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    "label": "Energy - Meeting with George Humphreys and Glenn Schleede, August 12, 1976",
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    "title": "Energy - Meeting with George Humphreys and Glenn Schleede, August 12, 1976",
    "citationUrl": "https://catalog.archives.gov/id/1515826",
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        "Energy Research and Development Administration. (01/19/1975 - 10/01/1977)",
        "President (1974-1977 : Ford). Council on Environmental Quality. (1974 - 1977)",
        "Energy policy"
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    "ocrText": "The original documents are located in Box 13, folder \"Energy - Meeting with George\nHumphreys and Glenn Schleede, August 12, 1976\" of the James M. Cannon Files at the\nGerald R. Ford Presidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nDigitized from Box 13 of the James M. Cannon Files at the Gerald R. Ford Presidential Library\nLIAISON STAFF MEETING\nWednesday, July 21, 1976\n7:30 a.m.\nMEETING & WITH GEORGE Emergy HUMPHREYS\nGLENN SCHLEEDE\nThursday, August I\n3:30 p.m.\nre: CEQ Draft R&D Report on Energy\nHold\nfor\nLIBRARY GERALD R. FORD\nand\nTHE WHITE HOUSE\nWASHINGTON\nTues, Aug 10\nKris:\nJMC would like to meet briefly\nwith Humphreys & Schleede re:\nthe attached on Wed. Can you\nset this up?\nthanks\nthus.\nC\n3:30\nFORD & LIBRARY GERALD\nTHE WHITE HOUSE\nWASHINGTON\nTachto\nAugust 10, 1976\nGleun\nMEMORANDUM FOR:\nGeorge\nFROM:\nSUBJECT:\nON ENERGY R&D\nThe Non-Nuclear Energy Research and Development Act\nof 1974 requires CEQ to evaluate the Federal Government's\nenergy research, development, and demonstration (RD&D)\nprogram, including public hearings and submission of a\nreport to the Congress.\nCEQ has completed the draft report and has been reviewing\nit with OMB for the last two or three months. OMB\nstaff, today, told me that they had reached an impasse\nwith CEQ staff on some parts of the report, particularly\nthose sections dealing with energy conservation.\na\nOMB staff believe the treatment of energy conservation\nis inconsistent with Administration policy. I agree.\nYou may recall that we went through a similar situation\nwith ERDA last March or April when ERDA was seeking to\nclaim a very large role for the Federal Government in\ndeveloping energy conservation technology. After\nconsiderable discussions, ERDA agreed to make clear in\ntheir report that the primary responsibility for energy\nconservation RD&D should rest with private industry.\nThe President has already been criticized for not\nrequesting enough money for energy conservation and\nthe Congress added $40 million to his request for ERDA.\nI believe the CEQ report issued in its current form\nwould provide the basis for still additional criticism.\nThe report could be revised to bring it in line with existing\npolicy, but this would require some rewriting and probably\nwould require acceptance by CEQ of a philosophy different\nfrom the one they are espousing in the draft.\nGERALD LIBRARY ? FORD\n-2-\nI am bringing this to your attention now because:\n-- CEQ staff are aware that I agree with OMB on\nthe need for a substantial change in the report,\nand\n-- The matter probably is being escalated within OMB.\nA copy of the report is attached.\nCC: George Humphreys\nGERALO\nLIBEARY\nAUG\n6\nFart 2\nBUILDING ENERGY CONSERVATION\nINTO ENERGY RD8D\nThe Council defines \"adequacy of attention to energy conservation\"\nin federal energy research, development and demonstration (RD&D) to mean\nthe capability to identify the full range of possible energy conservation\nRD&D options, to create a factual basis for comparing them to other\nenergy RD&D choices, and to develop appropriate programs to assure that the\nbest options are made available to the nation. This part of our assessment\nmeasures program planning and implementation at the Energy Research and\nDevelopment Administration against this definition of adequacy.\nSince its first National Plan (ERDA-48) was published in June of\n1975, ERDA's attention to energy conservation has been under critical\nreview by the Council and by others. For example, testimony at the\nCouncil's public hearings, held last September, questioned whether ERDA\nhad given adequate priority initially to energy conservation, considering\nconservation's possible future role, and the small amount of federal\nresources allocated to ERDA's conservation RD&D program compared with\nFORD LIBRARY\nthe resources allocated to other energy RD&D options.\nIn April of 1976, ERDA updated its first plan. ERDA 76-1 singles\nout conservation technologies for increased attention, ranking them with\nseveral supply technologies as being of the highest priority for national\naction. This represents a major change from the initial plan. It is based\non further analysis of conservation opportunities, is responsive to\npublic comments on the initial plan, and flects ERDA's conclusion that\nonly moderate progress is being made to date on the development of supply\ntechnologies. ERDA 76-1 establishes an immediate 5-year planning period\nduring which energy conservation opportunities ready for commercialization\nwill receive special attention. Further,\nthe President's FY1977 Budget increases ERDA's energy conservation RD&D\nresources by 64 percent.\nThe Council's assessment focuses on the revised National Plan\nand its underlying analyses. We believe that ERDA's National Plan\nfor Energy RD&D is a substantial accomplishment for such a new agency:\nThe plan is a major improvement over its predecessor\nin addressing energy conservation. It is a benchmark\nfrom which to begin a systematic effort toward a\nmore complete approach to conservation RD&D.\nThe Plan itself -- and its agenda for the future --\nillustrates ERDA's commitment to a rational and\nanalytical approach to energy RD&D. It is moving\ntoward the systematic and explicit identification of\nour energy problems and the development of tech-\nnology to resolve them.\nERDA has undertaken a substantial effort --\nsome of which began before ERDA 76-1 but was not\nyet completed by the first quarter of 1976 -- to\nimprove the Plan and to make the ERDA program more\neffective.\nERDA is actively seeking wide review and comment on\nits programs and appears responsive to comments and\ncriticisms received.\nThese developments are encouraging. In responding to our mandate,\nhowever, the Council must measure \"adequacy\" against plans and programs\nas they are now in place and operating, not simply on progress since\nERDA's establishment or on commitments to improvement. We recognize\nERDA's progress and the many positive steps already underway, but based\nupon our independent assessment of ERDA's planning and program implementation\nat the end of the first quarter of 1976 we have identified the following\nproblems:\nMany critical issues affecting the role of\nconservation in the overall energy RD&D program\nhave not yet been resolved (these are discussed\nin Chapter III). In particular, the appropriate\nplanning, development and commercialization time\nframe and levels of effort for conservation RD&D\nprograms have not been thoroughly addressed.\nThe current National Plan is not yet built on a\nstrong analytical foundation.\nGranting that conservation is a new program\nin a new agency, there remain serious questions\nabout the rate of progress in developing the\nanalytical ability to compare conservation\ntechnologies with the more advanced energy supply\ntechnologies.\nWe recognize that the magnitude and technical direction of an\nadequate conservation program are not easy to determine. We also realize\nthat simply \"throwing\" money at conservation would be wasteful. Never-\ntheless, the Council is seriously concerned about the pace of improvement\non several counts:\nMany of the basic agency policies and capabilities\nnecessary to give conservation the same level of\nplanning and management attention as supply enhancement,\nparticularly the more advanced technologies such as nuclear\nand coal, are still in a very rudiemntary stage of develop-\nment. Action plans to reach these objectives are\nunspecific. It appears that ERDA may fall short of\ncorrecting these problems in the next two years.\nThe Conservation programs are not generating the\nessential technical, economic and environmental\ninformation to permit analysis of conservation\nopportunities and planning based on conservation-\nsupply comparisons; nor is work to produce it in the\nfuture in place within all of the programs.