Get the Metric Right!

Tim Tyler argues that debates on renewable energy are marked by a lack of clear thinking. The metrics used are deeply flawed. A new look at renewable energy.

All of us have experienced dealing with people who just don’t understand the importance of getting the measure for success—the metric—right.  During the Vietnam era, many decision makers were fixated on body counts instead of battles won, not quite the best metric to judge victory in the conflict. And, I recall a talk given by a representative from a major bank, where the speaker went on and on about how many loans he had made to a couple of countries that were economic basket cases.  When asked how many of the loans were performing, he said that none were.  They were all bad debt.  I asked the man what his bank had done when the hundreds of millions of dollars worth of loans went south.  His reply astounded me:  ‘Why, they promoted me and gave me a raise, and upped my bonus because the measure of success was the value of the loans we made, not whether they were good loans or not.’  Getting the metric right continues to be terribly important or it leads to dire results as the recent rounds of financial and economic crises have demonstrated.

A key area where we need to identify proper metrics is the energy sector. It is the subject of never ending debate and affects every American.  Note the plural usage.  This discussion is not about one-size fits all solutions.  We do not have an energy problem; we have a batch of problems.  Each problem that we can define demands its own measures of success or failure. We need to think hard about what we want to measure and how we define success.

The discussion about ‘renewable energy’ is characterized by fuzzy thinking leading to the use of a flawed metric to measure success. We know that the efficiency of a central power plant is, by and large, between 22% to 35%. This is because of transmission line losses on hot days and the simple fact that a lot of energy in the form of heat and green house gases goes on up the smokestack into the atmosphere.  Those emissions are the source of a lot of our emissions, primarily in the form of carbon dioxide, and other Green House Gases (GHGs) like nitrous oxide.  The key challenge is to reduce GHG emissions. The practical metric is a measurement of how much we actually reduce GHGs…especially, carbon dioxide.

The almost religiously strict definition of ‘renewable energy’ as wind or solar or a variation on that theme, actually hinders efforts to reduce our carbon footprint. The measure of success in reducing our carbon footprint should be how much we actually lower our carbon footprint—not how much renewable energy we install or claim to purchase from third parties.

It is a troublesome truth that we have to “burn” something to generate electricity that follows the load—the actual consumption of electric power.  We have to overcome the disinclination of the sun to shine 24 hours per day or that of the wind to blow unceasingly and a constant rate. In addition, if we have wind or solar generated power we still have to get it to the consumer, which requires the construction of new power lines.

So, is an electric power solution that is much more efficient, say up to 85% and that dramatically reduces GHG emissions what we need? This solution is not to be found in a big wind farm or in a large photo-voltaic or “collecting solar” field that is tens or hundreds or perhaps several hundreds of miles from the consumer.  A new transmission line costs $1-10 million per mile and can take ten years or so to get approvals for. When we are thinking about reducing GHGs and lowering our carbon footprint, time has an obvious value.

The bigger the new ‘renewable energy’ field, the more we are likely to spend on the transmission and distribution infrastructure to get the power to the consumer.  Strangely enough, consumers who adore renewable energy do not like new power lines and pylons crossing the countryside.  Moreover it is interesting, and perhaps obvious, that even if you installed a major wind field in the Midwest, the electric power it produces is a rather long way from the areas of the US that are located in load pockets, where there is not enough electricity. Even if sufficient power was being produced in the Midwest, the transmission and distribution system simply cannot get it to the parts of California, the toe of southwestern Connecticut and parts of the greater metropolitan Washington DC area that need it.

Isn’t what we accomplish at least as important as how we talk about doing it? It makes sense to use energy generation techniques that actually lower our carbon footprint by 40% now, instead of waiting years to use those which require indeterminate research, approvals and construction. Recently there were cries of outrage in some quarters because one state decided that waste-to-energy should be considered a renewable. Additionally, in the wake of the Japanese Tsunami, the problems of reliance on nuclear power are even more complicated in terms of permits, dealing with NIMBYism, costs and real design. We cannot afford an over weaning focus on ‘PURE renewables.’ This may help us feel greater moral rectitude but will fail to address the key problem of reducing emissions. To repeat again: The measure of success in reducing our carbon footprint should be how much we actually lower our carbon footprint—not just how much renewable energy we install. Do you really think that by purchasing ‘guaranteed wind power’ from a third party you are actually lowering your carbon footprint locally and benefiting your environment while they might be sending you electric power generated by dirty coal plants?

The solution to the emissions problem goes back to Thomas Edison. It is “on-site power” which lowers GHG emissions by over 90%, reduces stress on the grid, has efficiency of nearly 85%, generally pays for itself in 5-10 years, uses excess thermal energy for cooling or heating, produces electric power that has as much as 99.999% or ‘five nines’ of reliability with no harmonics or voltage fluctuations, and can be installed as needed. The utility grid can be relegated, in a local context, to providing back-up power, reducing the carbon footprint by up to 40%. This can be achieved by burning natural gas or landfill gas. Local, on-site power installations in the 2-200 MW range are the best way to bridge the gap between theory and practice, and lower our carbon footprint.

My CEO, Guy Warner at Pareto Energy Ltd in Washington DC, notes that “the alternative is to install distributed energy resources” (DERs).   Under the DER approach, renewable energy is installed at or near its point of use and organized in local microgrids.  At a time of uncertain economic growth and differing preferences for environmental sustainability and energy reliability, microgrids are a sensible option. They can cater for particular demands and be customized as per each building's power and environmental needs. Moreover, decentralized DERs organized in local microgrids enable the capture and recycling of generator waste heat for building heating and cooling. Microgrids also promote the processing of community waste streams to create feed stocks for power generation.  Finally, unlike the fragility of the current central grid, microgrids avoid a single point of failure due to natural disasters or human mischief.”

To solve the emissions problem, choosing the right metrics is essential. We can measure the Carbon Footprint and other GHG reductions; we can measure the amount of grid power not being used (grid stress reduction); we can measure the costs of on-site power versus grid power per KW (it may be higher) and we can measure the increased reliability provided and quality of the power signal.  We can also measure the capital cost differentials—on-site power sized to specific reliability and power needs, versus the avoided costs of building a large central coal-burning power plant sized to meet peak power needs for the few hottest and coldest days of the year. An additional metric that is admittedly harder to define is the avoided cost of transmission and distribution system upgrades and the associated legal and time-value costs. On-site power or, in other words, distributed energy resources in the form of combined heat and power (CHP) can measurably lower a carbon footprint and do it quickly

It is worth exploring—and measuring–to validate a metric. Compare the costs of on-site power installed in the near term that reduces GHGs by 90+% and carbon dioxide by up to 40% to the costs and the timeline of a new nuclear or mythical “clean coal” central power plant and their associated transmission and distribution system. A new nuclear plant now costs a minimum of $10bn and likely 10-15-20 years of time-related opportunity costs—a lot of CHP and renewable energy can be deployed for that amount of investment. Burning some natural gas on-site and getting the known environmental benefits of CHP with the added benefits of high quality power that is extremely reliable definitely seems to be the better option. Another potential benefit that merits further discussion is the simple fact that an on-site power approach with microgrids can provide real protection from cyber attacks on the utility grid and other post-cyber attack benefits.

The bottom line to keep sight of when talking of renewable energy is simply this: Measure how much you reduce your local carbon footprint and GHG emissions—not how much ‘renewable energy’ you purchase.

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