So I’ve been battling a bit with Bart Verheggen. I realize that it’s not that uncommon of a situation around here, Eli Rabbet showed up to join against my reasonable points.
Bart said:
Energy saving is probably the archetypical no-regret measure. McKinsey has a graph similar to the one I pointed you too with much more detail of where the different options fall on that curve. No time to look up the ref now, sorry (the final will resume in a few minutes…)
We were discussing my point that it is a flat fact, that energy saving cannot achieve the goals that greenies want. I repeatedly and endlessly point out to the leftist environmentalists here that industry is already very efficient. This time I made the mistake of saying I’m an engineer and have studied these issues so I got this happy mocking return from Eli.
There are endless efficiencies to be found in industrial processes and consumer products. In the usual case one has to consider the up front costs and balance it against the payback time.
On the industrial side there are associated investment costs to change the processes which are paid back in savings, often in a very short time. Here is another example from a petrochemical plant where the substantial savings were so high that the payback took less than two months.
Some places have efficiency calculators on line to help. As a matter of fact, motor replacement is one of the simplest and most effective ways of saving energy, which Jeff should know if he works with motors.
The same sort of calculation goes for consumer goods. At some point, due to the price of repairs and energy, replacing any appliance or vehicle makes sense because the gains from increased efficiency quickly account cover the cost.
Jeff is an engineer and he is here to help us.
Endless returns eh? Eli linked to Dow, which of course is a huge energy consuming chemical company. A company that is critical to our global lifestyle. Well Dow, which is a big enough corporation to be in on and supportive of the global warming agenda, has worked with government on energy saving programs. They have set aggressive goals for energy savings which is excellent for a company that requires dramatic energy consumption to operate its business. Unfortunately, their goals are not achievable but that doesn’t matter, they can reset the bar later.
Eli sent this link 42009[1] which shows that Dow St. Charles plant, in joining the federal government, made a total annual energy savings of 272,000 MMBtu and $1.9 million, respectively. This is great stuff, and there is nothing wrong with energy savings, which I think was Bart’s original point. My point of course has been that if industry had a cost effective way for savings, in NEARLY ALL cases, they have already done it, are trying to do it, or will do it in the near future. It’s the nature of capitalism, which climatologists don’t seem to understand at all.
Now Eli is of course willing to accept any document from the government about energy savings without question. Fortunately for him, I am an engineer and in the spirit of his his fun mocking, am here to help.
First I tried to establish just how these massive savings were achieved. It turned out that the document described a steam leak/leaks and a few other items for improvements. In all the government determined there was $5 million to be saved, but after implementation Dow St. Charles was able to save 1.9 million- their own numbers with 1.1 million from steam leaks. Now you have to be an idiot to accept these numbers unquestioned because there is large incentive for both the government and Dow to inflate them, but I am an idiot — it’s in the name — so that’s exactly what I’m going to do.
Being an engineer comes with the knowledge that bulk chemical processing and purification typically comes with heavy energy consumption. I wanted to see how much energy this little 3000 person plant consumes.
I found this statement in the pdf linked above.
Using 3EPlus, DOE’s insulation calculation program, the team estimated total insulation losses to be approximately 1.0%. By reducing these insulation losses to 0.1%, the assessment showed that annual natural gas and cost savings of 3,030 MMBtu and $25,000 could be achieved.
So 3030 MMBtu (Million British Thermal Units) is 1-0.1 or 0.9% of the total usage. So the total plant power usage is 3,030,000,000 BTU*100/0.9 = 336,000 MMBtu. But wait! They claim an energy SAVINGS of 451,100 MMBtu from steam leak management!!
So according to Eli’s never exaggerated government documents, the steam leaks more than the usage!! I’m probably the only person to bother checking but our smell-o-meters are triggered now.
Of course we couldn’t stop there. There must be a total plant power usage number somewhere. Unsurprisingly for a “green” company which is forced to use MASSIVE energy, it turns out that the total usage isn’t easy to come by. They don’t like that number for some reason. I did find this chart though published by Dow St. Charles which amazingly enough stops right before the year 2007, the year of their massive energy savings. I wonder why??
BTU’s per pound of production at St. Charles.
They also managed to claim that this graph represents a steady improvement.
St. Charles Operations has demonstrated a steady improvement in reducing its energy usage — even while the site experienced a significant increase in production during the last few years.
Not quite what I got from the graph but it’s enough that I can look for total pounds of production to get energy consumption. From this site, the St. Charles facility is stated to produce 10 billion pounds of chemicals per year. So with 5200 btu/lb*10,000,000,000 lbs we get 52,000,000,000,000 or fifty two trillion BTU’s. Woah!
What’s even more amazing, besides the 0.025 USD/KWH, is the electric bill (double checked in the PDF) which amounts to a whopping 380 million dollars per year – 0.038 USD/lb material cost. The “irony abounds” is an incredible understatement when Eli Rabbit links this company as an example of ‘green’ improvement.
So the alleged total improvement from all these wonderful finds is 0.5 percent. One part in 200 was claimed to be saved from this amazing energy efficiency program. Again Eli wrote this — There are endless efficiencies to be found in industrial processes and Bart wrote this — Energy saving is probably the archetypical no-regret measure. My contention is and has been that capitalist industry is already very efficient where it can be – because as a business owner, wasting of money….. sucks.
So Dow claimed or more accurately proclaimed this huge efficiency increase, but let’s torture Eli and Bart a little further. Let’s look at how this half percent increase in efficiency compares to the annual variation in efficiency. From the bar chart above the one sigma deviation is ~0.5 percent of the consumed energy per pound – two tailed. The result is that this SAME efficiency gain occurs under normal unchanged operations by ACCIDENT once in about 8 years.