\nConservation program resources are limited, not just\nfor technical program development, but for the fact-\nfinding and other basic analysis which will permit\nsound conservation planning. This is in comparison\nwith the supply programs which get major technical and\nanalytical support from ERDA's extensive field laboratory\nstructure.\nAs we have noted, conservation RD&D is one of ERDA's high priority\nprograms for the next 10 years. Thus, delay in building the capability\nto analyze, plan, and implement energy conservation RD&D options could\njeopardize the near-term contributions of ERDA's programs. In short,\nmuch of the near-term could pass before ERDA fully integrates this capability\ninto its overall planning and management structure.\nEqually important, the Council believes that there are potentially\nsignificant conservation RD&D opportunities over the mid-term and\nlong-term. We believe that these opportunities must receive full\nconsideration in the critical early formative stages of ERDA's planning\nprogram. Momentum tends to build as commitments are made to specific\nsets of technologies and continues as multi-year claims are made on\nfuture funds. Already there is a great momentum behind a number of\nmid-term and long-term supply programs such as those to produce gas and\nliquid fuels from coal, and advanced nuclear systems, backed up by a\ncomparatively sophisticated planning capability. If mid- and long-term\nenergy conservation programs continue to receive inadequate attention\nin the early stages of this new agency, it will be difficult to redress\nthe balance later.\nERDA should accelerate its ability to analyze and develop potential\nconservation RD&D options across all time frames. To assure adequate\nattention to energy conservation we believe that the following general\nimprovements must be implemented within the next two years.\nERDA's analytical capability for planning, which is\nalready quite advanced, should be expanded to incorporate\nfully conservation technology options, including\ninformation on economic, environmental and social impacts.\nThe planning process should compare specific conservation\nand supply RD&D opportunities across all planning\nperiods and use these comparisons for establishing\npriorities and allocating available resources.\nThe conservation RD&D programs must identify conservation\nRD&D opportunities over all planning periods, generate\nsufficient information to analyze them, and organize\nresearch programs with sufficient focus to realize the\nbenefits of the best of the opportunities.\nERDA should carefully evaluate the role of federal\nconservation RD&D vis-a-vis the likelihood that the private\nsector will undertake the RD&D necessary to recognize the\npotential national benefits of energy conservation.\nThe remainder of this part of the report expands on these findings.\nAUG\nChapter III\nMAJOR ENERGY CONSERVATION ISSUES\nThe Council reviewed ERDA 76-1 and also looked carefully at its\nunderlying analyses. This chapter evaluates the National Plan from the\nperspective of adequacy of attention to energy conservation. It raises\na series of issues which we believe were not adequately addressed in\nERDA 76-1 but are essential to building conservation into ERDA's\nprograms. In our view, these issues should be given high priority\nattention and should be addressed specifically in the next version of\nthe National Plan in order to provide the basis for public\nreview and debate which ERDA recognizes is important. The major \"adequacy\nof attention\" issues, which we have framed in question form, are as follows:\nIs the near-term priority role established by\nERDA for new energy conservation technologies -\nprimarily stressing demonstration and application of\nexisting end-use products and processes --- the correct one?\nIs the energy conservation program of adequate size\nwhen measured against the potential benefits of\nconservation-intensive energy choices and the RD&D\nresources allocated to supply enhancement?\nAre all potential conservation RD&D options given\nfull consideration and are the energy conservation\ntechnology programs designed with adequate technical\nfocus?\nNear-Term Role for Energy Conservation RD&D\nThus, there are two additional adequacy of attention issues with respect\nto the substance of ERDA's near-term strategy:\nIs ERDA's energy conservation strategy sufficient to\nmake technically and commercially adequate conservation\ntechnologies available in the near-term?\nIs current energy conservation RD&D adequate to the high\npriority, near-term goal that ERDA set?\nIII-2\nA major purpose of ERDA's revised Plan is to broaden the Nation's\nrange of available energy options. Table II-1 lists the Plan's ranking\nof \"highest priority\" demand and supply technologies. The Council agrees\nthat energy conservation can play a critical role in the near-term and\nsupports the additional resource commitment.\nTable II-1: Proposed Priorities for RDED Technologies -\nHighest Priority Demand\nNear-Term Conservation\nConservation in Buildings and Con\n(Efficiency) Technologies\nsumer Products\nIndustrial Energy Efficiency\nTransportation Efficiency\nWaste Materials to Energy\nHighest Priority Supply\nNear-Term Major Energy\nCoal-Direct Utilization\nin\nSystems\nUtility/Industry\nNuclear-Converter Reactors\nOil and Gas Enhanced Recovery\nNew Sources of Liquids and\nGaseous and Liquid Fuels from\nGases for the Mid-Term\nCoal\nOil Shale\n\"Inexhaustible\" Sources\nBreeder Reactors\nfor the Long Term\nFusion\nSolar Electric\n*Source: ERDA 76-1\nBut we are concerned with the lack of precision as to ERDA's role during\nthis period. Since near-term energy conservation is given high priority,\ncommercial or almost commercial technology will form the basis for the\nRD&D program for the next 5 years. The Plan describes the major near-term\nopportunities in the three energy end-use sectors as:\nIII- 3\nIndustry conservation: \"[a] host of more\nefficient technologies\nis known.\nBuildings conservation: \"[a] number of specific\ntechnologies exist that need to be inte-\ngrated and may require innovative marketing\nby industry to motivate consumers to accept\nand install them.\"\nTransportation energy conservation: \"[the]\ntransportation sector\ncan reduce its\npetroleum consumption by using well-proven\ntechnologies and by implementing well-\nstudied operational changes.\"\nERDA 76-1 identifies the main RD&D obstacle with respect to this host of\navailable technologies as overcoming \"problems of economic uncertainties,\nand normal resistance to the acceptance of new 'products'. A five-part\nenergy conservation strategy is based on this statement: A national\npolicy conducive to the adoption of energy-efficient technologies; a\nfive-year planning horizon; accelerated identification of promising\ntechnologies and dissemination of information about their application;\nintegration of market and institutional barriers into the plans for\ndeveloping the most attractive conservation technologies and for facilitating\ntheir implementation; and demonstration programs to work out the implementation\ndetails.\nEarly application of available conservation technologies may make\nsense as a good consumer investment and is in the public interest. But\nmuch of ERDA's strategy is a commitment to existing technologies, essentially\n\"off the shelf.\" The agency does not devote any significant resources\nto upgrading the efficiency of these technologies. For example, heat\npumps are being employed in several building demonstration projects but\nthere is no RD&D program to improve heat pump performance or develop\nadvanced types of heat pumps. In contrast, ERDA does plan to upgrade,\nprior to commercialization, economically and technically submarginal\nsupply technologies such as coal liquefaction, coal gasification, and\ntertiary oil recovery. Conservation technologies do not receive the same attention\nIII-\nTwo additional questions relate to ERDA's concept of energy con-\nservation's future role:\nIs the near-term the correct high priority timeframe\nfor federal energy conservation RD&D?\nIs there more, new and different mid-term and\nlong-term conservation RD&D that should also have\nhigh priority considering potential national benefits?\nOne of the chief reasons for ERDA's assignment of high near-term\npriority to conservation is that few, if any, major new supply technologies\ncan provide significant amounts of energy by 1985. However, while con-\ncentrating on energy conservation in the near-term, we believe that ERDA\nmay be neglecting important and needed conservation opportunities in the\nmid- and long-term planning periods. Conservation in these periods could\nbecome an important source of energy if new supply technologies lag in\ndevelopment because of a combination of technical and institutional problems,\n(in the past, major transitions to new fuel supplies have taken 50 years\nor more = ERDA is hoping for significant results from its supply programs in\n10-20 years) or because of potentially serious environmental problems\n(see Part III of this report). The longer new supply technologies lag,\nthe greater contribution energy conservation can make to reduce the gross\nenergy required to meet the same human needs.