EE, Policy, and Irony

24 05 2011

As my crop of silver hair continues to expand, I have become more of a historian, particularly when it comes to cause and effect, and peoples’ behavior.  I step back and observe what is happening and what has happened as a result of this or that policy.  Theories are nice, and they may be well thought out and make sense but if they fail miserably, should we double down and try it again?  Policy isn’t like launching rockets or breaking the speed of sound.

For those things, you can test, observe failure/problems and make adjustments.  For example, Chuck Yeager was the first to break the speed of sound in an airplane.  As he did so, the vehicle, which looked like a beer keg with wings (tap included), shook violently and about blew apart.  Why?  Because it had straight wings, not “delta” shaped wings.  The tap of the keg was led by a shock wave that emanated back in a V, kind of like the wake behind a boat.  The straight wings resulted in the ends leading the beer keg’s shock wave and the portions closer to the fuselage were safely behind the shock wave.  There is a large difference in pressure upstream and downstream of the wave causing instability and the violent vibrations.  They learned.  Sweep the wings back so the entire wing is post shock wave.  All supersonic aircraft have since been designed that way.  Google for pictures of the Blackbird, Concorde, Stealth Fighter, F-14, 22, and a gazillion others and you can see this delta wing design.  You don’t see this on your basic subsonic A320 passenger jet.  Mechanical engineers should already know this.  If not, they went to the wrong school or slept through fluid dynamics.

Policy, on the other hand, does not work this way in my opinion because policy affects infinite variables and you are dealing with peoples’ decisions on a macro basis, not physics.  When accounting for decisions made by 300 million individuals followed by a chain reaction of decisions that is limitless, you will get the same results from the same policy every time.

Keynesian theory (stimulus), for example has failed, what a thousand times, not counting the depression?  But we keep trying.  See this damning report by two Ph.D. economists, one from The Ohio State University and one from the University of Western Ontario.  The Act “saved or created” 443 thousand government jobs and “destroyed” about 1 million private sector jobs.  I wonder if the study was funded by ARRA!  LOL!  Has anyone seen Joe Biden lately?

I could write a book regarding why it doesn’t work on a macro level, but let me just provide some reasons believers give for it not working: it wasn’t enough money ($800 billion is almost $3,000 for every man woman and child in the country – how many flat screen TVs from China do we need?), it doesn’t work during deficit spending, the financial crisis, the Bowl Championship Series, La Nina, Rosie quit The View, people were busy preparing for the apocalypse that failed to materialize over the weekend  – you name it.

Likewise, it’s been a bomb for energy efficiency.

  • Utility and regulatory stakeholders in Iowa opined they couldn’t wait for the funding to stop so people would get off their hands and get in the game again.  Now that ARRA is wearing off, an objective observer can see this happening – the economy improving, slowly.
  • Cash for clunkers miniscule EE impacts.  Over an AESP conference lunch last week, I visited with an engineer from Southern Company, Alabama and he said the Honda and Mercedes plants in their service territory were running around the clock, full tilt.  Post cash for clunker they were running at half capacity.  And savings?
  • A long time ago, I said the money going to EE needs oversight to ensure it isn’t wasted.  Well lo and behold, a few weeks after this we bid as a sub-consultant to evaluate the funds spent in California and won the project.  We haven’t seen a nickel’s worth of work yet.
  • With a business partner’s lead, we pursued pilot work to pursue some ARRA funds, despite my vowing not to pursue ARRA funds.  Result: $130,000 lost in work we will never be paid for.
  • We had a “shovel ready” LEED® project for a new federal building ready to go.  After dragging on for months, our LEED services were value-engineered out of it.  Did the OSU guy capture this?
  • In the past couple weeks we considered going after some DOE EE evaluation work with one of our best clients but dropped out once intelligence revealed a competitor was going to low-ball it with their “government rates”.  Reverse price fixing.  I wonder how the rest of their clients feel about this??

What else is ironic is I would say our industry is quite progressive, yet when politically favored are in power, EE gets the shaft.  Consider WI, which during the recession prior to this one, the Democratic governor Jim Doyle, almost collapsed the state’s energy program by taking HALF the budget dollars rather than cutting spending elsewhere.  In speaking with Californians last week at AESP, the same thing is on the table in Sacramento, with a Democrat uber-super-duper majority.  I said, I bet there’s uproar over that.  Not a peep.  How could this be?  Unions Trumpka EE, get it?

Meanwhile, on the right you have people like Rand Paul with his kooky bill to undo the incandescent ban; Glen Beck waxing hysterically that George Soros will use the CFL as a tool to overthrow the US government and Media Matters will control your smart grid connection; Bush and hydrogen; and of course there is a considerable faction of right wingers that would just as soon gut all EE efforts and drill, mine, build power plants, and power lines willy nilly, and waste resources per market forces.

Finally there is this triple lindy irony: the incandescent ban, signed into law by Bush, hated by right, generally applauded by policy people in our industry, is causing much angst for program people.  It’s taking with it a gravy train of easy savings for EE programs.  An entire cottage industry is developing to rationalize the legitimacy of maintaining these savings.  There’s a problem though.  I can get CFLs on Amazon.com for less coin than the less efficient halogen.  We may actually see incentives for throwing away working incandescent light bulbs (just guessing).

Will the Republicans dismantle our industry?  It’s probably not going to happen in Wisconsin.  A friend (Shaw) of a friend (Koch) of the governor is the administrator!  What a hoot – a story for another day.

written by Jeffrey L. Ihnen, P.E., LEED AP





Choose Solutions, Not Facts

19 04 2011

State and federal budgets are headed for the cliff to varying degrees with few exceptions.  Here in Wisconsin, we’ve had the Battle Royale fight to the death cage match with the repubs on one side and the unions on the other while the dems were hiding out in a witness protection plan.

Meanwhile at the federal level, we are on a dangerous trajectory unseen in my lifetime.  People have whined about the deficit and debt since my adolescence – the Miracle on Ice days against the Soviet Union.  I kept saying, “It’s not a problem.  It’s not a problem.”  Why?  Because the debt as a percentage of our economy was reasonable, and flat but very few people consider this metric – the one that matters most.  They just clobber each other over the head and call each other names and we have Jay Leno fodder like “pay-go”.

However, this all changed since the meltdown Lehman Brothers in the fall of 2008.  The debt as a percentage of our economy really IS becoming a major concern.  We are staring at $1.6 trillion deficits for as far as the eye can see.  Personally, I think the word trillion should be banned because it sounds inconsequential.  How about $1.6 million million, or $1,600 billion?

Do we cut spending, take away grandma’s pharmaceuticals, sell her home, and set her and her senile dog up in a tent under the bridge, or do we fleece “the rich”.  See, I’ve always believed when politicians talk about “the rich” they mean households with incomes of two freshly college-educated people, say an engineer and a nurse or a school teacher and pharmacist.

As a rational person, I did a little Saturday morning research and some pretty simple math to prove my point.  The chart below containing data from the IRS paints a pretty clear and grim picture for those expecting a free ride from “the rich”.  What it shows is total incomes and numbers of returns (households) by income bracket.  The average income of those in the top 1% is $1.2 million and the next 4% the average drops sharply to $220,000.  My analysis goes like this: suppose we just took everything these people made above $100k, $250k, and so on.  Taking everything in excess of $100k from the top 10% of earners is “only” $2.4 trillion – $800 billion more than the deficit.  I.e., if the government confiscated all household income above $100k, we would have an $800 billion surplus.  But almost no one in this country considers $100k to be wealthy.

So let’s move to $250k, which apparently according to the President is the line between the rich and not rich because he’s said ten thousand times he’s not touching the piggy bank of anyone making less than $250k.  Well guess what; if we take everything in excess of $250k, it doesn’t even balance the budget.  Everything!  Of course if we tried this, no one would make more than $250k.  If we took 90%, there would be very little income over $250k and so on.  Lastly, if we take everything in excess of $1 million, you know, stick it to the rich, it has practically a negligible impact on the deficit.  Hello Pesky!  And remember, this is EVERYTHING above $1 million.

