Recession means investments in energy efficiency will probably pull back. Public policy may need to actively help the private sector advocate energy efficiency in the environments we build.
Chapter 1. Thinking green in a blue economy
In 1979, during the final years of that era's energy crisis, President Jimmy Carter unveiled policy that gave tax incentives to businesses and consumers who purchased solar panels, and he did so with a symbolic gesture: He installed solar panels on the roof of the White House. Energy efficiency advocates use this anecdote regularly, most often to contrast Carter's energy policy with the policies of subsequent presidents, who removed Carter's solar panels and diverted attention from energy policy to focus on other agenda.
But Carter, the cardigan-wearing, wood-burning President whose doctrine deemed interference with U.S. oil production in the Persian Gulf to be an act of extreme hostility, routinely backed up symbolic energy steps like the White House solar panels with practical ones. Today, the United States faces another energy crisis. Few would argue the importance of the country's energy interests, and many assert that the changing of the guard in the White House is, once again, a symbolic step that needs practical action to follow. What those practical actions look like, and, what actions and policies the government implements is at the forefront of our industry's agenda. Could the private sector provide the necessary practical actions on its own, without government intervention that nudges efficiency forward? It may not have the chance to find out.
Ideally, technologies like solar panels and wind turbines soon become cheaper than the fossil fuels that they replace while machines become more energy-efficient whether they use fossil fuel or alternatives.
This progress is already underway: a 13 SEER air conditioning system, for example, uses about 23 percent less energy than a 10 SEER system. As energy prices continue to fluctuate, the best strategy to manage expenses might be to replace old, outdated equipment and avoid the unnecessary costs they incur. This concept is emerging in public policy discussions. It's important to remember that buildings are integral units, not pieced-together appliances and systems. For example, engineers can integrate efficient air conditioning systems with heat recovery systems to produce hot water at a lower cost. Conservation means making the most with available resources-in this case, existing systems and technologies or strategies to make the interplay between them more efficient-not buying every new technology that comes along. In some places, use of photovoltaics has nearly doubled every two years since 2002, and the renewable solar tariffs and net metering that come with these technologies are enormous incentives to encourage their continued use. Some buildings are beginning to use this technology in their marketing and leasing materials.
Upcoming years could see change in many areas: the composition of the private sector, government oversight and regulations, business incentives to minimize energy use, and investments in conservation technology could all shift as a result of the credit crisis and the 2008 United States presidential elections. With changes in the executive and legislative branches, government intervention into the energy industry could easily increase.
Surely there will be change. Appointment of energy efficiency advocates to the cabinet could change the regulatory landscape. Requirements for increased system energy efficiency could force building owners to retrofit older, less efficient equipment. A $150 billion government-led investment fund, as Obama proposed during his campaign, could compete directly with private equity firms for investment in the most-progressive energy technology.
Climate change legislation seems likely-both branches of Congress seem determined to put together a bill that will transcend party lines, and the Obama administration has stated similar interest in creating climate change policy. For domestic and work environments we make, such policy would nudge energy prices upward and drive demand for efficiency technology to reduce exposure or mitigate risk.
For manufacturers, new policy focused on climate change, and on HFCs in particular, would create a fork in the road: innovative manufacturers will see opportunities, while the rest will see an obstacle. Currently, public policy does not do a lot to encourage phaseout of appliances dependent on HFCs, so advocacy organizations have stepped up to educate policy makers about these chemicals.
An additional concern is the potential for investments in energy efficiency to slow due to domestic recession. The Obama administration has a plan that is particularly alluring. It would invest $150 billion during the next ten years in private efforts to create or nurture clean-energy technology. The administration would have great incentive to push this policy through because, aside from driving innovation, the fund would create jobs during a time when domestic unemployment is comparatively high.
It is tough to say what the actual affects of such capital infusion might be. While overall investments in the technology sector have dwindled recently with the economic downturn, investments in green technology have remained strong. But industry insiders predict that innovation will continue to originate in the United States, even if production is moved offshore to countries like China or India where labour rates are lower.
All other factors considered, recession might be the best time to invest heavily in innovative technology because emerging from downturns historically involves changing the status quo. Where public policy takes the environments we build in the near future won't be awfully surprising. Many technologies that policy may soon require already exist as options today. Energy efficiency requirements for appliances have been increased several times in the past and may be shortly revisited. High-performance building designations, such as Energy Star, are increasingly becoming useful marketing tools for developers, with simple upgrades in building automation technology as an alternative. The technology is already available.
