. If we submitted a 1000-building project for CDM verification, we shouldn't have to submit every building for verification, just a sufficient number to reasonably estimate the reductions.

2) Allow performance based methodologies- i.e. instead of measuring every technology's individual contribution to carbon reductions, measure the overall effect by measuring energy use per area and comparing it to other baseline projects to determine carbon savings.

3) Establish common performance baselines- i.e. allow each region to create a baseline for buildings based on property type, energy source, and climate zone.

How can we use the CDM to drive higher energy efficiency standards for buildings?
The UNEP report also suggested an innovative approach to using the CDM to help countries reach higher building energy performance standards. The idea is this: Let's assume the government of a developing country wants to raise building code energy standards over time. The government then establishes a new performance-based code that gets progressively more stringent over time. The CDM methodology could then establish a crediting baseline to help building owners deal with the burden of getting to the new, more stringent standard. Building owners would have to get over a minimum hurdle, called the crediting baseline, and would earn credits for any reductions between the crediting baseline and the sector standard. But there would also be a kicker- for any reductions over the sector standard, buildings would earn more valuable, "premium" credits, thereby providing incentive for using innovation to go beyond the sector standard.

This is a nice approach, because it places responsibility on the developing countries and their building owners to improve energy performance, but provides ample help in the form of CDM funds and does not require mandatory caps on overall carbon emissions.

What this means for China
Source: Wikipedia CDM entry

As we can see in the chart above, China is far and away the largest CDM market. More importantly, it is also the fastest-growing big real estate market. There is a huge opportunity for a better CDM methodology to help fund building energy efficiency in China.

Moreover, as China first adopted their national building energy standard in 2007, there is presumably significant scope to continue to ratchet this standard up over time using the innovative method the UNEP report suggested. Since, ahem,
in the past, compliance with the existing regulations [in China] was a large problem. Although today this situation has improved, there is still need for further improvement.. [IEA paper on energy codes, (PDF) p. 52]

this could be a great mechanism for China to finally get serious about making sure all buildings comply with energy standards.

Tuesday, December 9, 2008

Random Thoughts

Wind power investment ramps up in China
Ecoconcern announced last week that it is investing $1.1 bn into four onshore wind farms in China, for a total of 720 mW of wind power capacity. This is the latest indicator of rapid growth in wind investment in China. China currently has more than 6 gW of installed wind power and is aiming for 10 gW by 2010.
Current rankings of installed wind power (as of Jan 2008):
1) Germany- 22 gW
2) United States- 16.8 gW
3) Spain- 15.1 gW
4) India- 8 gW
5) China- 6 gW

Wal-Mart and MEP sign a sustainability MOU
WalMart signed a memorandum of understanding with the Ministry of Environmental Protection, agreeing to reduce energy use at existing stores in China by 30% and committed to meeting 40% reduction target in all new stores. Yet another step forward for WalMart. It’s pretty crazy how this company is moving forward environmentally, although there are still many detractors out there.

Toxins are present in 1/3 of toys
GreenBiz reports on some bad news about toxins in toys: it's not just the Chinese:
While much of the blame for deadly toys in recent years was placed on Chinese manufacturers, the Ecology Center points out that this year, in its second round of testing for its HealthyToys.org database, it's not just China making unsafe toys. Twenty-one percent of toys from China had detectable levels of lead, but so did 16 percent of toys from all other countries. And of the 17 toys made in the United States that were tested, 35 percent had detectable levels of lead, with two exceeding the federal limit for recalls.
This is just so disgusting. How can a company manufacture toys that contain known harmful substances? It's both shocking, but at the same time, not really that surprising.

Other Green China Blogs
China Greenspace is back from vacation, and has some good thoughts on China’s role in climate change talks.

LiveFromBeijing gives statistics to back up what we've all been thinking: Beijing’s air quality actually has gotten better thanks to the pollution control measures taken for the Olympic Games, even after the temporary restrictions were lifted in September.

Monday, December 8, 2008

Carbon tax or cap and trade?

Yesterday’s thoughts on oil prices got me thinking about how to best price carbon. One of the key problems with oil is the price volatility: just when momentum for alternatives seems to be peaking, oil can fall and make alternatives less attractive. Moreover, the volatility of prices makes long-term business planning and investing more uncertain, and therefore more expensive. I fear a similar dynamic may develop in a cap-and-trade scheme, and therefore am now in favor of a carbon tax.

Carbon Pricing
Now that the US is serious about climate change, it will need to get serious about pricing carbon and forcing businesses to internalize the societal costs of carbon that are not currently reflected in the price of fossil fuels.

In pricing carbon, we can either choose a quantity of carbon (cap and trade) emissions or we can choose a price of carbon emissions (carbon tax). The nice thing about cap and trade is that we can choose the quantity. We know where we need to be by 2050: 80% below 1990 CO2 levels. So it would be straight forward to just reduce the cap each year until we get to the desired level in 2050.

With a carbon tax, on the other hand, we can estimate how much a price on carbon will reduce the quantity of carbon emissions, but we can't know for sure. So on the surface, it seems like cap-and-trade is the best way to price carbon.

But here’s the problem: most carbon emissions are going to come, in one way or another, from long-lived assets, be it buildings, factories, infrastructure or autos. The returns from investments in clean and efficient energy will come in part from the avoided cost of energy and carbon prices. As I described in a previous post, investment decisions must meet some sort of internal rate of return hurdle to be accepted. The key thing to note here is that increased risk and uncertainty raises IRR hurdle rates. Therefore, energy and carbon price stability will lower IRR hurdle rates, increasing investment in clean and efficient energy.

My worry with cap and trade schemes is that the price of carbon can be widely volatile. The European Union's trading scheme has shown high volatility since it's inception:

Now, this data is from Phase 1 of the trading scheme, meaning this is still very much in the preliminary stages. It's possible that this could get better as governments get better at allocating carbon emission permits. But I don't like the idea of price volatility for carbon.

Carbon taxes are effective because they make the price of carbon predictable, encouraging the long-term investments in clean, efficient assets needed to reduce carbon emissions. As economist Charles Komanoff of the Carbon Tax Center said in the New York Times:
Making the price [of carbon] predictable is the most significant move you can make to control global warming. It would tilt literally billions of energy critical decisions toward using less carbon.
Implications for China
From a carbon price policy perspective, China is in an enviable position. They clearly need to move toward a carbon price at some point, and the sooner the better. But now that the US is committed to implement some sort of carbon price, China will be able to learn from the examples of other nations and hopefully implement a highly effective carbon pricing system. I think that carbon tax makes the most sense at this point in time, but maybe cap and trade will surprise us.