\nIn addition, should new supply technologies fail or fall short of\ncurrent expectations, the cost of energy could rise even more than\nexpected. Higher-priced energy automatically generates a market for\nimproved energy conservation technology. However, failure to conduct\nbasic RD&D now to provide energy conservation opportunities for the mid-\nand long-term could mean that neither conservation nor supply technologies\nwill be available when and if they are needed.\nIII- - 5\nRelative Size of the Conservation and Supply RD&D Programs\nFour underlying issues should be addressed by ERDA:\nAre the short-term factors which translate\nconservation's high RD&D priority into ERDA's\nsmallest energy RD&D program (its newness and\nrelatively early state of planning) also applicable\nin the mid-term and long-term?\nIs ERDA, in developing its program, considering\nthe conservation benefits and the likelihood\nthat private RD&D will produce the technology\nneeded to realize these benefits?\no Should a substantial federal conservation RD&D\nprogram exist as a hedge against the risk of losing\nthe large benefits of conservation?\nEarlier in this chapter we noted that ERDA's proposed energy\nconservation budget increased by 64 percent between FY1976 and FY1977.\nHowever, from a different perspective, energy conservation received\nonly 6 percent of the agency's total increase between the two years\n(see Figure II-2).\nComparison of energy conservation's share of ERDA's total program\n(not just the annual increase) shows a small conservation effort\nrelative to supply -- 4 percent of the total (see Figure II- for\na comparison). Conservation ranks next to smallest among the major\nRD&D programs.\nThe primary reasons for this situation are obvious: conservation\nis a new program that has started small and is growing fast; conservation\nis still in the early and relatively inexpensive stages of planning and\ndevelopment whereas some of the supply technologies are well into the\nmore expensive demonstration stage. However, we believe that these are\nshort-term conditions. They should be assessed to assure that conservation\nis receiving a share of RD&D resources commensurate with the potential\nbenefits and the appropriate federal role. In the future ERDA should\nmake explicit comparisons of the allocation of resources versus the\npotential benefits of conservation relative to supply RD&D. ERDA-76-1\nobserves that a barrel of oil saved can reduce\nimports at less cost than producing one through development of new supply\ntechnology; that energy conservation generally has a more beneficial\neffect on the environment; and that capital requirements to increase\nenergy use efficiency are generally lower than capital needs to produce\nan equivalent amount of energy from new sources (most new supply tech-\nnologies are highly capital intensive). Further, these benefits continue\nover time because the use of conservation as a \"source\" of energy can\nrelieve pressure for new supply technologies.\nAs a measure of benefits, ERDA 76-1 estimates energy impact goals\nfor each energy technology in the year 2000. On the basis of this\nbenefit measure, the proportions of RD&D effort directed at energy\nconservation and at the supply technologies with which it competes in\nthe near- and mid-term vary widely. Supply enhancement technologies\ncontribute about 66 percent of the total year-2000 goal and receive about\nERDA\n90 percent of the/RD&D effort in FY1977. Conservation technologies\ncontribute 22 percent and receive 4 percent,\nThese comparisons link energy savings with the one-year ERDA funds\ndirected at conservation. These comparisons are not the kind that we would\nlike to use in assessing the rationality of ERDA's allocation of funds among\nenergy conservation strategies or between conservation RD&D and supply RD&D.\nRather, the question is of the additional benefits (in terms of likely\nnational savings) expected from allocating additional ERDA funds to a\nparticular research area. The expected total energy savings from a\nconservation strategy may be high, but the impact of additional ERDA\nresearch on this savings may be small, either because the full potential\nis known or because the required research is being carried out by other\npublic or private institutions. Another strategy may offer less potential\nfor total energy savings, but the savings actually realized could be\nhighly dependent on ERDA research.\nERDA has not yet established research planning and analysis which\nproduce the kinds of information required to make these judgments. The\nCEQ review, therefore, though recognizing the weakness in the analysis,\nhas had to depend upon comparisons between total savings and research\nallocations. They do illustrate, in a general way, the apparent cost-\neffectiveness of investments in energy conservation.\n- r\nTo further illustrate the benefits\nside of the equation, the Council estimated consumer savings from technical\nimprovements in major portions of the transportation and buildings end-use\nsectors (see Table II-3). The proposed funding levels in FY1977 for\nthese R&D programs amounted to $12.8 million, $1.2 million, and less than\n$2.7 million respectively.\nTable II-3: Energy Conservation Benefits and RD&D Effort\n*\nIncremental\nBenefits\n($millions)\nAUTO EFFICIENCY\n- Redesign of non-engine components\n$59,000 mun\n- Engine re-design\nStratified charge, or\n21,000\nDiesel, or\n23,000\nStirling, or\n28,000\nBrayton\n29,000\nBUILDING EFFICIENCY\n- Improved insulation\n19,000\n- Advanced heat pumps\n6,000\n*After allowance for the time-value of money; constant\n1975 dollars.\nIII-9\nThese rough estimates, as did ERDA's, indicate large potential\nbenefits from improved end-use devices. Measured cumulatively over time,\nrather than just at the year 2000, the gap between potential of benefits\nand the level of federal RD&D planned to ensure these benefits grows\nwhich does not consider the full social costs of implementation\neven wider. Although this represents a very crude comparison, /the ratio\nof potential benefits compared to current expenditures appears so cost-\neffective as to justify significant investment.\nERDA 76-1 observes that establishing national priorities for\nenergy RD&D does not equate necessarily with priorities for the allocation\nof federal funds. Specifically, it states that primary responsibility\nfor the development of conservation technologies rests with the private\nsector because in general, they can be implemented with less government\ninvolvement than can supply technologies. This may be the case,\nparticularly for near-term conservation opportunities.\nMajor allocation of resources among RD&D options should not be made\nsubjectively. When the benefit/cost ratio of a conservation technology\nappears to be high, care must be taken to compare that opportunity on an\nequal footing with all competing options. The risk that, for institutional\nor other reasons, the private sector will not develop energy conservation\ntechnologies, or will not develop them soon enough should be carefully\nconsidered in allocating resources. If the risk appears to be too great\nin terms of lost or diminished benefits to justify near exclusive reliance\non private industry, the government should develop these technologies.\nIdentifying and Implementing Conservation RD&D Program Opportunities\nIn this area there are three issues which require attention:\nWhat alternative approaches might be used to\nidentify and compare conservation RD&D opportunities?\nAre ERDA's present energy savings estimates backed up\nby research work focused with sufficient depth on\nhigh payoff options?\nWhat factors explain the large variations in levels\nand concentration of effort among the energy\nconservation programs?\nAs noted, ERDA 76-1 states that conservation technologies provide\na potential cost-effective alternative to development of other energy\ntechnologies. Realizing this benefit will require the identification of\npotential conservation, as well as supply, opportunities. In order to\nprovide an objective basis for comparison,\nall potential opportunities should be ranked according to cost-\neffectiveness without attention to whether they are conservation or supply\noriented. This combined ranking could then be used for allocation of\navailable RD&D funds. Of course other factors, such as the likelihood\nof commercialization of a technology or whether the technology will be\ncommercialized without government assistance, must be considered before\nfinal resources allocation decisions are made. At this early stage in\nits development, ERDA has not yet implemented such a ranking process.