Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
1515826
label
Energy - Meeting with George Humphreys and Glenn Schleede, August 12, 1976
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
1515826
sourceUrl
contentType
document
title
Energy - Meeting with George Humphreys and Glenn Schleede, August 12, 1976
citationUrl
collections
James M. Cannon Files (Ford Administration)
James Cannon's Issues Files
subjects
Energy Research and Development Administration. (01/19/1975 - 10/01/1977)
President (1974-1977 : Ford). Council on Environmental Quality. (1974 - 1977)
Energy policy
iiifBase
thumbnailUrl
largeImageUrl
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
1515826
coverageEndDate
logicalDate
1976-08-01
month
8
year
1976
coverageStartDate
logicalDate
1976-08-01
month
8
year
1976
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
url
mediaId
9ee10e84f34854c8
ocrText
The original documents are located in Box 13, folder "Energy - Meeting with George
Humphreys and Glenn Schleede, August 12, 1976" of the James M. Cannon Files at the
Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 13 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
LIAISON STAFF MEETING
Wednesday, July 21, 1976
7:30 a.m.
MEETING & WITH GEORGE Emergy HUMPHREYS
GLENN SCHLEEDE
Thursday, August I
3:30 p.m.
re: CEQ Draft R&D Report on Energy
Hold
for
LIBRARY GERALD R. FORD
and
THE WHITE HOUSE
WASHINGTON
Tues, Aug 10
Kris:
JMC would like to meet briefly
with Humphreys & Schleede re:
the attached on Wed. Can you
set this up?
thanks
thus.
C
3:30
FORD & LIBRARY GERALD
THE WHITE HOUSE
WASHINGTON
Tachto
August 10, 1976
Gleun
MEMORANDUM FOR:
George
FROM:
SUBJECT:
ON ENERGY R&D
The Non-Nuclear Energy Research and Development Act
of 1974 requires CEQ to evaluate the Federal Government's
energy research, development, and demonstration (RD&D)
program, including public hearings and submission of a
report to the Congress.
CEQ has completed the draft report and has been reviewing
it with OMB for the last two or three months. OMB
staff, today, told me that they had reached an impasse
with CEQ staff on some parts of the report, particularly
those sections dealing with energy conservation.
a
OMB staff believe the treatment of energy conservation
is inconsistent with Administration policy. I agree.
You may recall that we went through a similar situation
with ERDA last March or April when ERDA was seeking to
claim a very large role for the Federal Government in
developing energy conservation technology. After
considerable discussions, ERDA agreed to make clear in
their report that the primary responsibility for energy
conservation RD&D should rest with private industry.
The President has already been criticized for not
requesting enough money for energy conservation and
the Congress added $40 million to his request for ERDA.
I believe the CEQ report issued in its current form
would provide the basis for still additional criticism.
The report could be revised to bring it in line with existing
policy, but this would require some rewriting and probably
would require acceptance by CEQ of a philosophy different
from the one they are espousing in the draft.
GERALD LIBRARY ? FORD
-2-
I am bringing this to your attention now because:
-- CEQ staff are aware that I agree with OMB on
the need for a substantial change in the report,
and
-- The matter probably is being escalated within OMB.
A copy of the report is attached.
CC: George Humphreys
GERALO
LIBEARY
AUG
6
Fart 2
BUILDING ENERGY CONSERVATION
INTO ENERGY RD8D
The Council defines "adequacy of attention to energy conservation"
in federal energy research, development and demonstration (RD&D) to mean
the capability to identify the full range of possible energy conservation
RD&D options, to create a factual basis for comparing them to other
energy RD&D choices, and to develop appropriate programs to assure that the
best options are made available to the nation. This part of our assessment
measures program planning and implementation at the Energy Research and
Development Administration against this definition of adequacy.
Since its first National Plan (ERDA-48) was published in June of
1975, ERDA's attention to energy conservation has been under critical
review by the Council and by others. For example, testimony at the
Council's public hearings, held last September, questioned whether ERDA
had given adequate priority initially to energy conservation, considering
conservation's possible future role, and the small amount of federal
resources allocated to ERDA's conservation RD&D program compared with
FORD LIBRARY
the resources allocated to other energy RD&D options.
In April of 1976, ERDA updated its first plan. ERDA 76-1 singles
out conservation technologies for increased attention, ranking them with
several supply technologies as being of the highest priority for national
action. This represents a major change from the initial plan. It is based
on further analysis of conservation opportunities, is responsive to
public comments on the initial plan, and flects ERDA's conclusion that
only moderate progress is being made to date on the development of supply
technologies. ERDA 76-1 establishes an immediate 5-year planning period
during which energy conservation opportunities ready for commercialization
will receive special attention. Further,
the President's FY1977 Budget increases ERDA's energy conservation RD&D
resources by 64 percent.
The Council's assessment focuses on the revised National Plan
and its underlying analyses. We believe that ERDA's National Plan
for Energy RD&D is a substantial accomplishment for such a new agency:
The plan is a major improvement over its predecessor
in addressing energy conservation. It is a benchmark
from which to begin a systematic effort toward a
more complete approach to conservation RD&D.
The Plan itself -- and its agenda for the future --
illustrates ERDA's commitment to a rational and
analytical approach to energy RD&D. It is moving
toward the systematic and explicit identification of
our energy problems and the development of tech-
nology to resolve them.
ERDA has undertaken a substantial effort --
some of which began before ERDA 76-1 but was not
yet completed by the first quarter of 1976 -- to
improve the Plan and to make the ERDA program more
effective.
ERDA is actively seeking wide review and comment on
its programs and appears responsive to comments and
criticisms received.
These developments are encouraging. In responding to our mandate,
however, the Council must measure "adequacy" against plans and programs
as they are now in place and operating, not simply on progress since
ERDA's establishment or on commitments to improvement. We recognize
ERDA's progress and the many positive steps already underway, but based
upon our independent assessment of ERDA's planning and program implementation
at the end of the first quarter of 1976 we have identified the following
problems:
Many critical issues affecting the role of
conservation in the overall energy RD&D program
have not yet been resolved (these are discussed
in Chapter III). In particular, the appropriate
planning, development and commercialization time
frame and levels of effort for conservation RD&D
programs have not been thoroughly addressed.
The current National Plan is not yet built on a
strong analytical foundation.
Granting that conservation is a new program
in a new agency, there remain serious questions
about the rate of progress in developing the
analytical ability to compare conservation
technologies with the more advanced energy supply
technologies.
We recognize that the magnitude and technical direction of an
adequate conservation program are not easy to determine. We also realize
that simply "throwing" money at conservation would be wasteful. Never-
theless, the Council is seriously concerned about the pace of improvement
on several counts:
Many of the basic agency policies and capabilities
necessary to give conservation the same level of
planning and management attention as supply enhancement,
particularly the more advanced technologies such as nuclear
and coal, are still in a very rudiemntary stage of develop-
ment. Action plans to reach these objectives are
unspecific. It appears that ERDA may fall short of
correcting these problems in the next two years.