Regardless, the debate over whether to price carbon should be over. It's encouraging to see that the debate in the US has now turned to how to price carbon.

China Raises Fuel Tax; Leaves America Behind the Curve, Again

Yesterday China announced a comprehensive restructuring of the fuel pricing
regime. This is a really clever move on the Chinese government’s part: they took advantage of low oil prices to both institute a higher fuel tax and allow gasoline prices to more closely follow market prices, while minimizing backlash from petrol consumers.

China just raised their petrol tax to ~$0.54 per gallon, versus just ~$0.18 in America. As an American in Beijing, it’s absolutely embarrassing that my country, the supposed leader of the free world, continues to lag even the environmental progressiveness of China, a country who by reputation doesn’t care about the environment at all.

BTW, I hope my blog shows that China’s horrible environmental reputation is undeserved, although they still have a LOT of work to do.

New Fuel Regime- Clever Public Policy
For more background on the fuel tax increases, feel free to check out this Forbes report or Green Leap Forward’s post on the change. I will describe it briefly here.

This change in the fuel price scheme will leave the price at the pump essentially unchanged from its current level of ~6.6 yuan per liter (~$3.63/ gallon), which has not been adjusted downward despite the steep decline in the price of oil.

Under the new regime, pump prices will now be tied to manufacturing cost. PetroChina and Sinopec, the two oil majors, will get a guaranteed profit margin of 4%, meaning Chinese consumers will essentially pay the cost of fuel plus 4% plus the new fuel tax. The fuel tax on gasoline will rise to 1 yuan per liter ($0.54 per gallon), up from 0.2 yuan ($0.11 per gallon). The revenue from the fuel tax increase will then be used to cut other driving-related taxes and tolls, making the tax “revenue-neutral”.

Chinese leaders showed some real savvy with this fuel tax increase. First, they get rid of the burden of subsidizing cheap oil. The Chinese government (and it’s state-owned oil majors) lost a lot of money in the early part of this year since they had to buy their oil at high prices on the world market (half of Chinese oil is imported), refine it, and sell it at low fixed prices. This new pricing scheme eliminates that burden, and will force Chinese petrol consumers to bear future cost increases.

The Chinese government did also provide a safety valve. The National Development and Reform Commission, the body responsible for the rules change, said
We will adjust the oil price regime in line with certain social groups' ability to bear the burden and to promote energy saving as well as environment protection.”
I think this safety valve is probably a good thing, as its very important for public policy to be as aggressive and progressive as possible without risking significant backlash from those hurt by such policies.

Second, Chinese leaders are able to advance the green agenda by raising the fuel tax. This will help price in some of the “externalities” currently not included in the price of gas. This is great from a policy perspective, but generally not popular among consumers, which is why the timing of this policy change was so savvy. Now that gas prices are low, the Chinese government and the state-owned oil firms are making windfall profits by buying the oil at low prices on world markets and selling it at high fixed costs to the market. There has not been significant widespread public backlash yet, and drivers have generally been able to bear the current price level. The government seized on this unique opportunity to quintuple petrol taxes without actually raising the price to the consumer. In fact, if oil stays at its current price for much longer, oil prices are actually likely to decline. Thus, consumers are happy with the move even though they’ll have to pay more for fuel. This doesn’t make OPEC happy, but as Green Leap Forward elegantly says, that’s a good thing for everybody else.

America, get your act together
Chinese automobile fuel economy standards are already higher than America’s. And now their fuel tax is three times higher too. Yet again, America has fallen behind China in progressive public policy. The current situation is not just Detroit's fault, in many ways it is also the fault of pervasive stubborn free market ideology on both sides of the aisle in Washington, DC.
This current financial crisis has really shown the limits of the free market economy. And the wild swings in oil futures over the past year have shown that no one can correctly predict the price of oil even a month from now. So how are corporations and individuals who purchase long-term assets that use energy going to cope? This uncertainty creates a disincentive to long-term investment in efficiency and clean fuels, which for many, many, many reasons, is so important. Clearly the free market is failing, since it is not providing the clean and efficient future we want.

We need a big tax on oil right now to set a floor and ensure that investments in alternatives will be viable, even as oil continues to fluctuate wildly.

If individuals and corporations know that the price of oil will be at a certain level or above for the next while, they can plan much more effectively. For example, if policy says the price of oil will never fall below $100, energy intensive companies will know that they need to develop a business model that works in this world. The problem with the Big Three is that they never imagined such a world. As Thomas Friedman noted in his column yesterday,
Many people will tell Mr. Obama that taxing carbon or gasoline now is a “nonstarter.” Wrong. It is the only starter. It is the game-changer. If you want to know where postponing it has gotten us, visit Detroit. No carbon tax or increased gasoline tax meant that every time the price of gasoline went down to $1 or $2 a gallon, consumers went back to buying gas guzzlers. And Detroit just fed their addictions — so it never committed to a real energy-efficiency retooling of its fleet. R.I.P.
Hopefully President-elect Obama heeds this advice and acts as soon as he comes into office. After all, he was the only presidential candidate who resisted calls for a holiday on our already measly gas-tax during the campaign. All the better for a carbon tax to happen now, while the US bails out Detroit with taxpayer money.

Friday, December 5, 2008

Green Building: Great Opp, but Perceived Cost Still a Barrier (Huh?)

Today I was reading the recently released McGraw Hill Construction SmartMarket Report on Global Green Building Trends and found myself again shocked at the massive market opportunity for green buildings in Asia, and even more shocked that more green buildings aren't being provided.

Huge opportunity for profits…
The Asian section of the report starts by noting that Asia is already a $1.4 trillion real estate market, and set to grow as China, Indonesia, Vietnam and the other developing tigers continue to expand rapidly alongside Japan and Korea. Assume 10% of this was green, and we’re talking a $140 billion market…

According to McGraw Hill, most of the growth in green buildings in Asia will be coming from the commercial and residential sectors in the near term, with government, retail and industrial lagging behind but still expanding.

I think this is powerful and shows that tenants and investors are catching on to the imperative to go green. At the US China Greentech Summit last month, Tishman Speyer’s sustainability guy, Steve Latargia, said the credit crunch will not affect Tishman’s drive to go green, saying that if they don’t build green, they wont have any tenants when the recession is over. The same trends are starting now in China and will only deepen as the market matures and more international and leading-end local tenants demand green space.