\nERDA measures its planned conservation RD&D accomplishments\nin relation to a \"no conservation\" forecast of future energy use. This\nkind of yardstick alone cannot identify what energy conservation RD&D\nshould be carried out in relation to supply RD&D. One alternative approach\nwould be to measure conservation objectives against the maximum feasible\nenergy savings physically achievable, using principles of the Second Law\nof Thermodynamics. In contrast to a \"no conservation\" energy forecast,\ntheoretical physical principles provide a steady reference for measuring\npresent against potential technology efficiencies.\nThe Second Law of Thermodynamics states the maximum fraction of\na given quantity of heat energy which can be converted into useful work\n(the fraction is always less than 1.0). Energy is not destroyed in pro-\nducing work; instead it changes from a high-quality form (one with a large\nfraction of its heat content available to perform work) to a lower-quality\nform. This quality feature stems in part from the temperature of the\nenergy source rather than simply the quantity of heat energy it con-\ntains. A change in quality or work-producing potential -- rather than\na change in quantity of energy -- is what is used up irretrievably in\nconverting energy into work. Under a Second Law approach, source of\nenergy and the work it is used for should be matched, with high\ntemperature energy sources reserved for tasks only high temperatures\ncan do and successively lower temperatures devoted to low-temperature\ntasks. Second Law efficiency measures the extent of a perfect match\nachieved in practice.\nRough thermodynamic calculations indicate that the ERDA-48\nenergy conservation outlook --- a 25 percent improvement by today's\nenergy efficiency standards -- captures by the year 2000 only about\n20 percent of the theoretical maximum efficiency improvement (see\nTable II-4).\nFORD\nTable II-4: Idealized Maximum and Planned Energy Savings\nENERGY CONSERVATION TARGET\nERDA\nYear-2000\n2nd-Law\nPercent\nGoal (Quads)\nMaximum\nIndustrial Process Heat\n2.0\n13.9\n14\nAutomobile Transportation\n3.7\n11.6\n32\nBus, Truck and Rail Transportation\n1.8\n8.0\n22\nBuilding Space Heating Systems\n1.6\n7.4\n22\nAir Transportation\n1.3\n7.3\n18\nIndustrial Electric Drive\n1.0\n4.6\n22\nBuilding Air Conditioning Systems\n0.7\n4.6\n15\nBuildings Electric Devices\n1.1\n2.9\n38\nBuildings Thermal Improvement\n0.4\n2.8\n14\nShip Transportation\n-\n1.5\n0\nIron and Steel Production\n0.2\n0.8\n25\nPrimary Aluminum Production\n0.04\n0.3\n13\nElectric Mass Transportation\n-\n0.2\n0\nTotal\n13.84\n65.9\n21%\nSource:\nBased on ERDA-48 Vol. 2 and\nEfficient Use of Energy: A Physical Perspective,\nAmerican Physical Society\nWe emphasize that Second Law principles only indicate a theoretical\nmaximum energy efficiency and only serve to estimate the maximum size\nof the efficiency gap where real world energy conservation RD&D opportunities\nmay exist. These calculations by themselves could not translate directly\nFirst,\ninto an RD&D program. / the full measure of idealized energy savings cannot\nbe realized in practice. As thermodynamic efficiency is increased more\nand more, other physical factors begin to act as a limit. Most important,\nthe Second Law of Thermodynamics does not consider economics. For both\nreasons, it can only suggest an upper limit on the extent of energy\nconservation possibilities that should be explicitly explored.\nAmong those conservation opportunities presently being pursued\nby ERDA's Office of Conservation Programs (OCP), there are issues of focus\nwhich warrant attention. Ideally, individual energy conservation RD&D\nprograms should focus on opportunities with the greatest energy savings\npotential. RD&D in these high payoff areas should be concentrated to\nensure technical and commercial success. Of course, it is true that a\nlack of correlation between the size of energy savings and the level of\neffort could have several causes: differing energy saving opportunities,\nthe state of advancement of technology, or existence of non-federal\nresearch efforts, for example. In addition, as pointed out earlier, the\nbenefits in terms of additional national savings from allocating RD&D funds\nto a particular research effort must be considered. However, large\ndeviations between focus of effort and potential energy savings provide\na signal that ERDA's system for assigning priorities with the energy\nconservation RD&D program may be inadequate.\nThe Council reviewed 145 project areas within 18 budget categories\nof the Office of Conservation FY1977 program and budget and compared\nthem for consistency in focus of effort versus potential savings. Two criteria\nwere used. The OCP budget categories expected to contribute the largest\nshare of 1985 energy savings might be expected to receive the largest\nshare of the total OCP budget. Within each high payoff budget category,\nthe average level of funds available for each project area might be\nexpected to match the high average energy savings expected from each\n(see Table _).\nFORD is LIBRARY GERALD\nTable\nFY1977 Budget, 1905 Savings, and Project Areas, by Budget Category\nAPPLICABLE PORTION\nBUDGET CATEGORIES\nPERCENT\nFY77 Budget\n1985 Savings\nBudant Savings\nELECTRIC ENERGY SYSTEMS & ENERGY STORAGE\n1.\nElectric Energy Systems\nSystems Management & Structuring\n6,010\n710\nElectric Power Transmission\n6.5\n11.1\n12,890\n60\nElectric Energy Systems Implementation\n12.3\n0.9\n--\n--\n--\n--\n2. Energy Storage\n20,840\n450\n19.8\n7.0\nEND USE CONSERVATION & TECHNOLOGIES\nTO IMPROVE EFFICIENCY\n1. Industry Conservation\nUnit Operations & Equipment Efficiency\nProcess Analysis & Modification\nAltornative Fuels, Materials & Processes\n8,650\n2,250\n8.2\n35.0\nAgriculture & Food Processes\nIndustry Information\n--\n:\n:\n:\n2.. Buildings Conservation\nCommercial Buildings\n3,850\n200\n3.7\n3.1\nResidential Buildings\n3,075\n280\n2.9\n4.4\nCommunity Systems\n6,850\n600\n6.5\n9.3\nUrban Wastes\nAppliancos\n5,950\n360\n5.7\n5.6\nTechnology\nPerformance Standards\n-\n--\nI\n:\nDissomination & Transfer\n--\n--\n--\n--\n3. Transportation Energy Conservation\nHeat Engine Highway Systems\n14,790\n510\n14.1\n7.9\nElectric & Hybrid Systems\n4,550\n80\n4.3\n1.2\nImplementation & Equipment\nNon-lligi:way Transport Systems\n3\n1,800\n340\n1.7\n5.3\nTechnology Studies\n:\ni\n--\n--\n4. Improved Conversion Efficiency\n15,000\n.580\n14.3\n9.0\nTOTAL\n105,055\n6,420\nThousands of barrels of oil per day -- equivalont. U.S. Engrgy Research and Development Administration, FY1977 Budget Estimates\nMay not add to 100 percent due to rounding.\nNote: To arrive at the 12 \"direct\" program areas shown in Table\n, the \"support\" subprograms and their associated\nfunds ($7 million) were excluded. Also, to simplify, several of the remaining 18 program areas were combined\n(see the \"Applicable Portion\" column in the table). Then, the percentage of total \"applicable\" funds and energy\nsavings accounted for by each \"direct\" program area was calculated. The \"Percent\" columns, at the right-hand side of\nthe table, indicate that the distribution of the budget by program area does not coincide with the distribution of\nexpected savings.\nIII-15\nCur major observation is that the two areas of largest expected\nsavings -- industry conservation and new technologies for buildings\n(\"other buildings\") --- are being funded below their expected contribution\nto energy savings. They account for about 50 percent of the 1985 savings\nand about 20 percent of the effort in FY1977. In contrast, energy\nstorage and heat engine highway systems account for about 30 percent of\nthe budget and only about 10 percent of the savings.\nIII-16\nResolving the Issues\nAddressing and resolving these issues is critical to ERDA's energy\nRD&D mandate and to meetings the responsibilities that its mandate implies.\nAll of them are inherently complex, and the answers will make an enduring\nimprint on our future energy choices. Their resolution will depend on\nthe methodology ERDA employs to plan and implement energy RD&D.