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Energy Policy and Energy Efficiency

James SweeneyStanford University

Director, Precourt Energy Efficiency CenterProfessor, Management Science and Engineering

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• Environmental Protection• Global Climate Change

• Security• Oil/International vulnerability• Vulnerability of infrastructure to terrorism, natural

disaster, or human error

• Economics (Public policy and private sector issues)• Prices of electricity, gasoline, natural gas• Price volatility: oil, natural gas, wholesale electricity• Management for energy efficiency can be very

profitable

Three Public Policy Drivers for Energy Policy in U.S.

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• Environmental Protection• Global Climate Change ?? Annex I country

• Security• Oil/International vulnerability ?• Vulnerability to natural gas supply disruptions ?• Electric market vulnerability ?

• Economics (Public policy and private sector issues)• Prices of electricity, gasoline, natural gas• Price volatility: oil, natural gas, wholesale electricity• Management for energy efficiency can be profitable

Three Public Policy Drivers for Energy Policy in Singapore

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Environmental

5

U.S. CO2 Emissions 2007

Source: http://www.eia.doe.gov/environment.html

0

500

1000

1500

2000

2500

3000

Residential Commerical  Industrial Transportation Electric Generation

Million Metric Tons of C

arbo

n Dioxide

Natural Gas

Petroleum

Coal

5

Most: Buildings

Some:Buildings

6

U.S. CO2 Emissions 2007

Source: http://www.eia.doe.gov/environment.html6

0

500

1,000

1,500

2,000

2,500

Residential Commerical  Industrial Transportation

Million Metric

 Tons of C

arbo

n Dioxide

Through ElectricityNatural GasPetroleumCoal

Most: Buildings

Some:Buildings

US Energy Consumption By Fuel

40

23 23

8.1

2.7 3.2

0.3 0.06 0.18

40

22 22

8.2

2.9 3.4

0.3 0.07 0.26

40

23 24

8.4

2.53.6

0.3 0.08 0.320

5

10

15

20

25

30

35

40

45

Petroleum

CoalNatur

al Gas

Nuclear

Hydroele

ctric

Biomass

Geotherm

al

Solar/P

V

Wind

Fuel

200520062007

Con

sum

ptio

n (Q

uads

)

Source:  Energy Information Agency, US DOE, Annual Energy Review

0

20

40

60

80

100

120

140

160

180

200

Petroleum Dry Natural Gas Coal Hydroelectric Power

Net Nuclear Electric Power

Net Geothermal, Solar, Wind, 

Wood and Waste Electric Power

Qua

drillion Btu of Produ

ction an

d Use 2004

20052006

World Energy Production and Use

Source:  Energy Information Agency, US DOE, Annual Energy Review

2008 Singapore Energy Use

Totals Source:  BP Statistical Review of World Energy, 2009; Bunkering Estimate  

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

Oil Natural Gas Coal Hydropower Nuclear Renewables

Qua

drillion Btu

For:Bunkering, Petrochemicals,motor fuel,town gas, electric generation, other industrial

For:Electric Generation

For:Bunkering

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Increased EconomicEfficiency

Decreased Energy Use

Reduced EconomicEfficiency

Increased Energy Use

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Economically Efficient Energy Intensification

Energy Efficiency Improvement

Inefficient Energy Saving

Waste

Increased EconomicEfficiency

Decreased Energy Use

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Increased commercial space

Gasoline Price Controls

Compact Fluorescent Penetration

LED Traffic Lights

Energy Cost Labeling

Gasoline Rationing

Incan-descent Lighting

Congestion Pricing

Personal Computer Penetration

Optimized Building Construction

Overly Strict Building Standards

Pigouvian Energy Tax

Increased EconomicEfficiency

Decreased Energy Use“Smart”Regional Land Development

Reformed CAFE Standards

Some Rapid Transit Systems

Improved Building Materials

Halt SUV Sales

Airline Deregulation

Energy Audits

Hybrid Gas-Electric Vehicles

High Definition TV

Plug-In Hybrids (Now in US)

Plug-In Hybrids (Future)

LED General Lighting (Now)

LED General Lighting (Future)

Internet Growth (??)

“Smart Buildings”Controls

Economic development

LED Task Lighting (Now)

Accessible Business Travel

Old appliance replacement

Behavioral Change:Program ThermostatLights, Tire

pressure,Driving Patterns

Appliance Efficiency Standards

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14

Source: McKinsey & Co.

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Buildings Energy Use in the US

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2006 Commercial Building Energy Uses: Operations Only

Source: 2008 Buildings Energy Data Book

Lighting25%

Space Cooling13%

Space Heating12%

Ventilation7%

Water Heating6%

Refrigeration4%

Cooking2%

Electronics7%

Computers4%

Other13%

Unknown7%

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2006 Residential Building Energy Uses: Operations Only

Source: 2008 Buildings Energy Data Book

Lighting12%

Space Cooling13%

Space Heating26%

Water Heating12%

Wet Clean6%

Refrigeration7%

Cooking5%

Electronics8%

Computers1%

Other4%

Unknown6%

Singapore Residential Building Energy Uses: Operations Only

Source: Energy Efficient Singapore. http://www.e2singapore.gov.sg/households.html

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Lighting is 21% of U.S. Electricity

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From “U.S. Lighting Market Characterization”, prepared for DOE EERE by Navigant Consulting, 2002

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From “U.S. Lighting Market Characterization”, prepared for DOE EERE by Navigant Consulting, 2002

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Energy Implications of 100% LEDs @ 120 Lm/wt System Efficacy

0

50

100

150

200

250

300

350

400

450

Commercial Residential Industrial Outdoor

TWhr

/yr

Current MixAll LED @ 120 lm/wt

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Why Do Negative Cost Options Continue ?