This demand for green space and a relatively small supply of space in China means that owners of green real estate should start to see a premium for their space. And sure enough, Jones Lang LaSalle reported recently that nearly ~70% of corporate real estate managers are willing to pay more for green real estate in China. This also gels with what Prosper Center has seen, commanding rents 5% above the going CBD rate. And just to drive the point home, 64% of Asian respondents to the McGraw Hill survey expect rapid growth in both sales and profits from green buildings.

…so what’s holding green back?
Higher perceived first costs are the key barrier to green building growth in Asia. In fact, fully 83% of respondents cited this as the key obstacle to further growth of green building. Interestingly, the same percentage of respondents cited higher first costs in America, a market that has much more experience with green construction. So this is a worldwide problem.

I continue to be surprised that the real estate market cannot get over this obsession with first costs, especially because it’s wrong: a recent report by Good Energies (PDF) shows the median cost premium for 150 recently built LEED buildings was a measly 2%, while median annual energy savings were around 30%. That’s a no-brainer investment. Jim Chen of Tishman Speyer China told me they brought in their LEED projects at a 3-5% premium, which is astounding given both the lack of a green product market in China and contractors’ relative lack of experience with green construction.

But second, and most importantly, this green premium is just an amorphous term used by developers and owners to resist change and learning. Most green building professionals now think of the green premium as a “tuition fee”, something a developer has to pay on his or her first few green projects while learning the ropes of green development. I bet that if you were to sift through the Good Energies data, you would find that developers who have done more than 5 LEED projects now pay no premium.

As Scott Muldavin of the Green Building Finance Consortium told me last summer, the green premium is not necessarily an increase in actual hard costs of construction. In most cases, developers have been building buildings the same way for a long time and are loath to change a winning formula. When they do finally begin to build green, they find that to do so successfully requires changing this formula, and they chalk this up to some amorphous, perceived “cost”. And as a result, they don’t do it.

All of this is a huge opportunity for a new type of real estate developer: one who understands integrated design, whole-systems thinking and how to tunnel through the cost barrier and doesn’t just try to tweak the old model to be “green”. With a new model, developers will be able to bring in better buildings at lower cost and outperform the tired, old real estate players who keep talking about upfront costs.

Wednesday, December 3, 2008

More on Electric Cars

This is a follow up to my previous post on the auto market in China. Greentech Media reported yesterday that Shanghai Automotive Investment Corp (SAIC) will invest 2 billion yuan ($293 million) to develop hybrid and electric vehicles in a new venture called Shanghai Jieneng (“energy saving”) Automotive Technology Co.

SAIC is China’s biggest carmaker, and a JV partner for both GM and Volkswagen. This is another good sign that electric cars are catching on in the eyes of Chinese auto-makers. For SAIC, this represents a doubling down of their investment in alternative powertrain technologies: SAIC and JV-partner GM are scheduled to release a hybrid electric Buick.

So it seems like manufacturers are making moves to help push China toward electrifying the vehicle fleet. What are the key roadblocks to making such a vision a reality?

Certainly the higher costs of electric vehicles (EVs) will be a barrier to widespread adoption in China. According to a McKinsey study (PDF), most EVs cost 25% more upfront, due largely to the expense of the battery. Moreover, based on the studies calculations, EVs don’t make sense economically at current gasoline prices in China (6.6 RMB/ liter or $3.63/ gallon). [As a note for American readers, China hasn't lowered gasoline prices despite the recent fall in oil prices.]

McKinsey calculates that gas prices would need to reach ~10 RMB/ liter ($5.50/ gallon) for BYD's new EV to make economic sense to consumers. That's too bad, since gas probably won't get that high in the near term. Hopefully BYD and the new SAIC venture can help bring down the cost premium, but I imagine that this premium is pretty fixed in the near term. Frustratingly, as with most things green, upfront costs are a serious barrier to further adoption of EVs in China.

Renewable power and carbon
Can China install the necessary amount of renewable power needed to power the auto fleet? Last time, I mentioned that it’s incredibly important that China electrify their car fleet with renewable power. While I still think that has to be the end goal, it turns out that China can reduce their transportation-related CO2 emissions even if powered by coal-fired power plants. McKinsey estimates that a coal-powered EV would produce 19% less CO2 than a similar gasoline powered standard car in China.

But 19% isn't nearly good enough. How much renewable power would it take to power China's entire car fleet on renewables? According to a Sierra Club report (PDF), EVs use about 12 kWh to travel 50 miles, more than the average US auto travels per day. Chinese autos generally drive shorter distances, but we'll stick with the 12 kWh estimate anyway. This equates to 4,380 kWh per year. So assume that all of China's existing 40 million cars were electric: this equals about 175.2 billion kWh, or about 6% of the 3 trillion kWh that China uses annually, according to the CIA World Factbook. Presumably, if these cars were all charged at night during off-peak hours, only limited additional capacity will be needed.

Of course, kWh used is not the same as installed kW capacity. I couldn't find many details on how much installed renewable capacity China would need to power their auto fleet, but will do some digging and get back to you with more detail here. FYI, this NRDC/ EPRI report says that only 4% more generating capacity would be needed if half of the US auto fleet were electrified.

Both grid infrastructure and charging infrastructure will be key to making EVs work in China. A smart grid will be critical to allow EVs to function most effectively and optimize peak power, a key selling point of the electric car model.

One related question I have concerns quick-charge battery technology. How can that work in the context of peak shaving? If batteries like BYD's are going to be 50% charged in 10 minutes, won't this put a massive strain on the electric grid? I have to look into this more.

As far as charging infrastructure goes, McKinsey estimates that China will have to spend between 5 and 10 billion RMB by 2020 to get to scale. Compared to the 1 trillion RMB that the State Grid plans to spend on grid infrastructure in the next three years, this is nothing, but still has to get approved by the government. Also, I have to imagine that the 5-10 billion needed for charging infrastructure is much, much cheaper than a similar scale of petrol station rollouts. But will the Chinese government challenge PetroChina and SinoPec and provide support for rolling out EV charging infrastructure? Or, alternatively, how can the oil companies put themselves in position to benefit from the trend toward EVs?

Buy-in from Chinese consumers
I think this will be the easiest piece of the EV puzzle for China. As the Greentech article on the SAIC investment noted, China already produces 5.5 million electric bikes a year. The streets of Beijing and Shanghai are already swamped with electric bikes, and they seem to outnumber motor bikes considerably. So I think the Chinese consumer already has a feel for electric transport, and it won't be a stretch to extend this to EVs. But as I mentioned in the last post, auto growth has been most rapid in the luxury and SUV sectors. Will newly affluent Chinese give up the power and feel of a V8 Audi for an electric vehicle, even if it's a Tesla Roadster?