\nIn ERDA 76-1, the agency recognizes the distance remaining to\nbe covered in achieving a fully adequate national energy RD&D plan and\nenergy research program. To further ERDA plans and programs,\na new framework for planning and implementing energy RD&D --- a Program\nPlanning, Budgeting and Review System --- will be set up. The concepts\nit reflects are ambitious and theoretically advanced. Today, however,\nrudiments are there, but little else. Consequently, the remaining two\nchapters of this part of the report discuss the methods ERDA used to\nforumulate the energy RD&D program that ERDA 76-1 represents and the actions\nthat are underway to enhance ERDA's capacity to address the issues set\nforth above.\nAUG\n6\n1976\nChapter IV\nDECIDING WHAT ENERGY CONSERVATION RD&D SHOULD BE CARRIED OUT\nThe Council believes that adequate provision for building conservation\nin ERDA's overall planning for\ninto /energy RD&D requires:\nA task-oriented, energy systems definition\nof energy choices,\nA process for deciding what RD&D should be carried\nout based upon ongoing comparisons of all potential RD&D options.\nComparisons based on comprehensive assessment\nof the energy, economic, environmental, and\nsocial impacts of the options.\nWe recognize that ultimately, the decision maker's judgment will determine\nthe composition of RD&D programs. The three elements listed above will provide\nthe basis for informed decisions and should be major factors in determining\nthe appropriate composition of the conservation RD&D effort. The remainder\nof this chapter expands on these elements and compares the approach used in\nestablishing priorities in ERDA 76-1 and in allocating resources among\npotential technology options. We then identify and evaluate improvement\nefforts which ERDA is undertaking. Finally, in the apprndix to this\nchapter we provide an illustrative example of an analytical approach which\nwe believe includes the principal elements for adequate consideration of\nenergy conservation.\nTask-Oriented Approach\nThe task-oriented approach identifies energy RD&D opportunities\nby looking first at the basic nature of the tasks energy can perform\nand at alternative ways to do them using different amounts of energy.\nStarting with end-use, it then poses and compares alternative con-\nfigurations of end-use devices and supporting distribution systems,\ntransport modes, conversion processes, and energy resources to serve them.\nIV-2\nIn the past, our energy decisions, including those related to ERDA's\nNational Plan, have not taken this approach. Typically, we looked first\nat energy resources and alternative conversion processes and methods.\nOften, this traditional systems approach ignored the final end-use step\nas well as the nature of the tasks which create our energy needs. As a\nresult, new and different end-use methods and devices often were overlooked\nentirely in posing future energy choices and deciding what energy RD&D\nshould be carried out.\nWe can clarify the difference by considering home heating as an\nexample. The traditional analysis begins with mining of coal and then\ncompares ways of converting, transporting and distributing it to homes\nin raw form or as a gaseous or liquid fuel or electricity. The task-\noriented approach begins with the problem of maintaining a comfortable\nindoor residential environment in the most efficient manner.\nThe task-oriented approach is a better way of analyzing energy\nchoices because, by broadening the view of energy end-use, it opens up\nnew possibilities for energy conservation early on. As a first step\nin the search for energy RD&D opportunities it asks: \"What is to be\naccomplished by spending energy on a given use?\" Also the task-oriented\napproach encourages consideration of the maximum efficiency that\nshould be achieved in getting the job done rather than simply improving\nthe efficiency of methods and devices now in use.\nMost important, unless the analysis begins with end-use, RD&D priorities\nand funds could be misdirected because possible end-use energy savings may\nnot come to light. End-use technology improvements are an integral component\nof each alternative energy system. Not fully considering end-use may produce\nwrong answers about the relative attractiveness of different supply and\nend-use conservation technologies.\nIX-\n3\nWithout incorporation of a task-oriented, energy systems definition\nof energy choices,\nRD&D priorities and funds may be misdirected.\nOngoing Comparison Process\nAn adequate method for building in conservation identifies and\nevaluates energy RD&D work to be carried out concurrently at many levels\nin the organization and therefore at different levels of detail, all closely\ninteracting and linked in the overall national planning process. A\nnational plan for energy RD&D evolves and is implemented by planning\nat top levels and all the way down and up the line.\nThe most detailed comparisons of RD&D alternatives should be done\nwithin individual RD&D program offices and at the level of specific\nRD&D tasks or projects -- for example, competing designs for a heat\npump or for a high-Btu coal gasification process unit. The detailed\ninformation for the top-level comparisons should be developed as a\nproduct of day-to-day research work.\nAt decreasing levels of detail, options should be identified and\nevaluated in both planning and implementing a national plan.\nAt the top, the comparisons and decisions regard the larger system --\nfor example, alternative liquid fuel, gaseous fuel, or electricity-based\ntransportation systems. To adequately build in energy conservation,\ninformation must be brought together at this level in a way which\nmakes possible comparative evaluations of conservation and supply\nRD&D opportunities.\nComprehensive Assessment of Consequences\nComprehensive assessment of energy RD&D options is critical to ensure\nthat a task-oriented approach and an ongoing comparison process ultimately\nproduce adequate attention to energy conservation. Comprehensive\nassessment has two dimensions. One concerns estimating the energy,\neconomic, environmental, and social benefits and costs of competing\nRD&D options. The other involves identifying, evaluating, and comparing\nend-use\nenergy conservation options to their supply counterparts over each\nproposed supply RD&D planning period.\nA method for comparing conservation with other RD&D should\nproduce timely impact assessments addressing major public conerns.\nThis can best be done by building the assessment into each energy RD&D\nprogram. Without timely assessments, drawn from research built into every\nenergy RD&D effort, comparisons of all attractive RD&D opportunities\ncannot be carried out, and conservation opportunities may not be fully\nconsidered.\nWithout comprehensive measurement of impacts of alternative uses\nof RD&D resources, attention to energy conservation in federal RD&D\nwill be of questionable adequacy.\nPrincipal Findings\nERDA recognizes that an approach similar to that outlined above is\nnecessary for RD&D planning and decisionmaking. Measures to improve its\nplanning process, discussed later in this chapter, could establish the\nbasis for adequate consideration of conservation. But a careful review of\nthe analytical and planning processes as expressed in ERDA 76-1 indicates\nsignificant problem areas:\nERDA has not performed task-oriented or systemwide\nevaluation to identify what energy RD&D is needed.\nFundamental economic and environmental information\nbasic to a functional building-in method is not available.\nMore important, the research work ultimately needed\nto provide this information is not built into the energy\nRD&D efforts of its supply and conservation program offices.\neffectively\nERDA's planning and budgeting are linked at the top.\nConsequently, broad agencywide decisions about what RD&D\nshould be carried out cannot be translated with confidence\ninto specific research.\nA general lack of policies, planning guidelines, and\ndecision criteria exists for insuring that all energy\nRD&D opportunities are compared objectively.\nERDA 76-1 makes commitments which could solve these problems; and\nwork is underway in a number of areas to implement these commitments. As\ndiscussed in this chapter, these represent a major commitment which could\nprovide the basis for adequately building-in energy conservation. To\nensure adequate attention to energy conservation, these commitments should\nbe implemented as rapidly as possible.\nWithout such an improvement, ERDA will not be able to make objective\ncomparisons between energy conservation and energy supply technologies\nwithin the next 2 years.\nII-6\nERDA's Building-In Method\nThis section examines the methods used to formulate ERDA 76-1 and\nthe current research of ERDA's Office of Conservation Programs.