The ineffectiveness of energy efficiency

Future energy scenarios from the European Commission and the International Energy Agency are all based on the assumption that improved energy efficiency and other climate policies will lead to lower energy consumption. This is wishful thinking. Human progress has always been accompanied by higher energy use – and that will not change in the future. If the EU were really to achieve lower energy use, it could only mean one thing: that Europe would start to decline economically compared to the rest of the world.

The Energy Star label stands for an international standard for energy efficient consumer products.
Whatever negative effects the economic crisis has had, it has not had an impact on the production of energy reports. Almost every day some institution produces some energy report – if it is not on EU energy policy, then it is on the low-carbon future that is awaiting us somewhere round about 2050.

Last week, the European Climate Foundation presented a large study: “Roadmap 2050, a practical guide to a prosperous, low-carbon Europe.”
This week the European Renewable Energy Council came up with an equally big report: “Rethinking 2050: Making the EU 100% renewables-based”.

And there have been many more like this. One wonders sometimes how useful or effective such reports are – or how many people actually read them. They do keep people busy, in a sort of roundabout away. If you take the European Climate Foundation, for instance, this is sponsored by six other foundations: The Arcadia Fund, the Children’s Investment Fund Foundation, the Climate Works Foundation, the Sea Change Foundation, the Oak Foundation, the William and Flora Hewlett Foundation and the McCall MacBain Foundation. These foundations are in turn financed by other foundations – or sometimes by the same foundations that they themselves fund. For example, the Climate Works Foundation is funded by The William and Flora Hewlett Foundation, The David and Lucile Packard Foundation, The Energy Foundation, the Doris Duke Charitable Foundation, The Joyce Foundation and The Oak Foundation. I have not traced the funding of all these foundations, but if we take just one example, The Energy Foundation, this is funded by, among others, The Climate Works Foundation, the William and Flora Hewlett Foundation and the Sea Change Foundation. You get the picture.

Some of these foundations do not lack for funds, by the way; the William and Flora Hewlett Foundation states on its website that it has $6.7 billion in assets. This puts into perspective another recent report – this one from Greenpeace – that breathlessly announced that the oil and manufacturing company Koch Industries (‘with tentacles around the globe’) from 1997 to 2008 ‘funneled more than US$48.5 million to organisations’ of climate sceptics. Shame on them. They are ‘twice as bad’, says Greenpeace, as ExxonMobil, which in the same period spent US$24 million funding scientists who are critical about global warming. The report is called, in typical Greenpeace style, ‘Secretly Funding the Climate Denial Machine’, but it is clear that the climate deniers are no match for the climate foundations of this world – let alone the environmental activist organisations like Greenpeace itself.

Greenpeace of course is a report factory in its own right. In fact, on 30 March Greenpeace USA produced yet another, rather interesting report, called ‘Cloud Computing and its Contribution to Climate Change’. It is an interesting report not because of the point it makes – no offence meant, but Greenpeace’s points are always perfectly predictable – nor because of its content, which is rather sketchy, but because of its topic.

Most of you probably know what “cloud computing” means, but for those of you who, like myself, are rather less trendy (it was only the second time I had ever come across this term), I will quote the report to explain the term: ‘Cloud computing, used as a metaphor for the internet, is based on an infrastructure and business model whereby - rather than being stored on your own device - data, entertainment, news and other products and services are delivered to your device, in real time, from the internet.’
The most famous ‘cloud-based company’, says Greenpeace, is Google. ‘All of Google’s signature products - Gmail, Google Documents and Google Earth - are delivered from the cloud. Its ambitious project to create a digital library will be entirely hosted by servers storing most of the world’s published work, all in digitised form.’ Other examples of cloud-based companies are Facebook, Yahoo and Apple.

What is interesting about “cloud computing” from the perspective of the energy sector is that, well, it uses a lot of energy! The computing companies rely on massive data centers that, as Greenpeace puts it, ‘consume incredible amounts of energy’. For Greenpeace, energy use of course translates into CO2 emissions – if the wrong type of energy is used. Thus, Greenpeace praises Yahoo, which is building a $150 million data centre near Buffalo, New York that will be run from a nearby hydroelectric power plant. Apple, on the other hand, gets a rap on the knuckles because it is constructing a $1 billion data centre in North Carolina that uses the “dirty” coal-fired power that State is famous for. Facebook likewise has commissioned a new data centre in Oregon, for which it has made a deal with Pacific Corp, a utility that is highly reliant on coal-fired power.

Up and up

However, apart from the climate issue, for the energy sector what is interesting is the effect the (cloud) computer revolution has on electricity demand. How much energy do all these new data centres, PCs, notebooks, mobile phones, and so on use? Hard figures are hard to come by. Greenpeace estimates that data centres and the telecom industry together use 623 billion kWh worldwide. That would be 4% of global electricity consumption. This amount is expected to triple by 2020 to almost 2,000 billion kWh. Depending on how overall energy demand evolves, that would probably lead to a doubling of its share in total consumption to some 8%.

What is striking about these numbers is that they go up and up. They are a perfect demonstration of a trend that was described in a wonderful book written by Peter W. Huber and Mark P. Mills published in 2005 called “The Bottomless Well: the Twilight of Fuel, the Virtue of Waste and Why We Will Never Run out of Energy”.
In this book Huber and Mills point out that, despite all the talk and optimistic assumptions about the effects of energy efficiency, energy consumption (and in particular power consumption) continues to rise inexorably.