Better Place?

All told, I think these problems are not actual roadblocks, but mere speed bumps on the road to electrifying China's vehicle fleet. In fact, I think the models already exist to overcome the problems described above. As I've mentioned before, I've really fallen in love with the Better Place model. And just yesterday, they announced a roll-out to Hawaii, in addition to the already announced roll-outs in the San Francisco Bay Area, Australia, Denmark and Israel. The reason I'm so fascinated with their business model is the way they can get over all four of the stumbling blocks described above. But most importantly, their model means that drivers don't have to buy the battery, bringing the price of an electric car in line with standard cars and eliminating the biggest hurdle to widespread adoption of EVs.

In my view, Better Place is a powerful symbol of what the future looks like. The company doesn't have any new technology, just an innovative business model for providing mobility. I've talked often about the need to use innovation to break the link between CO2 emissions and economic prosperity. While certainly some of this innovation will be high-tech, the majority will be low-tech innovation that finds new business models to deploy already existing technologies. Better Place is just one of the early movers, but I hope their success convinces other companies to follow their lead. And in the meantime, hopefully it helps the world electrify their auto fleet.

China Mobile is the biggest mobile phone network operator in the world. When will China Mobility, China's version of Better Place, become the biggest mobility network operator in the world?

Random thoughts

No more redeyes
GreenBiz blog has an interesting post on airplane CO2 emissions:
Carbon dioxide accounts for only half of a flight's contribution to the greenhouse effect. Just as important are thermal impacts of jet contrails -- a phenomenon known as radiative forcing. Contrails are high ice clouds whose development is catalyzed by the particulate in jet exhaust. These clouds block sunlight entering and heat leaving the atmosphere and account for half of total jet warming effects.
The effects of jet contrails are lowest in the summer and during the day. Nighttime flights contribute twice as much to the warming effect as daytime flights. Flying during the summer reduces carbon footprint by a quarter. Make that next trip to China a daytime flight during the summer.

Will US be able to ratify post-Kyoto treaty without China committing to carbon caps?

I had naively thinking that the Obama victory and his pleasing rhetoric on climate change meant that it was likely that the US would lead the post-Kyoto negotiation process, but as ClimateProgress notes, that's not necessarily the case. Getting a cap-and-trade or carbon tax scheme in place will take time, and China and India are still unwilling to commit to binding caps on carbon. This will make it tough for the US Senate to ratify the treaty, just like in 1997 with Kyoto. However, I think waiting for China to move is a total abdication of responsibility and leadership on the part of the US Senate, as the imperatives are even more clear this time around.

New Clean Energy Commercialization Center in China
BP and the Chinese Academy of Sciences are teaming up and investing $73 million in a new clean energy commercialization research center in Shanghai. Most of the focus seems to be on technologies I'm not particularly fond of (coal gasification, for example), but the center is also focusing on trying to roll out carbon capture and storage. Coal is a reality for the foreseeable future in China, and if CCS can become viable, this will help reduce emissions. If all went well, it might even allow China's leaders to commit to binding carbon caps.

NYC nightclub goes green...

NY Times GreenInc reports that a New York City nightclub is seeking LEED certification. The club, cleverly called Greenhouse, will seek LEED certification. When told of the concept, Julian of GreenLeapForward asked if they would be using human energy on the dance floor to power the lights. Unfortunately not, but means there is still large scope for innovation in the green nightclub scene. While sort of a silly idea for something as hedonistic as a night club to seek LEED certification, I think this is a continuation of the trend toward linking high-end consumerism with good causes. The RED campaign is a good example of this. While we can't consume our way out of the energy and climate mess we're currently in, responsible consumerism can at least help at the margins.

... and liquor store follows suit

Building Environmental and Performance News reports that a liquor store in Minnesota is seeking Green Globes certification, the first building in the state to do so. The store will be heated with a geothermal heat pump.

Monday, December 1, 2008

Cars in China

On the plane back to Beijing, I read a great Economist special report on cars in emerging markets. It’s about time I wrote something about autos in China, so I will focus on the important China conclusions from the report.

China- Poised to be the World's Biggest Auto Market by 2010
As with almost every meaningful absolute development statistic, it’s not a question of if China will pass the US, but when. In the case of total passenger-vehicle sales, China is predicted to pass the US for good in 2010. But relative development statistics usually tell a different story. China only has 30 cars for every 1,000 people of driving age, versus more than 900 cars for every 1,000 people in America. But China’s market is growing rapidly, while America’s is stagnating or even reversing.

Just over 70% of cars sold in China are foreign made, with VW and GM leading the charts. Interestingly, the article notes that in the early days of the Chinese auto industry, VW, the first to set up a Chinese JV with Shanghai Automotive Industry Association, accounted for 56% of the domestic market! This helps explains the remaining dominance of VW in some markets, like the Shanghai taxi market. Will Chinese brands take more of the market? It’s an interesting question.

According to the Economist, Chinese don’t feel very nationalistic when purchasing cars and will not put country of origin above quality, saying that the
Chinese still look down on their native brands, often with good cause… Chinese consumers are brand snobs who increasingly expect to be able to buy the best. Yet with its gigantic home market and a supportive government, it would be surprising if in ten years’ time China did not have at least a couple of car firms competing on equal terms with the world’s giants.
I truly hope that’s the case, and my Chinese manufacturer of choice is BYD, who I will describe in a moment.

What About the Environment?
As with most environment and development issues, you can either see China as the problem or as the solution.

Without a doubt, rising car use in China will be an environmental problem in the short term. Increased local pollution from tailpipes as well as carbon emissions will damage the environment. Moreover, the Chinese market looks to be copying the US’s bad example of large-car growth: in 2007, luxury car sales grew by 35% and SUV sales grew by 50%, versus just 4% sales growth for small cars.

A new “green” tax may help to incentivize growth in smaller cars and will also help domestic automakers. This is a tiered tax related to engine size that puts the lowest tax rate (1%) on cars with engines smaller than 1 liter, a market dominated by Chinese automakers. The tax increases progressively to the highest tax rate (41%) on engines larger than 4.1 liters, a market dominated by foreign automakers. A clever use of green protectionism, and also good public policy. But while the tax will help, it probably won’t make much of a dent in the massive growth of the Chinese auto market.

And even still, auto growth outside of China will be massive. According to the IMF, the world will have 2.9 billion cars in 2050, up from 600 million now.