\nDescription of Energy Choices\nThe Brookhaven Reference Energy System (RES) -- ERDA's primary\nplanning tool -- can systematically compare the energy costs of alternative\nenergy systems. It contains energy sources and technologies, and energy flows\nfrom resource extraction through to the end-use devices which convert delivered\nenergy (e.g., liquids, gases, solids or electricity) into desirable work\n(e.g., BTU's of residential space heat).\nEnergy efficiency is an important, explicit factor in the RES\ncalculations at each step from extraction through the end-use device.\nAlso, alternative end-use devices (e.g., a heat pump as a substitute for\nelectrical resistance heating) can be inserted into the\nenergy flows from extraction to each major category of end-use. For\nthis reason, ERDA's RES capability is a sound and sophisticated tool through\nwhich a task-oriented planning approach ultimately can be achieved.\nHowever, the RES cannot fully accomplish task-oriented, energy\nsystems definition of energy choices. First, the investment costs of\nthe end-use devices in the RES are not factored into its calculations.\nSecond, only the end-use device itself is contained explicitly within the\nsystem descriptions. For example, energy conserving opportunities applicable\nwithin more broadly defined energy using units (e.g., improved insulation\nof homes) but external to the end-use device (e.g., the furnace or air\nconditioner) are not accounted by the RES. This means that the costs of\nthese kinds of improvements, which make up a large share of the energy\nconservation RD&D opportunities ERDA anticipates, cannot be included\nexplicitly in energy systems comparisons.\nFinally, the RES presently is not configured to automatically adjust\nlevels of end-use efficiency (or use efficiency at critical intermediate\nsteps such as electricity generation) in response to the expected costs\nof energy supply. However, the economics of supply technology have a\nprofound effect on the basic economic attractiveness of energy conservation\ntechnologies and, as a result, on the level of energy demands. Also,\neconomically competitive\nend-use efficiencies achieved through/new end-use technologies have an\nequally profound effect on the relative attractiveness of alternative\nsupply technologies.\nUntil all investment costs associated with the end-use of energy are\nincorporated in the RES along with capability to automatically adjust\nenergy efficiency opportunities in light of changed supply costs, the RES\nhelp to\ncannot/accomplish the matching of supply and conservation intrinsic to\nthe task-oriented approach.\nEvaluation of Energy Choices\nEvaluation of energy choices beginning with end-use alternatives has\nthree steps. First, the basic nature of the tasks that energy might perform\nshould be described.* Second, tasks that energy can perform should be\nFORD\n&\nBERALD\n* In a general sense, ERDA does this. In formulating inputs to the\nReference Energy System they begin by estimating the amount of various services\n(e.g., miles of automobile travel) consumers may demand in the future.\nIX-3\nexamined by searching out a wide range of methods and devices that use\ndifferent amounts of energy. Third, energy conservation opportunities\nshould be assessed in relation to indicators of improvement potential, for\nexample the principles of the Second Law of Thermodynamics referred to\nearlier, rather than against the energy efficiencies of today's end-use\ndevices and methods. On these terms, there are three problems underlying\nERDA 76-1:\nThe kind of analysis by which ERDA set priorities\ndid not use the best capabilities of its planning tool.\nThe scenarios used to determine strategy emphasis\nare not developed from a task-oriented basis.\nThe number of energy conservation opportunities does\nnot reflect an assessment of energy RD&D potentials.\nThe Brookhaven system can calculate the least-cost combination of\nmyriad energy supply options which our economy should tend to select\nin the future. ERDA, however, did not use this capability in for-\nmulating the National Plan. Instead, future energy choices were\ndescribed in ERDA-48 and ERDA 76-1 with. six- subjectively-determined\nenergy futures. The energy choices which make up these six \"scenarios\" were\nevaluated by calculating by hand their impacts on our domestic resources\nand energy costs. Briefly, the six scenarios are: a baseline of no\nnew initiatives; improved efficiencies in end-use, synthetics from coal\nand shale, intensive electrification, limited nuclear power, and a\ncombination of all the technologies.\nBecause none of these scenarios reflects the combination of energy\nchoices that the economy might in fact produce, their usefulness in\ndetermining an energy RD&D mix is limited. Moreover, of the four scenarios\nwhich contrasted alternative energy choices (excluding the baseline and\nthe combination of all technologies) conservation improvements available\nfrom new technologies are generally reflected only in the improved end-use\nefficiency scenarios. The other scenarios varied supply and, although\na few items from the conservation scenario were considered, the Plan did\nnot carry out the kind of systemwide balancing of energy supply and energy\nconservation opportunities required by a task-oriented approach.\nFinally, ERDA's national planners and its end-use conservation program\noffices \"negotiated\" the assumptions used in the improved end-use scenario.\nNegotiations appear to have been over what percentage of improvements in today's\nend-use devices to use in the Plan. They did not consider potential energy\nconservation possibilities.\nRD&D Comparisons Throughout Planning\nAn ongoing comparison process links top-level planning with planning of\ndetailed research programs and, in turn, with budget decisions and program\nimplementation. In doing this, the need to make side-by-side comparisons\nof alternative RD&D opportunities should be kept in mind. Also at the\npoint where top-level comparisons are made, the planning process should\nensure that the costs and benefits and other attributes of competing\ntechnologies are based on detailed research programs designed to deliver\nthese results.\nWe found that ERDA has made general comparisons of this type in\nestablishing broad agency priorities. However, specific energy conservation\nand supply enhancement RD&D technology opportunities are not lined up\nfor comparison based on cost, benefit and impact information.\nThe planning and implementation approach outlined in ERDA 76-1\npromises a side-by-side ranking of energy RD&D options. To produce\nthis ERDA envisions various analyses of energy markets, both private\nand public investment attractiveness of new energy technology ventures,\nand energy-economic-environmental tradeoffs. A \"Program Strategy\"\ndocument is expected to synthesize these studies.\nThe kinds of analyses needed to produce strategy statements\nare currently in the first stage of development at ERDA.\nInformation and Planning Periods for Comparisons\nERDA's impact information reflects three inadequacies:\nThe environmental research that is basic to environmental\nassessments is not built into conservation RD&D.\nERDA's macroeconomic impact assessment capabilities,\nalthough its most advanced impact assessment area, are not\nadequate.\nThe information and analytical capability necessary to\ncompare the impacts of energy conservation and supply\nenhancement technologies do not yet exist for the mid-\nand long-term periods.\nAdequate information on the economic, environmental, and social\nimpacts of energy choices is basic to planning. Identifying and evaluating\nsuch impacts must be built into each RD&D program. Impact assessments\naddressing areas of major public concern should be available on a timely\nbasis, and the assessments should influence what RD&D is carried out.\nERDA's environmental assessment process is discussed in the following\nchapter and in Part III of this report.\nFORD\nAlthough in general, ERDA's macroeconomic impact assessment capabilities\nappear more advanced than its environmental assessment capabilities, they\nneed further development. Since formulation of the first National Plan, the\neconomic impact capabilities of RES have been extended. ERDA 76-1 tested\npossible impacts of new energy technology on national economic growth and\nother conventional indicators of economic well-being. The tests compared\nnew technologies against the alternative of simply allowing energy prices\nto rise enough to balance demand with supply.\nThe tests suggest that relying only on price increases to ration\nlimited energy supplies has serious economic impacts. As an alternative,\nnew supply technologies may become attractive. However, we do not\nbelieve this analysis alone is sufficient. The tests should also explicitly\nconsider the economic and other impacts of new conservation technologies. Until\nthis is done, ERDA's macroeconomic impact information will not be adequate\nfor building energy conservation into energy RD&D.