I conclude with facts that raising taxes on “the rich” is akin to fixing the weather-stripping on a large commercial building that is hemorrhaging energy waste.

And so it goes for energy savings.  One has to ask themselves, what can I expect for savings to pay for a renovation I want?  Start by considering you can’t save more than the building or a piece of equipment is using.  Sound pretty ridiculously simple?  Some end users could learn from this.

If you are on a buildings and grounds committee, you should know a few basic rules of thumb.  I will use schools as an example here.  New construction costs around $150 per square foot.  The cost of lighting and HVAC for the building is probably 20-30% of that cost with HVAC costing $20-$35 per square foot.  People should consider their own energy costs per square foot, but it’s most likely going to be in the $1-$2 per square foot per year.

So put some numbers together to get a SWAG (scientific wild ass guess) of what your return on investment may be for an HVAC system replacement.  At Michaels we call such a limit of savings or return on investment a bracket or a bracket calculation.  For example, if you are paying $1.50 per square foot per year and a new HVAC system costs $30 per square foot, your best possible return is a 20 year payback – that is if you save ALL the energy being consumed now.  It is safe to say that actual payback is twice that long.  Ditto for adding a variable speed drive to a pump.  One of our engineers may consider a variable speed drive for a pump and I may pull out my calculator and within thirty seconds conclude it’s never going to fly.  The motor uses $750 electricity at most, and installing a drive is going to be at least $2,000.  After screwing around with more detailed data and analysis, it will be a 12 year payback and that’s going nowhere.

Imagine being hired to analyze options for an HVAC replacement, considering several alternative systems.  Wouldn’t you know it! The payback was infinite because the new system would cost more to operate in energy than the 90 year old steam system that provides no ventilation and no air conditioning.  The board is shocked at the price tag and doesn’t want to pay for the study!  They were “misled”.  Wha?  I would call it an introduction to the real world, circa 2011.

This is like going to the optometrist because the patient can’t see very well, thinking they need a $100 pair of glasses.  The doctor does his series of tests and he diagnoses cataracts.  The exam costs $150 and the cataract surgery costs $7,000.  Otherwise, the eyes are fine.  The patient is enraged and refuses to pay for the exam.  The patient still wants the eyeglasses – prescribed by said optometrist!  This is a perfect allegory to a real story.

You may be able to choose among solutions, but you cannot rewrite history, pick your own reality, or defy the arithmetic.

Tidbits

Checking in after my rant No Brazil Syndrome, how many radiation-related deaths have occurred as a result of Fukushima’s damage sustained in March 11’s massive earthquake?  Zero.  Meanwhile, in the same period, probably more than 3,000 Americans have died in car crashes and deaths from the tsunami in Japan alone exceed 13,000.

Like most other things, you (you) have infinitely more control over your well being than that thing poses.  Stay out of the sun or wear strong sunscreen, don’t smoke, keep your BMI within better than recommended limits, skip the red meat, wear your seatbelt/helmet, exercise, don’t break the speed limit, check your cholesterol and blood pressure, get your colonoscopies…

written by Jeffrey L. Ihnen, P.E., LEED AP





Pregnant Snake Armpits

1 03 2011

Although I don’t appreciate talking about it, we have a black list of companies and organizations for which we will not again partner with, work with, or bid their request for proposals.  What type of activities land somebody on this list?

Companies or organizations that take our business development efforts and give it to someone else.

We are working on retro-commissioning for a major player in the Midwest grocery market.  As with most of our investment-grade studies for energy retrofit or retro-commissioning, we like to use contractors to provide us with pricing because we expect they will get the work and therefore, the pricing is going to be more accurate in addition to having accountability for the prices at implementation time.  The contractor was very reluctant to help because he was afraid he would help develop pricing and concepts and then somebody else would get the work.  I laughed out of familiarity with such shenanigans.

Unfortunately, while working on the grocer project, we were victims of just what the contractor was talking about, on a different project.  We had completed an energy study for a quasi non-profit, quasi-government outfit (Jeff, how many times do you have to get burned before you learn?) and we were moving into developing the design and provided a proposal.  We had already pretty well nailed down the scope of the project.

Inject another righteous government agency to “help” this end user.  Well, they took our developed scope of work and put out a competitive request for proposals with OUR work on it.  So now we’re faced with throwing away all the development we had already done just to be competitive with the other bidders who were handed this on a silver platter.  As I wrote last week, it’s a rainy day in hell when a government outfit takes anything but the low bid, otherwise known as the cheapest, crappiest system imaginable; one that meets only the major recognizable features, like equipment efficiency.    There are plenty of places to cut cost on the design and on the project itself.

That agency is blacklisted.

Companies that use our credentials to win a job and then dump us like a cheap date.

Last year we had “teamed” with a local architect on a LEED project for a new nearby federal facility.  I must digress for a moment.  This project was in progress when the “stimulus” was passed – you know the one that was supposed to break loose the shovel-ready projects.  If this wasn’t shovel-ready, I don’t know what was.  The plans and specifications had been lying about for year or two waiting for approval to proceed.  It drug on for months once the stimulus passed.

Come to think of it, this one too was in our hip pocket and they bid the work out again.  I’m not sure why because the design was 90% completed but I suppose some milestone had passed and federal statutes required a rebid or something.

So now that it’s competitive, once again after doing a bunch of development and front end work, we have to cut cost to beneath the cheap and crappy level.  So our client, the architect asked us to chop our down our price.  We provided a counter offer and waited.   And waited, and waited.

We already had 20 or so LEED projects under our belt compared to near zilch for the architect.  Finally, we get a hold of the scumbag, er, I mean client, and he says, oh yeah, “The good news is, we won the project.  The bad news is, you aren’t on the team.”  This is lower than a pregnant snake’s armpit.  (stolen from the aussies and modified by me).

Blacklisted.

Companies or organizations that use our proposal in attempt to beat “their” firm down in price.

This one is more difficult to nail down but let’s just say if it walks like a duck and quacks like a duck…  A large organization pursued by a bunch of consultants / contractors has been working with a provider for years and maybe they want a new or modified service, or maybe it’s just the same stuff they’ve been provided with many times.  Now they suddenly want a proposal from us.  This is either a Sarbanes Oxley corporate requirement (ok), process to actually evaluate invited bidders (ok), charade to fake a bureaucrat into thinking the chosen one was competitively selected (not ok), or a hammer to beat down the firm they know they are going to hire (not ok).  Essentially, we are wasting a bunch of our time to benefit only the buyer.  The other bidder(s) gets screwed too.

Blacklisted after a few of these – typically takes a few rounds of abuse to have this scam come into clear focus.

Wolves in sheep clothing.

Over the years we’ve been pursued by numerous companies that would like to partner with us.  It would be a marriage made in heaven.  Next step: an initial public offering on the NASDAQ!  Uh huh.  Sure.  These dirt bags just want access to our clients and for some reason, controls companies and performance contractors make up a substantial portion of this bunch.

Show me the money before I lift a finger or you are blacklisted.

A better way.

Recently a business partner stated it well, “What do we have in business and life but our reputations?”  And I always say to our company’s people, you best treat well everyone you work with in the company, our clients, and even the competition.  You never know who will one day be your client or supervisor, employee, or maybe someone you want to partner with, or get help from.

Everyone involved in business transactions should benefit – consultant, owner, utility, shareholders, and contractor.  Clearly and unfortunately, some entities think they can get ahead while screwing others and thinking they are getting a good deal or making extra profit.  Sooner or later these outfits run out of victims to exploit.  It shouldn’t be a fixed pie that everyone fights over.  It should be a pie from which everyone’s slice grows.

Tidbits

It appears Sacramento is contemplating the same fateful robbery of EE program dollars by hocking the stream of energy efficiency money.   In WI, this grab actually happened and crippled programs.  Ironically, or maybe not so, they would be both carried out under Democrat governors.

Outrage of the Week

Maybe I should start an outrage of the week?  Well here is the inaugural.  The DOE is calling it “Market-Driven Solutions” to work with behemoths like Target and Wal-Mart to develop new efficient rooftop heating and cooling units.  Is this the same Wal-Mart with $420 billion worldwide sales and $14.4 billion in annual earnings?  Chu, you have got to be kidding me.

