Energy Management

Renewable energy at the tipping point

Peter Garforth says aging infrastructure + cheaper renewables = real efficiency investments (finally).

By Peter Garforth

It has been nearly 20 years since a team from the University of Delft in the Netherlands postulated the priorities to create the cleanest and most energy-efficient systems for the lowest long-term cost. With changes in technology and costs, I thought it would be interesting to see whether this hypothesis has stood the test of time.

Called the Trias Energetica, the concept lays out three levels of priority:

  1. Reduce the demand for energy by avoiding waste and implementing energy-saving measures
  2. Use sustainable sources of energy instead of fossil fuels
  3. Produce and use fossil energy as efficiently as possible.

This codifies the assumption that the cleanest and cheapest energy source is the energy we don’t need to use and that renewable energy supply should take priority over efficient fossil supply and distribution. In many ways, the Trias Energetica has been the philosophical underpinning of the energy policy of the EU, albeit with many twists on the road since the 1990s.

Some years later, in 2003, the energy agencies of California adopted a similar basis for state energy policy. Called the California Loading Order, it prioritized energy efficiency and demand response, followed by the use of renewables and distributed generation. It remains California's policy underpinning today.

Every objective study in the past two decades has shown that allocating resources to efficiency and energy waste avoidance is cheaper by far than allocating them to any supply option. One of the most well-known of these studies was the 2006 study by McKinsey and Vattenfall that looked at the cost-effectiveness of various measures to reduce energy use and carbon emissions. This study convincingly showed that investment in efficiency measures was substantially cheaper than using energy. The measure with the lowest cost and highest return was simple insulation!

Despite this, we still seem to struggle with making multiyear commitments to invest in efficiency and changed energy-management practices. The exact reason why is not always obvious. It may have something to do with the need for long-term commitment to a plan that lacks obvious excitement or glamour. Slow wins, however substantial, always struggle to get attention.

For most of the past 20 years, the promise of sustainable or renewable sources of energy has proved somewhat elusive to realize. Renewable power and heat generation lacked scale, reliability, and cost as the effective, clean alternative to the fossil system that has served us well since the start of the Industrial Revolution.

This caused some proponents of the Trias Energetica to fudge the language of the second level and use “clean and renewable sources” to encompass the use of efficient fossil generation. This was really an attempt to disguise a switch of the second and third levels, hoping no one would notice the inconsistency. This is seen to some extent in the subtle rewording of the California Loading Order.

Some countries and regions broadly stayed the course, convinced that the strategic benefits would ultimately be delivered. Often, this route entailed the use of legislative mandates or substantial incentives – not always politically popular. This period also saw industrial leaders and others investing in renewables based less on sound economics than on personal conviction and/or a desire for good publicity.

Collectively, these governments and believers finally succeeded in creating scale and technical innovation to where we are today. The levelized cost of renewable power from wind and solar is now competitive with that of fossil alternatives and is being added to the world’s power system at faster rates than traditional power plants are. We see even the paradox of climate-change-skeptical politicians fighting to support renewable-energy legislation simply for the employment and economic development it brings.

At the third level, it has been a major challenge to reinvest in more modern and efficient fossil-fuel plants. The reasons are many. Aging grids struggle with smaller distributed fossil supply.  Accounting distortions make fully depreciated inefficient plants more economically attractive than new ones. Inertia and a sense of “If it ain’t broke, don’t fix it” plays a role, as does an interest in protecting coal and other fossil-fuel industries. Getting permits for a large central plant is a headache-filled public relations exercise globally.

This is changing. Old plants need replacing because of age or failure to meet new regulatory standards. Grids are being upgraded to handle diverse supply sources, thanks in large part to the explosion of renewables. Cities are increasingly expanding thermal systems, making heat a saleable byproduct of power generation. Decreasing costs and flexible regulations are making on-site heat and power generation a real option for industrial and commercial users.

In the 1990s, when the Delft team laid out the Trias Energetica (and later when California adopted the Loading Order), there were many reasons to be skeptical. From today’s vantage point, the original hypothesis appears to be borne out by experience and data. As energy managers, the question we should ask is, “Does the Loading Order drive our energy management planning and priorities?”

Read Peter Garforth's monthly column, Energy Expert.