So, in summary, the DOE found a massive plant in the United States and worked a deal with DOW to analyze and improve electric consumption efficiency. Engineers at the plant were tasked to work with and support this fantastic program. Together they analyzed the massive plant, scouring it for anything they could find for energy loss and were able to identify a few key areas of problem. The primary area was steam leakage, which was identified by meter readings to cause about 3 million USD/ year in losses. It turned out that some of the meters weren’t working so the number dropped to 1.1 million in losses according to UNCALIBRATED, low accuracy meters. How do I know they are uncalibrated and low accuracy– because I’m not a climatologist. No really, in industry, they are assumed calibrated until they become critical, which these meters are not. They are likely designed to detect leaks of significant size.
Anyway, after searching endlessly through the plant, these boys and girls identified ‘massive’ steam leaks – over a million dollars of steam sneaking out by surprise!! Which then turned into savings.
Does anyone here know what a million dollars of steam looks like? Steam is cheap you know — especially for Dow. I can calculate it but it would be embarrassing for Dow and perhaps to the point of being dangerous for me, Dow is a fine and important company IMHO. So instead, I’ll acknowledge their claimed energy savings with a polite thank you.
Why don’t the climatologists realize the extents corporations will go to in order to save a million dollars?
Does anyone want to bet on whether or not this was one steam leak which was measured for annual output but in reality lasted under a week?
I’m tired again, but guys like Bart, Eli, Trenberth, Mann, Schmidt, on and on, don’t have a damned clue about industry. They don’t have a single f..ing idea what it takes to run a company. They are leftists, without understanding of production – or a care to learn, but they will sell you a plan for it. They are happy to sell their enlightened views and despite their hubris, they are wrong.
Because they are ignorant.
I wish somehow they would come to grips with the fact that they should simply study climate and not enforce policy on industry. At the same time, expecting that to happen would make me naive.
—————————————————————-
Eli wrote:
At some point, due to the price of repairs and energy, replacing any appliance or vehicle makes sense because the gains from increased efficiency quickly account cover the cost.
Yes Eli, at some point. Unfortunately that point is not contained within the locus of what we evil capitalist business owners refer to as …reality.
the Air Vent 
Gosh, they’re still chasing steam links? They (the refiners/ petrochemical industry) were aggressivly adding insulation to pipes and fixing steam leaks right after the first oil embargo in the ’70’s.
After 30 years of trying to improve efficiencies I’m puzzled that they could find any leaks to fix. Much less show that their previous work was so bad they could still find a million dollars of wastage to repair. Something ain’t right here.
Tom Bakewell
Jeff, I think you might be related to Elmer Fudd 😉
#2 Nice reference.
Steam leaks are in interesting problem because the pipes need to have ‘safety valves’ (I forget the proper name) which leak over time. The normal operating proceedure is to periodically assign some people to check every valve in the plant. It is quite possible that all they did is execute their normal procedure but do in a way that generates greenwash PR and government subsidies.
Eli said: “There are endless efficiencies to be found in industrial processes….”
Not in private industry.
Astonishing! This is likely the single statement most innocent of reality that I’ve seen this month.
Yeah Jeff, I prefer chasing deer over “rascally rabbits”. Probably why I don’t blog ;). Deer are such gentle creatures. Except during the rut. Or when they’re eating.
Nice one Jeff. They really don’t have a clue.
A few years ago I had the dubious pleasure of working with a leftist academic on an innovative product. In conversation one day he mentioned that if we succeded he’d like ‘a penny per unit manufactured’ as royalty for his innovation. He knew the retail value of the high volume product the company was making and thought he knew about retail mark up. He really thought this would be fair and ranted about the huge profits the company owners must make. In reality the company made less than a penny per unit before tax.
Thinking some more about Eli’s belief.
Plant maintenance can languish for various reasons mostly to do with using the cash elsewhere, cost of energy loss not high enough relative to cost of insulation upgrade and leakage repairs, etc.
A significant increase in fuel costs can inspire a lot of maintenance work since cost of fuel becomes more significant part of cost of product.
If you look at sudden oincrease in cost of fuel as inspiration for repair and replacement instead of MBTU’s you might see these occasional discoveries of “endless efficiencies”
Jeff, I agree with your view of the likes of Hansen, Trenberth, Mann etc and all the sycophant supporters such as Bart. However, not only do they not understand industry, but they also do not understand the basic technology and have to make hypotheses (which have been falsified) to hide their incompetence. An electric current occurs due to voltage difference. Heat transfers (or heat flux occurs) from a high energy state to a lower energy state. Temperature difference is a driver of heat flux. Engineers have been making measurements, calculations and developed equations since the first engines were developed hundreds of years ago. The so-called climate scientists would never get published in engineering journals.
Plants of this size will have an inspection and maintenance cycle whereby over a period of time all of the plant will be inspected. The steam leaks found by the energy saving drive would have probably been found by the normal inspection/maintenance schedule so any savings should only apply to the period up to when normal maintenance was scheduled.
Within the electric utility industry, around the world, there are groups whose job is to find lost Watts. Within consulting firms that supply products and services to the electric utility industry there are groups whose job is to make and apply software for this job. Been going on for many decades.
Watts take fuel. Fuel takes money. Save Watts, save money. Been known forever.
Oh, and then there’s thermodynamics.
That was a very funny post. Have so many people never worked in the private sector? Post should be named ‘Government aid helps industry find money lying on floor, and teaches them about payback periods’.
Very weird indeed.
Good stuff Jeff.
You are 100% correct. Bugs Bunny doesn’t have a Scooby!