Like General Electric, why doesn’t Wal-Mart get back to what they used to do well; innovate, rather than going to Washington with its hand out.  Time to put a “strong sell” on Wal-Mart stock.  They’re washed up.

This is a free market solution: an RFP for manufacturers of rooftop units to develop units that meet Wal-Mart’s specifications, reliably, and supply them with heating and cooling equipment for the next 100 stores.  After 100 stores, the incumbent has a huge advantage for (hopefully) proven success.

A portion of the $1.6 trillion, or as I like to say $1.6 million million, deficit is funding this kind of crap.  This wouldn’t be funny even if it weren’t true.

Oxymoron of the week: “DOE facilitates market-driven solutions”.

written by Jeffrey L. Ihnen, P.E., LEED AP





RFPs from the Edge

22 02 2011

Last month, the one session I attended at the AESP national conference was how to write a better request for proposal (RFP).  It was sort of a forum led by our friends at Tetra Tech.  Essentially, it was full of people like me, for whom a major responsibility is business development and marketing – responding to RFPs.  For a while I sat there like a lump, thinking, eh, just deal with it and quit whining.  Toward the end of the session I started getting fired up.

Here are some guidelines for writing RFPs:

  • If you’ve already decided who you are going to hire but have to go through an RFP process as a formality to keep some government wonk off your back, just issue the RFP with a one-week deadline with an impossible pile of content to gather so it is obvious to everyone who knows anything (i.e., not the clueless wonk), that the RFP is a charade.  I have plenty of opportunity without being duped into writing a proposal for which we have no chance.  And whatever you do in this scenario, don’t extend the deadline because some clueless bidder doesn’t “get it” and asks for an extension.
  • If you are going to extend the deadline, do it days before the deadline passes.  One thing that really smoked my butt last summer was having a deadline extended with about three hours to go for the 5:00 deadline.  This was obviously to accommodate some whining  bidders.  The RFP had been out for weeks.  If a bidder can’t manage their time better than that they deserve no chance at the project.  Is that how you would handle the actual work should you win?  I wrote as much in our proposal on that one, sparing the name calling, however.
  • If you are going to extend the deadline, do it before the original deadline.  That is correct.  We recently submitted a proposal on a Friday, the due date.  We added to the proposal that we had not received the questions (from bidders) and answers (from buyer) for the proposal.  Samples of this Q&A are discussed in You Are So Fired.   As a result of not having the Q&A, we wrote that if there is something we didn’t get from the guy who promised we would get the Q&A, have mercy on us.  The next Tuesday here came the Q&A and an extension to the next Thursday, two days away.  Good grief!  And it had MAJOR implications.  See next bullet…
  • If there is a deadline for completing the actual project, PUT THIS IN THE RFP! (please)  The RFP discussed in the previous bullet was for a quarter million dollars with no project timeline mentioned in the original RFP.  We provided two scenarios: first to complete it by late fall for one price and second to finish early the next year.  In the Q&A provided after the due date, the report was to be completed by June 30.  Nice.  If I had known that I probably wouldn’t have even bid the thing because it’s too aggressive and practically impossible to deliver.  Did I mention this was an ARRA (“stimulus”) project.  Makes sense that it makes no sense.
  • Either provide a very detailed scope of work or budget, or both.  If neither is provided, you have nothing to bid on.  This may sound like a “duh” but some RFPs want innovation and therefore leave the approach wide open, which is ok, but unless the RFP comes from congress, which knows no limit on spending, please give me a number to work with.
  • Know what you are doing.  We were recently teaming with another firm on a proposal for a relatively huge pile of work.  The constraints on cost per project and per unit of savings were about 40% lower than industry standards.  For example, a rule of thumb is that a program should deliver savings for about 1.5 times the energy cost per unit.  They were talking about something more like 0.8 times cost per unit.  C’mon.  This will be a case of hopefully getting the project and then explaining their plan is naive and needs a reality pill.
  • Keep it linear not a convoluted, semi-parallel piece of junk.  Some RFPs have an approach, scope of work, form of proposal, with a total of about 4 separate lists of things to cover.  I want to be sure to cover everything and present it clearly but this gets a little difficult when the format detailed in the RFP is a mess.  It doesn’t flow like I want because the RFP is a heap of junk.
  • Don’t mislead or outright lie about selection criteria.  When I see an RFP from a government entity with a proposal selection process that puts less than 50% scoring on cost, I know nobody put any thought into that.  Sometimes it’s a laughable 20% of the weighting.  It would be a rainy day in hell when a government entity doesn’t select the lowest cost proposal.  Quality and ROI rarely (and I do mean not always) matter to government entities, which is why we skip most of them.  I did fall for the ARRA one above, like a dope.
  • And of our wonderful utility clients, tell the purchasing / sourcing departments we are not designing a power plant, transmission system, or even a measly substation.  We don’t need to carry $20 million in professional liability insurance.  This may be asking for the impossible too, but ask the legal department to be reasonable.
  • Finally, for cry sakes hire the firm / team with the best proposal.  In the past year, we assembled a team to do a study for a regional energy efficiency consortium.  Our team put a lot of thought into the proposal and developed an outstanding approach and work plan.  I knew who our competition would be.  A firm that had done a million of these and they would switch covers on the last report, make some adjustments for the region and tell them what they tell everyone else.  If you kid yourself long enough, you’ll start accepting it as correct.  At some point you have to go to the streets and find out rather than tweak the last edition.  Our approach was to get real data from the ground up.  We lost to the mass-market provider and in the post mortem, the consortium rep couldn’t tell us a single reason why we weren’t selected.  In fact, she only told us how much they liked our proposal, over and over.  Head, meet wall.

Tidbits

I was in Austin, TX last week for my first real visit to the state.  Per my experience, there is no shortage of traffic.  Per the locals, the city likes sprawl.  It features a nice downtown and believe me when I tell you I’ve never seen so many people running in the morning darkness as there were in Austin.  Not in New York, Washington DC, Columbus, Chicago, Milwaukee, Madison, Minneapolis, Denver, Tucson, Phoenix, San Diego, Sacramento, Portland, or Seattle.  The only thing that I’ve experienced that was close was in the hills outside Silicon Valley.  And the Austin dudes are fast.  I was passed by three women in one six miler – four if you count one that pulled out in front of me and pulled away.  Fantastic!  These women were probably in their running prime but I’m not going to whine about my age till I’m at least 60.  But the average high temperature in July/August is 96F, which to me in WI, is a god-awful 4-H day, hazy, hot, humid, heinous.

written by Jeffrey L. Ihnen, P.E., LEED AP





Green Jacket, Cigar, Gold Rings, and Disneyland

18 01 2011

I attended the Midwest Energy Efficiency Alliance last week and it was an interesting environment, to say the least.  This was the 4th or 5th MEEA conference I have attended. 

Behavioral stuff is an up and coming topic/issue in the EE industry.  I am planning to do a rant that to save energy, people have to give a crap.  I just need something to push me over the edge.  After all, just about all lasting energy efficiency requires behavioral changes.  Only inanimate, stationary, non-energy consuming stuff, e.g., insulation, doesn’t require behavior change.  Everything else has a behavioral component for maintenance, avoiding rebound and things like that.

What was probably most interesting to me was the political environment addressed by speakers at the conference.  For whatever reason, MEEA likes to attract people from Washington DC to discuss current events.  Essentially, people from the Department of Energy, Alliance to Save Energy, and Center for American Progress, to name a few, are on the defensive with the congressional wipeout last fall.  The theme I absorbed was one of playing defense and riding out this storm.  The mood for some was as though their dog had just left them and passed on to k9 heaven. 

One speaker was afraid of the jobs that were going to be lost but also threw wild numbers around – like the energy efficiency portion of the stimulus produced $50 billion in economic activity and that the regulation put in place and on auto pilot will produce billions of baskets of bread from the heavens in the next couple years. 

