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President's Message 2nd Quarter 2014

By Robert Thornton posted 06-16-2017 20:15

  

From District Energy Magazine, Second Quarter, 2014


In recent months, during frequent discus­sions with policy makers, regulators, utility officials, agency heads and real estate developers, I have often been reminded of the quote in Oscar Wilde’s The Picture of Dorian Gray: “Nowadays, people know the price of everything and the value of nothing.” Time and again this phrase hits home when discussing district energy’s advantages over traditional in-building equipment. All too often, I find people drawing quick conclusions based on simplistic calculations of equipment efficiencies based, at best, on laboratory test ratings or, at worst, on notional and unproven manufacturer claims of efficiency, wrongly assumed to last in perpetuity. Obviously, many factors impact energy economics including the real and volatile costs of fuel; part-load performance; labor, maintenance and service costs; replacements and repairs; and, of course, capital investment and space opportunity costs. Time and space prevent a full discus­sion here, but the comparative economics remain an ongoing challenge of education and research. And a big part of our challenge lies in our ability to define the value of district energy by capturing and contrasting the full range of benefits of more resilient, more ef­ficient and cleaner energy services for cities and communities.

In Wilde’s 1890 novel, Dorian Gray is a physically beautiful young man who is objectified in a painting by an artist. When the painting brings the artist overnight fame and fortune, he becomes infatuated with Dorian who, in turn, becomes enthralled with the he­donistic pursuits of the artist’s influential and powerful friend, Lord Henry Wotton. Dorian, realizing that his newly elevated social status is ephemeral and tied solely to his appearance, whimsically expresses a desire to sell his soul to ensure that the portrait that the artist has painted will age, rather than he. When his wish is granted and Dorian sets out on a life of abject debauchery, the portrait captures each sin as disfigurement, displaying the “unseen” impact on his soul. 

In some ways, I feel that many of our energy decisions are like this Faustian bargain, giving us immediate gratification while hoping to mask the long-term impact on our economy, our environment and our children’s future. A perfect example in the U.S. is Congress’s sud­den infatuation with extracting, liquefying and shipping huge volumes of shale gas overseas and linking its export to a patriotic delever­aging of Europe’s dependence on Vladimir Putin’s natural gas. The fossil lobby is ever eager to paint a new picture, yet fails to fully acknowledge what accelerating exports might do to slow the “re-shoring” of U.S. manufactur­ing, increase the cost of consumer goods and, quite frankly, increase the price of power. We are quick to hang this new portrait on the wall, depicting U.S. natural gas as somehow defend­ing freedom for Ukraine, Germany and Poland when, in reality, there may be some real unforeseen and unintended consequences of increasing its export.

Please don’t misunderstand: I am no pro­tectionist and am not opposed to exporting U.S. natural gas. I appreciate how exports will improve the U.S. energy trade balance. But let’s be honest; it will take some time to acti­vate the new liquefied natural gas terminals before we can deliver sufficient throughput of U.S. supply to make a dent in Germany’s 30 percent dependence on Russian gas. Moreover, once that gas is liquefied and on board, those ships will likely sail to the des­tination port of the highest bidder. Will that tanker unload in Poland, where U.S. LNG will compete with pipeline gas, or on the island of Japan, where today’s demand price is around $17 per MMBtu, nearly 300 percent of the U.S. domestic market price? And I think it’s a bit simplistic to think that Russia, with nearly 70 percent of its GDP tied directly to exports of oil and gas, will cut off its nose to spite its face and imperil its tenuous economy with threats to close the valves in Ukraine. With the recent Intergovernmental Panel on Climate Change report describ­ing the causal link between carbon dioxide emissions, climate change and global economic disruption, it’s time we tempered our fossil fuel hedonism with some real soul-searching about the value of investment in efficiency, especially at a community scale.

Another underappreciated conse­quence of unfettered consumption of fossil fuels is the price of air pollution from combustion. Power plants alone are not the sole cause, but in March 2014, the World Health Organization (WHO) reported that 7 million deaths annually, or one in eight across the globe, are caused by dirty air, with nearly one-third occurring in Asia, where the rates of cardiovascular and pulmonary disease are soaring. The WHO report calls air pol­lution the world’s single biggest envi­ronmental health risk. For the moment, set aside overheating the atmosphere with climate-changing CO2 and simply consider the costs of early death and disease onset for millions of citizens. China has got to see the writing on the wall of dense, stultifying smog where Beijing’s skyscrapers are not visible from a block away. The recorded level of particulates in the air has at times been four times dirtier than the typical air in an airport smoker’s lounge. So what price will Chinese citizens pay when so little value is applied to clean air? What is a reasonable price for electricity from coal or lignite-fueled power plants that would enable them to install environmental controls yet still feed cheap power to the manufacturing sector? Heck, much of the coal we used to burn in the now shut­tered Midwest coal-fired power plants is currently fueling China.

For many reasons, we need to paint a different picture for China’s future, a picture that includes more district heat­ing and cooling, integrated combined heat and power and a determined focus on more efficient power generation. The WHO report was released in conjunction with a World Bank study on China’s drive to urbanize, which estimates China will invest $5.3 trillion in urban infrastructure over the next 15 years, moving 100 mil­lion farmers into cities and shifting 100 million more current city dwellers into newer urban locations nearer to schools and hospitals, claiming land the size of the Netherlands. The World Bank calls for more densification in China to avoid urban sprawl that uses up land, extends daily commutes and consumes more energy for transit, housing and business. For instance, the World Bank study cites Guangzhou, a city of 8.5 million inhabit­ants, as ideally housing 4.2 million more, to be more on par with the density of Seoul, South Korea. To achieve those lev­els of population density with any sense of sustainability will absolutely require well-designed district energy systems operating at very high efficiencies.

Densification and transit-oriented de­velopment are important trends for North America as well. Baby boomers are selling off the suburban homestead and moving downtown to be within walking distance of interesting restaurants, culture and other services. Millennials will happily forego a car, preferring to live within walking distance of a good latte and a few trolley stops or easy bike ride from the office. Our cities are clearly regional eco­nomic engines, and as population grows, the energy appetite of our urban centers will escalate. Mayors, CEOs and scientists want access to cleaner, more reliable and more resilient energy services, best provided by distributed generation utiliz­ing district energy, CHP and microgrid technologies. Those cities that succeed in the decades ahead will have recognized this shift today and not only planned for more modern infrastructure but also more importantly enabled the policies, zoning and incentives to deploy it.

It’s time we peel back some layers on our energy decisions and look at the whole picture. This is not easy, nor will it be uniform across boundaries. What makes sense in Portland may not play in Peoria. Regional energy prices, state policies and regulations, and cultural norms will influence outcomes. But the writing is on the wall. The true picture of healthier, thriving cities and communities will be those that invest in thermal en­ergy infrastructure, enable more distrib­uted generation and understand source energy efficiency. It is critical that we work with and inform regulators about how to properly apportion costs and risks so that public and private investment in district energy is accelerated and the true value of these assets is realized.

Moreover, it’s time we dealt with the real elephant in the room. We spend countless man-hours on regulating the efficiency of refrigerators and television sets, rightfully applauding these incre­mental gains, while ignoring the ridicu­lous inefficiency of electricity generating plants, which account for fully 36 percent of total energy waste in the U.S. economy. Like the wizened and desiccated Dorian Gray in the painting, the remote power station that literally dumps two-thirds of its energy input as waste heat should be recognized for what it really is and not confused with some fictitious image from an earlier era. It’s time we painted a new picture for the future of our energy systems.



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