The Conservation programs are not generating the
essential technical, economic and environmental
information to permit analysis of conservation
opportunities and planning based on conservation-
supply comparisons; nor is work to produce it in the
future in place within all of the programs.
Conservation program resources are limited, not just
for technical program development, but for the fact-
finding and other basic analysis which will permit
sound conservation planning. This is in comparison
with the supply programs which get major technical and
analytical support from ERDA's extensive field laboratory
structure.
As we have noted, conservation RD&D is one of ERDA's high priority
programs for the next 10 years. Thus, delay in building the capability
to analyze, plan, and implement energy conservation RD&D options could
jeopardize the near-term contributions of ERDA's programs. In short,
much of the near-term could pass before ERDA fully integrates this capability
into its overall planning and management structure.
Equally important, the Council believes that there are potentially
significant conservation RD&D opportunities over the mid-term and
long-term. We believe that these opportunities must receive full
consideration in the critical early formative stages of ERDA's planning
program. Momentum tends to build as commitments are made to specific
sets of technologies and continues as multi-year claims are made on
future funds. Already there is a great momentum behind a number of
mid-term and long-term supply programs such as those to produce gas and
liquid fuels from coal, and advanced nuclear systems, backed up by a
comparatively sophisticated planning capability. If mid- and long-term
energy conservation programs continue to receive inadequate attention
in the early stages of this new agency, it will be difficult to redress
the balance later.
ERDA should accelerate its ability to analyze and develop potential
conservation RD&D options across all time frames. To assure adequate
attention to energy conservation we believe that the following general
improvements must be implemented within the next two years.
ERDA's analytical capability for planning, which is
already quite advanced, should be expanded to incorporate
fully conservation technology options, including
information on economic, environmental and social impacts.
The planning process should compare specific conservation
and supply RD&D opportunities across all planning
periods and use these comparisons for establishing
priorities and allocating available resources.
The conservation RD&D programs must identify conservation
RD&D opportunities over all planning periods, generate
sufficient information to analyze them, and organize
research programs with sufficient focus to realize the
benefits of the best of the opportunities.
ERDA should carefully evaluate the role of federal
conservation RD&D vis-a-vis the likelihood that the private
sector will undertake the RD&D necessary to recognize the
potential national benefits of energy conservation.
The remainder of this part of the report expands on these findings.
AUG
Chapter III
MAJOR ENERGY CONSERVATION ISSUES
The Council reviewed ERDA 76-1 and also looked carefully at its
underlying analyses. This chapter evaluates the National Plan from the
perspective of adequacy of attention to energy conservation. It raises
a series of issues which we believe were not adequately addressed in
ERDA 76-1 but are essential to building conservation into ERDA's
programs. In our view, these issues should be given high priority
attention and should be addressed specifically in the next version of
the National Plan in order to provide the basis for public
review and debate which ERDA recognizes is important. The major "adequacy
of attention" issues, which we have framed in question form, are as follows:
Is the near-term priority role established by
ERDA for new energy conservation technologies -
primarily stressing demonstration and application of
existing end-use products and processes --- the correct one?
Is the energy conservation program of adequate size
when measured against the potential benefits of
conservation-intensive energy choices and the RD&D
resources allocated to supply enhancement?
Are all potential conservation RD&D options given
full consideration and are the energy conservation
technology programs designed with adequate technical
focus?
Near-Term Role for Energy Conservation RD&D
Thus, there are two additional adequacy of attention issues with respect
to the substance of ERDA's near-term strategy:
Is ERDA's energy conservation strategy sufficient to
make technically and commercially adequate conservation
technologies available in the near-term?
Is current energy conservation RD&D adequate to the high
priority, near-term goal that ERDA set?
III-2
A major purpose of ERDA's revised Plan is to broaden the Nation's
range of available energy options. Table II-1 lists the Plan's ranking
of "highest priority" demand and supply technologies. The Council agrees
that energy conservation can play a critical role in the near-term and
supports the additional resource commitment.
Table II-1: Proposed Priorities for RDED Technologies -
Highest Priority Demand
Near-Term Conservation
Conservation in Buildings and Con
(Efficiency) Technologies
sumer Products
Industrial Energy Efficiency
Transportation Efficiency
Waste Materials to Energy
Highest Priority Supply
Near-Term Major Energy
Coal-Direct Utilization
in
Systems
Utility/Industry
Nuclear-Converter Reactors
Oil and Gas Enhanced Recovery
New Sources of Liquids and
Gaseous and Liquid Fuels from
Gases for the Mid-Term
Coal
Oil Shale
"Inexhaustible" Sources
Breeder Reactors
for the Long Term
Fusion
Solar Electric
*Source: ERDA 76-1
But we are concerned with the lack of precision as to ERDA's role during
this period. Since near-term energy conservation is given high priority,
commercial or almost commercial technology will form the basis for the
RD&D program for the next 5 years. The Plan describes the major near-term
opportunities in the three energy end-use sectors as:
III- 3
Industry conservation: "[a] host of more
efficient technologies
is known.
Buildings conservation: "[a] number of specific
technologies exist that need to be inte-
grated and may require innovative marketing
by industry to motivate consumers to accept
and install them."
Transportation energy conservation: "[the]
transportation sector
can reduce its
petroleum consumption by using well-proven
technologies and by implementing well-
studied operational changes."
ERDA 76-1 identifies the main RD&D obstacle with respect to this host of
available technologies as overcoming "problems of economic uncertainties,
and normal resistance to the acceptance of new 'products'. A five-part
energy conservation strategy is based on this statement: A national
policy conducive to the adoption of energy-efficient technologies; a
five-year planning horizon; accelerated identification of promising
technologies and dissemination of information about their application;
integration of market and institutional barriers into the plans for
developing the most attractive conservation technologies and for facilitating
their implementation; and demonstration programs to work out the implementation
details.
Early application of available conservation technologies may make
sense as a good consumer investment and is in the public interest. But
much of ERDA's strategy is a commitment to existing technologies, essentially
"off the shelf." The agency does not devote any significant resources
to upgrading the efficiency of these technologies. For example, heat
pumps are being employed in several building demonstration projects but
there is no RD&D program to improve heat pump performance or develop
advanced types of heat pumps. In contrast, ERDA does plan to upgrade,
prior to commercialization, economically and technically submarginal
supply technologies such as coal liquefaction, coal gasification, and
tertiary oil recovery. Conservation technologies do not receive the same attention
III-
Two additional questions relate to ERDA's concept of energy con-
servation's future role:
Is the near-term the correct high priority timeframe
for federal energy conservation RD&D?
Is there more, new and different mid-term and
long-term conservation RD&D that should also have
high priority considering potential national benefits?
One of the chief reasons for ERDA's assignment of high near-term
priority to conservation is that few, if any, major new supply technologies
can provide significant amounts of energy by 1985. However, while con-
centrating on energy conservation in the near-term, we believe that ERDA
may be neglecting important and needed conservation opportunities in the
mid- and long-term planning periods. Conservation in these periods could
become an important source of energy if new supply technologies lag in
development because of a combination of technical and institutional problems,
(in the past, major transitions to new fuel supplies have taken 50 years
or more = ERDA is hoping for significant results from its supply programs in
10-20 years) or because of potentially serious environmental problems
(see Part III of this report). The longer new supply technologies lag,
the greater contribution energy conservation can make to reduce the gross
energy required to meet the same human needs.