The Upside
How will the environment cope with 3 billion cars on the road? The only hope is to decouple the growth in autos from growth in CO2 emissions from autos.

China is already starting to take up the challenge. Chinese electronics firm BYD is rolling out a fully electric car with incredibly promising battery technology. The first models will hit the street in Israel in 2009. A firm controlled by Warren Buffett’s Berkshire Hathaway took a 10% stake in BYD in October (See Green Leap Forward’s blog post on it for a closer look at BYD and Buffett’s investment). I really think/ hope that BYD’s technology platform will it allow to roll out cheap, reliable, comfortable and marketable electric cars in short order. I also think they’re right to start by selling their cars first in foreign markets. This way, if all goes well, BYD can bring the product back to China as a successful developed world concept, which will help combat the traditional mainland China consumer bias against domestic auto brands.

I think BYD also represents a new model for China and it's industrial policy. BYD is essentially leapfrogging the old guard of internal combustion engines, and moving straight to the future. i personally think China's push into auto manufacturing is misguided, since gasoline powered autos make no sense in the carbon neutral world that we're ultimately going to have to get to. I think biofuels could be a useful intermediary step, but doubt they will make it in the long run.

China can also use its relative lack of installed petrol infrastructure as an advantage, and leap frog to an electric grid. (For more on how this might be done, read about betterplace, a company with a business plan for replacing that really wowed me.) But in order to get over the CO2 emissions problem, the car fleet must be powered by renewables.

While I really think that China’s leadership can help the world cope with the environmental strain of 3 billon autos, I don’t know why we would want to. Even after we solve the environmental piece of the problem, we will still have the problems of both traffic and social isolation that go hand and hand with car-centric development. I’ll leave the readers with the below photograph from TreeHugger. In 2050, in a world with 9 billion people, how can we find space for 3 billion cars on the road?

Sunday, November 30, 2008

ABCs and GHGs in Asia

A report recently released by the UN Environment Programme sheds further light (no pun intended) on the fact that cities across Asia are getting dimmer. The Atmospheric Brown Cloud (ABC) Report named 13 cities as ABC hotspots, with Beijing, Shanghai and Shenzhen all making the cut. The thing I found most interesting about the report is that it illustrates the incredibly complex nature of the climate system.

ABCs are made up of emissions and particulate matter released from the burning of fossil fuels and biomass. This particulate matter reduces the amount of sunlight hitting the earth’s surface in two ways. First, some particulates, such as sulfate, act as reflectors that bounce sunlight away from the earth. Second, other particulates, such as black carbon in soot, trap and absorb light before it hits the ground. The effect of these ABCs has been quite pronounced over the last quarter century: Guangzhou has seen a 20% reduction in sunlight since 1970.

Complicated Climate Effects
The effect of ABCs on the climate is quite complicated. The sulphates that reflect sunlight away from earth actually keep the climate cooler than it otherwise would be. In fact, the report estimates that ABCs may have reduced GHG-caused rises in global temperature by between 20 and 80%! This may help explain why eastern China has actually seen average temperatures decline over the past decade, globally the warmest on record.

The idea that pollution actually helps moderate climate change is pretty incredible. The scary thing is, though, as China continues to develop and eventually begins to aggressively reduce local pollution and the associated sulfates, this may actually increase the global warming effect of GHGs. As the report notes:
Simply tackling the pollution linked with brown cloud formation without simultaneously delivering big cuts in greenhouse gases could have a potentially disastrous effect.
But on the bright side (I’m really on today), if China were able to eliminate ABCs, presumably sunlight would return to pre-1970 levels and increase 10-25%. This would likely cause solar power generation to be more effective. SOM, designers of the Pearl River Tower, mentioned that the lack of strong sunlight somewhat impeded their energy generation from the PV systems. So, this brightening effect would seem to reduce GHG emissions by making solar generation more effective.

In other climate related news, the World Meteorological Organization (WMO) released their latest Annual Greenhouse Gas Bulletin, which shows that atmospheric CO2 concentrations have continued to rise, and are now at 383 parts per million (PPM). CO2 is by far the most important GHG, accounting for about 90% of radiative forcing (link to wiki or something) in recent years. This level of CO2 is particularly disturbing, as it is already higher than the 350 PPM level that NASA scientist James Hansen calls safe (PDF). Climate scientists are engaged in ongoing debate over what atmospheric CO2 level humanity ultimately needs to aim for (see Joe Romm's ClimateProgress blog for more), but the “safe” range will probably be somewhere between 350 and 450 PPM. The world added 2 PPM to the atmosphere last year, and this number is set to rise to 3 PPM annually as emissions continue to grow. This doesn’t give us much time, but I remain optimistic we can avoid the worst effects of climate change if we get our act together soon.

BTW Charlie- if you're reading, this title was not meant to be a rip-off of your recent post "The ABCs of SEDs"...

Thursday, November 27, 2008

Net-Zero Energy

Today I want to follow up a little bit on the net-zero concept I described in yesterday’s post on the Pearl River Tower.

How Does Net-Zero Work?
Net-zero energy buildings (ZEBs) produce as much energy on-site as they use annually. The reason ZEBs are referred to as "net-zero" is that they are still connected to the grid. Sometimes they are producing more power than they are consuming and feeding power to the grid and running the meter back, and sometimes they are consuming more power than they are producing and pulling power from the grid. But for a ZEB, the energy given to the grid is equal to the amount of energy pulled from the grid on an annual basis.

Net-Zero Energy ≠ Carbon Neutral
It’s important to note that net-zero refers to energy use, and does not necessarily mean zero carbon emissions from energy use. A key issue here is what type of energy the building produces. For tall buildings, renewables probably will not be enough to power the entire building, and therefore some sort of carbon-based fuel source will have to be used.

The Pearl River Tower, for example, gets less than 10% of its energy needs from the wind turbines and BIPV. The designers planned to use natural gas microturbine co-generation for a significant portion of its electricity generation (although this ultimately was scrapped). Now, of course using natural gas-powered co-gen is not carbon neutral, but is incredibly efficient, generally in the range of 60-80% (versus ~45% for super high-efficiency coal plants). Given both the high-efficiency nature of this process and the relatively low level of carbon in natural gas, this type of process has the potential to significantly reduce emissions over drawing electricity from a predominantly coal-powered grid. So, net-zero-energy is not necessarily carbon neutral, but a really good intermediate step.