“the pipes need to have ‘safety valves’ (I forget the proper name)”
I think you mean steam traps – they periodically open to purge condensate from steam lines. From time to time they get stuck on the open position. They are easy to find because noisy. Plants have programs to find and fix these, but the intensity of those efforts wax and wane depending on priorities.
I suspect the reported energy savings is an accounting trick: normal maintenance activities that would happen anyway got counted as part of this program. In reality, plant energy usage is no different than it would have been otherwise.
I’m not even sure how to respond to the notion that there are “endless effeciencies to be found” and his implicit assumption that engineers don’t understand payback periods. This guy has no idea how industry operates and what engineers do for a living.
Sadly, I think he’s more rule than exception.
Note that the computation is about $8/decatherm to compute their savings. For use that large with a large NG delivery contract, the time had to be around Katrina/good times. Current prices for such large contracts are about $5 to $6/DT. Money can be found when the price is high, but often the maintenance of traps and insulation will be lessened when costs are low. Something Eli missed.
Another “small” item missed by Eli when discussing replacement costs. The value of incremental investment. An example is that when the SO2 rules were passed, industry could buy low sulfer fuel, buy credits, or retrofit. Each company could do the most economical by investing money appropraite to their needs, such that replacement was not made of the capital equipment. Yet, the proposal is to get rid of CO2 generation. They fail to include in their costs analyses the added cost of replacement. Good boilers can easily last 50 to 60 years. Adding small improvements such as insulation, better traps ,etc. can extend a boiler’s life, while reducing costs. However, given that boilers are at about 90%and at current max, where does this “endless effeciencies” come from?? Because this is heat transfer and they demands heat loss, heat differential, and entropy, the best that could be expected ever with tubed/metal transfer is 95%. Eli should stick to gardening carrots, with carrot eater, I suppose. 😉
Jeff ID, let me see if I understand this dust-up. Your point, I think, and it would be mine, is that private and profit oriented entities will be attempting to find energy savings on a continuous basis. Is the Hare Apparent making an argument that a special effort or incentive or government intervention is required to obtain more energy efficiencies? Or is the argument merely about the amount of energy available to be saved, with reasonable cost payback, relative to the overall useage?
It was my experience in industry that programs instigated for savings often did little more than document savings that were already in the works or simply provided a final push, that an official program can provide, for ideas already in the works. Lots of ideas can be generated by these programs that on the face of it sound quite good, but when it comes to a practical payback many have to be disgarded.
#16 Well Bart is of the opinion that we can begin to stave off climate doom by implementing the ‘no-brainer’ savings and work our way to the expensive stuff. I told him to name a ‘no-brainer’ to which he replied with the first quote above. Then the Rabitt stopped by and gave this link to what a no brainer is, while teasing me about being an engineer.
As Dr. Steig will tell you, that just makes it fun for me.
So I took apart the ‘no brainer’ and made a few extra points for entertainment on the way. What a jerk I am eh?
Anyway, I think it will be interesting to see if these two have another shot at the ‘no-brainer’ savings being missed by the wasteful capitalists.
I used to work for an internationally famous chemical company making the ultimate green product. Plastic made from wood pulp and acetic acid. Acetate. There was not a year that went by when they didn’t strive for more and more efficiency. There was not a year that went by when they didn’t make someone redundant because the costs were too high. As time went by, department after department was closed, not because the product they made wasn’t good or efficiently made but because someone else made it cheaper due to the relative costs of energy and people. The last product to be made was the most lucrative and ironically it is connected to the tobacco industry (gee, the AGWers are right after all). Finally the plant I worked at shut completely and the remaining work moved to the much bigger and even more efficient main site. That is to close this year and the order books are to be transferred to the US and China. Energy costs are being cited as the reason. Guess which sites will be the next to close? Clue, it’s not the ones in China.
I left under my own steam (ha, ha), volunteering for redundancy. I was very happy to go. Working for a company that is trying to fight rising fuel prices with ‘efficiencies’ is truly soul destroying.
There were not endless efficiencies to be made, only cheaper places to operate.
As a last bit of recycling, much of the equipment removed from the site I worked at was shipped to China. In case you were wondering if maybe they had some supper efficient methods that enable them to make a profit where the UK factories couldn’t.
People who wonder why I believe so strongly in these issues only need to look at what these proposed policies will do to our future. I can’t imagine anything more destructive than a carbon tax, and I can’t imagine why people would jump into it when there is no solution other than nuclear for the problem.
It’s bad policy which will destroy our future and one more avenue which government will get its claws into and never let go. They won’t be able to let go because of the powerful friends they have running the carbon exchange which was already set up in Chicago by Obama. They won’t want to make their own powerful friends loose money. If the law looks like its going to pass, I’m thinking of tossing some money their way to ride the spike.
Good stuff Jeff, and, based on my experience, I agree fully with Dan Hughes.
Re: TinyCO2 (Jul 12 12:47),
I used to work for the other company that still makes cellulose acetate. Your experience sounds very familiar. One thing to remember about cost saving is that there still has to be a payback. If it takes a capital investment of $20 million dollars to save $1 million/year, it isn’t going to happen. The other problem is that when the cost of energy goes up, the cost of materials will go up too with some delay. If you don’t have the cost saving project shovel ready when the energy cost goes up, then by the time you finish the design, the cost of materials has probably gone up so much that there won’t be a payback.
Solvent recovery for the cellulose acetate process was heat integrated, resulting in a large savings in energy and an increase in capacity, which was limited by the heat load to the river, over 30 years ago. There really isn’t anything of that magnitude available any more.
The acronyms for that sort of thing are NPV (Net Present Value) and CFRR (Cash Flow Rate of Return). If they aren’t sufficiently positive for a project, it isn’t going to happen.