In addition, should new supply technologies fail or fall short of
current expectations, the cost of energy could rise even more than
expected. Higher-priced energy automatically generates a market for
improved energy conservation technology. However, failure to conduct
basic RD&D now to provide energy conservation opportunities for the mid-
and long-term could mean that neither conservation nor supply technologies
will be available when and if they are needed.
III- - 5
Relative Size of the Conservation and Supply RD&D Programs
Four underlying issues should be addressed by ERDA:
Are the short-term factors which translate
conservation's high RD&D priority into ERDA's
smallest energy RD&D program (its newness and
relatively early state of planning) also applicable
in the mid-term and long-term?
Is ERDA, in developing its program, considering
the conservation benefits and the likelihood
that private RD&D will produce the technology
needed to realize these benefits?
o Should a substantial federal conservation RD&D
program exist as a hedge against the risk of losing
the large benefits of conservation?
Earlier in this chapter we noted that ERDA's proposed energy
conservation budget increased by 64 percent between FY1976 and FY1977.
However, from a different perspective, energy conservation received
only 6 percent of the agency's total increase between the two years
(see Figure II-2).
Comparison of energy conservation's share of ERDA's total program
(not just the annual increase) shows a small conservation effort
relative to supply -- 4 percent of the total (see Figure II- for
a comparison). Conservation ranks next to smallest among the major
RD&D programs.
The primary reasons for this situation are obvious: conservation
is a new program that has started small and is growing fast; conservation
is still in the early and relatively inexpensive stages of planning and
development whereas some of the supply technologies are well into the
more expensive demonstration stage. However, we believe that these are
short-term conditions. They should be assessed to assure that conservation
is receiving a share of RD&D resources commensurate with the potential
benefits and the appropriate federal role. In the future ERDA should
make explicit comparisons of the allocation of resources versus the
potential benefits of conservation relative to supply RD&D. ERDA-76-1
observes that a barrel of oil saved can reduce
imports at less cost than producing one through development of new supply
technology; that energy conservation generally has a more beneficial
effect on the environment; and that capital requirements to increase
energy use efficiency are generally lower than capital needs to produce
an equivalent amount of energy from new sources (most new supply tech-
nologies are highly capital intensive). Further, these benefits continue
over time because the use of conservation as a "source" of energy can
relieve pressure for new supply technologies.
As a measure of benefits, ERDA 76-1 estimates energy impact goals
for each energy technology in the year 2000. On the basis of this
benefit measure, the proportions of RD&D effort directed at energy
conservation and at the supply technologies with which it competes in
the near- and mid-term vary widely. Supply enhancement technologies
contribute about 66 percent of the total year-2000 goal and receive about
ERDA
90 percent of the/RD&D effort in FY1977. Conservation technologies
contribute 22 percent and receive 4 percent,
These comparisons link energy savings with the one-year ERDA funds
directed at conservation. These comparisons are not the kind that we would
like to use in assessing the rationality of ERDA's allocation of funds among
energy conservation strategies or between conservation RD&D and supply RD&D.
Rather, the question is of the additional benefits (in terms of likely
national savings) expected from allocating additional ERDA funds to a
particular research area. The expected total energy savings from a
conservation strategy may be high, but the impact of additional ERDA
research on this savings may be small, either because the full potential
is known or because the required research is being carried out by other
public or private institutions. Another strategy may offer less potential
for total energy savings, but the savings actually realized could be
highly dependent on ERDA research.
ERDA has not yet established research planning and analysis which
produce the kinds of information required to make these judgments. The
CEQ review, therefore, though recognizing the weakness in the analysis,
has had to depend upon comparisons between total savings and research
allocations. They do illustrate, in a general way, the apparent cost-
effectiveness of investments in energy conservation.
- r
To further illustrate the benefits
side of the equation, the Council estimated consumer savings from technical
improvements in major portions of the transportation and buildings end-use
sectors (see Table II-3). The proposed funding levels in FY1977 for
these R&D programs amounted to $12.8 million, $1.2 million, and less than
$2.7 million respectively.
Table II-3: Energy Conservation Benefits and RD&D Effort
*
Incremental
Benefits
($millions)
AUTO EFFICIENCY
- Redesign of non-engine components
$59,000 mun
- Engine re-design
Stratified charge, or
21,000
Diesel, or
23,000
Stirling, or
28,000
Brayton
29,000
BUILDING EFFICIENCY
- Improved insulation
19,000
- Advanced heat pumps
6,000
*After allowance for the time-value of money; constant
1975 dollars.
III-9
These rough estimates, as did ERDA's, indicate large potential
benefits from improved end-use devices. Measured cumulatively over time,
rather than just at the year 2000, the gap between potential of benefits
and the level of federal RD&D planned to ensure these benefits grows
which does not consider the full social costs of implementation
even wider. Although this represents a very crude comparison, /the ratio
of potential benefits compared to current expenditures appears so cost-
effective as to justify significant investment.
ERDA 76-1 observes that establishing national priorities for
energy RD&D does not equate necessarily with priorities for the allocation
of federal funds. Specifically, it states that primary responsibility
for the development of conservation technologies rests with the private
sector because in general, they can be implemented with less government
involvement than can supply technologies. This may be the case,
particularly for near-term conservation opportunities.
Major allocation of resources among RD&D options should not be made
subjectively. When the benefit/cost ratio of a conservation technology
appears to be high, care must be taken to compare that opportunity on an
equal footing with all competing options. The risk that, for institutional
or other reasons, the private sector will not develop energy conservation
technologies, or will not develop them soon enough should be carefully
considered in allocating resources. If the risk appears to be too great
in terms of lost or diminished benefits to justify near exclusive reliance
on private industry, the government should develop these technologies.
Identifying and Implementing Conservation RD&D Program Opportunities
In this area there are three issues which require attention:
What alternative approaches might be used to
identify and compare conservation RD&D opportunities?
Are ERDA's present energy savings estimates backed up
by research work focused with sufficient depth on
high payoff options?
What factors explain the large variations in levels
and concentration of effort among the energy
conservation programs?
As noted, ERDA 76-1 states that conservation technologies provide
a potential cost-effective alternative to development of other energy
technologies. Realizing this benefit will require the identification of
potential conservation, as well as supply, opportunities. In order to
provide an objective basis for comparison,
all potential opportunities should be ranked according to cost-
effectiveness without attention to whether they are conservation or supply
oriented. This combined ranking could then be used for allocation of
available RD&D funds. Of course other factors, such as the likelihood
of commercialization of a technology or whether the technology will be
commercialized without government assistance, must be considered before
final resources allocation decisions are made. At this early stage in
its development, ERDA has not yet implemented such a ranking process.