However, renewables could provide enough power to get to net-zero energy use. Low-rise buildings with large, flat roofs are ideal siting grounds for PV panels and therefore are easier to bring to net-zero carbon. As renewables become more efficient, they will also increasingly be able to power taller buildings.

But there is also the issue of embodied energy, which as I mentioned in my post a few days ago, accounts for a significant portion of a buildings lifetime carbon emissions (20% in the West, 40% in China). So just being operationally net-zero-energy does not mean that a building is carbon neutral when looking at the entire lifecycle, but brings us a whole lot closer to where we need to go in terms of energy use and carbon emissions.

Opportunities for ZEBs in China
The following excerpt of a report by the US Nat'l Renewable Energy Lab (PDF) describes the feasibility of implementing ZEBs on a wide-scale in the US:
Using today’s technologies and practices, the technical potential is that 22% of the buildings could be ZEBs. With projected 2025 technologies, the technical potential is that 64% of the buildings could be ZEBs. If excess electricity production could be freely exported to the grid, then with the projected 2025 technology in every building, the commercial sector could generate as much as 37% more energy than it consumes.
Good news for the US built environment, and there is reason to suspect that there is an even larger opportunity in China. The conclusions of the NREL report only apply to existing buildings, but achieving net-zero is much easier in new construction. Since China will double it's floor space over the next 15 years, the Chinese have a great opportunity to implement net-zero designs on a massive scale. This isn't simply pie in the sky, since as the Pearl River Tower proved, net-zero design is already possible in China (although policy may have to change in some cases to accommodate running the meter back).

Moreover, the NREL report singled out warehouses as the best opportunity for ZEB penetration, estimating that fully 95% of warehouses could be ZEBs by 2025, versus less than 25% for offices (although as I mentioned above I think China can beat this level thanks to their large amounts of new construction). China's logistics market is (or at least was) hot, and grew at nearly twice the rate of GDP in the first half of this decade. While such rapid growth is probably not great from a green viewpoint, the fact is, this has created a lot of flat roof space, which can be viewed as a good opportunity to install a lot of PV and get a large number of Chinese buildings to net-zero.

But if Chinese owners are to pursue this opportunity, there are still hurdles to overcome. First and foremost is the fact that grids in places like Guangzhou do not yet have the infrastructure for net metering. Hopefully JUCCCE's smart grid program can help overcome this road block.

Second is the financing model for solar PV, the technology that NREL thinks is the best way to get to net-zero. Solar is expensive and many developers will be unwilling to spring for the expense. An alternative financing model needs to be developed. One promising scheme is the "rent-a-roof" model, where building owners lease their roof space to utilities who then install solar panels. I think this is a fantastic idea, since not only do building owners not have to pay for the solar panels, they actually get paid to rent their roof out! That's a real no-brainer. Utilities own and install the solar panels and use generate electricity for the grid. This will probably take some good policy to get it to scale, but pairing this financing scheme with a smart grid could allow China to really make progress on building CO2 emissions.

Wednesday, November 26, 2008

Peal River Tower

Last week I attended a GreenBuild lecture on the Pearl River Tower in Guangzhou. The building is designed by Skidmore, Owings and Merrill (SOM) and will be the new headquarters for a Guangzhou tobacco corporation.

Scheduled for completion in 2009, the 71-story, 2.3-million square-foot tower will be the most energy efficient supertall tower ever built, claims SOM.

In fact, there were rumors this building was going to be a “net-zero” building, i.e. it would produce as much energy as it consumed on an annual basis. Unfortunately, this relies on being able to “run the meter back”, or sell energy back to the grid at times when the building is producing more energy than it is consuming. The infrastructure and laws in Guangzhou do not yet allow for this, and therefore the key on-site microturbine co-generation system was scrapped. However, SOM did design the building to allow for the microturbine to be installed as Gaungzhou updates their grid policies.

Despite the fact that the building won’t be truly net-zero-energy, it will still be a showcase project for energy efficiency and onsite generation, both to China and the world. SOM made energy efficiency the core of their design, and designed the entire building around this goal. As Roger Frechette, Chief MEP Engineer of SOM told us at Greenbuild,
“Form for the sake of form is no longer good enough. Form now has to be apart of the performance of the building. The whole building should be built as a single unit that has a better level of performance than we’ve seen before.”
SOM’s design process really took Mr Frechette’s principles to heart, using a four-pronged, whole systems approach to get to net-zero energy use:

Source: Architectural Record case study (good source for more info on the specifics of the building design)

1) Reduce- use “negawatts” as the primary energy source
2) Reclaim- take the waste from various processes and use it as inputs for other processes
3) Absorb- take advantage of the local climate for wind, solar, daylighting, etc
4) Generate- meet whatever energy needs remain with microturbines and co-gen

The building’s unique shape allows it to harness wind power more effectively. Tall buildings act as a sail, with wind pushing against them. In standard buildings, the designers use more concrete or steel to stiffen up the core to withstand the wind force. In the Pearl River Tower, by contrast, the openings on the side of the building allow wind through, which has the dual effect of relieving pressure on the building and driving wind turbines mounted in the throat of the openings. According to SOMs calculations, this design also reduces the sway at the upper portion of the building, allowing for less material to be used while still maintaining safety and comfort levels, reducing the building’s embodied energy that I keep harping on (please note however that the designers did not take advantage of this, but theoretically could have). The Pearl River Tower also uses building integrated photovoltaics (BIPVs) embedded in the glass curtain wall to produce energy.

Unfortunately, these systems can’t power the building on their own. Together, these technologies provide less than 10% of the buildings power. But the developer wanted them because they served as a powerful symbol. As Mr Frechette recounted:
“I asked the developer what he thought about the wind turbines. The developer asked, “do they spin?” and I said they did, and he said, “then I like them.”
He added that Guangzhou is a city of 15 million people and wind turbines on wind building won’t begin to dent the overall energy use, but hopefully other developers and owners will see these working wind turbines as a symbol. If every owner did this, it really would start to make an impact.

Given all the cool features and the incredible energy efficiency, this building must have cost a fortune, right? Not so. The building cost an extra 100MM RMB ($15MM) to build. Based on average construction prices for Class A office in China, this equates to ~10% premium.

SOM claims the investments in energy efficiency have a payback of 4.8 years. Not bad for a building a building that will have a lifetime of at least 50 years.

Why were the designers able to get so much energy efficiency with so little additional upfront cost? Because they tunneled through the cost barrier! This building is a great example of how proper whole-systems thinking can add value, both environmentally and economically.