It should also be noted that while $1.1 million is big bucks for an individual, it disappears into accounting noise and variance when applied to an operation of this size. Literally, it’s trivial. And as others have implied, it may well not be real — just moving standard results of normal operations into a temporary ‘special’ category for PR value. I suspect these numbers have more to do with marketing (aka Greenwashing) than bottom lines.
@TinyCO2
“There were not endless efficiencies to be made, only cheaper places to operate.”
Exactly. Eli’s dream “endless efficiencies” are just that. Most companies have already made their gains from quick and low-cost improvements and generally they are now up to the category where major investment is required. Do they invest in upgrading existing assets or build anew where environmental regulations are less strict and energy and labour costs are lower?
For efficiency gains most companies won’t even look at anything with more than a 3 year payback (if even that these days). That is one of the reasons why governments want to incentivise renewable energy. There is an article in today’s Telegraph about a brewery planning to invest in biogas for treatment of its waste materials. At the bottom of the article the discussion is how delays and cutbacks on government subsidies are ‘hurting’ the renewable energy industry in the UK. (link here: http://www.telegraph.co.uk/earth/earthcomment/geoffrey-lean/7882316/Raise-a-glass-to-beery-biogas.html). These technologies are just not viable without that political intervention.
Jeff,
you probably could make use of this energy+cost saving potential database here to solve the dispute in a more general way:
http://iac.rutgers.edu/database/
The downloadable Excel files unfortunately are not up to date so it looks like a job for R web scaping…
DeWitt Payne at 1:21 pm
LOL, small world 🙂
I think it’s a common experience for anyone in a high energy manufacturing business. Steel production led the way.
It’s not just raw materials that increase in cost due to the rise in fuel prices. People become more expensive. They still need to travel to work, still need to heat their homes. How many people want their salaries to decline compared to the cost of living?
Or are we to go back to a time when factories housed employees nearby, in high density housing? I’m sure that climate science’s ivory tower dwellers think that’s a good idea.
It annoys me the way people are disconnected from industry, energy and even farming. They’ve no idea what’s involved or how much they rely on the output.
Thanks, Jeff,
It was a pleasure to read your quantitative analysis after reading so much qualitative information about climate “science.”
At this stage it is hard to tell if industries learned to fabricate from the government, or visa versa.
It is like the chicken and the egg.
In both cases, quantitative analysis like yours may expose some flaws. There are other tell-tell signs of official faksehoods.
In promoting false information, it is common to overlook quantitative data that conflicts with the story.
Astrophysicists realized that such data on the solar neutrino flux cast doubts on the Standard Solar Model of a Hydrogen-filled Sun.
That “problem” was solved when one hundred and seventy-eight (178) SNO co-authors reported that the solar neutrinos just oscillate away. They don’t, but nobody else could check their measurement.
But the Sun still discards billions of metric tonnes of Hydrogen each year as smoke – a waste product – from the solar engine, just as cars discard CO2!
It is true that CO2 accumulates at the ends of tailpipes and at the tops of chimneys – just as Hydrogen accumulates at the top of the Sun’s atmosphere.
With kind regards,
Oliver K. Manuel
Former NASA Principal
Investigator for Apollo
Yup, after 30+ years in petrochemicals, I can assure you that there is not much low hanging fruit in energy savings, at least not in most of the world. In developing countries (where capital is short and investors demand extremely rapid paybacks on investment) some projects to improve efficiency, that would be funded in the USA, Europe or Japan, get turned down for lack of a short pay-back (2-3 years or less is not and uncommon requirement).
Were there may be the possibility of significant energy efficiency improvements is in private homes, where lack of capital (and often lack of rational investment choices!) is much more common than in industries. Getting individuals to make the needed investments will never be easy, even if energy prices rise significantly. For example, getting someone to better insulate their home for a couple of thousand dollars is not going to happen if they just don’t have the money, no matter how quickly the investment would be paid back in reduced energy costs.
If you want to have a big impact on CO2 emissions, then build lots of fast breeder nuclear power stations. The investment costs for nuclear plants can be reduced by expediting siting and construction permits, and by settling on a few standard designs which are used everywhere.
hehe.
for guys who like steam,
http://www.komax.com/drawings/steamheater&oxygencontacting.html
(psst, my ex father in law, brilliant radar engineer turned inventor)
And he would sit there noodling equations and then say. “hey, I can use this mixer to
de superheat steam.”
http://www.komax.com/products/desuperheater.html
And for fans of turbulent flow.. this thing is precious to watch.
http://www.komax.com/triple-action-mixer.html
ok.. geek off jeff, sorry for the OT
It’s a small world
They live in…
sorry if that song gets stuck 🙂
I had a look at the rutgers data base ( motors hehe)
All the paybacks were less than 2 years. with the exception of alternative energy.. ave 8 years. adoption rate? 5%
one solar project had a payback of 967 years
has anybody ever done a project (cost savings) with a payback of greater than 3 years? not in my experience, but I could be wrong
Steven, it has been known to happen in the water/wastewater world for publicly owned water works, since a good well run system can be in operation in excess of forty years and expansion of population (increase in demand) is expected. Most industry does not have a 40 year + demand increase in their basis.
PS Liked the tech. I have specced static mixers and direct injectors. If I have problems with the ones I have, I will look up these. It looks as though the design of the injector has solved the rattle and sticking problems as the unit wears, and the mixer the streaming and not to mention buildup of crud with the back mixing. Certain fluids typical in ww have a problem with fouling that looks to be lessened with the Komax design.
Steven Mosher, I note Reynolds Numbers used in one of the graphs. Dimensionless numbers such as Reynolds, Prandtl and Nusselt are unknown in the ivory tower world of climate pseudo-science.