When seeking to complement the private sector in producing energy efficiency technologies for mainstream use, United States regulators and lawmakers may very well look to the international community for cues. This is why when examining domestic energy situations, the contention that what goes on outside the United States has more impact than what goes on within its borders may have merit.
One barometer for the energy discussion on a global scale is the Group of Eight, which meets annually to discuss international economic issues. The G8, traditionally more economically-focused than other NGOs, is perhaps in the best position to affect global energy trade.
The G8, unfortunately, missed an opportunity to advance energy debates when it excluded China from its energy meetings earlier this year. Given China's thirst for imported oil and its high level of carbon emissions, it isn't possible to have a meaningful discussion about energy without their involvement. Despite the growth of China's economy, it will remain a significant importer of oil for the foreseeable future.
The G8's energy actions will be telling. If it engages China in next year's dialog about energy issues, then the global community, and the United States in particular, will benefit from a nongovernmental ally in shaping solutions to global energy challenges. If it fails to engage China or excludes other emerging and influential nations, then it risks not advancing truly global energy solutions. Given its authority and its stated goal to address global energy dilemmas, the G8 should take any opportunity to engage all significant importers and exporters in dialog about these issues and to push global leaders toward alternative energy solutions. Neither the public nor the private sector alone will produce meaningful progress toward reducing energy consumption. What is vitally important is that both work together to understand the issues and ensure that sound energy policy begins now and continues apace as the economy rebounds.
Green Event, circa 1960: "Love your mother- Mother Earth! Come to the Quad tomorrow at noon to rally for the environment and against the politicians who poison our water and pollute our air. BYOB."
A Green Event, Today: "On November 14, more than 40 business leaders, eminent researchers, financiers, and policy makers convened at La Costa Resort in Carlsbad, CA for the Danfoss EnVisioneering Symposium to discuss conservation themes including pending legislation involving climate change and energy efficiency."
The 60s rally is historical fiction. The EnVisioneering Symposium is an accomplished fact. Washington is the vortex of important domestic issues, and energy efficiency is a focus on Capitol Hill. This was apparent at the Danfoss EnVisioneering Symposium on Climate Change in Carlsbad, where a large portion of the discussion centred on climate change and energy efficiency legislation that may take hold with a new Congress and administration set to take over in January.
Industry Readies for 2009 White House In particular, panelists agreed that climate change bills that are currently in Congress would, if passed, significantly increase energy efficiency demands and dramatically reduce the use of HFC refrigerants, an issue of critical importance to the HVAC&R industry.
With President-elect Obama's emphasis on energy, energy security and "green" jobs, Kevin Fay, president of government relations firm Alcalde & Fay, projected at the Symposium that lawmakers will pass new regulations or modernize existing policy that has outlived its usefulness. This, he said, would include climate change legislation, although he projected such policy isn't likely to pass before late 2009 or 2010.
The 2008 bills, he added, had common approaches that could become the foundation for new legislation in the next Congress.
David McIntosh, former counsel and legislative assistant for energy and the environment for Sen. Joseph Lieberman, ID-Conn., said he expects legislation to affect the HVAC&R industry and mandate a phase-down of HFC refrigerants. He noted that each bill authored by Congress recognized the important roles that these refrigerants play in today's high-efficiency air conditioning and refrigeration equipment.
McIntosh projected that future energy legislation could include mandates for new energy efficiency standards, as well as subsidies and tax incentives. The Congress and administration could look to state initiatives as possible models for legislation, as well as past federal initiatives. He also expects that the Obama administration would enunciate a basic plan for climate change, outlining fundamental principles such as "cap and trade," targets and timetables, and affixing each to a specific industry segment such as transportation, utilities, and HVAC&R.
With such an outline, he said, Congress could begin work on specific portions of the agenda, without having to write a single comprehensive bill covering all aspects.
At times, planners should look at energy regulation from this policy-making perspective in order to adequately prepare for likely regulation.
Two committees-the Senate Environment and Public Works Committee and the House Energy and Commerce Committee-produced bills in 2008, and McIntosh said he expects the financial dimensions of the climate change issue to draw the House Ways and Means Committee and the Senate Finance Committee into the issue. He also predicted senior staff from the Environmental Protection Agency and the Department of Energy would also recommend input to legislation.
He urged the HVAC&R industry to closely follow the proceedings of these committees and agencies. Because of the changing of the guard in Washington, 2009 will undoubtedly be a big year for energy efficiency policymaking and planning, and every indication points toward more regulation or oversight of how energy is created, supplied, used, and priced.