ERDA measures its planned conservation RD&D accomplishments
in relation to a "no conservation" forecast of future energy use. This
kind of yardstick alone cannot identify what energy conservation RD&D
should be carried out in relation to supply RD&D. One alternative approach
would be to measure conservation objectives against the maximum feasible
energy savings physically achievable, using principles of the Second Law
of Thermodynamics. In contrast to a "no conservation" energy forecast,
theoretical physical principles provide a steady reference for measuring
present against potential technology efficiencies.
The Second Law of Thermodynamics states the maximum fraction of
a given quantity of heat energy which can be converted into useful work
(the fraction is always less than 1.0). Energy is not destroyed in pro-
ducing work; instead it changes from a high-quality form (one with a large
fraction of its heat content available to perform work) to a lower-quality
form. This quality feature stems in part from the temperature of the
energy source rather than simply the quantity of heat energy it con-
tains. A change in quality or work-producing potential -- rather than
a change in quantity of energy -- is what is used up irretrievably in
converting energy into work. Under a Second Law approach, source of
energy and the work it is used for should be matched, with high
temperature energy sources reserved for tasks only high temperatures
can do and successively lower temperatures devoted to low-temperature
tasks. Second Law efficiency measures the extent of a perfect match
achieved in practice.
Rough thermodynamic calculations indicate that the ERDA-48
energy conservation outlook --- a 25 percent improvement by today's
energy efficiency standards -- captures by the year 2000 only about
20 percent of the theoretical maximum efficiency improvement (see
Table II-4).
FORD
Table II-4: Idealized Maximum and Planned Energy Savings
ENERGY CONSERVATION TARGET
ERDA
Year-2000
2nd-Law
Percent
Goal (Quads)
Maximum
Industrial Process Heat
2.0
13.9
14
Automobile Transportation
3.7
11.6
32
Bus, Truck and Rail Transportation
1.8
8.0
22
Building Space Heating Systems
1.6
7.4
22
Air Transportation
1.3
7.3
18
Industrial Electric Drive
1.0
4.6
22
Building Air Conditioning Systems
0.7
4.6
15
Buildings Electric Devices
1.1
2.9
38
Buildings Thermal Improvement
0.4
2.8
14
Ship Transportation
-
1.5
0
Iron and Steel Production
0.2
0.8
25
Primary Aluminum Production
0.04
0.3
13
Electric Mass Transportation
-
0.2
0
Total
13.84
65.9
21%
Source:
Based on ERDA-48 Vol. 2 and
Efficient Use of Energy: A Physical Perspective,
American Physical Society
We emphasize that Second Law principles only indicate a theoretical
maximum energy efficiency and only serve to estimate the maximum size
of the efficiency gap where real world energy conservation RD&D opportunities
may exist. These calculations by themselves could not translate directly
First,
into an RD&D program. / the full measure of idealized energy savings cannot
be realized in practice. As thermodynamic efficiency is increased more
and more, other physical factors begin to act as a limit. Most important,
the Second Law of Thermodynamics does not consider economics. For both
reasons, it can only suggest an upper limit on the extent of energy
conservation possibilities that should be explicitly explored.
Among those conservation opportunities presently being pursued
by ERDA's Office of Conservation Programs (OCP), there are issues of focus
which warrant attention. Ideally, individual energy conservation RD&D
programs should focus on opportunities with the greatest energy savings
potential. RD&D in these high payoff areas should be concentrated to
ensure technical and commercial success. Of course, it is true that a
lack of correlation between the size of energy savings and the level of
effort could have several causes: differing energy saving opportunities,
the state of advancement of technology, or existence of non-federal
research efforts, for example. In addition, as pointed out earlier, the
benefits in terms of additional national savings from allocating RD&D funds
to a particular research effort must be considered. However, large
deviations between focus of effort and potential energy savings provide
a signal that ERDA's system for assigning priorities with the energy
conservation RD&D program may be inadequate.
The Council reviewed 145 project areas within 18 budget categories
of the Office of Conservation FY1977 program and budget and compared
them for consistency in focus of effort versus potential savings. Two criteria
were used. The OCP budget categories expected to contribute the largest
share of 1985 energy savings might be expected to receive the largest
share of the total OCP budget. Within each high payoff budget category,
the average level of funds available for each project area might be
expected to match the high average energy savings expected from each
(see Table _).
FORD is LIBRARY GERALD
Table
FY1977 Budget, 1905 Savings, and Project Areas, by Budget Category
APPLICABLE PORTION
BUDGET CATEGORIES
PERCENT
FY77 Budget
1985 Savings
Budant Savings
ELECTRIC ENERGY SYSTEMS & ENERGY STORAGE
1.
Electric Energy Systems
Systems Management & Structuring
6,010
710
Electric Power Transmission
6.5
11.1
12,890
60
Electric Energy Systems Implementation
12.3
0.9
--
--
--
--
2. Energy Storage
20,840
450
19.8
7.0
END USE CONSERVATION & TECHNOLOGIES
TO IMPROVE EFFICIENCY
1. Industry Conservation
Unit Operations & Equipment Efficiency
Process Analysis & Modification
Altornative Fuels, Materials & Processes
8,650
2,250
8.2
35.0
Agriculture & Food Processes
Industry Information
--
:
:
:
2.. Buildings Conservation
Commercial Buildings
3,850
200
3.7
3.1
Residential Buildings
3,075
280
2.9
4.4
Community Systems
6,850
600
6.5
9.3
Urban Wastes
Appliancos
5,950
360
5.7
5.6
Technology
Performance Standards
-
--
I
:
Dissomination & Transfer
--
--
--
--
3. Transportation Energy Conservation
Heat Engine Highway Systems
14,790
510
14.1
7.9
Electric & Hybrid Systems
4,550
80
4.3
1.2
Implementation & Equipment
Non-lligi:way Transport Systems
3
1,800
340
1.7
5.3
Technology Studies
:
i
--
--
4. Improved Conversion Efficiency
15,000
.580
14.3
9.0
TOTAL
105,055
6,420
Thousands of barrels of oil per day -- equivalont. U.S. Engrgy Research and Development Administration, FY1977 Budget Estimates
May not add to 100 percent due to rounding.
Note: To arrive at the 12 "direct" program areas shown in Table
, the "support" subprograms and their associated
funds ($7 million) were excluded. Also, to simplify, several of the remaining 18 program areas were combined
(see the "Applicable Portion" column in the table). Then, the percentage of total "applicable" funds and energy
savings accounted for by each "direct" program area was calculated. The "Percent" columns, at the right-hand side of
the table, indicate that the distribution of the budget by program area does not coincide with the distribution of
expected savings.
III-15
Cur major observation is that the two areas of largest expected
savings -- industry conservation and new technologies for buildings
("other buildings") --- are being funded below their expected contribution
to energy savings. They account for about 50 percent of the 1985 savings
and about 20 percent of the effort in FY1977. In contrast, energy
storage and heat engine highway systems account for about 30 percent of
the budget and only about 10 percent of the savings.
III-16
Resolving the Issues
Addressing and resolving these issues is critical to ERDA's energy
RD&D mandate and to meetings the responsibilities that its mandate implies.
