Designing Climate Solutions

Designing Climate Solutions- A Policy Guide to Low Carbon Energy
By Hal Harvey, CEO of Energy Innovation (SF based energy-environmental policy firm)
with Robbie Orvis and Jeffrey Rissman

"Most people in the energy space fall in love. They fall in love with a certain technology- they love nuclear, or they love solar, or they love coal. And they also fall in love with certain types of policy- for example a carbon tax will solve everything, or carbon cap is an evil scheme or what have you. I think falling in love makes you a bad judge, I should know."- H. Harvey

Main Points:

• Hal Harvey is the founder of Climate Works foundation, program director at the Hewlett foundation, and the president and founder of the Energy Foundation. He is also a Heinz award winner for his work with the environment.  
• Triage- the minimum number of things you have to do to win. How to design energy policy.
• Most energy policy is decorative policy- it just doesn't make a difference. There are about a dozen energy policies that work and you need to figure out which ones to pursue.
• The world spends $5 trillion/year on energy and $6 trillion/year on infrastructure that sets future energy patterns. Cash flow is not a process. 
• UNFCCC are setting up a climate abatement fund which is $100 billion/year which is 1% of the current spend on energy annually.
• Oil production and international security
• Productivity and transportation- Bus Rapid Transit (Guangzhou) was built in 9 months, has the speed of a subway, capacity of a subway, and costs less than 5% of a subway system. Requires brilliant engineering and system optimization. They dedicate lanes for buses only. Stations only for the buses. You pay to get into the station and not into the bus. 
• Three complementary types of energy policy
• Economic Signals
• Performance Standards- RPS
• Support for R&D- drives costs down
• How do they all interplay with one another?
• These three types of policy encompass the lot. If you have strong performance standards you reduce the price shock of a carbon tax. Conversely if there is a carbon tax then a performance standard is a rational choice. We have strong fuel efficiency standards and super cheap gas (contradictory policy). Second, economic signals support R&D if price of energy is higher then firms will support R&D. Also R&D will reduce costs of energy. Third, Performance standards create markets for R&D. 
• Economic Signals simultaneously impact your purchase decisions and consumption decisions. A good economic signal does not have much government intervention. Market signals fail in buildings and transportation.
• Carbon taxes are proposed to be ~$25/ton which is about $0.25/gallon. So $0.25/gallon is the noise in the variability of gas prices anyway. If you want to really know what the impact that carbon taxes have on consumer behavior, look at a tax of about $600/ton. 
• Six Policy Design Principles
• Provide regulatory certainty
• Create long term signals for the market
• Example: The US Production Tax Credit- wind turbine industry sees fluctuation
• Create long term horizons
• Establish clear R&D strategies, investment targets, cost effective, less political uncertainty, comports with capital cycle
• Example: California's AB32 has a 2050 target, but only had a 2020 law. So people quit buying carbon permits because they didn't know what happens after 2020.
• Set performance standards that are technology-neutral and price-finding
• If you want to abate a ton of carbon you can use many methods (geothermal, energy efficiency, solar). If you think you want to plan for every part of the country, you are fooling yourself- Soviet style planning.
• Example: Germany offered about $0.23/kWh for their feed in tariff, and they have had to drop that. Not a price finding policy, just a price falling policy. 
• Require continuous improvement
• Use the political bandwidth once to cut energy more than half with continuous improvement. They are now talking about zero-net energy. If Gerald Ford had said 3-4% improvement in fuel efficiency standards per year we would have saved over $1 trillion dollars and saved the auto industry (because it would have been long term signal with continuous improvement). 
• Example: When Jerry Brown was elected as governor he created a building code called Title 24. Gil Masters made Harvey go to Sacramento to see the hearings for it. The policy gets tighter every 3 years without legislature or political battle. They made a rule that said "any technology that pays for itself within 7 years, gets rolled into the next set."
• Reward performance, not investment
• For Example: China is required to build a certain number of GW of wind each year. They are not required to hook them up, so they have the largest curtailment. Up to 40% of wind turbines in China are not operating.
• Go "upstream" to capture 100% of the market
• Target emissions at the source, minimize loopholes, selective target group (more effective, efficient vs. less expensive, time-consuming)
• For Example: go upstream and tax the source so that the power plants change their behaviors as opposed to the downstream sources, because it will be more widespread and effective that way.
• What do we need to do?
• Vehicle Efficiency Standards
• Car companies used the "truck loophole" by creating SUV's that could be classified as a truck and have lower fuel efficiency standards. Then they made the standards weight-based, but weight isn't the issue, size is the issue. Your standards should miles per gallon, but grams of CO2 per mile (this accounts for footprint of making the car as well as efficiency). 
• The Top 10 Policies
• Transportation
• Vehicle performance standards
• Fuel and vehicle taxes
• Smart Urban Design
• Utilities
• Renewable Portfolio Standards
• Utility Scale Energy Efficiency Programs - increase renewables 3%/yr
• Buildings and Industry
• Building Codes and Equipment/Appliance Standards
• Industrial energy efficiency programs
• System-Wide
• Carbon Pricing- build economic signals that don't conflict with portfolio standards
• Properly Aligned economic incentive
• Support for R&D and innovation
• How do you build a stable energy system if you don't have a stable mix? Important for grid because you need second by second balancing. The old paradigm (power system planning) is that you build three classes of power plants (baseload, shouldering, peakers) and you dispatch them in economic order. New paradigm is system optimization: There are half a dozen ways to balance the system that don't have to do with dispatching power plants, like demand-response. You can create a bid structure for fast ramping services, turning things on and off (demand side bids were 80% cheaper than the supply side bids). 
• What your ideas on central energy storage policy? The electricity system doesn't need batteries until you are at 80% renewables or greater. Cars need batteries and the cost of batteries have dropped and performance have increased. 
• What about Project Drawdown vs. Designing Climate Solutions?
• "Here’s the thing about the Drawdown book: It’s a technology book, not a policy book. And it’s geographically indifferent — it doesn’t say you have to do this in the top 20 countries, or anywhere. It doesn’t mention policy, it doesn’t mention geography — and without those two things, it’s not a plan. I think it’s a good contribution to the world, but it doesn’t tell anyone what to do on Monday morning." - Hal Harvey

For an in-depth look at Harvey's book, watch his lecture at the Stanford Precourt Institute for Energy on How to Land on a Low-Carbon Energy Future! 

Take a look at the talk Hal Harvey gave at the Climate Solutions anniversary dinner in Portland!

Listen to Chris Nelder's interview with co-author Robbie Orvis on The Transition Show!

Read the Vox article that goes in-depth into Harvey and Orvis' book!

Play around with the Energy Policy Simulator from Energy Innovation LLC!