If truth is the first casualty of war, as we learned from author Mark Krebs ("It's a War Out There: A Gas Man Questions Electric 'Efficiency,'" December 1996, p. 24), then certainly the truth has been mutilated beyond recognition.
His article, which suggests that electric utilities have used conservation and demand-side programs improperly (to build electric load at the expense of natural gas!) is full of inaccuracies, misleading charts and other errors. Moreover, one can easily say the reverse: There are many cases in which 20th-century gas utilities have taken ideas such as conservation and turned them into marketing strategies that compete head-on with electricity.
In Washington, D.C., for example, Potomac Electric Power Co. offers rebates on room and central air conditioners and heat pumps, but only if they satisfy certain minimum efficiency criteria, while Washington Gas Light Co. offers an incentive of $1800 for installation of a gas-fired heat pump, with no minimum efficiency requirements. (Source: Washington Consumer's Checkbook magazine, Winter/Spring 1997.)
Overall, we at the Edison Electric Institute have identified many items in the Krebs article that warrant a closer look (see sidebar). One particular subject concerns carbon emissions.
The Krebs article ignores the beneficial effects of electric technologies in minimizing growth in carbon emissions. Let's start with Mr. Krebs' citation of the International Energy Outlook 1996, where world energy consumption increases by 60 percent, electricity demand doubles, and carbon emissions exceed 1990 levels by 54 percent in 2015. Over the 20-year period, that translates into worldwide annual growth rates in energy consumption and electricity demand of 2.4 percent and 3.5 percent, respectively, but only a 1.75-percent annual rate of growth in worked carbon emissions (using 1990 as the base for the 25 years). The smaller emissions growth rate stems directly from efficiencies from electric technologies.
Interestingly, Mr. Krebs (who also serves as chairman of the American Gas Cooling Center Education Committee) ended his article quoting a report that asked for more incentives and federal funding for gas technologies, but nowhere does he talk about increasing the efficiency of gas appliances.
In a truly competitive market, the customer will have access to unbiased information about all resources and technologies. The customer will decide which fuel to use.
Steven Rosenstock, P.E.
Manager, Electrotechnology Policy,
Edison Electric Institute
The author responds:
I find I must claim responsibility for one typo (the bar labels on the right-hand side of figure 3 were transposed). Otherwise, EEI and Mr. Rosenstock have largely (though unwittingly) substantiated my original underlying theme. Consider that report about how Washington Gas Light Co. has offered incentives to install gas-fired heat pumps without efficiency standards.
The only heat pump on the market fired by natural gas is the York Triathlon. Whether it builds or decreases load depends upon the climate. In temperate climes, such as Washington, D.C., summer gas sales volumes from the Triathlon's cooling operations are offset by a nearly exact decrease in winter sales volumes. This load-balancing effect is due to the significantly higher seasonal efficiency of the Triathlon in the heating mode relative to that of a traditional furnace.
Thus, the Triathlon's real benefit for natural gas LDCs (whose load factors are typically half that of electric utilities) is to help reduce negative cash flows resulting from the short seasonal profile of natural gas consumption for comfort heating. Were it not for the intense segregation of IRP and DSM programs that discriminate against society's best interests, the Triathlon would represent an ideal, cost-effective technology.
But consider PEPCO, which competes against WGL in the Washington area. PEPCO's recent DSM programs bought considerable business through large-tonnage, "high-efficiency" (electrical) chiller rebates. Otherwise, PEPCO's customers may have gone with gas-fueled cooling systems, primarily to avoid PEPCO's substantial demand charges. Although PEPCO's service territory is considerably smaller than Washington Gas Light's, PEPCO spent an estimated $50 million on its program, compared with WGL's estimated rebate expenditures of less than $100,000. Although electric utilities easily can outspend natural gas utilities, nobody wins a rebate war.
As for efficiency increases for gas appliances, Mr. Rosenstock apparently missed my discussion on electromagnetic valves. I suppose I should have also mentioned that 60 percent of an engine's waste heat can be recovered for other useful purposes.