All of them are inherently complex, and the answers will make an enduring
imprint on our future energy choices. Their resolution will depend on
the methodology ERDA employs to plan and implement energy RD&D.
In ERDA 76-1, the agency recognizes the distance remaining to
be covered in achieving a fully adequate national energy RD&D plan and
energy research program. To further ERDA plans and programs,
a new framework for planning and implementing energy RD&D --- a Program
Planning, Budgeting and Review System --- will be set up. The concepts
it reflects are ambitious and theoretically advanced. Today, however,
rudiments are there, but little else. Consequently, the remaining two
chapters of this part of the report discuss the methods ERDA used to
forumulate the energy RD&D program that ERDA 76-1 represents and the actions
that are underway to enhance ERDA's capacity to address the issues set
forth above.
AUG
6
1976
Chapter IV
DECIDING WHAT ENERGY CONSERVATION RD&D SHOULD BE CARRIED OUT
The Council believes that adequate provision for building conservation
in ERDA's overall planning for
into /energy RD&D requires:
A task-oriented, energy systems definition
of energy choices,
A process for deciding what RD&D should be carried
out based upon ongoing comparisons of all potential RD&D options.
Comparisons based on comprehensive assessment
of the energy, economic, environmental, and
social impacts of the options.
We recognize that ultimately, the decision maker's judgment will determine
the composition of RD&D programs. The three elements listed above will provide
the basis for informed decisions and should be major factors in determining
the appropriate composition of the conservation RD&D effort. The remainder
of this chapter expands on these elements and compares the approach used in
establishing priorities in ERDA 76-1 and in allocating resources among
potential technology options. We then identify and evaluate improvement
efforts which ERDA is undertaking. Finally, in the apprndix to this
chapter we provide an illustrative example of an analytical approach which
we believe includes the principal elements for adequate consideration of
energy conservation.
Task-Oriented Approach
The task-oriented approach identifies energy RD&D opportunities
by looking first at the basic nature of the tasks energy can perform
and at alternative ways to do them using different amounts of energy.
Starting with end-use, it then poses and compares alternative con-
figurations of end-use devices and supporting distribution systems,
transport modes, conversion processes, and energy resources to serve them.
IV-2
In the past, our energy decisions, including those related to ERDA's
National Plan, have not taken this approach. Typically, we looked first
at energy resources and alternative conversion processes and methods.
Often, this traditional systems approach ignored the final end-use step
as well as the nature of the tasks which create our energy needs. As a
result, new and different end-use methods and devices often were overlooked
entirely in posing future energy choices and deciding what energy RD&D
should be carried out.
We can clarify the difference by considering home heating as an
example. The traditional analysis begins with mining of coal and then
compares ways of converting, transporting and distributing it to homes
in raw form or as a gaseous or liquid fuel or electricity. The task-
oriented approach begins with the problem of maintaining a comfortable
indoor residential environment in the most efficient manner.
The task-oriented approach is a better way of analyzing energy
choices because, by broadening the view of energy end-use, it opens up
new possibilities for energy conservation early on. As a first step
in the search for energy RD&D opportunities it asks: "What is to be
accomplished by spending energy on a given use?" Also the task-oriented
approach encourages consideration of the maximum efficiency that
should be achieved in getting the job done rather than simply improving
the efficiency of methods and devices now in use.
Most important, unless the analysis begins with end-use, RD&D priorities
and funds could be misdirected because possible end-use energy savings may
not come to light. End-use technology improvements are an integral component
of each alternative energy system. Not fully considering end-use may produce
wrong answers about the relative attractiveness of different supply and
end-use conservation technologies.
IX-
3
Without incorporation of a task-oriented, energy systems definition
of energy choices,
RD&D priorities and funds may be misdirected.
Ongoing Comparison Process
An adequate method for building in conservation identifies and
evaluates energy RD&D work to be carried out concurrently at many levels
in the organization and therefore at different levels of detail, all closely
interacting and linked in the overall national planning process. A
national plan for energy RD&D evolves and is implemented by planning
at top levels and all the way down and up the line.
The most detailed comparisons of RD&D alternatives should be done
within individual RD&D program offices and at the level of specific
RD&D tasks or projects -- for example, competing designs for a heat
pump or for a high-Btu coal gasification process unit. The detailed
information for the top-level comparisons should be developed as a
product of day-to-day research work.
At decreasing levels of detail, options should be identified and
evaluated in both planning and implementing a national plan.
At the top, the comparisons and decisions regard the larger system --
for example, alternative liquid fuel, gaseous fuel, or electricity-based
transportation systems. To adequately build in energy conservation,
information must be brought together at this level in a way which
makes possible comparative evaluations of conservation and supply
RD&D opportunities.
Comprehensive Assessment of Consequences
Comprehensive assessment of energy RD&D options is critical to ensure
that a task-oriented approach and an ongoing comparison process ultimately
produce adequate attention to energy conservation. Comprehensive
assessment has two dimensions. One concerns estimating the energy,
economic, environmental, and social benefits and costs of competing
RD&D options. The other involves identifying, evaluating, and comparing
end-use
energy conservation options to their supply counterparts over each
proposed supply RD&D planning period.
A method for comparing conservation with other RD&D should
produce timely impact assessments addressing major public conerns.
This can best be done by building the assessment into each energy RD&D
program. Without timely assessments, drawn from research built into every
energy RD&D effort, comparisons of all attractive RD&D opportunities
cannot be carried out, and conservation opportunities may not be fully
considered.
Without comprehensive measurement of impacts of alternative uses
of RD&D resources, attention to energy conservation in federal RD&D
will be of questionable adequacy.
Principal Findings
ERDA recognizes that an approach similar to that outlined above is
necessary for RD&D planning and decisionmaking. Measures to improve its
planning process, discussed later in this chapter, could establish the
basis for adequate consideration of conservation. But a careful review of
the analytical and planning processes as expressed in ERDA 76-1 indicates
significant problem areas:
ERDA has not performed task-oriented or systemwide
evaluation to identify what energy RD&D is needed.
Fundamental economic and environmental information
basic to a functional building-in method is not available.
More important, the research work ultimately needed
to provide this information is not built into the energy
RD&D efforts of its supply and conservation program offices.
effectively
ERDA's planning and budgeting are linked at the top.
Consequently, broad agencywide decisions about what RD&D
should be carried out cannot be translated with confidence
into specific research.
A general lack of policies, planning guidelines, and
decision criteria exists for insuring that all energy
RD&D opportunities are compared objectively.
ERDA 76-1 makes commitments which could solve these problems; and
work is underway in a number of areas to implement these commitments. As
discussed in this chapter, these represent a major commitment which could
provide the basis for adequately building-in energy conservation. To
ensure adequate attention to energy conservation, these commitments should
be implemented as rapidly as possible.
Without such an improvement, ERDA will not be able to make objective
comparisons between energy conservation and energy supply technologies
within the next 2 years.
II-6
ERDA's Building-In Method
This section examines the methods used to formulate ERDA 76-1 and
the current research of ERDA's Office of Conservation Programs.