Energy efficiency is not like giving a child an immunization.  I’m a member of Rotary International and one of Rotary’s missions is to end polio worldwide.  We were down to just a few very poor and politically repressed countries like Afghanistan and Sudan, but like anything, completely eliminating something is very difficult.  Anyway, I’ve seen many photos of children bawling their eyes out as volunteers dripped immunization in their mouth.  This may seem unpleasant to the tikes but it is obviously in their favor and has a practically infinite benefit/cost ratio. 

Conversely, we can’t ram energy efficiency down peoples’ throats.  How many times do I have to say it?  The price of ramming things down American’s throats: 63 house seats, 6 senate seats, 5 net governorships with a near sweep in the Midwest, and a tidal wave of state house flips.  Here’s how regulations work: increase the cost of doing business and businesses move out of the state or overseas and then they get blasted for being Benedict Arnolds by the very folks who impose the regulations. 

Like light bulbs I discussed last week, energy efficiency is gathering really positive momentum, not because of top down regulation, but because it’s good for business.  See Save Energy – Get Out of Jail where Wal-Mart used “green” to get thousands of critics off its back.  They in turn are requiring energy efficiency standards for their suppliers.  I just red about Holcim cement getting ENERGY STAR® ratings on five of their plants.  I can’t speak with certainty but I don’t think they are taking the time and expense to get ENERGY STAR to pump up their four-wheel-driven employees.  They are obviously doing it for marketing.

And the DOE person was concerned about the jobs that will be lost once the stimulus is gone.  What jobs?  I’ve never lived through such a bizarre two years in my life and I’ve been in business for 20 years – eewe, old codger, I am.  It’s been crazy.  Talk about modifying behavior.  Millions of people purchasing vehicles a few months before they otherwise would, leaving in its wake a predictable buying vacuum – how many jobs did that create?  I don’t know, but I just read that Ford is planning to bring on 7,000 workers about 17 months after the cash for clunkers fiasco.  The $8,000 first-time home buyer credit – same thing.  The housing market is still searching for a bottom.  Just let it bomb and let’s get on with the recovery.  With regard to EE, probably hundreds of millions of dollars have been spent pursuing federal grants.  Enormous efforts have been expended trying to get free money.  This, my friends, is not stimulative.  It’s fighting over other people’s money to be repaid sometime in the future by said people.  This too as with my rant last week was a bipartisan bad idea started by Bush. 

Meanwhile, our industry is booming but the DOE speaker doesn’t know this because she lives in the beltway bubble.  The downturn only hit our new construction and LEED services.  Our other EE services have more than made up for it and we have four engineering spots to fill but we can’t find qualified people.  How bizarre is this?!  I think I mentioned we had an outstanding candidate we spent no time giving an offer to but she already had two other offers and took one closer to the spouse’s job.  Our usual evaluation teams have had to sit out requests for proposals because some couldn’t handle the work they already had in the tank.  We’re passing on RFPs as well.  So jeezo woman, when the stimulus goes away we’ll still be working hard to find people – as will be many others in this industry.

Back to the MEEA conference:  After a series of “Oh woe is me” talks, one guy in the crowd walked up to the mic to make a suggestion.  Rather than duking it out over regulation and climate change policy, why don’t we focus on the irrefutable common benefits that everyone can buy into – that EE is cost effective and is good for business.  Give that man a standing O, a green jacket, cigar, bottle of milk, gold rings, a trophy and a trip to Disneyland.  THIS is what we ought to be doing, not battling it out over something people rank 19th out of the most critical issues of the day and something half the population opposes. 

Tidbits

Speaking of jobs… Note to wonks trying to “create” or “focus on” jobs:  People invest and are in business to make money; period.  They are not in business to hire people.  People are hired as necessary to make more money.  Think about that.  If the bureaucrats want more jobs, let people and companies make more money. 

And speaking of sole purpose of business is making money…  In New Years Collage I chronicled a three way fight The Wall Street Journal, several utility CEOs and the EPA were having.  Among the CEOs cheering the EPA’s increase in emissions regulation was Exelon Corporation’s John Rowe.  I was eating lunch at MEEA next to a long-time Chicagoan familiar with Mr. Rowe’s strategy for Exelon (parent of ComEd, which serves Chicago).  The gentleman said Mr. Rowe sold off all of Exelon’s coal generation, leaving it with only nuclear plants.  He said the nuclear plants had among the highest operating costs in the country, which left Exelon with a high operating cost, which had to be made up by higher rates.  The gentleman explained how Mr. Rowe brought on a former Naval Nuclear engineer (Yeah!  Go Navy!) to improve the “efficiency” of the nuclear fleet.  And so he turned them around overnight.  As a result Exelon has virtually no coal generation, very efficient nuclear plants, and the highest return on capital of any utility in the business.  As I mentioned above and in several other rants, CEOs report to shareholders.  Shareholders rule.  Profit is king.  I have no problem with any of this except, I think lobbying for government to regulate a competitive advantage for yourself is not something I would do.  Preparing for and reacting to policy, good or bad policy, is fine, and indeed smart business to me.  Otherwise you might find yourself on a street corner with a tin cup. 

BTW, this was not a wild eyed ideologue I was enjoying lunch with, but I did check the facts and what he told me was pretty well right in line with an article by Forbes magazine

written by Jeffrey L. Ihnen, P.E., LEED AP





Feral Cat, What Say You?

30 11 2010

Back in August I came close to posting a blog “Enough of the Empire State Building Already” but that one faded away.  In case you never read anything about energy savings and sustainability, the building is undergoing a $20 million renovation to improve energy efficiency.  The project would shave the facility’s $11 million energy bill (a cool $4 per square foot) by 38%.  Johnson Control ran ads in every trade magazine I get and various publications, including major newspapers, ran articles by the dozens.

Coming in a close second to the Empire State Building was the Northland Pines High School in Eagle River, WI.  Apparently it was the first LEED Gold certified High School for New Construction Version 2.1.  Ok.  It seems everybody associated with the project ran an ad for their greatness: manufacturers and vendors of stuff used for construction, contractors, service providers, congress people, the governor, priests, rabbis, dog catcher, and the feral animals themselves.  This went on for months.

Well it all hit the fan.  As I was flipping through my stack of trade magazines this long holiday weekend, I saw in HPAC (short for Heating Plumbing and Air Conditioning but they actually go by HPAC – HPAC.com) in their August issue that a group of stakeholders including the building committee, a couple licensed professional engineers, and other taxpayers are appealing the certification with the USGBC.  They claim the design does not and cannot meet indoor air quality standard ASHRAE 62, minimum energy performance, ASHRAE Standard 90.1, OR the minimum commissioning requirements.  Ouch!  What do you feral animals have to say for yourselves now?

I’m not going to do a ton of investigating of this crime but I have no reason at all to believe the appellants are not standing on firm ground.  What is interesting is the firestorm of HPAC reader comments, which read like blog comments of far left and far right cutting each others’ livers out.  Jeezo, the comments are still swirling three issues AFTER the first mention of it in August.  Comments include the following, each of which I respond to:

  • One of the points I raised concerned legal liabilities and the USGBC’s refusal to accept responsibility for advice about guideline compliance.

o   The USGBC shouldn’t have responsibility for advice it gives.  It’s up to the design and construction teams.  The guidelines are available.  If they can’t read, find new firms to do the job.

  • The USGBC seems to prey on undereducated, uninformed owners and the public.

o   Nice.  There are certainly uninformed folks, but I’m sure the USGBC is a deceitful money grubbing outfit headed by Gordon Gekko’s offspring.  The guy would probably dump a five gallon bucket of used motor oil in the lake if you paid him $100.

  • LEED is a standard of relative greenness, not a contract for overpaid lawyers and underemployed engineers to litigate.  …the LEED process has been a powerful force bringing green design mainstream.

o   Agreed.

  • LEED is bogus.  Let common sense prevail.  Why can’t you simply tell the architect/engineer firm(s) to design the most EE building you can without a third party intervening?

o   Because cheap and crappy always wins the bid and the average firm doesn’t really know squat about REALLY producing an efficient, comfortable, and code-compliant facility.

