Transcript Slide 1

Russian Presidential Academy of National Economy and Public Administration
A Thought Experiment – Energy as Work:
Understanding the Economic Imperative of Greater Efficiency*
John A. “Skip” Laitner
Gaidar Forum 2015
Russia and the World: New Dimensions
Sustainable Development: Decarbonization Pathways
January 15, 2015
* In the spirit of the discovery of the Higgs boson which required the support and hard work of 10,000 theoretical
and experimental physicists from 100 different countries – as many of those countries were at war with each other!
Integrating a Deeper Perspective
• The productivity benefits from the current generation
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of industrial technologies are generally diminishing.
Evidence indicates that, among the biggest reasons
for those diminishing returns, is the inefficient use of
resources – especially the inefficient use of energy.
A social and economic transformation is clearly
needed to sustain the economy and move it forward –
driven by purposeful effort that includes both directed
actions and targeted investments which drive
improvements in resource productivity.
Energy efficiency – not necessarily new supply – may
provide the critical and productive link between today’s
economic activity and tomorrow’s economic future.
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The Six-Step Thought Experiment
• Explore the critical difference between energy as
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a “commodity” versus energy as “work.”
Examine the magnitudes of energy waste.
Review the possible link between energy
efficiency and per capita economic activity.
Examine the costs of energy services as they
impact economic activity.
Offer final thoughts with suggested next steps
ahead.
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We Begin with Two Views on Energy
• Energy as commodities that are sold on the market
(e.g., barrels of oil or kilowatt-hours of electricity) –
tracked by the various governmental agencies.
• Energy as the capacity to do useful work, necessary
to transform matter into necessary goods and services
for a local economy and distribute or make them
available as needed
• To ensure the appropriate development of innovation
that ensures sustainable economic activity, the
emphasis needs to be on energy as work.
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Exploring Energy as Work
Energy = Exergy + Anergy = Constant
Source: Kümmel (2011)
Work = Exergy * Efficiency
Source: Ayres and Warr (2009), and Laitner (2014a,b)
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Energy = Exergy + Anergy = Constant
Useless
Anergy
High Quality
Exergy
Drawn neither to scale nor shape
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Energy = Exergy + Anergy = Constant
Useless
Anergy
High Quality
Exergy
As high quality energy is used up,
there is more waste but total
energy remains constant
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Comparing reported energy, applied exergy, and useful work
Total “Energy
Commodities” Reported
Total Exergy
Applied
as Work
Useful Work
Completed
Where the difference between the useful work that is completed,
and the total exergy that is consumed, equals waste. . .
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Comparing Russian Federation and the United States:
Energy, GDP and Initial Levels of Energy (in)Efficiency
Region
Population GDP (USD
(Millions) 2005 PPP)
TPES
(Mtoe)
TPES
Intensity
(Exajoules) (MJ/$GDP) %Efficiency
%Waste
Russian Federation
142
2,104
731
27.5
13.8
9.9%
90.1%
United States
312
13,226
2,191
82.4
6.6
20.9%
79.1%
Source: IEA Energy Indicators for 2011 (2013)
Note: This comparison draws only from the conventionally reported energy. If a full exergy assessment
shows perhaps 20 percent of exergy that is not reported, then the “exergy efficiency” might be reduced to
about 8 percent and 14 percent for the Russian Federation and the United States, respectively.
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Where we want to be. . .
What we want to avoid!
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A Key Distinction between Energy Costs
and the Full Costs of Energy Services
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Energy costs generally refer to the unit price of energy
flows as they may be paid by a household, business, or
government consumer of energy
The full costs of energy services refer to the array of
capital, labor, and energy resources as they enable the
transformation of matter into useful goods and services
A proper accounting of energy services includes both the
costs of market transactions and the array of social,
economic, and environmental externalities
Yes, it is important to consider the cost of energy; but
the inefficient use of any resource may impose even
larger total costs that limit future economic opportunity.
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Economy-Wide Benefits of a Lower Cost of Energy Services
Energy Expenditures (currency)
(perhaps the most important slide of this talk!)
Initial Total
Energy
Purchases
plus Social,
Economic,
Health, and
Environmental
Costs
Reference
Case Cost of
Energy Services
Costs in Year X
Policy and
Program
Expenses
Year X
Investment
Expenditures
Year X
Reduced Total
Cost of
Energy
Services
Year X
Remaining
Costs of Energy
Services
Year X
The combination of energy efficiency and new energy resources must be able
to reduce the real cost of energy services each year, and in whatever year!
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A Further Thought on the Tough Choices
“Individuals have a natural tendency to choose
from an impoverished option bag. Cognitive
research in problem solving shows that individuals
usually generate only about 30 percent of the
total number of potential options on simple
problems, and that, on average, individuals miss
about 70 percent to 80 percent of the potential
high-quality alternatives (emphasis in the
original).”
Dr. Jeffrey S. Luke
Catalytic Leadership: Strategies
for an Interconnected World, 1998
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A Final Thought on a New Reality??
The complete economic recovery and robust
development of the World’s long-term prosperity
will not be possible without large increases in
purposeful investment and greater levels of
resource and energy efficiency – all enabled by
significant reductions in the full cost of energy
services, and motivated by informed attitudes
and more productive behaviors. It can be done.
The opportunities are there. But they require
imagination, effort, and new business models
together with new ways of managing resources.
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The difficulty lies not with the new
ideas, but in escaping the old ones. . .
John Maynard Keynes
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Selected References
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Ayres, Robert U. and Benjamin Warr. 2009. The Economic Growth
Engine: How Energy and Work Drive Material Prosperity. Northampton,
MA: Edward Elgar Publishing, Inc.
International Energy Agency. 2014. Energy Efficiency Market Report.
Paris, France: OECD/IEA.
Kümmel, Reiner. 2011. The Second Law of Economics: Energy,
Entropy, and the Origins of Wealth. New York, NY: Springer.
Laitner, John A. “Skip.” 2014a. “The Link between Energy Efficiency,
Useful Work, and a Robust Economy.” In: Byrne, John, and Wang,
Young-Doo, eds. Green Energy Economies. New Brunswick, NJ:
Transaction Publishers.
Laitner, John A. “Skip.” 2014b. “Linking Energy Efficiency to Economic
Productivity: Recommendations for Improving the Robustness of the
U.S. Economy.” Wiley’s Energy Environ 2014. doi: 10.1002/wene.135.
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Contact Information
John A. “Skip” Laitner
Senior Research Fellow
Russian Presidential Academy for National Economy and Public Administration
Principal Economist and Consultant
Economic and Human Dimensions Research Associates
Senior Fellow, American Council for an Energy-Efficient Economy (ACEEE) and the
CNA Public Policy Research Institute for Energy, Water, and Climate
Tucson, Arizona USA 85750
c: (571) 332-9434
Email: [email protected]
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