Payback time and Return on investment always has to take account of change in technology of production and product life. The longer the payback the higher the risk that one will never get all your money back. Look at Spain with its alternative energy. The country going backwards with high unemployment.
This post indicates the lack of understanding of basic technology by the team and hanger-ons http://hockeyschtick.blogspot.com/2010/07/u-mass-hasnt-heard-of-1st-law-of.html
Some academicians are susceptible to a particularly insidious particulate sedimentation problem in their information pipeline. It’s gonna take more brilliance than a Komax design to clear out that crud.
==================
Jeff, you say you are tired; perhaps this will cheer you up; it’s a long thread at SoD where Arthur Smith engages Leonard Weinstein and William C Gilbert [williamcg] and at least meets his eristic match:
http://scienceofdoom.com/2010/06/22/venusian-mysteries-part-two/#comment-3947
#27 tinyCO2
“I’m sure that climate science’s ivory tower dwellers think that’s a good idea.”
It is a good idea….for everybody else.
i have worked for the civil service here in the uk and have also ran my own business. They have absolutly no idea about the real world, and that for a business there cost base is always under review.If bart is realy so good at cost cutting, he could make a very good living as a consultant!
re 33.
John P. one of the areas where the designs flourish is in waste water , sludge, very high viscosity material.
he may be my ex father in law but dude knew how to design stuff. funny it all went back to his work with klystrons
kinda the opposite problem.
One would think that Dow, being a 6 sigma company, had already done the work on cost savings, efficiency and maximum output versus energy input. So I guess they took the government along for the ride.
Jeff – re carbon tax. Over dinner last night I was tackling a guy called xxxxxxx, an energy economist who advises UK and European governments on energy policy, esp with respect to carbon. He’s a sound guy, no magical thinking, a realist. He’s especially virulent on wind power.
I said I opposed a carbon tax, for various reasons. He said, roughly, a tax is a tax is a tax. We tax fuel. We tax income. We tax capital gains, inheritance, profits, sales tax. He said don’t be so precious and libertarian when the gvt already spends 50% of gdp, grow up. He said he’d rather have a carbon tax, especially a border tax (to prevent bogus number fiddling about UK co2 emissions as we export manufacturing to China – he wrote the defining piece on how UK emissions have risen 15%, not fallen 10%, if you add back imported co2), and CUT corporation tax and the top rate of personal tax, as a more libertarian approach.
It made me think. He’s a libertarian, in that he wants the state back to 35% from 50% (UK figures).
#42, The carbon tax is a hidden tax on everything where the politicians set the value based on whatever whim they have.
In the US if we had a simple pay the government for energy you use tax, the politicians would have the option to send rebates to farmers, preferred green companies or whatever all in exchange for political favors. e.g. campaign contributions, support for individuals or policies or whatever was expedient. How about preferred auto companies which installed a ‘green program’ of some sort and slipped a half million into someones campaign coffer.
In a cap and trade tax system the politicians aren’t directly controlling the price, but by the top members planning to make available more or less shares, they physically set the price of the good. They can therefore change the value across the country on a whim. All that you would need to know is a day before the speech what they were planning to say. Nothing illegal about that because they are politicians who are just setting carbon policy but the information would have huge value. It becomes money with a value determined by those with the strings. All the insiders have to do is sit under the money faucet with a wheelbarrow and remember to scrape some off the top for the helpful politicians.
Obama doesn’t want cap and trade because he believes in capitalism. He helped form the carbon exchange in Chicago and every single energy plan to come out of congress is in the form of cap and trade.
All of the proposals are cap and trade (as I predicted) — do you believe in coincidences the first time?, the second time? how about the tenth?
We’ve had numerous proposals from our government- maybe 10 now. All the same.
I love the ‘grow up’ comment. As though all taxes are created equal and it’s childish to say no to a tax. By increasing the cost of energy, you are front loading the cost of doing business, especially energy intensive large industrial scale business. The same kind of business that helps countries win wars, build machines, ships planes and process raw material. I know the UK has chased a lot of that very important business offshore, America has as well but that is a dangerously stupid policy in my opinion. Then your friend would apply the tax on the imported goods, as though the country of production would simply report the ‘true’ carbon release. hahaha. Can you even imagine the paperwork..?
If someone told me to grow up and accept carbon tax, I might have to tell them to be quiet and consider which energy limited countries have our lifestyle.
And the dumbest part of a carbon tax is that its in response to global warming damage such as ?????
Oh yeah!
Jeff:
Neat analysis. The notion of endless efficiencies within major corporations given current technologies is wishful thinking and juvenile. That said, I think there are numerous commonsense efficiency gains that do exist, especially those driven by changes in the available technology, e.g., compact flourescents and LED technologies. But many are to be found in areas that are probably politically off limits to AGW types. For example, what is the actual energy budget for recycling plastic bottles and cans? Replacing a functioning 5 year old car with a hybrid? Replacing old solid wood windows (+ storms)with vinyl replacement windows?
That’s it, Moshe; featherless two legged Klystrons, shot through the forests of Akademe. Maybe a bounty?
==============
He didn’t really say grow up.
1 I agree your view re reducing co2 as response to warming.
2 He has told the gvt and the EU that their mandatory or targeted reductions can only be achieved thru a depression, and has specifically opened their eyes to exporting jobs is bad, and cannot be claimed to reduce CO2.
3 European governments are trying to raise revenue, need to raise revenue.
4 Energy is taxed here very heavily – petrol, what you lot like to call gas, is over $8 a gallon (UK Gallon), same through Europe. I don’t know what the tax on industrial gas, heating oil etc is.