The Bottomless Well by Peter Huber and Mark Mills
Huber and Mills started a debate back in 1999 when they wrote an article in Forbes magazine estimating that the manufacture and use of computers accounted for 8% of electricity consumption in the US. Many people were upset by this claim, because it was “cool” to assume that computerisation and the internet would lead the way to a new, much less energy-intensive economy. The idea behind this reasoning is that in the internet age, GDP growth and energy consumption are “decoupled”, because, as Huber and Mills phrase it, ‘the new wired economy is so much more efficient than the old’. For example, ‘online stores substitute “clicks for bricks”. Delivery trucks are more efficient than trips to malls. Wired supply chains reduce inventories, cut overproduction, reduce unnecessary capital purchases, eliminate paper transactions, reduce mistaken orders, and thus save energy all around. The internet will eventually cut travel.’ Etcetera.
 
This sounds quite reasonable, but in fact, say Huber and Mills, it is just not true. The two authors do not deny that energy efficiency is important nor that it is continually increasing. In fact, they say, it has been increasing for 20,000 years! Nevertheless, in absolute terms, energy use is also continually increasing. This is because the hoped-for “dematerialization” of the economy is only relative: ‘Our consumption of knowledge-intensive goods grows faster than our consumption of energy-intensive goods – but both continue to grow… With faster information have come faster cars, jets and power plants, and more energy consumption all around. When we learn more, faster, about the world around us, we engage it more, not less. There is then, perhaps, reason to suppose that higher speeds on the information highway will raise – not lower – energy consumption.’ One simple example is that the internet has had the effect of increasing rather than lowering the amount of travel, as people want to go to places they have seen on the web. Another example: a Playstation uses much less energy than the first mainframe computers – but there are many millions of Playstations around.

The argument of Huber and Mills does not depend on theory: it is simply borne out by the facts. While the cost of producing energy and conveying information has been dropping over time, energy consumption has risen.

And Huber and Mills point to another important trend: the ongoing electrification of the economy. In 1950 20% of GDP came from industries and sectors that use electricity as their core fuel; today it is 60%. And this number is bound to grow. All of the innovative, dynamic sectors of the economy nowadays are based on electricity: computing, telecoms, entertainment, financial services, medical technology, even transport – as our cars are also slowly but surely being electrified.

There is a reason for this, namely the fact that human beings, as Huber and Mills explain, are constantly “refining” energy into an ever more “ordered” form: from thermal power to motive power to electrical power and even further, to laser technology. In fact, most of the energy we use is “wasted” in the process of creating more “ordered” forms of energy, such as the electricity, that have an ever greater capacity of improving the production processes in the economy.

This is why the growth of GDP has a direct relationship to the growth of energy use. Power, as Huber and Mills point out, is ‘one of the three fundamental inputs (with material and information) that determine the productivity of labour in every sector of the economy’.
The result has been a spectacular rise in the standard of living as energy use has increased: ‘Every person in America is now served by the equivalent of about 200 human servants’. And there is no reason why this trend will stop.

Bad news

If Huber and Mills are right, what can we expect of future energy demand? This question brings us back to the reports on the zero-carbon economy that some of us say we should achieve by 2050. If you develop scenarios for such an economy, it makes a lot of difference what your assumptions are about demand growth.

As it happens, the assumptions in the report of European Renewable Energy Council are based on the European Commission’s “New Energy Policy” scenario, which is a part of the EU’s Second Strategic Energy Review that came out in 2008. This is an important document because it underlies much of the EU’s energy and climate policies.
The “New Energy Policy” scenario is called like this because it ‘assumes vigorous implementation of new policies to make substantial progress on energy efficiency for reaching other energy and climate targets’. It is contrasted with a Baseline or business-as-usual scenario.

Under the EU’s New Energy Policy scenario, primary energy consumption in the EU is expected to decrease between 0.4% and 0.5% per year to 2020. This means it will be 6-8% lower in 2020 than in 2005. Presumably, this trend will continue to 2030 and beyond, leading to ever lower energy consumption. As the European Commisson puts it: ‘After decades of rising energy demand, the EU’s energy consumption would decline for the first time as a result of policies and measures on energy efficiency, renewables and climate change.

The report of the European Climate Foundation bases its energy demand predictions on the well-known annual World Energy Outlook of the International Energy Agency (IEA). The IEA does not give separate figures for the EU, but it does provide figures for the OECD. The IEA predicts that in a

‘After decades of rising energy demand, the EU’s energy consumption would decline for the first time as a result of policies and measures on energy efficiency, renewables and climate change’
business-as-usual scenario primary energy demand in the OECD will grow just 5% over the period 2007-2030. In the IEA’s “450-scenario”, which may be compared to the EU’s “New Energy Policy” scenario, as it assumes vigorous climate policies, total primary energy demand in the OECD would drop about 5% from 2007-2030. In this scenario, electricity demand is expected to remain stable over the same period. (See table 9.4 of the World Energy Outlook 2009.) In other words, the IEA is slightly less “optimistic” about the slowing down of energy demand than the European Commission, but that may be because the OECD includes the United States.

If Huber and Mills are right, however, both scenarios are quite unrealistic. They are certainly unrealistic on the basis of historical evidence. With the advent of “cloud computing”, and who knows what other new inventions and developments (space travel?), it is, in fact, much more likely that energy use, and particularly power consumption, will continue to grow – under whatever scenario.

Indeed, whatever one may think of the climate problem, or the use of renewable energy, it would be bad news if energy consumption stopped growing or even started declining. It would mean the end of human progress.

To quote Huber and Mills one more time: ‘From the bacterially enriched uranium reactor at Oklo, to the Spindletop oil field, to the heterojunction semiconductor, the trajectory of all life on Earth has been defined by the self-amplifying process of energy in successful pursuit of more energy.’

Let us hope that this is a message that the report-writers and policy-makers in the EU will not lose sight of. If they do, it may well be the EU that will stop growing and start declining, compared to the rest of the world.