SOM turned the conventional design model on its head. Instead of starting with a design that meets code and then slapping green features on as the budget allowed, they started with a design that was net-zero-energy and then removed the more expensive green features (ie microturbine co-gen) to get to the point that their budget allowed. They also smartly designed the building so that the microturbine co-gen can be added in the future as policy or economics change.

Radiant cooling was a cool example of how whole-systems thinking can add serious double bottom line value (good intro to radiant cooling). Radiant cooling uses significantly less space than more typical variable-air volume cooling while providing the same (or even higher) levels of comfort and less energy. Because the radiant cooling system uses less space, SOM was able to design five more floors into the building! That results in about a 7% increase in rentable floor area, which pays for the more expensive radiant cooling system. So radiant cooling not only provided better comfort with less energy, but also paid for itself through extra rentable space. That’s powerful stuff.

I don’t want to sound like I’ve drunk too much SOM Kool-Aid, but the design process is pretty exemplary. However, they are not the first to do this though, Bill Reed, RMI and other visionaries have been talking about the deeply integrated net-zero design approach for years. But SOM is one of the first to take this cutting-edge approach and apply it to such a landmark building. And for that, they deserve our kudos.

Monday, November 24, 2008

Tunneling Through the Cost Barrier- Using Whole-Systems Thinking to Save Energy and Money

Natural Capitalism , by Amory Lovins, L Hunter Lovins, and Paul Hawken, is a book that has profoundly shaped my current worldview, particularly my take on clean energy. A proper review of the various concepts described in the book would take more room than I have here, but today I will focus on one of the key concepts: tunneling through the cost barrier.

Now, the authors do a much better job of explaining this concept than I ever could, so you can read the chapter here. I'll just summarize my key takeaways:

1) Design really matters. Especially with long-life assets such as buildings, power plants, and infrastructure, smart energy-efficient design is critical. As Joe Romm says:
Although up-front building and design costs may represent only a fraction of the building's life-cycle costs, when just 1 percent of a project's up-front costs are spent, up to 70 percent of its life-cycle costs may already be committed.
2) System context matters. Systems existing in isolation is what has led us to our current energy and climate crisis. We must start thinking about systems as interrelated- see Green Leap Forward's post on watergy for a good example.

3) Bigger savings can be cheaper than smaller savings. Economic theory correctly tells us that each additional unit of energy efficiency is more expensive than the last, assuming the same system. The trick to tunnel through the cost barrier is to redesign the system. Natural Capitalism uses the example of adding more insulation and removing the fur
nace: not only do we not have to pay for energy to run the furnace in the future, but we also don't have to pay for the capital cost of the furnace.

4) Start with downstream savings and work backwards. This is the gospel of energy efficiency and the fundamental reason why efficiency is 4-6x cheaper than building a new power plant. Distributing power from a power plant is inefficient: maybe 70% gets lost at generation and 10% gets lost in transmission, so 80% of the energy is wasted by the time it reaches the building to power the lights or the air conditioning. Now, reversing this calculation, if we reduce energy use in the building by 1 BTU, then we can reduce energy use at the power plant by 5BTU.

"Tunneling through the cost barrier" is an incredibly optimistic concept- one that says we can reduce energy use and at no- or low-additional cost. Pretty cool stuff.

Thursday, November 20, 2008

Embodied Carbon in Chinese Commercial Buildings and Potential for Building Materials Innovation

Reducing energy consumption of a building is obviously vital to reducing CO2 emissions and winning the current war on global climate change and dirty energy. But what about all the CO2 that goes into the building? How much does it matter?

“Estimating Total Energy Consumption and Emissions of China’s Commercial and Office Buildings”, a recent report by LBNL, tries to answer this question. Their findings are quite interesting.

Commercial Buildings CO2 Emissions
China’s buildings officially account for 19% of China’s total energy consumption but according to various Chinese academics, buildings probably account for more like 23%. This is expected to rise to 30% by 2010, broadly in line with the US.

Unfortunately, the paper does not state explicitly what percentage of total CO2 emissions is accounted for by buildings, but since China’s fuel source is so predominantly coal driven, it’s probably fair to say that building energy use currently accounts for about a third of total CO2 emissions.

This is significant, especially when coupled with the data from the global McKinsey Carbon Abatement Cost Curve, which calculates building efficiency to be one of the cheapest sources of carbon abatement available globally. Buildings are therefore a key leverage point for reducing carbon emissions in a cost-effective manner.

Embodied Carbon Emissions Versus Operational Carbon Emissions
The most interesting takeaway from this report is how much carbon is embodied in a building when it is built. As you can see from the graph below, the building materials and construction account for approximately 40% of a Chinese commercial building’s lifetime CO2 emissions!

Note that the above conclusion is based on a 30-year building lifespan. If the building were to have a longer (shorter) lifespan, the share of CO2 emissions attributed to operations would increase (decrease).

The report indicated that China's embodied CO2 is pretty much in line with embodied CO2 of buildings in other countries. For reference, commercial buildings in the west typically have ~20% of their total lifetime carbon emissions embodied in construction, but this is mostly due to their higher overall energy use during their lifetimes.

These statistics point to massive opportunity to reduce CO2 emissions by focusing on reducing the embodied carbon of building materials.

Building Material Innovation
Not only are building materials a strong carbon reduction leverage point, but the building material industry has been a laggard for some time, allowing for new, innovative companies and ideas to produce low-carbon, high-performance and cost-competitive building materials.

One such company is Serious Materials. Serious is a venture backed startup firm based in Silicon Valley. Their primary product at this point is EcoRock, a low-embodied carbon drywall.
Traditional drywall manufacturing processes use significant energy, but Serious Materials has developed a proprietary chemical process that allows the drywall to essentially cook itself, resulting in 80% less energy use during the manufacturing process. EcoRock is also 80-85% composed of post-industrial recycled content. The product carries only a slight premium over traditional drywalls and will be rolling out in early 2009.

Serious Materials and EcoRock illustrate one example of the many possibilities for massive low-carbon innovation in the building materials industry. Mark Mitchell, VP of Business Development at Serious Materials, told me that the EcoRock innovation was easy: the drywall industry has had essentially zero innovation since it came about in the late 1890's. Serious Materials was able to leverage cutting edge materials science technology and will likely transform the industry.

Another company to watch is CalStar Cement. CO2 emissions from cement production represent 5% of annual CO2 emissions globally, an absolutely astounding number. Marc Porat, CEO of CalStar, notes that since 1824, "the fundamental technology platform (calcined limestone) has not changed. Until now, that is. CalStar is developing a cement product that produces 90% less CO2 than conventional products. Imagine the CO2 abatement potential if all cement were produced using this process. Khosla-backed Calera is also said to be developing a carbon-negative cement. By the way, China produces 45-50% of the world's cement, and will watch these emerging technologies with interest.