Overall, I couldn't agree more that customers should enjoy access to unbiased information on energy technologies and resources. However, America's future cannot be relegated to a totally electric world. Robust competition requires viable alternatives (em and not just from energy marketers on the supply side. Being free to choose among energy suppliers, but only as long as that energy is electricity (no matter how diverse the resource), will not, in my opinion, guarantee a more competitive market.
Mark E. Krebs
Director, Market Planning
Laclede Gas Co.
Editor's Note: The FORTNIGHTLY
has edited each letter for clarity of
presentation and to fit available space. (em B.W.R.
Gas vs. Electricity
Which Is More Efficient?
EEI's Steve Rosenstock:
1. Electric Demand Growth. Electric demand growth predicted for the U.S. by the Electric Power Research Institute falls well below assumed population and economic growth rates. Krebs' own Figure 1 supports that conclusion. It indicates that yearly per-capita electricity consumption will grow from approximately 11,000 kilowatt-hours per person in the year 2000 to 25,000 kWh per person in the year 2050 (em an average annual growth rate of only 1.65 percent.
In fact, EPRI's predictions for electric demand growth are consistent with integrated resource planning and demand-side management. Mr. Krebs says that "EPRI's prediction "opposes the economic goals of IRP and DSM." But that is not true. Otherwise the Gas Research Institute could be found guilty of the same charge, as GRI projects gas demand growing from 21.3 Quadrillion Btu (Quads) in 1994 to 23.7 Quads in 2000, for a growth rate of 1.31 percent in the years 2000-2015 (em comparable to EPRI's predicted
1.65-percent U.S. electric growth rate for the first half of the 21st century.
2. Fuel-Cycle Analysis. The analysis of fuel-cycle efficiency is heavily flawed. Krebs posits that coal burned at U.S. electric utilities returns only about 8,000 Btu per pound, on average, but the DOE/EIA Electric Power Annual 1994 shows much higher figures (em 10,319 Btu per pound in 1993, and 10,265 Btu per pound in 1994. Also, Krebs omits some losses that will likely occur in the extraction of natural gas.
The average efficiency at a coal-fired power plant in the U.S. in 1994, according to DOE/EIA, was 33.3 percent, not 30 percent. New technologies have efficiencies of 40 percent and higher. The overall power plant efficiency accounts for any "parasitic" adjustment. The Oak Ridge National Laboratories, in their studies of the U.S. transmission and distribution systems conducted for the DOE, have shown an overall average T&D efficiency of 92.5 percent rather than the 90 percent shown.
3. Choice of Resource. In his statements about environmental competition, Mr. Krebs forgot to mention that choice of supply in electricity will allow consumers to choose the energy resource (coal, hydro, solar, wind, etc.), as well as the end use. Unfortunately, gas competition allows no such choice among underlying resources.
4. Avoided Costs. In his novel discussion of avoided costs, Mr. Krebs refers to a 1995 ORNL report entitled Justification for Electric-Utility Energy-Efficiency Programs, and purports to show that natural gas offers a higher per-penny energy content than electricity. But the article fails to quote passages from the report showing avoided energy costs for electricity have fallen significantly in recent years, and projecting a figure of approximately 4 cents per kWh by year 2005 (em well below the range (7-14 cents per kWh) shown in the Krebs article.
Moreover, Krebs' Figures 2 and 3 lack any reference to year and fail to identify the inflation or discount rates used to project the values. When real numbers are used, there are no large disparities in the avoided cost of electric generation versus gas utility operations.
5. Thermal Energy Storage. In Figures 4 and 5, Mr. Krebs attempts to show the increase in electric usage from installation of thermal energy storage systems, but his graphs are flawed for many reasons. For instance, the graphs could be combining the "before-and-after" results of retrofits with those new construction systems, which will differ from retrofits because they start with usage and billing demand figures of zero. Similarly, any comparisons should use actual monthly on-peak demands rather than billing demands, which may be reflect ratchets established before the installation. Also, the graphs do not show whether the "before" data or "after" data was adjusted for climate conditions, or for functional or operational changes to existing facilities.