  • I agree [not me – the next guy reader/commenter].  USGBC does not check if equipment is installed per drawings.

o   If it did, it would cost a fortune and no one would do it.

  • [in response to the previous statement the next guy says] Get a life.  LEED is a standard of relative greenness… blah blah.  [The exact same statement as above by the same guy, published two months in a row]
  • [in response to the previous]  Mr. Perkins just doesn’t get it.  Building green just to get LEED points, rather than building a building that will improve the health of occupants[with minimal] lifetime costs, is total BS… Too many folks just care about LEED certification, not if a building really works.

o   In my opinion, LEED actually improves the odds that a building “really works”.  It requires somebody to at least fake their way through commissioning and at least think about designing for efficiency and healthy environments.  To say LEED diverts designers and contractors away from these things is irresponsible.

I mentioned before in this blog that our MO is to fix immediate problems first and take corrective action later.  Too frequently building owners/stakeholders go after the party they think is responsible and meanwhile the building festers away.  The second too-frequent approach is to hire the same fools responsible for the kludge to fix it.

Owners and stakeholders should first fix the problem by hiring somebody who knows what they are doing.  This does two things, both of which they want to fix a screwed up building: (1) gets the building working optimally as soon as possible and (2) by doing so gives them leverage with the responsible parties for some sort of settlement.

Attacking USGBC for establishing green building methods and metrics but not enforcing them with an iron fist is ridiculous.  Why not go after ASHRAE for not coming down on people like a ton of bricks for not following ASHRAE’s standards?  Energy codes that are state law in many states aren’t even enforced in some of them.  I’m not sure about the rest of the parties involved with LEED projects but engineers have codes of ethics.  I would say blowing off owner desires, cutting corners and lying about what was or was not done probably violates these ethics.  How about attacking these losers and scoundrels and running their underwear up the flagpole instead?

Tidbits

I would guess you haven’t heard but the Chicago Climate Exchange is shutting down.   At one point in this blog I explained I think that trading something that has no value in and of itself is unprecedented.  Currency is only thing I can think of that has no intrinsic value but currency is actually a means to put value on things.  I can buy groceries with currency.  I can’t buy anything with a carbon credit.

Numerous corporations were buying carbon credits and even “supporting” the legislation in the event some sort of cap and trade passed.  The legislation disintegrated and there remain only a few ashes of political will to even whisper the phrase.  The carbon value that existed was 100% speculation.  The value that remains is 100% nothing.

As I mentioned in a recent post, if cap and trade didn’t pass during last congress with unstoppable majorities in both houses and the White House, I don’t see it happening.  This does not rule out the EPA creating their own laws to put a price on carbon dioxide.

In “The Nebulous Green Job” I ranted about Green Jobs, of all things.   As it turns out the green jobs stimulus portion of the stimulus has not been too stimulating.  The Washington Post reports that the recently green-educated graduates are having difficulty finding work in solar energy installation, green landscaping, recycling, and green building demolition.  Well, heeeyeah!  Electricians and plumbers are on the prowl for PV and solar water heating systems.  There is already a live and well recycling and building demo industry.  I just burned up “the tube” in my microwave oven this weekend and the nice local do-everything, small but mighty superman store otherwise known as Coon Valley Dairy Supply replaced it.  I asked what they did with the old ones.  A local guy picks them up and strips them down into piles of materials to be sold to buyers – no government green-job intervention included.  Cool!  If there is a market people will find it and fill it.

written by Jeffrey L. Ihnen, P.E., LEED AP





Cool Milk, Raisin Bran, and I’m Fine

23 11 2010

I stay in hotels/motels probably 40-50 nights per year, at least it seems so.  If lodging facilities were in a league of teams competing to be the greenest facilities, these guys would be the Detroit Lions.

Most franchise motels, those not located in downtown high rise buildings, are built with the cheapest, crappiest stuff possible.  The only thing that is decent in them is the TV but sometimes even that is a junky 19 inch CRT clunker.  Who has spent a night in room with through-wall air conditioner/heater with a temperature control knob that spins round and round like the fake knobs on a Fisher Price toy for a 2 year old?  They fit as tight as clown pants and leak like a small fishing boat with a cannon ball hole in the hull.

At least they’ve gotten rid of the “Styrofoam” comforters that were once ubiquitous lodging fixtures.  I believe Styrofoam comforters were made of some sort of synthetic material and I think they may have been fireproof, like children’s fireproof pajamas.  (do they still make those things?)  Anyway, they could probably survive in a steel melting furnace.  They were scratchy and stiff like snuggling up under a cozy hunk of cardboard or yesterday’s newspaper at best.

Ventilation and exhaust in most lodging facilities are terrible.  A year ago I stayed in an older hotel in suburban Chicago.  They had the room temperature set way back to 55F and this was mid-January, about 15F outside.  Good thing?  NO!  I turned it up to around 70F.  I worked on my computer in the room for a couple hours before our client/colleague arrived from O’Hare for dinner.  In two hours the room struggled to get to 65F.  I never took my coat off in that time.  Why was this happening?  Exhaust fans somewhere, kitchen or swimming pool were sucking the building negative, big time, as I noticed with the blast of incoming wind when I entered the building.  So these guys probably thought they were saving energy by setting back room temperatures but instead, they were heating their makeup air coming in through the cheesecloth walls with crappy guest room electric resistance heaters, rather than much less expensive natural gas that they probably had somewhere on the rooftops.  At the same time they were freezing their guests.  This is the polar opposite of the Iowa State University removal of kitchen trays.  They are wasting energy like crazy and shooting their feet with terribly uncomfortable guest rooms.

Later last winter I stayed in a motel in Phoenix.  Ironically, this place was suffering from moisture problems.  The bathrooms had no exhaust whatsoever.  After a reasonable shower there is a stagnant fog bank until the door is opened.  The fog condenses on the cooler room surfaces.   The metal stuff around the ceiling was discolored by rust and the wallpaper was sagging and also discolored.  So let’s take a space that has plenty of cooling load, in Phoenix, and add a bunch of latent (moisture) dehumidification on top of that, and rot the bathroom to rubble at the same time.

In a motel in near the Minneapolis airport, they lacked ventilation/exhaust.  Entering the building, it smelled like a high school football locker room in August.  Again, I’m sure somebody thinks their saving energy while they are driving customers away with their raunchy environment.

Some lodging facilities still use incandescent light bulbs and there doesn’t seem to be a correlation with lighting type and facility age, nightly rates, or facility size.  Needless to say, these places deserve to go out of business because if there is one easy thing to do to save energy in a lodging facility with no adverse effects…

Another thing that always cracks me up is the location of ice and vending machines – typically in a small almost enclosed space.  The ice machine is hammering away as it bathes in its own waste heat at about 100F that hangs around like a cloud.  The soda machine and ice maker are working overtime to keep their contents cold with excessive heat gain in 100F heat while their compressors are working harder with higher condensing pressure.  Then there are those stupid ice machines that dump a pound of ice into an acrylic hopper thingy that dumps into your ice bucket.  The ice sits there and mostly melts before the next guest comes by.  They empty what’s left and need more.  Push the button for more ice and it dumps about 3 pounds into the hopper again.  They only need a handful so they either take 3 pounds or leave it there to melt – melt in the room or melt in the 100F cloud – take your pick.

With the bucket of ice in hand, go back to the room and take a crappy tiny plastic glass out of the crappy plastic liner.  It holds about a thimble’s worth of fluid.  You almost have to bite the ice cubes in half to fit them in the glass.  Nothing shouts cheap and crappy louder than these plastic thimbles.  A nice glass tumbler is probably worth paying at least $5 more per night.

And then there is breakfast which runs from reasonably sustainable to pornographically wasteful.  I’m very easy to please for breakfast, like Jeff Spicoli in Fast Times and Ridgemont High, “All I need are some tasty waves, cool buzz, and I’m fine.”  All I need is some cool milk, raisin bran and I’m fine.  Last week’s raisin bran feast featured two of those tiny jokes for boxes of cereal, a half pint carton of milk, plastic bowl and spoon.  I eat a tiny simple meal and have more garbage than I can carry in two hands to the waste bin.  What’s wrong with a big dispenser of bulk cereal, some porcelain bowls, metal silverware, and bulk milk?  What would that be, like 95% less landfill waste?  Bulk cereal and milk must cost about ¼ of the hokey kiddy boxes and cartons.  Somebody is short a few cards of a full deck.