\nGuidance to assure necessary impact information is generated and\nprocedures to ensure that all impacts of public concern are fully considered\nshould be formalized. These procedures should extend below headquarters\nlevel where the day-to-day research is done.\nComparison Planning Periods\nERDA's rationale for energy RD&D is providing choices for the future.\nTo do so, energy conservation and supply enhancement technological\nopportunities should be assessed over comparable periods of time. This\nwill focus attention on the comparative economic, environmental, and social\nimpacts of the alternative technologies. The conservation program is not\nyet generating the information necessary for these comparisons.\nIV-12\nPlans for Improvement\nERDA presently is improving its agency-wide and specific program\nplanning capabilities in a major way.\nProgram Planning, Budgeting and Review (PPBR) System\nThis system is to provide \"an integrated approach to analyzing future\nenergy technology needs; formulating the federal role in addressing those\nneeds; designing targeted programs to conduct ERDA's portion of the plan;\nallocating resources consistent with the Plan and program design; and\nensuring that ERDA's programs are effectively managed.\"\nThe components of this approach include:\n\"normative planning,\" which establishes broad\nenergy technology goals\n\"strategic planning,\" which defines how the\ngoals can be achieved most effectively\n\"program planning,\" which describes in detail\nhow the ERDA program will be implemented\n\"resource allocation,\" which directs ERDA\nresources at the most important activities\n\"program implementation,\" which delineates\nthe specific activities to be accomplished\nwithin approved budgets\n\"program evaluation,\" which identifies\ndifferences between the operating plan and\nactual conditions.\nA number of formal documents are envisioned by ERDA to accompany\nthese components (see Table II-6).\nERDA's PPBR system, an advanced approach to management of a large,\ncomplex organization, is still in its early stages. Future reports of\nthe Council will address its use in considering and effecting conservation RD&D.\nI\nis\nTable II-6: PPBR System Outputs\nNational Plan for Energy RD&D: documents the comprehensive goals\nand priorities that help define what should be done if energy\nproblems are to be resolved through technology development\n(e.g., ERDA-48 and ERDA 76-1).\nProgram Strategy: for each technology program, presents major\nprogram goals and strategic implementation milestones derived\nfrom an analysis of the effectiveness of RD&D in resolving\nenergy problems and the need for a federal role in RD&D.\nProgram Plan: details the most cost-effective federal program\nfor implementing each technology program's strategy and specifies\nhow each program will be managed and related to other federal ,\nprograms.\nERDA Budget: presents comprehensive near-term priorities and\nthe annual allocation of resources.\nProgram Approval Document: a 1-year operating plan, carved out\nof each program plan, which provides a baseline for monitoring\nprogram operations during 1 fiscal year.\nEnvironmental Development Plan: the EDP outlines the environmental\nresearch program planned in parallel with each technology program\nplan, to resolve environmental issues at a pace consistent with\nthe rate of technology RD&D.\nEnvironmental Impact Statement: required by the National Environ-\nmental Policy Act, conveys the results of the environmental\nresearch outlined in each program's EDP to major program\ndecision points.\nSource: ERDA 76-1\nIV-\nBetter Analysis\nERDA's\nMore specific improvements are underway to enhance /capabilities\nfor defining systemwide energy choices and for identifying and evaluating\nenergy RD&D opportunities. ERDA plans to:\nAdd the investment cost of alternative end-use\ndevices to its principal assessment tool, the\nBrookhaven Reference Energy System.\nInvestigate the macroeconomic impacts of nonprice-\ninduced energy conservation.\nImplement a newly developed technique (called \"relevance\ntrees\" by ERDA) for structuring a task-oriented approach\nto identifying energy RD&D opportunities and for\nevaluating and ranking these opportunities in a\nsystemwide context independent of whether they represent\nconservation or supply enhancement RD&D.\nRevise the ERDA 76-1 scenarios.\nInclude Second Law of Thermodynamics calculations\nin its Reference Energy System estimates.\nThe further step of comparing energy conservation and supply enhancement\nRD&D in planning is progressing:\nHaving identified the kinds of analyses needed\nto support planning, ERDA's next goal is to\nanalyze in more detail programs that are aimed\nat the same or similar markets.\nA second goal is to apply tools such as venture\nanalysis, economic impact analysis, tradeoff\nstudies, net energy analysis, and constraint\nstudies (in order to quantify) the costs and benefits\nof selected energy technologies.\nThe Council believes these improvements can result in adequate\nattention to energy conservation. However, we are concerned that although\nERDA is initiating the required work, RD&D opportunities will not be\ncomprehensively ranked during 1976. With budget leadtimes, with legal\nrestrictions on moving funds between programs, and with multi-year commitments,\nwork planned and budgeted during 1976 will not be begun until 1978. RD&D\nin 1978 still may not benefit from the necessary comparisons of conservation\nand supply. The Council believes that ERDA should establish an action\nagenda for implementing its improvement efforts. Until these improved\nanalytical planning methods are being used to consider conservation on an\nequal basis with all other options in establishing RD&D\npriorities, ERDA's plans should make clear that priorities will be closely\nreevaluated on an annual basis.\nExample of a Task-Oriented Approach\nA national program of energy RD&D should, as a minimum, evaluate\nenergy choices in terms of complete energy production and use pathways.\nThe most essential feature of doing so is the identification and\nevaluation of competing energy choices beginning with end-use needs.\nOur earlier discussion of a task-oriented building-in methods.\ndescribed one system pathway: from mining coal, step-by-step, through\nits final use to heat a home. This discussion illustrates the need for\ncomparisons of competing energy systems which encompass\nextraction, conversion, transmission, distribution and end-use. It\nshows how environmental, economic, and social impacts change the attrac-\ntiveness of individual configurations of conversion, transmission,\nand distribution technologies. But most important, the value of new\nand different end-use technologies becomes clear. Coal is the source of\nenergy in all the examples throughout the energy conservation section.\nSystems Definition of Energy Choices\nResidential space heating needs may be satisfied with many different\nsystem configurations.* Geographical variables affect the availability\nand quality of coal, seasonal annual heating needs, and the technologies\nat each step from extraction on.\nIn our illustration a number of individual technical components\nwere combined at each extraction, conversion, transmission, distribution,\nand end-use step to form alternative pathways from coal through resi-\ndential space heat. These technical components were configured for\nNew York, Chicago, and Los Angeles using coal from the east, midwest,\n**\nand west.\nFor each coal source and city, economically second-rate\n*\nTo simplify the illustration, we do not consider residential space\ncooling. as well as other residential energy uses (e.g., water heating)\nwhich relate to space heating.\nIn the interest of brevity, only Chicago is discussed here.\npathways were eliminated, until the best configuration reflecting four\nsystemwide alternatives remained: direct burning of coal to generate\nelectricity, coal liquefaction, high-Btu coal gasification, and a\ndual conversion system consisting of an intermediate low-Btu coal\ngasification conversion step and an. electrification final conversion\n*\nstep.