Description of Energy Choices
The Brookhaven Reference Energy System (RES) -- ERDA's primary
planning tool -- can systematically compare the energy costs of alternative
energy systems. It contains energy sources and technologies, and energy flows
from resource extraction through to the end-use devices which convert delivered
energy (e.g., liquids, gases, solids or electricity) into desirable work
(e.g., BTU's of residential space heat).
Energy efficiency is an important, explicit factor in the RES
calculations at each step from extraction through the end-use device.
Also, alternative end-use devices (e.g., a heat pump as a substitute for
electrical resistance heating) can be inserted into the
energy flows from extraction to each major category of end-use. For
this reason, ERDA's RES capability is a sound and sophisticated tool through
which a task-oriented planning approach ultimately can be achieved.
However, the RES cannot fully accomplish task-oriented, energy
systems definition of energy choices. First, the investment costs of
the end-use devices in the RES are not factored into its calculations.
Second, only the end-use device itself is contained explicitly within the
system descriptions. For example, energy conserving opportunities applicable
within more broadly defined energy using units (e.g., improved insulation
of homes) but external to the end-use device (e.g., the furnace or air
conditioner) are not accounted by the RES. This means that the costs of
these kinds of improvements, which make up a large share of the energy
conservation RD&D opportunities ERDA anticipates, cannot be included
explicitly in energy systems comparisons.
Finally, the RES presently is not configured to automatically adjust
levels of end-use efficiency (or use efficiency at critical intermediate
steps such as electricity generation) in response to the expected costs
of energy supply. However, the economics of supply technology have a
profound effect on the basic economic attractiveness of energy conservation
technologies and, as a result, on the level of energy demands. Also,
economically competitive
end-use efficiencies achieved through/new end-use technologies have an
equally profound effect on the relative attractiveness of alternative
supply technologies.
Until all investment costs associated with the end-use of energy are
incorporated in the RES along with capability to automatically adjust
energy efficiency opportunities in light of changed supply costs, the RES
help to
cannot/accomplish the matching of supply and conservation intrinsic to
the task-oriented approach.
Evaluation of Energy Choices
Evaluation of energy choices beginning with end-use alternatives has
three steps. First, the basic nature of the tasks that energy might perform
should be described.* Second, tasks that energy can perform should be
FORD
&
BERALD
* In a general sense, ERDA does this. In formulating inputs to the
Reference Energy System they begin by estimating the amount of various services
(e.g., miles of automobile travel) consumers may demand in the future.
IX-3
examined by searching out a wide range of methods and devices that use
different amounts of energy. Third, energy conservation opportunities
should be assessed in relation to indicators of improvement potential, for
example the principles of the Second Law of Thermodynamics referred to
earlier, rather than against the energy efficiencies of today's end-use
devices and methods. On these terms, there are three problems underlying
ERDA 76-1:
The kind of analysis by which ERDA set priorities
did not use the best capabilities of its planning tool.
The scenarios used to determine strategy emphasis
are not developed from a task-oriented basis.
The number of energy conservation opportunities does
not reflect an assessment of energy RD&D potentials.
The Brookhaven system can calculate the least-cost combination of
myriad energy supply options which our economy should tend to select
in the future. ERDA, however, did not use this capability in for-
mulating the National Plan. Instead, future energy choices were
described in ERDA-48 and ERDA 76-1 with. six- subjectively-determined
energy futures. The energy choices which make up these six "scenarios" were
evaluated by calculating by hand their impacts on our domestic resources
and energy costs. Briefly, the six scenarios are: a baseline of no
new initiatives; improved efficiencies in end-use, synthetics from coal
and shale, intensive electrification, limited nuclear power, and a
combination of all the technologies.
Because none of these scenarios reflects the combination of energy
choices that the economy might in fact produce, their usefulness in
determining an energy RD&D mix is limited. Moreover, of the four scenarios
which contrasted alternative energy choices (excluding the baseline and
the combination of all technologies) conservation improvements available
from new technologies are generally reflected only in the improved end-use
efficiency scenarios. The other scenarios varied supply and, although
a few items from the conservation scenario were considered, the Plan did
not carry out the kind of systemwide balancing of energy supply and energy
conservation opportunities required by a task-oriented approach.
Finally, ERDA's national planners and its end-use conservation program
offices "negotiated" the assumptions used in the improved end-use scenario.
Negotiations appear to have been over what percentage of improvements in today's
end-use devices to use in the Plan. They did not consider potential energy
conservation possibilities.
RD&D Comparisons Throughout Planning
An ongoing comparison process links top-level planning with planning of
detailed research programs and, in turn, with budget decisions and program
implementation. In doing this, the need to make side-by-side comparisons
of alternative RD&D opportunities should be kept in mind. Also at the
point where top-level comparisons are made, the planning process should
ensure that the costs and benefits and other attributes of competing
technologies are based on detailed research programs designed to deliver
these results.
We found that ERDA has made general comparisons of this type in
establishing broad agency priorities. However, specific energy conservation
and supply enhancement RD&D technology opportunities are not lined up
for comparison based on cost, benefit and impact information.
The planning and implementation approach outlined in ERDA 76-1
promises a side-by-side ranking of energy RD&D options. To produce
this ERDA envisions various analyses of energy markets, both private
and public investment attractiveness of new energy technology ventures,
and energy-economic-environmental tradeoffs. A "Program Strategy"
document is expected to synthesize these studies.
The kinds of analyses needed to produce strategy statements
are currently in the first stage of development at ERDA.
Information and Planning Periods for Comparisons
ERDA's impact information reflects three inadequacies:
The environmental research that is basic to environmental
assessments is not built into conservation RD&D.
ERDA's macroeconomic impact assessment capabilities,
although its most advanced impact assessment area, are not
adequate.
The information and analytical capability necessary to
compare the impacts of energy conservation and supply
enhancement technologies do not yet exist for the mid-
and long-term periods.
Adequate information on the economic, environmental, and social
impacts of energy choices is basic to planning. Identifying and evaluating
such impacts must be built into each RD&D program. Impact assessments
addressing areas of major public concern should be available on a timely
basis, and the assessments should influence what RD&D is carried out.
ERDA's environmental assessment process is discussed in the following
chapter and in Part III of this report.
FORD
Although in general, ERDA's macroeconomic impact assessment capabilities
appear more advanced than its environmental assessment capabilities, they
need further development. Since formulation of the first National Plan, the
economic impact capabilities of RES have been extended. ERDA 76-1 tested
possible impacts of new energy technology on national economic growth and
other conventional indicators of economic well-being. The tests compared
new technologies against the alternative of simply allowing energy prices
to rise enough to balance demand with supply.
The tests suggest that relying only on price increases to ration
limited energy supplies has serious economic impacts. As an alternative,
new supply technologies may become attractive. However, we do not
believe this analysis alone is sufficient. The tests should also explicitly
consider the economic and other impacts of new conservation technologies. Until
this is done, ERDA's macroeconomic impact information will not be adequate
for building energy conservation into energy RD&D.
Guidance to assure necessary impact information is generated and
procedures to ensure that all impacts of public concern are fully considered
should be formalized. These procedures should extend below headquarters
level where the day-to-day research is done.