6. Program Dollars. If electric utilities have been "fooling" state utility commissions, then how does Mr. Krebs explain that according to the DOE/EIA U.S. Electric Utility Demand-Side Management 1994 report, electric utilities in the U.S. spent over $1.59 BILLION in 1994 on energy efficiency programs? For "other load management" programs, electric utilities spent $54.0 MILLION in 1994. In other words, electric utilities spending on energy efficiency programs was 29 times greater than on other load-management programs.
7. Gas-Electric Mergers. In terms of the Texas market, Mr. Krebs makes it appear that electric utilities are hurting competitive activities by merging with gas companies. He forgets that it "takes two to tango" in a friendly merger.
Mark Krebs, LaClede Gas Co.:
1. Electric Demand Growth. Mr. Rosenstock argues that GRI's projection of a 1.31-percent growth rate for natural gas is essentially the same as EPRI's 1.65-percent projection for electrical consumption, in that each contradicts economic goals of IRP and DSM. He did not mention, however, that the increased consumption of natural gas occurs primarily through centralized power plants. GRI's projections show natural gas consumption remaining essentially stagnant or declining for the residential, commercial and industrial sectors. If anything, GRI's projections confirm EPRI's "manifest destiny."
2. Fuel-Cycle Analysis. I based my analysis of fuel-cycle efficiency on values for Texas (lignite) adjusted for seasonal and time-of-day sensitivities of a particular end use (em that being engines versus motors used for commercial air-conditioning and agricultural irrigation purposes. Such uses occur predominately in the summertime, when peak electrical losses in transmission and distribution can double base losses. The message? Not to prove the invariable fuel-cycle efficiency of any particular end-use technology, but to illustrate that calculating and comparing fuel-cycle analyses is not "rocket science." Indeed, "actual highway mileage may vary." Either sector (em gas or electricity (em could improve its environmental competitiveness.
3. Choice of Resource. Mr. Rosenstock appears to try to make a case for generation resources that significantly reduce or eliminate emissions. I hope that occurs. However, such widespread alternatives are unlikely to emerge without improved accounting of environmental externalities.
4. Avoided Costs. Today's avoided costs are tomorrow's stranded investments. Up to the present, the over-building of electric generation capacity has depressed legitimate energy conservation programs and cogeneration markets while burdening ratepayers. In the future, this over-building will stifle legitimate competitive alternatives on both sides.
Mr. Rosenstock asserts that real numbers would eliminate large disparities between avoided cost of electric generation and gas utility operations. To respond, I ask: What has any natural gas utility ever built that even remotely approaches the cost of one nuclear power plant? And as for a lack of dates, my figures 2 and 3 were based upon a GRI funded study in 1993 that was properly footnoted.
5. Thermal Energy Storage. If the "before-and-after" comparison did not clearly distinguish between retrofits and new construction, I am willing to take the blame.
In terms of the ratchet effects, Mr. Rosenstock's assessment is insightful but misguided. Basically, TES systems often "crash." Consequently, if stand-by chillers come on line to maintain air-conditioning requirements, subsequent ratchet clauses may be invoked. On account of these tendencies, some electric utilities have dismantled their TES programs. (In a recent general rate case for San Diego Gas & Electric Co., TES was deemed not cost effective in markets other than new construction in the high-rise office sector.)
6. Program Dollars. The DOE's "energy efficiency" programs are staffed largely by "electrocentric" personnel. They are also plagued by a lax definition of energy efficiency, resistance to source efficiency, and a historical avoidance of California Standard Practice guidelines, which provide valuable insight and guidance for determining the differences between conservation and load building:
"Categorizing programs as conservation, load building, and so on, is important ... For example, the promotion of an electric heat pump can and should be treated as part of a conservation program if the device is installed in lieu of a less-efficient electric resistance heater. If the incentive induces the installation of an electric heat pump instead of gas space heating, however, the program needs to be considered and evaluated as a fuel substitution program."
7. Gas-Electric Mergers. Mr. Rosenstock is astute. In all probability, when a natural gas utility merges with an electric utility, the electric utility will emerge as the dominant force. With electrification generally more profitable for a combined utility than gasification, both utilities in such a merger are culpable if energy consumers loose choices between major competitive end-use alternatives.
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