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Has the electric industry got lawmakers in its back pocket, or are charges of bias just smoke?

Thank you for trying to make some sense out of the continuing site vs. source energy debate with your article of April 15 titled, "Appliance Efficiency: Does the Fuel Cycle Make A Difference?" This debate has raged since the 1970s, and it is time that the effort put into it is applied to more constructive purposes.

The question posed by your article is whether the U.S. Department of Energy is biased in its energy efficiency standards-setting process. In fact, this debate is more about whether the standards-setting process can be used to gain market advantage for a particular energy source. Several inconsistencies in the statements made in your article highlight this point.

• Apples and Oranges. Mr. Hemphill of the GRI correctly points out that "comparing electricity and gas is comparing apples to oranges." Yet, the only reason to employ a source energy calculation is to attempt to make such an "apples to oranges" comparison. That is exactly why the existing federal standards-making process separates appliances into product classes, and sets an appropriate standard for each class.
  In the water heater rulemaking, for example, one standard will be set for electric resistance water heaters based on what is achievable and economic for that technology. Another standard will be set for natural gas-fired water heaters based on what is achievable and economic for that technology. This approach avoids the need for an "apples to oranges" comparison of electricity to natural gas, and makes the site vs. source energy debate irrelevant.
• Efficiency Calculations. Mr. Rosenstock of the Edison Electric Institute states that source energy would "make calculation entirely too complicated." Mr. Fritts of the American Gas Association (AGA) states that "the gas industry, in fact, has come up with its own calculations for adding source to the efficiency equation." Both of these statements seem to imply that source energy can be calculated with any degree of certainty when, in fact, it is at best only a gross estimate that varies depending on who is doing the calculating and what they want to conclude. Further, none of these statements recognizes that there is a fatal energy policy problem with source energy estimates, because they favor any fuel used directly by an appliance.
  For example, under AGA's source energy calculation procedures, an oil- or even a coal-fired furnace is preferable to electric resistance heat. Using this method, a gas furnace would be preferable to electric resistance heat even if the electricity was supplied from over 50 percent renewable energy.
• Latest Technology. Mr. Fritts also complains about DOE's decision not to base the minimum standard for electric water heaters on the capabilities of heat pump water heaters because they are not yet "on the market" [although] DOE continued to evaluate potential gas water heater improvements that are on the market. The alternatives to DOE's action would have been to either set an electric water heater standard that could not be met or to not consider improving the gas appliance standard because an electric option is not available. Neither option would make sense.
• Energy Consumption. Mr. Hemphill implies that DOE's standards-setting activities are related to recently observed reductions in residential gas . Yet AGA reported in January that "the for natural gas in new single-family homes rose to 70 percent in 1998, up from the 69 percent captured in 1996 and 1997." (Emphasis added by the author. Reference AGA press release dated Jan. 14.) Maybe the standards are working?
  On the other hand, DOE has issued no new gas furnace or water heater standards for nearly 10 years. In fact, a recent study by Rand Corp. for DOE found that the basis for setting energy standards (site or source) had no impact on markets for electric and gas water heaters. ("Measures of residential energy consumption and their relationships to DOE policy," Ortiz and Bernstein, Rand Corp., MR-1105.0-DOE, November 1999.)
• Cost and Payback. Mr. Goldstein of the National Resources Defense Council states that "the much more useful way to measure energy is in cost." Mr. Fritts seems to agree. In fact, cost is one of DOE's main criteria in standard-setting, as required by statute. Review of several recent DOE support documents for proposed appliance standards shows that life cycle cost and payback are the main criteria used by DOE in determining the level of efficiency that is reasonable for a standard. To their credit, DOE has even expanded their cost analyses based on stakeholder recommendations to be able to statistically determine what percentage of the population will be harmed or will benefit from new standards.