Comparison Planning Periods
ERDA's rationale for energy RD&D is providing choices for the future.
To do so, energy conservation and supply enhancement technological
opportunities should be assessed over comparable periods of time. This
will focus attention on the comparative economic, environmental, and social
impacts of the alternative technologies. The conservation program is not
yet generating the information necessary for these comparisons.
IV-12
Plans for Improvement
ERDA presently is improving its agency-wide and specific program
planning capabilities in a major way.
Program Planning, Budgeting and Review (PPBR) System
This system is to provide "an integrated approach to analyzing future
energy technology needs; formulating the federal role in addressing those
needs; designing targeted programs to conduct ERDA's portion of the plan;
allocating resources consistent with the Plan and program design; and
ensuring that ERDA's programs are effectively managed."
The components of this approach include:
"normative planning," which establishes broad
energy technology goals
"strategic planning," which defines how the
goals can be achieved most effectively
"program planning," which describes in detail
how the ERDA program will be implemented
"resource allocation," which directs ERDA
resources at the most important activities
"program implementation," which delineates
the specific activities to be accomplished
within approved budgets
"program evaluation," which identifies
differences between the operating plan and
actual conditions.
A number of formal documents are envisioned by ERDA to accompany
these components (see Table II-6).
ERDA's PPBR system, an advanced approach to management of a large,
complex organization, is still in its early stages. Future reports of
the Council will address its use in considering and effecting conservation RD&D.
I
is
Table II-6: PPBR System Outputs
National Plan for Energy RD&D: documents the comprehensive goals
and priorities that help define what should be done if energy
problems are to be resolved through technology development
(e.g., ERDA-48 and ERDA 76-1).
Program Strategy: for each technology program, presents major
program goals and strategic implementation milestones derived
from an analysis of the effectiveness of RD&D in resolving
energy problems and the need for a federal role in RD&D.
Program Plan: details the most cost-effective federal program
for implementing each technology program's strategy and specifies
how each program will be managed and related to other federal ,
programs.
ERDA Budget: presents comprehensive near-term priorities and
the annual allocation of resources.
Program Approval Document: a 1-year operating plan, carved out
of each program plan, which provides a baseline for monitoring
program operations during 1 fiscal year.
Environmental Development Plan: the EDP outlines the environmental
research program planned in parallel with each technology program
plan, to resolve environmental issues at a pace consistent with
the rate of technology RD&D.
Environmental Impact Statement: required by the National Environ-
mental Policy Act, conveys the results of the environmental
research outlined in each program's EDP to major program
decision points.
Source: ERDA 76-1
IV-
Better Analysis
ERDA's
More specific improvements are underway to enhance /capabilities
for defining systemwide energy choices and for identifying and evaluating
energy RD&D opportunities. ERDA plans to:
Add the investment cost of alternative end-use
devices to its principal assessment tool, the
Brookhaven Reference Energy System.
Investigate the macroeconomic impacts of nonprice-
induced energy conservation.
Implement a newly developed technique (called "relevance
trees" by ERDA) for structuring a task-oriented approach
to identifying energy RD&D opportunities and for
evaluating and ranking these opportunities in a
systemwide context independent of whether they represent
conservation or supply enhancement RD&D.
Revise the ERDA 76-1 scenarios.
Include Second Law of Thermodynamics calculations
in its Reference Energy System estimates.
The further step of comparing energy conservation and supply enhancement
RD&D in planning is progressing:
Having identified the kinds of analyses needed
to support planning, ERDA's next goal is to
analyze in more detail programs that are aimed
at the same or similar markets.
A second goal is to apply tools such as venture
analysis, economic impact analysis, tradeoff
studies, net energy analysis, and constraint
studies (in order to quantify) the costs and benefits
of selected energy technologies.
The Council believes these improvements can result in adequate
attention to energy conservation. However, we are concerned that although
ERDA is initiating the required work, RD&D opportunities will not be
comprehensively ranked during 1976. With budget leadtimes, with legal
restrictions on moving funds between programs, and with multi-year commitments,
work planned and budgeted during 1976 will not be begun until 1978. RD&D
in 1978 still may not benefit from the necessary comparisons of conservation
and supply. The Council believes that ERDA should establish an action
agenda for implementing its improvement efforts. Until these improved
analytical planning methods are being used to consider conservation on an
equal basis with all other options in establishing RD&D
priorities, ERDA's plans should make clear that priorities will be closely
reevaluated on an annual basis.
Example of a Task-Oriented Approach
A national program of energy RD&D should, as a minimum, evaluate
energy choices in terms of complete energy production and use pathways.
The most essential feature of doing so is the identification and
evaluation of competing energy choices beginning with end-use needs.
Our earlier discussion of a task-oriented building-in methods.
described one system pathway: from mining coal, step-by-step, through
its final use to heat a home. This discussion illustrates the need for
comparisons of competing energy systems which encompass
extraction, conversion, transmission, distribution and end-use. It
shows how environmental, economic, and social impacts change the attrac-
tiveness of individual configurations of conversion, transmission,
and distribution technologies. But most important, the value of new
and different end-use technologies becomes clear. Coal is the source of
energy in all the examples throughout the energy conservation section.
Systems Definition of Energy Choices
Residential space heating needs may be satisfied with many different
system configurations.* Geographical variables affect the availability
and quality of coal, seasonal annual heating needs, and the technologies
at each step from extraction on.
In our illustration a number of individual technical components
were combined at each extraction, conversion, transmission, distribution,
and end-use step to form alternative pathways from coal through resi-
dential space heat. These technical components were configured for
New York, Chicago, and Los Angeles using coal from the east, midwest,
**
and west.
For each coal source and city, economically second-rate
*
To simplify the illustration, we do not consider residential space
cooling. as well as other residential energy uses (e.g., water heating)
which relate to space heating.
In the interest of brevity, only Chicago is discussed here.
pathways were eliminated, until the best configuration reflecting four
systemwide alternatives remained: direct burning of coal to generate
electricity, coal liquefaction, high-Btu coal gasification, and a
dual conversion system consisting of an intermediate low-Btu coal
gasification conversion step and an. electrification final conversion
*
step.
Initially, we limited comparisons of the four systemwide alternatives
to the estimated full life-cycle costs per unit of space heat available
in a residence. We made the comparisons in three steps. The first
began with extraction (coal mining) but stopped with the cost of energy
"as delivered" to the residence but before costs of installing and maintaining
alternative residential space heating systems were factored in (Figure II-5
shows the example results fro Chicago) **
Horizontally, the figure shows six points where the estimated
energy costs were compared. The first three points (left-to-right)
make up the production and delivery portion of the pathway. The last
three complete the energy production and use pathway by including costs
of three end-use devices. Each represents a more efficient residential
heating device: today's devices, an improved version of today's devices,
and a heat pump, respectively.
The costs are shown by an index rather than estimated dollars per
unit of energy. The index was derived by dividing the estimates
available for each technical component by the cost of $13
imported crude oil at a comparable step in its conversion to residen-
tial. space heat.