Towels.  I think every motel/hotel features reuse of towels with a cheesy door hanger thingy with a white owl on it.  Help us save the planet (while we commit every environmental sin in the green bible).  It says simply hang your towel up rather than throwing it on the floor in heap if you want to reuse it.  I have found this to be more challenging than changing a tire with my bare hands.  The housecleaners take it no matter where I put it.  You almost have to hide it between the mattress and box spring but you would have to remove the mattress and lay it perfectly flat or they would notice the lump and take it.

I think the most sustainable motel I’ve stayed in was in Monterey (CA) last summer.  My room had no air conditioning.  Actually, I didn’t need cooling all week in mid-August so this was actually a pretty smart thing.  The room also had all CFL lighting of course and the bathroom had wall-mounted occupancy sensors – impressive!  Breakfast featured bulk everything, and no disposable dishes or utensils.  But no raisin bran!

Tidbits

I was pointed to this video on YouTube by a reader, regarding Playing With Fire.  A bit humorous, but scary.

And by the way, not only is this gamble risky and won’t work, it already isn’t working.  Interest rates have gone up since this was announced – the opposite of what was supposed to happen.  Could it be that people aren’t rats after all?  Supply and demand – when markets move in the opposite direction the puppet master would like, you know which is going to be right.

written by Jeffrey L. Ihnen, P.E., LEED AP





Playing with Fire

9 11 2010

I was pretty much like every other 12 year old boy.  I liked fire, explosions, and crashes.  If you think I’m crazy, why are movies sometimes beginning to end filled with the same?  Enough said.  Growing up on the farm there were always plenty of things to burn.  One time I asked my dad if I could burn an old cattle feeder that we no longer used.  No problem.

You never see these things anymore but they were wood structures, like a weekend cabin that could withstand an F4 tornado, except it was all wood, nails and fasteners – solid fuel.  So I loaded it up with 40 or 50 paper feed bags – like the big dog food bags.  This probably would have been enough to get it going and burn it down.  But I’m impatient and I want a big fire.  So I grabbed a milk jug and put some diesel fuel in it and thought, eh, what the heck.  I’ll go half and half with gasoline.  I knew gasoline was risky.

So I sprinkled that all over the pile of paper bags and lit a bag (there was a door on the end about waste high).  I watched the flame creep up the paper until it got into the fuel-soaked portion of the bag.  That started to burn as I watched and then, Fahwoom!  A giant fireball blew up and rolled me back, bass over teakettle like when I was kicked one time by a cow – which may explain my dementia.  Fortunately, I knew I was playing with fire and I was prepared to backpedal real fast.  All I got was singed hair on my arms, knuckles, and eyebrows.  I got what I wanted though!  It was a hell of a fire.

As I mentioned a while back, I’m an efficiency freak, and not just for energy.  I also get riled up regarding economic efficiency and how it could impact our industry.  There are many things that apply the brakes and throw sand in the gears of the economy but I’ll get to that later.

This week, I want to discuss the Federal Reserve (Fed) rather than energy efficiency directly because the stakes are enormous and I think everyone should know what is happening.  For years and years (forever) there has been a lot of concern about the nation’s debt.  Why?  I would guess that 99.9% of Americans think we will need to pay it off sooner or later and that’s going to hurt like a tooth extraction with no painkiller.  If only.

Last week beneath all the election buzz the Fed announced it would buy $600 billion in U.S. Treasuries over the next six or nine months.  This is on top of the $1.3 Trillion it’s already purchased.  These numbers, by the way, are staggeringly incomprehensible.  See what a trillion dollars looks like.   I did a little “measurement and verification” on this and it appears to be fairly accurate.  Furthermore, companies in the U.S. have a total of $800 billion cash on hand.  So in the end, we are talking 2.5x companies’ cash on hand.

What is the Fed?  It’s a mysterious central bank with twelve regional banks run by appointed egg heads who are accountable to no one.  Typically, these people have spent their entire lives in academia, politics, think tanks – i.e., a parallel universe.  They set the federal funds rate – the rate central banks charge one another for overnight loans.  When they talk about cutting or raising interest rates, this is it.  The Fed’s mission is supposed to be monetary stability; to avoid extreme fluctuations in inflation, deflation and the exchange rate of the dollar.  If you have an interest bearing money market fund or certificate of deposit, you already know these interest rates are zero.  Controlling the federal funds rate is all they normally do, but they are now going crazy.

Real lending rates (personal/business loans) for all of us track interest/yield on federal Treasury bonds.  For example, the 30-year mortgage tracks in step with the 10 year Treasury bond (I think).  The 15 year mortgage tracks the 5 year Treasury and so on.  “Real” interest rates are set by the marketplace by buying and selling bonds and other debt.

Never think you can’t lose money in bonds.  Bond prices and interest rates move in opposite directions.  For example, a thousand dollar bond may be issued at 5% interest.  Consider the $50 payout fixed.  In this simple example, it would pay $50 per year in return for your cash and risk.  When interest rates go up to 7%, the value of your bond drops because it’s paying you only $50 per year and the bond price will adjust to reflect the current 7%.  The value of the bond would drop to something probably in the $70s.  The opposite would occur if interest rates drop.

It’s all supply and demand.  If there is tremendous demand for bonds, the bond price is high relative to the interest rate.  Enter the Fed.

The nearly $2 trillion in bonds the fed will own will be purchased with freshly printed money.  They are buying U.S. bonds with funny money.  Why?  To “stimulate” the economy.  By sopping up bonds like crazy, they get very low interest rates.  The borrower (U.S. Treasury) wants to sell bonds with the lowest possible yield and as long as they have the Fed throwing gazillions at them, it’s easy.

Many of you have probably refinanced your homes at unheard of rates lately as a result of this Fed activity.  That’s great and you should do it but don’t for a minute think the ball-peen hammer isn’t coming around.

Here is the risk.  The huge gamble the Fed is making is artificially driving down the cost of borrowing to spur the economy so people buy stuff.  They hope the economy will get going and people will pay taxes to lower the deficit/debt and have money to invest in U.S. bonds, rather than the Fed doing it all with funny money.

Injecting all this cash into the world economy and “monetizing our debt” is driving down the dollar.  Supply and demand.  More dollars floating around, more supply, means the value declines.  All you have to do is watch commodity prices for the results.  Comparing to a year ago:  Gasoline up 10%, Gold up 23%, Silver up 42%, Copper up 27%, Corn up 55%, Soybeans up 22%, Beef up 13%, Cotton up 117%.  Do you think this escalation is due to supply/demand (although cotton, used to make the greenback is really up)?  No.  They are up in large part because of a weak dollar.  It’s inflationary for us.  You can easily find information on rising food prices in case your trip to the store doesn’t do it for you.

A weak currency is good for trade to a certain extent.  A week dollar generally means a strong yen, euro, franc, pound, etc.  Strong currency means people from these countries can buy American goods for cheap because they exchange their highly valued currency for a lot of our currency and buy our stuff.  The opposite is true for us.  Imports are expensive, which also puts upward pressure on inflation.  This is great until the people buying our debt start to squeal.  Go back to that thousand dollar Treasury bond.  If that is purchased with Japanese yen and the dollar subsequently drops 20% against the yen, the Japanese guy is stuck with crappy dollars so when he cashes out, he gets 20% fewer yen than he would without the devaluing.  Or he can just keep his crappy dollars and hope for the best.

