Sustainability, Efficiency, and the Private Sector


Kyle Gray
Econ 2010

Going green is seen by many as a costly endeavor with a slow rate of return if any return at all.  Governmental enforcement of environmental regulations can be slow, costly, and ineffective in the long run.  With a change in paradigm the market for improvement can be huge, and the opportunities for businesses and individuals to become more efficient and sustainable are becoming more lucrative. Going green will soon be looked upon as the “right thing to do” not because it is helping the environment, but because it will lower costs, and the change will be lead by businesses and individuals, not governments. Below I will describe areas where this innovation will occur and how one nonprofit consulting agency called the Rocky Mountain Institute is facilitating them.

The large turning points in societies in the last few centuries have been lead from the private sector. The industrial revolution was companies competing to innovate; the automotive industry arose and changed our lives without any up-front government help, and though the information age was conceived in the space program and other government work it changed our lives through private sector innovation.  It is reasonable to expect a similar revolution in the way we use our energy to come from the private sector, not from the government. The Rocky Mountain Institute’s vision “is a world thriving, verdant, and secure, for all, for ever.”

Building Innovation:

Currently, US buildings use 42% of the country’s primary energy and 72% of its electricity; the $400 billion spent annually to heat and power buildings is more than the government spends on Medicare. It is forecasted that the nation’s total building square footage is going to increase by 28% between now and 2030 and 60% percent of buildings will be newly reconstructed or in need of renovation.

“Standard forecasts project that the buildings sector’s energy use will keep rising. But those forecasts aren’t fated to come true. We can save 38% and could probably save 69% of building sector’s projected use of primary energy in 2050, very cost-effectively. Investing an extra $0.5 trillion (in 2010 present value) over the next 40 years could save 38% of energy costs or $1.9 trillion—a $1.4-trillion-net opportunity requiring no new invention.” (RMI.org)

Integrative design on buildings is a key form of design that could provide huge returns on building design and renovation. Integrative design give a holistic picture of building design that fully considers all capital costs involved instead of compartmentalizing them. A good example of this is determining how much insulation should be used in a home: currently the formula is using the thickness that will repay it’s marginal cost from the present value of the saved heating energy, but it does not consider the capital cost of the heating system itself (ducts, fans, pipes, pumps, wires, controls, and fuel source). Considering these costs, a house built with high efficiency insulation, windows air-to-air heat exchanges etc. can cost less overall than the heating system they replace. This approach has been adopted in over 20,000 houses in the EU and US saving 75-95% heating energy with no additional cost.

A retrofit to the empire state building is now underway with a plan to save 38% of its energy expenditure with a 3-year payback: remaking its 6,500 windows into superwindows that allow light but not heat to pass through, as well as renovating it’s lighting system will save 17.4 million by allowing them to downsize their cooling systems instead of replacing and expanding them. (Lovins, 2010)

The true value of these savings can be seen when we consider the compounding losses that occur to for each unit of energy output. As seen in the image below, 100 units of primary energy used results in 10 units of output. A compound savings effect can occur through the integrative design techniques described above, not that by consuming 3 units less of energy, the savings compounds to 30 units of primary energy saved.

 Image

(Image source: Lovins 2010)

Business leaders should recognize these benefits and demand more effect design outcomes and look for the net effects of improved efficiency when considering the costs and benefits. This will create a “demand pull” effect to drive reforms of engineering pedagogy and practice.

Automotive innovation:

            Innovations in automobile efficiency are about to reach critical mass and make electric cars affordable and feasible in our nation, both for individual and public transport, and commercial freight systems.

            Automobiles are deeply entrenched in U.S. culture. Most American cities are difficult if not impossible to navigate quickly without one. Cars are often seen as a status symbol.

            Heavy trucks account for 18% of US oil usage, which is about 3.8 million barrels a day, 60% percent of goods in the US are moved by tractors and trailers, but despite their ubiquity, the design of freight truck systems has remained unchanged for over 50 years. It is not a stretch of the mind to see the inefficiency of a giant rectangle moving down the freeway at 55mph. Our trucking systems are laden with opportunities to increase efficiency and be a huge benefit to both businesses, consumers, and the environment. According to the Rocky Mountain Institute the technology currently exists to increase trucking efficiency by 45% (and an additional 30% when extrapolating improvements to 2050) with the immediate benefits of lower and more predicable fuel costs, and reduced pressure from governmental regulations. (Sahl, 2009)

 

 Image

(Image source:  Lovins 2011)

            Innovation has been slow due to the fragmented nature of the trucking industry, but an example of an early adopter of these practices is Wal Mart. In 2006 Wal Mart worked with RMI to identify ways to increase the efficiency of their freight fleet. Wal Mart has a goal of doubling their fleet’s fuel economy by 2015, increasing their competitive advantage by reducing fuel dependency and cost at the pump, as well as the added net benefit of reducing carbon dioxide emissions by 26 billion pounds between now and 2020. (RMI.org, 2011)

            These are only a few of the innovations that the RMI is using to drive a shift to sustainability and efficiency through the private sector. As more companies adopt these methods to reduce their bottom line, it will become essential for other companies to adopt them as well to remain competitive.

 

Sources:

Amory B. Lovins (14 March 2010). Integrative Design: A Disruptive Source of Expanding returns to Investments in Energy Efficiency. Retrieved from http://www.rmi.org/Knowledge-Center/Library/2010-09_IntegrativeDesign

 

Amanda B. Sahl, Mike B. Simpson, Hiroko Kawai (2009). U.S. Transformational Trucking Environment and Efficiency in Freight Mobility. Retrieved from http://www.rmi.org/Knowledge-Center/Library/2009-19_USTransformationalTrucking

 

Amory B. Lovins (2011). Reinventing Fire Transportation Sector Methodology. Reinventing Fire Transportation Sector Methodology. Retrieved from http://www.rmi.org/Knowledge-Center/Library/2011-16_RFtransportationsectormethodology

RMI.org (2011) Wal-Mart’s Fleet Operations

http://www.rmi.org/Walmartsfleetoperations

 

 

 

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