* Of these conversion technologies, coal liquifaction, high-Btu gasi-
fication.
low-Btu
gasification
FIGURE II-5: Economics of Four Systems to Heat Chicago with Coal-Derived Energy
INTERMEDIATE
FINAL
DELIVERED TO
1975
IMPROVED
HEAT
CONVERSION
CONVERSION
RESIDENCE
HEATING PLANT
FURNACE
PUMP
6
2
5
COST
INDEX
4
4
4
3
3
2
2
2
3
2
1
1
1
1
4
4
1
3
3
LEGEND:
4
DIRECTLY BURN WESTERN COAL TO GENERATE ELECTRICITY.
3
CA3IFY WESTERN COAL TO PRODUCE HIGH-BTU PIPELINE QUALITY CAST
2
GASIFY WESTERN COAL TO PRODUCE LOW-BTU GAS TO, IN TURN, GENERATE ELECTRICITY.
1
LIQUIFY WESTERN COAL AND REFINE TO PRODUCE FUEL OIL.
0
Cost indox 1.0 represents heating Chicago residences with $13.00 imported oil,
It is immediately apparent that the relative economic
attractiveness of the four systems changes dramatically as the com-
parison extends beyond the conversion step -- gasification, liquefaction,
or electrification -- to the point of use. Compared only on an as-
delivered basis (to the residence from the coal), the coal-synthetic
oil and gas systems are about twice as attractive economically as
burning coal directly to produce electricity. The dual-conversion
system -- coal to low-Btu gas to electric -- looks uniquely unattrac-
tive for residential space heating here.
The second step in the example analvsis extended the comparison
of the four systemwide choices for residential space heat to include
the efficiency and life-cycle investment and operating costs of today's space
heating devices (see Figure II-5). Including both energy production and
use in the economic comparisons brings the attractiveness of direct
coals to electric system more into line with synthetic oil and gas.
The reason is the 100 percent end-use efficiency of electrical resistance
heating compared to the lower efficiency of gas-fired and oil-fired
residential heating plants. * The dual-conversion system, however, still
looks inferior despite its 100 percent end-use efficiency.
In the former case, a system with higher delivered energy costs
before end-use becomes more economically competitive when its higher end-use
efficiency is considered. In the latter, a 100 percent efficient end-use
device does not make economic sense when supplied by a high-cost dual
conversion energy pathway. The need for systemwide analysis of energy
choices is clear.
*
This 100 percent level should be interpreted as a relative measure of
efficiency for well-insulated electrically-heated homes, against which
gas-and-oil-fired systems can be compared.
Task-oriented Viewpoint
A question remains about whether new energy conservation technology
can improve the overall economic performance of these
four systems or can change their relative economics. To illustrate, the
analysis next considered more efficient oil and gas heating plants as well
*
as an electric heat pump (see Figure II-5). Without a heat pump, more
energy efficient gas and oil heating plants lower total costs per unit
of space heat for their systems. Better furnaces decrease the relative
economic attractiveness of the electric configurations, again because
electrical resistance heating is already 100 percent efficient.
Adding a heat pump, however, makes the direct coal-to-electric
configuration economically comparable to coal synthetics for Chicago's
space heat needs. It should also be noted that the dual-conversion
low-Btu gasification-to-electric option may also approach the economically
competitive range for purposes of deciding what RD&D candidate tech-
nologies to pursue.
Comprehensive Assessment of Consequences
Energy costs alone cannot adequately reflect impacts of energy RD&D
options. For example, the four residential space heating systems have
other economic, environmental, and social impacts which should be compared
comprehensively. The environmental quality assesment illustrates the need for
comprehensive impact measures.
*
A natural-gas actuated heat pump was excluded because initial costs
lower gas heat economic feasibility. Again to simplify the illus-
tration, new end-use technologies potentially capable of affecting
gas heat like the way heat pumps affect electric heat are excluded,
for example, solar-assisted gas heating systems.
Environmentally, the four systems that produce residential space
heat from coal also produce different land, air, and water pollutants.
They occur at different geographical locations, all with potentially
unique vulnerabilities to each pollutant. For example, the environmental
impacts will be measured in terms of only two air pollutants --- sulfur
dioxide and nitrogen oxides, and to simplify, total pounds of SO 2
and NO emitted will be used as the measure. Like the economic com-
X
parisons, environmental comparisons are made before and after energy
conservation technologies are added (see Figure II-6);
These two environmental impacts influence the relative attrac-
tiveness of the options for meeting Chicago residential space heating
needs with coal. Considered before energy conservation improvements,
two technologies -- liquefaction and high-Btu gasification -- stand
out as especially advantageous economically and environmentally. They
also produce less so 2 than today's oil-based heating systems. In
contrast, before-conservation comparisons add environmental disadvantages
onto the economic disadvantages of the direct-coal-to-electric system.
FIGURE II-6: Environmental Consequences of Coal-Based Residential Heating
1975
IMPROVED
HEAT
1975
IMPROVED
HEAT
FURNACE
FURNACE
PUMP
FURNACE
FURNACE
PUMP
4
SO₂
NO
X
4
3
LBS
MMSTU
4
2
2
4
1
baselline
4
1
2
I
1
2
1
3
3
baselline*
3
2
3
0
4
DIRECTLY BURN WESTERN COAL TO GENERATE ELECTRICITY.
3
GASIFY WESTERN COAL TO PRODUCE HIGH-BTU PIPELINE QUALITY GAS.
2
GASIFY WESTERN COAL TO PRODUCE LOW-BTU GAS TO GENERATE ELECTRICITY
1
LIQUIFY WESTERN COAL AND REFINE TO PRODUCE FUEL OIL.
Represents heating Chicago residences with $13.00 imported bil.
More important, energy-use efficiency improvements can have a
major effect on the relative environmental position of the four competing
systems. On economics alone, improving today's heating plant moved all
but the dual conversion system (low-Btu gasification to electric) into
a comparable cost range. Coupling environmental measures with slightly
improved oil and gas furnaces, however, further reduces the attractive-
ness of the direct coal-to-electric option relative to oil and gas
synthetics.
Heat pumps were shown earlier to represent an economically worth-
while addition to the electric systems, but not dramatically so. Applied
to the electric-based systems, however, a heat pump significantly
decreases SO, 2 and NO x emissions. After heat pumps are included in the
system, then, the electric systems appear equally-attractive eco-
nomically and environmentally to synthetic oil and gas. To build energy
conservation into RD&D adequately, more sophisticated end-use technol-
ogies -- exemplified by the heat pump --- may become especially attrac-
tive when environment is more fully considered. In addition, an entire
class of supply enhancement technologies - coal-to-electric systems --
may become a more attractive candidate for RD&D.
FORD LIDRA
The intent of the coal-Chicago illustration is to demonstrate that
systematically addressing additional impacts of competing RD&D options
changes their relative value dramatically. The illustration is clearly
incomplete for deciding what energy RD&D should be carried out. Addressing
other environmental, macroeconomic, and social impacts would provide
more insights into different kinds of opportunities for RD&D and could
reorder the ranking of opportunities. The Council suspects that would