Although I personally don't always agree with DOE's standards determinations, the current process used by DOE makes the source vs. site issue irrelevant and arguments of bias tenuous at best. The arguments of bias appear more targeted at using these standards as a way to capture market share. So let's drop the source energy debate, and move on!

Timothy A. Bernadowski Sr., P.E., C.E.M.
Conservation and Customer Technology
Virginia Power
Glen Allen, Va.

This letter concerns April 15 article entitled "Appliance Efficiency: Does the Fuel Cycle Make a Difference?" by Carl J. Levesque. I have been representing the natural gas industry on the U.S. Department of Energy's Advisory Committee for Appliance Energy Efficiency Standards by secretarial appointment since 1997. Although the article accurately conveyed the traditional debate between "site vs. source," as well as the problems of getting such issues discussed within the forums provided by DOE, it only alluded to the fundamental issue: how energy policies are increasingly manipulated by vested interests to determine whose ox gets gored in the marketplace.

Since the advent of energy efficiency legislation in the mid-'70s, the direct use of natural gas has been held to a much higher performance standard than electricity. Subsequently, gas end-use consumption began to plateau, while electric consumption continues to increase unabated. Thus, site-based energy efficiency policies significantly increase the revenues of the electric utility industry. In fact, according to Edison Electric Institute's Mike McGrath, in the Oct. 23, 1998 Washington Letter, losing its market advantage through site-based energy efficiency measurements "could have cost the electric power industry billions of dollars."

Considering that the present gap between gas and electric consumption that has emerged since the mid '70s now stands at over 10 quadrillion Btu, I would say this particular form of corporate welfare for the electric utility industry likely amounts to at least a few billion dollars. So if energy efficiency policies were source-based instead, would these monies begin to flow to the gas utility industry? Hardly. They would flow to consumers and taxpayers, where they rightly belong.

Another issue that was alluded to is how such policies misinform consumers. The extent of such misinformation is best illustrated by simply doing the math, as shown below.

 

Site vs. Source Efficiency
Space heating example Site efficiency of electric heat pump (6.8 Btu per watt) / (3.4 Btu per watt) Site efficiency of gas furnace (78 percent annual fuel utilization efficiency, or AFUE) Conclusion: Electric is 122 percent more efficient.				= 200 percent = 78 percent
Source efficiency of electric heat pump (6.8 Btu per watt) / (3.4 Btu per watt) * 29.3 Source efficiency of gas furnace (78 percent AFUE * 90.1 percent) Conclusion: Gas is 34 percent more efficient.				= 58.6 percent = 70.3 percent
Water heating example Site efficiency of electric water heater, 0.88 energy factor (EF) Site efficiency of gas water heater, 0.54 EF Conclusion: Electric is 34 percent more efficient.				= 88 percent = 54 percent
Source efficiency of electric water heater, 0.88 EF * 29.3 percent Source efficiency of gas water heater, 0.54 EF * 90.1 percent Conclusion: Gas is 23 percent more efficient.				= 25.8 percent = 48.7 percent
Clearly, all Btus are not created equal. Rather, it is the relative emissions that accompany energy alternatives that most matter. But once again, consumers are being kept ignorant through lack of proper disclosure. For example, the following table compares how many gas water heaters it takes to equal the pollution of just one electric water heater.
SO2	NOx	TSP	CO	CO2
5,041.5	11.1	36.0	2.4	3.1
Source: American Gas Association's "The Economic, Efficiency and Environmental Implications of More Stringent NAECA Standards for Residential Water Heaters," Dec. 2, 1993

Given these issues, it is no wonder that EEI values continuing the biases within the site-based energy efficiency policies at "billions of dollars." Just how long can they hold consumers and the environment hostage? As long as they can get politicians and bureaucrats to do their bidding. Yet, according to the impeccable RAND institution, which DOE contracted ostensibly to study these issues, none of this is even relevant.

Mark E. Krebs
Director, Market Planning
Laclede Gas Co.
St. Louis

 

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