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Market Failures and Market Barriers

Market failures Market barriers Externalities Low salience of energy

issuesPrincipal/Agent Problems Incomplete markets for

energy efficiency

Distortionary regulatory and fiscal policies

Cognitive Skills

Insufficient and inaccurate information

Systems Issues

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Policy Priorities• Energy Supply

– Get Prices Right (carbon tax or cap and trade)– Incentives for innovation: R&D

• Including learning by doing– Regulations: Safety, Pollutants

• Energy Use– Get Prices Right (carbon tax or cap and trade)– Incentives for innovation: R&D

• Including learning by doing– Regulations: Safety, Pollutants– Interventions to address barriers, market failures

• Cognitive/information• Agency problems• Systems problems (including chicken & egg)

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INSTANT(Infosys – Stanford Traffic Project)

Research by Balaji Prabhakarat Infosys in Bangalore, India

Funded by PEEC

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• The INSTANT project uses the framework of incentive mechanisms to reduce road traffic congestion.

• Infosys employees were given chances for one month extra salary for each time they took bus to arrive before 8 am

• The goal of our work is to incentivize Infosys commuters to travel at uncongested times.

• INSTANT serves as a pilot project to demonstrate the applicability of incentive compatible congestion pricing to combat congestion.

About INSTANT

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Commuter arrivalsCommuter arrivals Bus commuter arrivals

Other commuter arrivalsAverage morning bus commute time and total person-hrs saved

2000 person‐hrs

1400 person‐hrs

2300 person‐hrs

100 person‐hrs 500 

person‐hrs600 

person‐hrs

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• The INSTANT project advances a strong argument in favor of "charging congestors and rewarding decongestors".

• This contrasts with current congestion charging schemes which are viewed as "yet another tax", and makes it possible to consider congestion pricing via a "market approach".

Impact of INSTANT

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California Analysis

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Source: Art Rosenfeld, California Energy Commission

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AB 32 ChallengeAB 32 Challenge

0

100

200

300

400

500

600

700

1990 2000 2010 2020

Mill

ion

Met

ric T

ons

per Y

ear

(CO

2E

quiv

alen

t) Reduction Required

(175 MMT)Business As Usual2020 AB32

Target

00 50 100

150

Diesel anti‐idling

Fuel efficient tires for LDV

Fuel econo

my ‐m

edium/heavy trucks

Petroleu

m & Gas Produ

ction

Fuel econo

my standards ‐Fed

eral Ene

rgy Bill

Solar P

V (CA Solar Initiative)

Utility

 Based

 Ene

rgy Efficiency

Huffm

an Bill (P

rimarily lightin

g)Fede

ral Stand

ards and

 Title 24

 Revisions

Cemen

t Produ

ction Fuel Switching

Fuel econo

my standards ‐P

avley Bill

Cemen

t Produ

ction Efficiency

Petroleu

m  Refining

Fly Ash Sub

stitu

tionfor Cem

ent

Smart G

rowth plann

ing and othe

rs

Redu

ced venting/leaks in oil and gas system

Conservatio

n forest managem

ent

Light duty plug

‐in hybrids

Conservatio

n tillage

CHP Re

side

ntial and

 Com

mercial:  Aggressive

Indu

strial  CHP (aggressive grow

th)

High‐GWP gases: statio

nary sou

rce

Afforestatio

n/ Reforestatio

nBiod

iesel

Recycling‐Co

mpo

sting

CHP Re

side

ntial and

 Com

mercial

Indu

strial CHP (price

 incentives and

 PTC)

Forest con

servation

Land

fill M

ethane

 Capture

Biogas Electricity

High‐GWP gases: mob

ile sou

rce

Port electrification

Med

ium/heavy truck hybridization

Ethano

l (Low Carbo

n Fuels)

Small hydro

Geo

thermal pow

erOther Materials Produ

ction

Wind Electric

Solar The

rmal

Aggressive IOU EE

Biom

ass Electricity

Coal Plants with

 CCS

‐400

‐300

‐200

‐100

0

100

200

300US$

 per Ton

 CO2e

Total CO2 Reductions (Million Metric Tons CO2 Equivalent)

CO2 Marginal Abatement Cost Curve

Smaller than 0.5 MM Tonnne ReductionVery Responsive to CO2 PricesPartially Responsive to CO2 PricesMinimally responsive to CO2 PricesExisting Regulation

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Scoping Plan Incentives

Not Covered by Cap and Trade 

(High GWP Gases)

Complementary Measures 

(Light Duty Vehicle Standards, 

Electricity/Gas Energy Efficiency, Renewables, Low 

carbon fuel standard, regional targets, others)

Cap and Trade

Cap and Trade

0

20

40

60

80

100

120

140

160

180

200

CO2e Reductions (MMTonne)

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Precourt Energy Efficiency Center

http://peec.stanford.edu