5 I think his job is to disabuse gvts of the notion that they are making any difference to CO2, help them raise revenue in the most harmless way possible and pretend they are doing something about the planet, and get a rational energy policy in terms of keeping the lights on (nuclear and gas).
6 We don’t actually make anything any more, I can’t remember what % of the economy is defined as manufacturing, smaller than you.
7 He was interesting on how gvt thinking is infused with peak oil thinking, they believe oil goes back to $150+, they believe (why?) that natural gas is linked, and hence stupid wind projects now will look clever in three years time. Oddly they don’t apply that thinking to nuclear. Oh well.
8 Any carbon tax would be pretty trivial in terms of end cost to a gallon or therm I think. Oil going from $70 to $100 would dwarf any suggested tax.
9 Our politics isn’t quite as blatantly pork barrel as yours, and politicians will always try and bribe constituencies, whether with cash from a carbon tax or income tax.
did you see this? http://rogerpielkejr.blogspot.com/2010/07/emerging-climate-technology-consensus.html
I suspect you will be ok with it until 2/3 thru and then your teeth will start gnashing at the idea that gvt can invent technology – I’m not sure how they get to that conclusion, other than nuclear power. But I thought it wasn’t a bad stab at puncturing most nonsense, the Bart’s and Eli’s won’t like it.
We are cooling, folks; for how long even kim doesn’t know, but probably for long enough to disabuse us of the notion that CO2 is a powerful greenhouse gas.
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A quick Google search and results indicate that the various chemical-processing industries have methods and procedures similar to those in the electric-utility industry. There’s consulting business in process improvement and optimization. Very likely there are in-house groups doing this in the larger companies.
No surprise.
#46, It sounds like it was an interesting dinner.
I enjoyed it. Asking about the attitude, ideology, intellect of politicians who are actually in charge of energy policy in UK and Europe can’t not be interesting.
#50 I enjoyed your hints about that from your #46. Very interesting.
China is the new golden boy of the climate community. I think that our politicians would do well to catch a bit more of their self interest style policy making.
Jeff, any chance you could xxxx xxxx out the name of the person in my #42. I probably shouldn’t have named him, and no sense is lost by removing the name.
Done
Jeff,
OT, but the wascally wabett is claiming there is “Quick Ice” in Greenland.
http://rabett.blogspot.com/2010/07/what-goes-up-often-melts-down.html
DeWitt brings back old memories of the disagreements that used to arise between R&D/ Engineering and accounting in corporations that worked for. Persons in Engineering and/or R&D would come up with ideas, models and prototypes that on the surface seemed like great ideas and with practical applications- and then accounting would get hold of them and many would be deemed unacceptable after doing NPV and CFRR calculations. I came from an R&D and Engineering background, but I often had to side with accounting, who I thought always did a thorough and honest analysis.
The few times that a corporate officer in a sufficiently high position (and usually with an Engineering background) could “over rule” accounting decisions, we invariably had a money loser on our hands, even though we might get awards and favorable publicity from the effort.
I don’t understand why we don’t just use Gibbs Free Energy for everything. After all it is Free.
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That’s a JOKE son.
I just posted this over at Bart’s:
Jeff, I don’t know whether I should post this here or on your site–may do both.
What I think you are neglecting in this is the large number of energy savings projects in commercial and light industrial projects that are deferred due to upfront investments. These involve no new technology and are on somebody’s wish list, but every year at budget time something else seems to be a higher priority.
I have worked in such environments for more than 30 years, and I know that this happens a lot. It goes from fleet replacement to building maintenance and covers a lot in between.
These guys aren’t out there hiring six sigma black belts to benchmark best practice. They are harried and hurried small and medium business managers trying to make the pieces of the puzzle fit together. And energy efficiency can always wait ’til next year.
At the top of the sidebar on my blog:
Engineering is the art of making what you want from what you can get at a profit.
Capitalism (so called) is the most Green economic system we know.
Tom,
When business people talk about ROI there are TWO critical factors to consider: 1) what is the direct financial return for the investment and 2) what is the opportunity cost.
If business people are saying they have better things to do with their money then that means the efficiency improvements are not a worthwhile investment. Forcing companies to make these investments or taxing them and then using their money to pay for them simply exacerbates the harm to economy.
TimG #59,
Thanks, you saved me some time by responding correctly to Tom Fuller. Capital is ALWAYS limited in any business and capital usually goes to the application that has the best return.
No so with government “investments” (AKA wealth transfers).
What a jerk I am eh?
My experience in engineering is that the best engineers tend to be jerks, prickly, and hard to get along with.
Wanna make something of it?
Well, perhaps proving everybody’s point (they’re doing it for the wrong reasons, maybe, but they’re finding things to do…)
Rebound in Energy Efficiency Spending Predicted by New Research
Johnson Controls annual Energy Efficiency Indicator points to rising costs, public image as drivers
PR Newswire
MILWAUKEE, April 19 /PRNewswire/ — Those looking for signs that the U.S. economy is rebounding can find encouragement in the fourth annual Energy Efficiency Indicator released today by Johnson Controls, Inc., the global leader in delivering products, services and solutions that increase energy efficiency in buildings.
A survey of more than 1,400 North American executives and managers responsible for making investments and managing energy in commercial buildings found that planned investment in energy efficiency is expected to rebound in 2010. Following a decline last year, the survey found that 52 percent (up from 46 percent) are planning to make capital investments in energy efficiency and 60 percent are planning (up from 55 percent) to make operating budget expenditures in efficiency programs over the next twelve months. However, a significant number of the business leaders surveyed (38 percent) said that the largest barrier to making energy efficiency investments is limited capital availability.
