The Green Gap

In the Cold War, we feared a Missile Gap was a strategic weakness. Nowadays, we must awaken to the fact that the Green Gap is true strategic weakness: the nations whose economies will thrive in the coming years will not be those with the biggest factories, but those with the most sustainable, efficient, and ecological markets. What we require is a Strategic "Green Reserve" of ecological design to weather the coming changes that both climate and resource scarcity will force on the international economy.

Monday, 23 May 2011

True Cost Accounting and Utilities

Let's say you work at a job where you are paid $24,000 a year to make widgets.

The problem is that your commute to work costs too much money. You report to your supervisor and say "Hey Steve, I need some kind of help to pay for my commute costs. I spend $400 bucks on gas each month and it's eating into my salary something awful!"

Steve replies, "Yeah, a lot of other people have been noticing that, so the company has decided to open up a staff gas station. If you buy gas at the station, then it will only cost you $200 per month, and you should have more of your paycheque left over at the end of the month."

"Great!" you say, and walk happily out of Steve's office.

Sure enough, the company has built a brand new gas station right in the company parking lot. It's not exactly under the umbrella of your widget factory, so it pays rent to the widget factory for the space in the parking lot it takes up, and buys its gas by itself. It's a real honest to goodness gas station... it just happens to charge less for gas. You fill up your tank, and sure enough, instead of costing $40 bucks per tank, it costs $20. You're pleased with yourself as you walk into the office and give Steve a high-five. Life is good.

Your paycheque comes around, and you notice a problem. Instead of being $2000, it's $1700. There's some entry on there that says "Energy costs" and they've docked you a full $300 bucks for it. You storm into Steve's office to ask him what gives. Steve, who talks too much and doesn't know how to lie (it's why he's still your supervisor and not Vice President), tells you: "well, because the company is offering these rebates on fuel, we had to recoup costs somehow. It's about sharing the burden."

"But you docked me $300 bucks! I already paid $200 for gas, that's $500 total where before I used to pay $400!"

"Well, yeah," continued Steve, "it's cost sharing, so some people drive more than you and some dive less, but we all have to share the load equally, right? I mean, teamwork and all!"

You cast a sideways look at John, who drives his Humvee three hundred kilometres every day to the office and back. He shrinks under your gaze. Your blood starts to boil. You realise you're paying for his gas. But wait... not everyone has that kind of commute. The average amount of gas has to be about the same as you. There's no way that EVERYONE in the office uses that much fuel. You challenge Steve on his murky accounting.

"No, no, no..." says Steve, "that's not the total cost of the deduction. You see, in order to allow the gas company to make money, we decided to waive its rental fee for the lot where it's sitting. Since the company has to recover that cost somehow or another, we added that rental fee to the deduction."

By now, you're mad. "But that's just rent! There's no WAY that would come up to three hundred bucks!"

Steve doesn't break pace, explaining calmly and exasperatingly patiently: "well, there is more to it than that. You see, the gas is hard to control. In order to get the pumps here, we had to cut corners on some of our valves and switches. The truth is, the system is really hard to stop pumping, and there's very little capacity to store the actual gas itself onsite. The problem is that even if there isn't a car at the pump, the pump has to keep pumping for a little while because it has to be shut off at a completely different location. We lose about 9-10% of the gas that way... so we have to pay for that, too..."

Steam is gradually billowing out your ears.

"...and then there is the matter of upkeep of the equipment, payment for the gas itself, and the central administration of the program. We all have to work together to make the savings happen."

Now... let's stop this madness for a moment. What I was talking about wasn't actually gas... it's electricity. It's generated by central power stations and transmitted over wires to get to your house. In the process of transmission, there are current losses due to inefficiency of the system and the fact that some of the electricity has to be discharged. In the US in 2007, the total system loss was about 9%. Also, the system is administered (in the case of Alberta, for example) by a government-run agency: AESO. AESO has to pay for the construction of new electrical capacity in the form of grid improvements. The grid, after all, is a "public good" they say.

Who pays for AESO? Well, one way or another, the end user does. Either we're taxed to pay for it (Alberta spent $500+ million on utilities in 2009) or we're charged for it through end user fees. One way or another, we will pay - it just comes out of a different budget line. Even if you were completely off-grid, your Alberta provincial taxes and levies will go to pay for the grid. Even if you use extremely energy-efficient appliances, you still pay for the people who don't. There's also the question of the Alberta Utilities Commission, which is the administrative arm of the utilities issue.

So let's think about this. Per year, each household in Canada spent an average of $2204 in 2009 for utilities. That's not a small chunk of change. Over the life of, say, a photovoltaic panel (25 years plus), that would be $55100... not counting increases in utility prices. Also, a portion of your tax goes to pay for utilities without you being able to say anything about it... so if we were talking real cost of utilities, this amount of money would be higher.

A GigaJoule is about 278 kWh electricity. 140x278=38920.

If you had to replace all that heating and electricity with something like photvoltaics, that would be nigh impossible. A 30,000 kWh system costs about $150,000, and is huge in size. That kind of expenditure is just plain stupid. But what about using energy efficiency combined with local generation? For example, the PassivHaus specification states that a house cannot use more than 15kWh/m.sq. of heating per year. Since there are over 25000 houses in the world that meet this specification, it's possible. That's a grand total of 2787 kWh/year in heat for a 2000sq.ft. house. Calgary houses do not need air conditioners.

If we add the typical energy use (7453kWh) plus the heating (2787kWh) all of a sudden we have a much more manageable 10240kWh for a regular dwelling. That's doable within the budget for less than $30k in PV alone.Mix it up a bit with wind (ample in Alberta) and you could really pump out the juice for that price and make money back. Add 14% to the price of the house for PassivHaus certification, and you're off-grid. You can even save more energy, because with energy-saving appliances and the proper systems, you can be using far less electricity than a normal detached dwelling does. Don't forget to calculate in your $4500 rebate for energy efficiency. Plus you never suffer the cost of a price increase in fossil fuels again (or suffer the cost of simple inflation on energy prices).

Right now, in-situ generation seems to be only a break-even scenario, but the reduction in costs over all is far greater than the sum of its parts. That's because, like in our stupid gas example above, the actual cost of the grid, utility administration, and inefficiencies, are actually passed on in your tax dollar, not in your energy bill. Imagine Alberta no longer having to repair power lines? In Calgary, where the lines are underground, imagine the avoidance of repair costs... if you've ever seen a power line repair in Calgary, you know: they have to dig in under the asphalt to get at the wires and then patch the whole thing up again. It's labour intensive. What if we simply didn't have to pay for the grid anymore? It's possible. It costs less over all than the grid does, and it would actually create jobs for installers, repairmen, and retrofitters. I know that on the face of it the math just comes out about even out between the two scenarios over an amortisation of 25 years... but that's only because nobody counts the hidden costs that come at us in our tax bill rather than our electricity bill. With real cost accounting, and a full reckoning of system costs on your electricity bill, you'd be saving FAR more money with a home system. Now, just to make the government include all the costs in the bill rather than in hard-to-find nooks and crannies in your tax bill.

No comments:

Post a Comment