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.


Anders said...

Great post. We need to keep on writing about these issues!
/Anders in a snowy Sweden

Bowo said...

Nice summary!