“Our research shows attention to energy efficiency is continuing its growth among business leaders,” said Dave Myers, president of Johnson Controls Building Efficiency business. “Commercial buildings consume 18 percent of the energy and 35 percent of electricity used in the U.S. each year. A focus on improving energy efficiency in existing buildings is the best way to address carbon reduction goals being set by a growing number of organizations.”
EEI survey results will be discussed today during a webcast that begins at 11 a.m. EDT. Visit http://www.videonewswire.com/event.asp?id=66695 to participate in the webcast.
The Energy Efficiency Indicator (EEI), in its fourth year, tracks energy management priorities, practices and investment plans among decision makers responsible for commercial buildings and their energy use. Johnson Controls is currently conducting the survey in other parts of the world including China, France, Germany, India, Poland, Spain, and the United Kingdom, with results to be released at events during the summer of 2010.
The North America research was conducted by Johnson Controls in association with the International Facility Management Association (IFMA) and the American Society of Healthcare Engineering (ASHE). A total of 1435 decision-makers were surveyed in North America between February 23 and March 15, including CEOs, CFOs, real estate leaders and facility managers from a range of organizations including small businesses, global corporations and the public sector.
“This research helps our members to compare their priorities and energy management efforts with those of their peers,” said Donald Young, vice president of communications for IFMA. “This year’s results demonstrate that workplace professionals not only play a major role in controlling operational costs, but also are among the most important decision makers when it comes to managing an organization’s carbon footprint and public image.”
According to this year’s survey, 65 percent of business leaders say they are paying more attention to energy efficiency than they were one year ago; 84 percent of respondents say that energy efficiency is a priority for new construction and retrofit projects planned for this year.
The most important factor influencing energy efficiency decisions is energy cost savings, with 97 percent of respondents identifying it as significant. Sixty four percent expect energy prices to rise in 2010. Overall the average expectation of respondents is a seven percent increase in the combined price of energy over the next 12 months.
The next most important factors influencing energy efficiency decisions are enhanced public image (63 percent), government and utility incentives (62 percent), and reducing greenhouse gas emissions (62 percent). This climate concern is growing in importance, up from 57 percent that considered greenhouse gas reduction a significant factor in 2009.
Seventy-five percent of decision makers believe significant legislation mandating energy efficiency and/or carbon reduction is likely within the next two years, compared to 85 percent in 2009 and 76 percent in 2008.
“Interestingly, despite a slight drop in expectations for climate legislation this year, more organizations are setting voluntary carbon reduction goals,” said Clay Nesler, vice president, Global Energy and Sustainability, Johnson Controls. “Organizations are using a variety of strategies to meet these commitments, but the vast majority identify energy efficiency in buildings as their top climate strategy.”
When asked what specific energy efficiency improvements have been implemented over the past 12 months, the most popular are those with low capital cost and/or a rapid return on investment. The survey shows that 72 percent switched to energy efficient lighting; 63 percent trained facilities staff; 61 percent educated building occupants to save energy; 56 percent made set point adjustments; 40 percent installed occupancy or daylight sensors; and 33 percent upgraded building controls.
Tom Fuller,
Boiled down, the alarmist claim is that people in business are too stupid to do what is in their own best interest. Not surprising, that is the basic liberal idea — that liberal wonks can use govt power to force the little people to do what they are too stupid to understand is in their own best interest.
I know you are a proud lefty, but I hope you can understand why we (those of us with decades of experience watching liberal wonks royally f*** up without ever learning) just aren’t buying the alarmist claim.
As I’ve written before, they have zero credibility at all until they at least learn that real, grownup scientists check their instruments for accuracy.
Thanks Jeff.
I personally don’t think people in business are stupid. I’m in business myself and have a fair opinion of my own intelligence. I’ve met far smarter people in the private sector than either in academia or government.
But I do believe government can and occasionally (occasionally!) put its thumb on the scales to make some decisions more or less attractive. Tax breaks for energy efficiency improvements to me fall into that category.
And I really do believe there are efficiencies to be realised in business use of energy. I think they fall down the ladder in capex budget meetings and get pushed into some dim future. I’ve seen it happen. Heck, it’s happened to me.
Tom Fuller, I think the material in your post can be summarized as: When capital is difficult to come by the energy saving expenditures will decrease relative to other more basic expenditures required just to keep the business’s head above water. Also most surveys like this one are not worth the paper they written on unless one has some actual details about the business budgets in question. A few anecdotal remarks from “some” executives are even more worthless. CEOs are trained to give answers that are “correct” without committing to anything.
Tax incentives merely cloud the free market picture and unfortunately require some bureaucrat to make decisions on what exactly gets a tax break. Two things I know for sure: That bureaucrat will not know what priorities to give (and perhaps the decision will be a political one to favorites of the politicians in power) and that to see the true genius of some business persons give them the opportunity to game (legally, of course) a system with a tax break.
Tom #65
“And I really do believe there are efficiencies to be realised in business use of energy. I think they fall down the ladder in capex budget meetings and get pushed into some dim future. I’ve seen it happen. Heck, it’s happened to me.”
.
Sure, but businesses are designed to maximize economic efficiency, not energy efficiency (even though the two sometimes coincide). As your experience shows, less efficient use of capital takes a back seat to more efficient use, even when that less efficient use is improved energy efficiency. Tax breaks may tip the balance in some cases, but please note that too specific a government incentive is usually corrupting and wasteful rather than constructive… that is, the total benefit is less than the total cost when all externalities (like more taxes or higher prices paid by the public) are included. We evil capitalists are very good at producing unintended negative consequences from government involvement when there is a profit to be made. Cap-and-trade is about as corrupting a government involvement as I can imagine.
