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





Black Monday Stampede

10 03 2010

July 1992: Tickets for U2’s ZooTV show at RFK stadium in Washington, DC go on sale by Ticketmaster.  The tickets are snapped up in a few hours, as fast as the phone lines could handle the traffic.  This was before anyone knew what the internet was (no Al Gore jokes).  Fortunately, a second date was announced and the roommate waited for the crack of 12:00:00 AM for a shot at the second batch, successfully.

March 1, 2010:  Federally funded rebates become available for efficient appliances in Iowa and Minnesota.  Phone lines jammed with 10 times expected volume and internet traffic at 100 times expected traffic took down the website of the contractor running Iowa’s program in the first hour, within minutes of opening.  Ultimately, Iowa’s share of the funds was gone within 8 hours.  Minnesota’s program dragged on until the next morning.  It was a Wal-Mart-style black Friday digital stampede.  Thank goodness for (don’t use Al Gore jokes) technology – I didn’t see any reported injuries or fatalities.

Some of these federally funded appliance incentives run two to ten times utility incentives.  What were they thinking?  Combined with utility incentives the total can exceed 50% of the purchase price for crying out loud.  See “Policy to Curb Carbon” (government doesn’t know how to do energy efficiency) and “Incentive or Discount” (people trained to wait for handouts to buy).  This is pretty much a giant transfer of wealth from people paying taxes to people taking the rebate checks, and I don’t begrudge the people taking the money.

Apparently the people who designed these state programs, which are actually handouts at these rates, don’t understand the market and/or supply versus demand.  Obviously they gave away too much money and taxpayers got far less than they should have for their “investment” in terms of reduced energy consumption, emissions, and sales and in some cases manufacturing here in the states.

And to top off the environmental benefits of the appliance programs, participants are to send their old appliance to the scrap heap, with self-policing enforcement.  Who’s going to do that?  They will either end up with a second refrigerator or freezer in the basement or the old stuff will show up on Craig’s list.

Recall cash for clunkers last summer.  The intent there was to offer a total of $1 billion incentives, up to $4,500 per vehicle and it was planned to run from late July through November.  Within a week or two the billion dollars was gone and congress quickly shoveled in another $2 billion.  THAT was all gone by Labor Day.

While attending the International Energy Program Evaluation Conference in Portland, OR, last fall I was engaged in a small group discussion – was cash for clunkers a free rider?  A free rider is somebody who takes an incentive for something they were going to do anyway.  This is considered to be a waste of incentive money.  That’s arguable in this clunker case because it more than likely moved the purchase date forward for buyers, but I also think it’s the wrong question to ask.  The more appropriate question is, was it cost effective?

Answering the free rider question, Edmunds estimates that of the 690,000 cars purchased through the cash for clunkers program only 125,000 were incremental.  That is, only 125,000 transactions took place that otherwise would not have.  The rest just displaced a sale that was going to happen soon anyway.  Figuring in free ridership, the taxpayer cost per vehicle was $24,000.  And then consider this: the average trade-in value of the clunkers was about $1,500, which may be worth $1,800 for sale to the next guy.  All these cars were destroyed.  That comes to $1.2 billion in destroyed working assets.  So the feds spent $3 billion to increase profits by car dealers by perhaps $125 million and destroyed $1.2 billion in assets.  Annual energy savings for these 125,000 vehicles would be roughly $120 million.  And maybe the domestic automakers lost a little less money as a result of the program.  Woohoo!

To be fair, the cash for clunkers program may have resulted in the purchase of more efficient vehicles than would otherwise be purchased.  Hardly.  The average fuel economy of cars sold through the program was 25.4 mpg.  The corporate average fuel economy for cars is 27.5 mpg and with light trucks included, it is 23.5 mpg.  In other words, these “efficient” cars were essentially average.

And the doozer of them all: free golf carts thanks to tax credits and sundry other incentives for electric / high mileage vehicles. 

These aren’t incentives.  They are gifts from frugal people to people who probably don’t need this crap.  But good for them, I say.  You have to play the game that’s put in front of you.