So what the fed is doing is very dangerous.  They are devaluing the dollar.  The Fed can’t keep printing money to buy bonds.  Sooner or later the debt will need to be financed with real money from real investors seeking what has been the safest investment on the planet.  Continuing to use printed money, the currency will continue to fall until foreign investors that are buying like 40% of our debt give us the middle digit and pull out.  Then what?!!  Trillions of dollars will be lying about.  Everyone has cashed out and the U.S. dollar won’t be worth anything because nobody wants them and there are gazillions of them.  Compounding the problem, interest rates will go sky high because the Treasury can’t find people to buy their debt that melts faster than a Klondike Bar in downtown Bagdad on a summer day.  Inflating our way out of debt is easy but devastating.

The Fed and the government have to stop treating employers and investors like lab rats.  We are not stupid.  We can see the lunacy.  And they wonder why they can’t “create jobs”.

I’ll be out buying gold bullion at $1,400 an ounce to hide in an undisclosed location.  Once it takes a grocery cart full of cash to buy a loaf of bread, I’ll be able to buy the bakery with an ounce of gold.[1]

Epilogue

There are other very negative consequences of buying debt with printed money.  First, it takes a lot of pressure off free wheeling congress to control the deficit.  Second, what is the Fed going to do with all these bonds that pay extremely low yields once interest rates start rising?  They are going to lose a gazillion dollars selling worthless bonds, that is if the economy ever gets going.  Who will take that hit?  Sounds a bit like Fannie and Freddie to me.  Taxpayers will be stuck with that bag.

Since we lab rats won’t behave like they do in a text book, things may not pick up for years and years.  See Japan which has tried this for what, 20 years?  They have enormous debt.  Government tried to stimulate the economy about a dozen times.  People aren’t spending due to deflation.  Stuff just keeps getting cheaper as they sit on their cash.  This with the Fed’s activity has dropped the value of the dollar by 15% against the yen since April of this year.

U.S. officials are being lectured around the world about these reckless policies.  The death spiral of 2008 was all due to ruthless, evil banks, we are told.  Well the Fed has had interest rates very low for a long time, in addition to congress pushing home ownership onto people who can’t afford them.  We had a stock market bubble in the late 1990s.  A commodity bubble just before the 2008 collapse and the housing bubble just popped.  Another commodity bubble is building and I would say the late stock market run-up is building a bubble as well.  Stocks are rising as companies are improving earnings by slashing costs – laying off people.  This won’t last as companies have limited costs to cut.

When will these people look at past policies and the ensuing results and learn from history, rather than their bogus theories?  The economy is not like physics where there are laws like gravity, speed of sound, and conservation of energy.  The economy has a huge macro human element.  The most accurate prediction of what will happen can be found by looking back at history.  I remember as I sat on the sidelines in the late 1990s while people were paying insane prices for stocks.  Valuations were far, far outside historic norms.  But we were in a different era.  Sure, Sonny.  The NASDAQ composite has gained minus 50% since then.

Thinking hyperinflation could never happen here is short sighted and dangerous.  Nobody imagined 9/11, the submersion of New Orleans, or last summer’s unstoppable oil spill.  The Fed didn’t prevent the 1930s from happening and they won’t stop the next one either.  In response to the 1929 stock market crash and recession, Hoover did exactly what gave us 10 years of misery; raised taxes sharply to cut the deficit and Smoot Hawley to cut off trade with the rest of the world.  We are trending toward the same thing all over again.  HELLO!

Lastly, I’ve said before that we need a strong economy and demand for energy to have a strong EE industry.  We’ve done ok through this recession but no one will care about EE when the dollar isn’t worth the paper it’s printed on, or we spend the rest of my career in a grinding contraction like Japan.

Tidbits

Back in March I railed against daylight savings time because it doesn’t save energy.   National Geographic referenced reports saying the same.  But one study claimed there was savings: The Department of Energy.  The hell you say!  It saves precisely 0.02% total energy consumption.  This reminds me of predicting CO2 levels by viewing 500 year old tree rings.  The reported precision is about 1000X greater than they can possibly measure or calculate with confidence.  I wonder how many millions of dollars somebody got to build a model that would support the answer they pulled out of the air to start with.


[1] Do not construe this as investment advice.  Roll your own dice at the casino of the Federal Reserve.

written by Jeffrey L. Ihnen, P.E., LEED AP





Dow Chemical Finds Free-Market Religion

27 07 2010

I was going to talk about sane solutions for ground transportation this week and I was going to lead with a tidbit, but that snowballed into the entire rant of its own.

Last week I was reading The Wall Street Journal on my 1994 organic cotton-stuffed futon when I had a “Ha!  You scheming, scamming, shysters!” moment.    In Law of Gravity Repealed, I accused for-profit corporations who are in favor of carbon caps of essentially getting in bed with the political hacks in Washington to form the rules of the game such that they come out ahead of their competitors.  First off, this is a really stupid and naïve strategy that has been demonstrated time and again.  The saying goes if you’re not at the table, you’re on the menu.

Companies have three choices when a bill that will deeply affect their business is being debated: (1) fight it with everything they’ve got, (2) help form the legislation whether it will be good for them or not, and (3) ignore it and hope for the best.  I would say that most times when they cede power to the government and think they can come out ahead, they get burned badly.  This happened with big pharma and the insurance industry with the recently passed healthcare bill.  Big pharma thought they could greatly increase their sales with 30 million new customers.  What idiots.  Hello?!!  And they suppose Washington is going to let them charge “market” rates for these 30 million new customers carried entirely by the government.  What morons.  With perhaps the exception of utilities that will be able to more easily recover costs due to their monopoly status, other large corporations will get burned in the same way with any cap and trade bill that is passed.  The exception may be General Electric where the pathetic CEO Jeffrey Immelt is putting all the company’s chips on successfully bribing a majority in Washington to save the company.  Otherwise tell me, how is a HUGE energy consumer like Dow Chemical or producer/user like Exxon Mobil going to come out on top.  Don’t mess with Washington.  You’ll get the horns.

To get back on track regarding last week’s WSJ –  [reprinted in this news source because it is no longer available on the WSJ’s website]  Dow Chemical, one of the companies I mentioned a couple months ago has seen the political light, which is actually the dark side because there is no bright side in Washington.

Suddenly when cap and trade was shelved last week and Harry Reid started talking instead of a wimpier policy to encourage the use of natural gas, Dow found free-market religion.  Using natural gas in place of nearly any other fossil fuel will reduce CO2 emissions.  But wait!  Dow is suddenly opposed to reducing greenhouse gasses.  In a letter supported by many companies and other “special interests”, they write to call on the Senate “not to include any provisions in energy legislation that would ‘artificially’ increase demand for natural gas in the power and transportation sectors.”  Let’s see.  Cap and trade; artificial pricing pressure and market manipulation.  Nope, I’m not seeing any difference here.  I don’t understand Dow’s reversal.  What happened to the do-gooder spirit?

Purely guessing, Dow probably has millions of carbon credits that are worthless without cap and trade.  They may also think they can increase their insulation sales with its passage.  I would also like to see the other corporate signatories on that letter.  T Boone is most likely not a signatory.

In another non-irony, the National Corn Growers Association also opposes the “artificially” high priced natural gas.

[Courtesy pause here while you finish laughing out loud]

I cannot think of more manipulated markets than the ones for corn and ethanol.  First, federal programs to pay farmers to NOT produce crops have been around for decades.  I recall as a kid, we had to “divert” xx% of baseline corn acres.  So what did we and everyone else do – diverted the acres where nothing grew (sandy patches) or acres that were at high risk of being flooded.

Second, there is the fattest sacred cow of them all: ethanol.  The ethanol lobby that includes weaklings like Archer Daniels Midland along with the Corn Growers Association has bagged a permanent 50 cent per gallon subsidy courtesy of me and a few million other Americans, the taxpayers.  In addition to this handout, it may be the most trade-protected industry in the country, save for maybe sugar.  Imports would be slapped with an insurmountable 54 cent per gallon tariff so we can’t import cheaper ethanol from places like Brazil where cane-sugar-derived ethanol has allowed them to be energy independent since 2006.  A 50 cent subsidy plus a 54 cent tariff on imports: more than a dollar a gallon direct artificial price manipulation.  I can’t think of a more favorably manipulated market than the one the corn industry has.