Building materials, thanks to their large contribution to carbon emissions and the historic lack of innovation in the industry, present an enormous opportunity for entrepreneurial companies to make money and reduce carbon emissions.

Wednesday, November 19, 2008

Green Leap Forward post on Tianjin eco-city

Julian has just put up a good post on Tianjin's new eco-city at Green Leap Forward. Definitely worth the read.

Currently at GreenBuild in Boston, and will have more to report soon.

Monday, November 17, 2008

Chinese Energy Use and CO2 Emissions Data

This post is based on data pulled from Dr. Mark Levine's presentation addressing the myths and realities of Chinese energy use and CO2 emissions. Dr. Levine is the head of the China Energy Group at Lawrence Berkeley National Laboratory and delivered this presentation at the JUCCCE forum last week in Beijing. Download the presentation here.

Energy Prices
Energy prices in China are at or above international levels. For example:
  • Residents of Guangzhou pay $0.16/kWh, higher than San Francisco
  • Natural gas prices in Guangzhou are $10/ mcf, same as San Francisco
  • Coal prices cost $147/ ton, higher than the US
This flies in the face of the notion that low, subsidized energy prices cause Chinese industry to ignore energy efficiency.

Energy Intensity and Carbon Savings
China has reduced it's energy intensity (amount of energy used per dollar of GDP) dramatically since 1980. Between 1980 and 2000, China's GDP quadrupled but energy use only doubled. This is good news. The central government has also committed to a 20% decrease in energy intensity from 2005-2010 and looks to be on track to achieve at least 2/3 of that goal.

Of course, absolute emissions levels have risen dramatically over that period, but the CO2 savings over what would have happened are remarkable. Thanks to the 20% energy intensity goal, China will save 1 billion metric tons of CO2 in 5 years. For comparisons sake, the EU's commitment under Kyoto will save 300 million metric tons. So, China has taken action, but it's important to note that the EU's commitment is an absolute reduction of CO2 emissions, while China's reduction is only relative to otherwise massive growth in CO2 emissions.

Energy Use per Capita
The really scary thing, though, is the graph to the right. China is currently at 1/8 of the US's level of energy use per capita. Based on what I've seen here in Beijing, as Chinese get wealthier, they will follow the US's model of higher energy consumption. If China were to use the same amount of energy per person that the US currently does, the additional emissions would equal 122% of the world's current CO2 emissions. I.e., if China starts using as much energy per capita as the US tomorrow, world emissions would double and then some.

Given that China (and India, Brazil, on down the line) will not give up their ambitions of wealth and the energy use that comes with it, it is imperative that economic growth and increased energy use become decoupled from carbon emissions. Bring on the disruptive technological change! (For more on this, see Green Leap Forward's interview with David Tyfield)

Coal Use and Reserves
As we all know, China has huge reserves of cheap, dirty coal and is not afraid to use it, right? Well, sort of. China only uses twice as much coal per capita as the US, but in light of the graph above showing that China only uses 1/8 as much energy as the US, it's clear that China is more dependent on coal and not yet using as much natural gas at the US for power. Importantly, China has only about 1/10 of the coal reserves of the US on a per capita basis, which means the US has about twice as much coal as China on an absolute basis.

The key takeaway from these statistics is that the US must lead the way on coal. The US is already a huge user of coal and has massive reserves of the stuff, and will likely show China the way on coal. Will clean coal become an option? Or carbon capture and storage? Or will disruptive technological change make coal obsolete? Likely it will be a blend of these three, but I would love to see cheap, clean energy beat coal at it's own game.

CO2 Emissions
In Dr. Levine's view, "by any measure of contribution to atmospheric CO2, the Chinese have done far less harm than the United States." He points to the fact that the US is not only emitting more on a per capita basis now, but has been emitting far more for the past 100+ years. As you can see in the graph to the left, from a cumulative per capita perspective, US emissions far outstripped China's. Since CO2 emissions are persistent, Dr. Levine feels cumulative historic emissions is the most relevant data point for climate negotiations. Therefore, the US must take significant action on capping and reducing CO2 before China should be expected to do anything.

I am still deciding what I think about this argument over CO2 and who should be responsible for cleaning up. I think there are several things in favor of Dr. Levine's point, namely the graph above as well as the fact that many of the goods China produce ultimately get sent over the sea for us to consume. According to an Boston Globe op-ed by China environmental and social researcher Josh Muldavin, "the carbon dioxide embedded in China's exports to the United States in 2004 alone is estimated at 1.8 billion tons, equivalent to 30 percent of the US total." Wow.

But China Environmental Law blog (CELB) had a pretty interesting take on this stuff:
In the “myth busters” session we were treated to the fun you can have with numbers when you place 1.3 billion in the denominator. Apparently China has no bigger role to play in climate change negotiations than say, Botswana. But while were playing this game, the next time someone tells you how green China is and points to where China ranks with respect to total installed wind power (for instance), ask them how China compares with Germany or the US on a per capita basis.
CELB also brought up the contradiction between China wanting to be seen as an international powerhouse when it suits it, but wanting to be treated like just any other developing country when it comes to climate change:
Does anyone think (regardless of who wins the election next Tuesday), that the US Senate will ratify a treaty that commits a recession-plagued US to a treaty where it must undertake real GHG reduction limits, while a growing economic power house like China (associated now in US public perception with a spectacular and lavish Olympics and a Shenzhou space program complete with vanity space walks) gets to continue to increase its GHG emissions and gets lots of money and free technology to boot?
Both sides have a point. Climate change discussions will likely become the most critical element of US-China relations over the coming decades. Both sides need to give a little bit and stop waiting around for the other to act first, but obviously, given the overwhelming advantage in both GDP per capita and emissions contributions per capita, the US should move first and much, much farther than China in the near term.

Fundamentally, the current climate change stalemate is based on the prevailing view that carbon emission reductions inhibits economic growth. The "CO2 limits= reduced economic growth" paradigm needs to be innovated away. CO2 caps are important, but unless the heretofore existing link between CO2 and economic growth is broken, CO2 emissions won't be significantly reduced. Thankfully, the new model for economic growth is quickly becoming CO2 limits + innovation + massive investment in green infrastructure, technology and jobs = economic growth. Hopefully, Obama and Hu both grasp this and can find ways to work together and move past the old debate of who should give up growth.