\nInitially, we limited comparisons of the four systemwide alternatives\nto the estimated full life-cycle costs per unit of space heat available\nin a residence. We made the comparisons in three steps. The first\nbegan with extraction (coal mining) but stopped with the cost of energy\n\"as delivered\" to the residence but before costs of installing and maintaining\nalternative residential space heating systems were factored in (Figure II-5\nshows the example results fro Chicago) **\nHorizontally, the figure shows six points where the estimated\nenergy costs were compared. The first three points (left-to-right)\nmake up the production and delivery portion of the pathway. The last\nthree complete the energy production and use pathway by including costs\nof three end-use devices. Each represents a more efficient residential\nheating device: today's devices, an improved version of today's devices,\nand a heat pump, respectively.\nThe costs are shown by an index rather than estimated dollars per\nunit of energy. The index was derived by dividing the estimates\navailable for each technical component by the cost of $13\nimported crude oil at a comparable step in its conversion to residen-\ntial. space heat.\n* Of these conversion technologies, coal liquifaction, high-Btu gasi-\nfication.\nlow-Btu\ngasification\nFIGURE II-5: Economics of Four Systems to Heat Chicago with Coal-Derived Energy\nINTERMEDIATE\nFINAL\nDELIVERED TO\n1975\nIMPROVED\nHEAT\nCONVERSION\nCONVERSION\nRESIDENCE\nHEATING PLANT\nFURNACE\nPUMP\n6\n2\n5\nCOST\nINDEX\n4\n4\n4\n3\n3\n2\n2\n2\n3\n2\n1\n1\n1\n1\n4\n4\n1\n3\n3\nLEGEND:\n4\nDIRECTLY BURN WESTERN COAL TO GENERATE ELECTRICITY.\n3\nCA3IFY WESTERN COAL TO PRODUCE HIGH-BTU PIPELINE QUALITY CAST\n2\nGASIFY WESTERN COAL TO PRODUCE LOW-BTU GAS TO, IN TURN, GENERATE ELECTRICITY.\n1\nLIQUIFY WESTERN COAL AND REFINE TO PRODUCE FUEL OIL.\n0\nCost indox 1.0 represents heating Chicago residences with $13.00 imported oil,\nIt is immediately apparent that the relative economic\nattractiveness of the four systems changes dramatically as the com-\nparison extends beyond the conversion step -- gasification, liquefaction,\nor electrification -- to the point of use. Compared only on an as-\ndelivered basis (to the residence from the coal), the coal-synthetic\noil and gas systems are about twice as attractive economically as\nburning coal directly to produce electricity. The dual-conversion\nsystem -- coal to low-Btu gas to electric -- looks uniquely unattrac-\ntive for residential space heating here.\nThe second step in the example analvsis extended the comparison\nof the four systemwide choices for residential space heat to include\nthe efficiency and life-cycle investment and operating costs of today's space\nheating devices (see Figure II-5). Including both energy production and\nuse in the economic comparisons brings the attractiveness of direct\ncoals to electric system more into line with synthetic oil and gas.\nThe reason is the 100 percent end-use efficiency of electrical resistance\nheating compared to the lower efficiency of gas-fired and oil-fired\nresidential heating plants. * The dual-conversion system, however, still\nlooks inferior despite its 100 percent end-use efficiency.\nIn the former case, a system with higher delivered energy costs\nbefore end-use becomes more economically competitive when its higher end-use\nefficiency is considered. In the latter, a 100 percent efficient end-use\ndevice does not make economic sense when supplied by a high-cost dual\nconversion energy pathway. The need for systemwide analysis of energy\nchoices is clear.\n*\nThis 100 percent level should be interpreted as a relative measure of\nefficiency for well-insulated electrically-heated homes, against which\ngas-and-oil-fired systems can be compared.\nTask-oriented Viewpoint\nA question remains about whether new energy conservation technology\ncan improve the overall economic performance of these\nfour systems or can change their relative economics. To illustrate, the\nanalysis next considered more efficient oil and gas heating plants as well\n*\nas an electric heat pump (see Figure II-5). Without a heat pump, more\nenergy efficient gas and oil heating plants lower total costs per unit\nof space heat for their systems. Better furnaces decrease the relative\neconomic attractiveness of the electric configurations, again because\nelectrical resistance heating is already 100 percent efficient.\nAdding a heat pump, however, makes the direct coal-to-electric\nconfiguration economically comparable to coal synthetics for Chicago's\nspace heat needs. It should also be noted that the dual-conversion\nlow-Btu gasification-to-electric option may also approach the economically\ncompetitive range for purposes of deciding what RD&D candidate tech-\nnologies to pursue.\nComprehensive Assessment of Consequences\nEnergy costs alone cannot adequately reflect impacts of energy RD&D\noptions. For example, the four residential space heating systems have\nother economic, environmental, and social impacts which should be compared\ncomprehensively. The environmental quality assesment illustrates the need for\ncomprehensive impact measures.\n*\nA natural-gas actuated heat pump was excluded because initial costs\nlower gas heat economic feasibility. Again to simplify the illus-\ntration, new end-use technologies potentially capable of affecting\ngas heat like the way heat pumps affect electric heat are excluded,\nfor example, solar-assisted gas heating systems.\nEnvironmentally, the four systems that produce residential space\nheat from coal also produce different land, air, and water pollutants.\nThey occur at different geographical locations, all with potentially\nunique vulnerabilities to each pollutant. For example, the environmental\nimpacts will be measured in terms of only two air pollutants --- sulfur\ndioxide and nitrogen oxides, and to simplify, total pounds of SO 2\nand NO emitted will be used as the measure. Like the economic com-\nX\nparisons, environmental comparisons are made before and after energy\nconservation technologies are added (see Figure II-6);\nThese two environmental impacts influence the relative attrac-\ntiveness of the options for meeting Chicago residential space heating\nneeds with coal. Considered before energy conservation improvements,\ntwo technologies -- liquefaction and high-Btu gasification -- stand\nout as especially advantageous economically and environmentally. They\nalso produce less so 2 than today's oil-based heating systems. In\ncontrast, before-conservation comparisons add environmental disadvantages\nonto the economic disadvantages of the direct-coal-to-electric system.\nFIGURE II-6: Environmental Consequences of Coal-Based Residential Heating\n1975\nIMPROVED\nHEAT\n1975\nIMPROVED\nHEAT\nFURNACE\nFURNACE\nPUMP\nFURNACE\nFURNACE\nPUMP\n4\nSO₂\nNO\nX\n4\n3\nLBS\nMMSTU\n4\n2\n2\n4\n1\nbaselline\n4\n1\n2\nI\n1\n2\n1\n3\n3\nbaselline*\n3\n2\n3\n0\n4\nDIRECTLY BURN WESTERN COAL TO GENERATE ELECTRICITY.\n3\nGASIFY WESTERN COAL TO PRODUCE HIGH-BTU PIPELINE QUALITY GAS.\n2\nGASIFY WESTERN COAL TO PRODUCE LOW-BTU GAS TO GENERATE ELECTRICITY\n1\nLIQUIFY WESTERN COAL AND REFINE TO PRODUCE FUEL OIL.\nRepresents heating Chicago residences with $13.00 imported bil.\nMore important, energy-use efficiency improvements can have a\nmajor effect on the relative environmental position of the four competing\nsystems. On economics alone, improving today's heating plant moved all\nbut the dual conversion system (low-Btu gasification to electric) into\na comparable cost range. Coupling environmental measures with slightly\nimproved oil and gas furnaces, however, further reduces the attractive-\nness of the direct coal-to-electric option relative to oil and gas\nsynthetics.\nHeat pumps were shown earlier to represent an economically worth-\nwhile addition to the electric systems, but not dramatically so. Applied\nto the electric-based systems, however, a heat pump significantly\ndecreases SO, 2 and NO x emissions. After heat pumps are included in the\nsystem, then, the electric systems appear equally-attractive eco-\nnomically and environmentally to synthetic oil and gas. To build energy\nconservation into RD&D adequately, more sophisticated end-use technol-\nogies -- exemplified by the heat pump --- may become especially attrac-\ntive when environment is more fully considered. In addition, an entire\nclass of supply enhancement technologies - coal-to-electric systems --\nmay become a more attractive candidate for RD&D.\nFORD LIDRA\nThe intent of the coal-Chicago illustration is to demonstrate that\nsystematically addressing additional impacts of competing RD&D options\nchanges their relative value dramatically. The illustration is clearly\nincomplete for deciding what energy RD&D should be carried out. Addressing\nother environmental, macroeconomic, and social impacts would provide\nmore insights into different kinds of opportunities for RD&D and could\nreorder the ranking of opportunities. The Council suspects that would"
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