To demonstrate the damage heavily manipulated markets wreak, many ethanol companies went bust starting a couple years ago as the price of their feedstock, corn, soared to record highs.  Nobody saw those prices coming.  Maybe they should have hedged against the risk of soaring feedstock prices  – whoop!  Can’t do that anymore because of the recently passed financial overhaul.  More manipulation and interference…

Epilog:  I’m practically from Iowa and my family has grown a lot corn for many years.  Even though it is all fed to livestock, the artificial upward pressure on the corn market would seem to help because it makes growing livestock more expensive, driving down meat and poultry supply and improving prices.  But like the tobacco industry that was strictly controlled with government quotas, farmers would benefit from the trashing of government manipulation.  Income rises and surprise!  Farms get smaller – just what everyone seems to want!

written by Jeffrey L. Ihnen, P.E., LEED AP





A Frivolous Novelty

20 07 2010

For this week’s publication, I was trying to think of an expensive, short-lived, duplicative, inconvenient, limited use, frivolous novelty.  Did I mention expensive?  After a half-hour of wonderment, the best I could do is a Homer Simpson bottle opener.   But really the Homer Simpson bottle opener will last longer and at least be useful (note, I didn’t say serve it’s purpose, which is to make people laugh) probably for a far longer period than the electric car.

Twenty years ago “they” were talking about developing electric cars, I guess to save us from carbon dioxide, but I don’t recall the CO2 debate being as intense then as it is now.  I recall arguing with my roommate, who was a perfect match for me (we shared best men duties at each other’s weddings), that the electric car is a stupid idea because once again our friend Pesky Reality will not allow this bad idea to ever go mainstream.  You know, Pesky is going to be our imaginary friend from now on.  I’ve never had one actually so we will see how this goes.

I already have a 20 year winning streak, but “they” are making another futile run at this doomed idea.  Of course this is being served up by the connoisseurs of bad ideas.  The factory of remedies that are worse than the disease: Washington DC.

GW Bush’s dopey idea for the next miracle of personal transportation was the fuel cell.  The only emission would be water vapor – egads! The number one greenhouse gas.  Maybe the next time this stupid idea comes back to life Pesky can start a campaign advertising the greenhouse gas thing and it will crash and burn faster the Hindenburg.   Hmmm.  Hindenburg.  Hydrogen.  Bad idea.  Crashing.  Seventy years later here we are again!  I would call that an overt, as opposed to a subliminal message from Hephaestus, the god of fire.

I’ll just mention a few of Pesky’s problems with the fuel cell.  First consider the fuel, hydrogen.  Where does it come from? Where can I buy it?  How do I store it?  How is transported?  What is the driving range on a full tank?  Answers: splitting the water molecule with electricity (?), ?, ?, ?, and 36 feet.  So there it is.  You can’t mine or drill for hydrogen.  Well, I guess you can, but just not successfully.  As I recall, from what was it, 9th grade chemistry, it is the first element on the periodic table and a mole of any gas takes the space of roughly 1 cubic foot.  In other words, this is an extremely sparse gas and fuel source.  Liquid hydrogen?  Sure, at about minus 270C.  I just pulled that number out of the air but trust me, you won’t be able to make -270C with some standard plumbing pieces parts and household chemicals from Home Depot and Wal-Mart.

Back to the electric car.  I am aware of the Nissan Leaf, Chevrolet Volt, and Tesla something or other.  The first two have a driving range of 100 miles.  The Tesla has a more conventional driving range of 300-400 miles.  Price tag: about $100,000.  The Leaf and Volt can be had for a song: $40,000.

Yeah, yeah, yeah.  As soon as someone is able to push Pesky aside and develop a long range battery that weighs less than the sculpture of Abe Lincoln in his monument on the national mall, we’ll be home free.  I don’t think so.

The fuel source for electric cars is widely distributed and you can get it pretty much anywhere.  However, Pesky requires a rectifier and transformer to turn AC current delivered over the power lines to DC and then step the voltage down or something like that to “fill” the battery.  Price tag: $2,000.   Ok. Maybe you can buy one of these things and use it until the next ice age.  But it takes 8 HOURS to charge the batteries.  It takes 3 minutes to fill the tank with gasoline.  One hundred miles in 8 hours: 12.5 miles per hour of filling.  Gasoline: 340 miles in 0.05 hour: 6,800 miles per hour.  If I remember correctly, that is roughly Mach 10.  This is like making 30-year aged, single-malt scotch compared to thawing, or as my wife calls it “de-thawing”, a bagel in the microwave.  What happens if you forget to plug in when you get home at night?  Call in to work dead? As in dead battery?

Where are you going to charge once you leave the home-base 30 mile radius?  Who is going to install all $2,000 charging stations for you?  It will be like the Amish when they all get together for their Sunday services.  All the buggies are parked in the yard while the dozens of horses that pulled them there are packed in a shed munching hay, drinking water and lying about for 8 hours.  They are recharging their batteries, man.  That’s beautiful but is the modern American going to put up with 12.5 miles per hour of charging time?  Does anyone root for both the Vikings AND the Packers?  (If so, he/she should be locked up)

Assume engineers are able to speed up the process.  Charge time will still be constrained by the electric “pipes” coming to your home.  An electric water heater or clothes dryer probably pull the greatest demand in a typical house.  The water heater input is limited to 4.5 kW, equivalent of about 6 horsepower.  My lawnmower has at least 3x as much power.  See why it takes such a long time to charge, and it’s not ever going to change without a bazillion dollar modification to the electric grid?

And then there is this little problem:  You probably haven’t thought of it this way but your gasoline-powered automobile is a little and very efficient combined heat and power plant.  That’s right.  I’m going to guess a car is about 20% efficient with maybe 10% burned up in friction and the other 70% dumping heat out the radiator, just like a power plant.  Everyone north of the Florida panhandle needs heat and even if you don’t mind wearing a snow suit and big furry hood, you won’t be able to see where you are going with out lots of heat to keep the windows defrosted or defogged.

Well how much heat does it take?  When I first drove my little (2002) Honda Civic to work in -20F weather, as I coasted down the “big hill” (at least a mile long, maybe 500 feet vertical), the water temperature gage went from “50%” to about “20%”.  I thought crap, the thermostat is probably stuck.  No.  The heater just sucked all waste heat out of the engine while it wasn’t “working” in about 70 seconds.  Where is that kind of heat in an electric car coming from? – from the battery.  But the gas car has 70% of its energy consumption available for space heat.  Once the same heat is extracted from the Abe Lincoln battery, you’re hundred mile range is now down to about 30 miles.  Well guess what the average commute distance is in the U.S., Pesky.  Its 16 miles, 32 round trip.  I guess that car is good for a drive to the convenience store for milk and bread, but just make sure it’s fully charged so you can make it back up the hill.

Recently, Obama has been doing photo ops at an electric delivery truck factory in MO and a battery factory for electric cars in MI, neither of which would be a shadow of themselves without hundreds of millions of free money from the “stimulus”.  I don’t give investment advice but if I were an investment advisor, I would put a strong sell on these stocks.  Then I would short them.  I would buy put options.  If I worked at these places, I would be looking for another job.  The government gave these guys a big push to get going but there is no engine under the hood.

I never like to just thrash things and leave it be without offering alternatives.  Sooner or later we will have no choice but to use alternate fuel sources.  There is no infinite source of oil, although there is probably a 200 year supply if we decided to remove restrictions and technologies allow us to extract oil in more extreme places.  Remember, in the late 1970s we were on the verge of running out of natural gas.  Forty years (40) hence we have a bigger glut of natural gas than ever.

Like efficiency in buildings, in the short term we can make huge gains with existing “technologies” – have heat, have a driving range limited by the driver, and refuel in three minutes every four hours.  In the long term, the alternate fuel source will be in liquid form.  Sources may be algae, wood, (not corn ethanol), garbage or other waste material like dog hair.  I have a bottomless and continuous supply of free dog hair.

Unless something riles me up more in the next week, I will discuss the interim.  Pesky will have the week off because he will have no say in these matters.

written by Jeffrey L. Ihnen, P.E., LEED AP