# 58 said “Capitalism (so called) is the most Green economic system we know.” you are kidding right. Remember when refuse was just dumped, that was not green but cheap and would still be done if not for some rules.
Re: Kenneth Fritsch (Jul 13 12:54),
There are tricks that can be played in cost accounting to make a project look better or worse. The normal rule was to cost a project assuming purchase and installation of dedicated equipment. That’s a pretty tall hurdle, especially when there was currently idle equipment that could be used. I remember statements during a recession like: We’ll lose $1/lb on this product, but it will make a $0.50/lb contribution to profit. Bean counting is such fun.
I just don’t think businesses are as efficient as you all are making them out to be, nor that they are that ‘rational’ in making investment choices. I really don’t. Never enough time, never enough money, always doing two out of the three things that you really, really have to do. That’s my experience of the business world.
Re: nc (Jul 13 16:38),
As a counter example, I give you Communist East Germany, the former Soviet Union and current mainland China. Capitalism is not anarchy. It requires a government capable of enforcing contracts and protecting property. The conflict of interest when the government also manages the means of production should be obvious.
#70 Tom Fuller,
Businesses are not always rational but politicians and bureaucrats out to justify their own existence are the dictionary definition of irrational.
That is why I will trust industry to make the best capital allocations before I would ever trust government.
Better, certainly. Best? Probly not…
Tom;
“Best” is only known in hindsight, when the consequences arrive. Governments and ‘crats are adept at fudging or ignoring consequences, but if a business competitor makes better use of capital than you do, prepare to be squashed!
Smith’s invisible hand can swat, too.
Tom Fuller, I think you must consider that I, and I would judge others here, do not think for a minute that business decisions cannot be wrongheaded. In fact in a free market with capitalism, we have a profit system that eventually punishes wrongheaded decisions. On the other hand, we do not have that mechanism working when governments make mistakes and in fact the bigger and more obvious the mistake, the more likely that the government’s answer will be greater funding.
It is like the economists who point to an inherent error in the market system (often due to the presence of government rules and regulations already in place) and then blithely suggest that this is a rationale for the government to intervene (more) and without ever mentioning that the government has many inherent problems of its own and that intervention in the past has most often lead to making the problem worst.
Tom,
Read this. Then we can talk.
http://www.eternityroad.info/index.php/weblog/screeds/14/
Government doesn’t work because all of the incentives line up against rational, efficient action. Decisions aren’t made to help people. They are made to help politicians and bureaucrats. Read the whole thing and tell me where he’s wrong.
As an environmental engineer I reguarly come across the same problems, business will save itself money if it can, its that damn obvious and simple, no one wants to waste money on innefficient processes if they dont have to.
The only time I see money wasted is when leftist politics (driven by the feel good eco brigade or the wrap us up in cottom wool crew) comes along and focusses on non-issues for huge cost because an un-educated public misunderstand the problem due to greenwashing. Yes sometimes there are problem that affect the environment that need to be fixed, but often something like wastewater water overflows dont actually do ANY harm to a river, but non-experts dont see the subtle differences and will happilly spend $130,000,000 on a non-problem (this is from experiance!!!). $130,000,000 could be spent on real benefits, but nope, often its spent on a non-problem because the ill informed public dont like the “idea” of it.
And yes, monitoring equipment is rarely ever calibrated and normally can be assumed to be incorrect – thats from years of experiance flow monitoring wastewater systems
Tax breaks for energy efficiency improvements to me fall into that category.
But there is opportunity costs to that road. Suppose what we really need is more work on small fusion – i.e. it gives a bigger energy payback. Then you are sacrificing big gains for small gains.
Or suppose research on business methods could empty most office towers and reduce traveling to and from work by 80%?
How can we be sure the government is making the right decision and is not being paid off by insulation contractors and manufacturers? How can we be sure that the government is not paying for something people would do in any case? i.e. cars for clunkers. Or that such efforts will not turn into something like the ethanol boondoggle. Or the wind turbine boondoggle. Or the solar cell boondoggle.
Maybe the money would be better spent on developing electrical storage.
Hayek’s Nobel Lecture is called The Pretence of Knowledge:
http://nobelprize.org/nobel_prizes/economics/laureates/1974/hayek-lecture.html
What are the risks? Suppose if the decision is made by government and there is a 50/50 chance of making a bad decision while if left to individuals you get 90% choose right and 10% choose wrong? Even better suppose that 90% make a bad decision and learn from their mistake. How long does government take to correct errors? How long does it take to fix bad law?
Tom says: never enough money
Which is of course helped by government taking more money.
Your own arguments refute you.
# 58 said “Capitalism (so called) is the most Green economic system we know.” you are kidding right. Remember when refuse was just dumped, that was not green but cheap and would still be done if not for some rules.
Ah. Yes. Which is why China and Russia are ecological wonderlands and America is an ecological wasteland.
I admit you are correct on this point. But one point does not an economy make. And it might have been fixed in a lower cost manner by suing for damages.
#78;
Thanks for the Hayek link. Here’s a suggestive excerpt:
The imposition of Green policies, subsidies, and standards (in the teeth of obvious real-world warnings like the 2.2:1 job cost/benefit ratio experienced by Spain) seem to me to be a perfect example of such hubris. The ancients Greeks’ warned-of madness and (self-)destruction are clearly under way.
#46;
HotRod;
You and xxxxxxx might enjoy the review (and the book) by Dyson of Nordhaus’ modelling of the cost-benefit nets out 100 yrs. for the various alternate mitigation strategies, ranging from the Gore-Stern variety to doing nothing.
He distinguishes carbon tax and cap-and-trade; the former is relatively benign, the later not so much!
Brian, thanks.