Power Loss

Power Loss: The Origins of Deregulation and Restructuring in the American Utility System
By Richard F. Hirsh

Main Points:

• Richard Hirsh got into energy consumption when he was working with Virginia legislators for the state. Wanted to discover the link between economic growth and electricity- do we need to build more powerplants? The power companies have been saying that growth in electricity has coincided with growth in GDP since the end of WWII. He has a masters in physics and a PhD in the History of Science.
• Growth in Energy Consumption was a positive trend of American culture from 10 quads in 1900 to about 70 quads in 2000. Gross national product have increased with energy consumption hand-in-hand. Economic growth was a good thing- more jobs, higher material standards, reflective superiority of a market economy. GDP/GNP became proxies for prosperity, abundance, superiority, and progress. 
• School of cultural anthropology arose in the 1940's from the work of Leslie White that said that low energy consumption was associated with primitive societies, while rising indicators of energy use showed that a society was becoming more affluent. 
• The use of electricity took off in the 20th century while the total energy consumption started to taper off during the 1950's. Electricity was a very versatile secondary form of energy- that increased productivity and a higher material standard of living (refrigerator, toaster).
• Rural Electrification in 1920's and 1930's: electric utility companies were promoting a need to consume electricity so that they could produce more electricity. Ronald Reagan was paid as a spokesman of general electric.
• Electricity price declined substantially- around 1892 (10 years after Edison started his power plant in NYC) the cost of electricity was $6/kWh and dropped down to $0.13/kWh in 1973. This price decline of 98% is amazing. 
• Virginia Electric Power Company (Vepco) had an annual report with the word "Grow" and they were growing at 14% per yr increase of demand for electricity (doubling every five years). They could sell energy for lower costs, they were giving dividends to stockholders, and utility managers thought they were stewards of technological and social progress. 
• In the 1960' and 1970's- the growth of the environmental movement brought into question growth of energy consumption. (Earth Day on April 22,1970) 
• The Limits to Growth was a book that had a doomsday prediction of the growth of energy consumption, but very few people were buying into it at the time. 
• Energy Crisis of 1973 (17 October 1973) - OPEC began their oil embargo and the prices raised by four fold. This caused the stock market to tank and created gas shortages.
• President Carter (1977) did start an aggressive energy policy that could have had long term impacts. Carter emphasized the notion of conservation as the "quickest, cheapest, most practical source of energy." 
• Difference between energy conservation and energy efficiency. Energy conservation includes deprivation and sacrifice- do more with less ("cardigans"). Efficiency means doing the same with less energy consumption. Rather than driving a car that gets 15mpg, drive a car that gets 30 mph. Efficiency sounds like a much more attractive idea than conservation. 
• Traditional viewpoint: "continuing the nation's historical growth trend will require more energy than the no-growth option, which would freeze socioeconomic progress at roughly the current levels." In a 1979 report however, we can get more out of less. 
• And since the 1973 you see that while energy consumption tapered off, the GDP increased quite nicely over time. In the 1970's we used about 15,000 BTU to make a dollar's worth of GDP and today we use 7,000 BTU for the same dollar. This is something that people in the 1960's and 1970's did not anticipate. 
• Arthur Rosenfeld has made supply conservation curve. We would have used a whole lot more energy between 1973 and 2005. We spend $700 billion less per year on energy than we would have done otherwise. We have 70 quads of avoided supply due to our efficiency measures. Meanwhile, the growth rate of electricity has been declining since the 1950's. 
• From 1949 to 1973, the electricity consumption rate grew by 8% per year (doubling rate of 9 years). The doubling rate formula is 72/ (rate) = 72/8= 9 years. This is due to compound growth. But after 1973, the growth rate in electricity consumption went down to 2%/year. And in the past fifteen years it has only been at 1%/year. 
• If the growth rate had remained the same after 1973, we would be using 11 times more electricity than we currently are! So what has changed in terms of energy efficiency?
• Spurred by economics (higher prices)
• Equipment manufacturers seek competitive advantage
• Government incentives and standards creation
• Concern for the environment
• Example, would be the refrigerator 
• Fridges increased in size and energy use increased
• In 1973, the manufacturers found ways to reduce the amount of energy that fridges would need. So the use of electricity in the fridge went down.
• The cost of fridges also declined- a 21 cubic foot fridge, using 410 kWh/yr,  $243 (81% cheaper and 79% less energy than a fridge in 1973).
• What government incentives helped this out?1976 CA Standard, 1990 NAECA Standard, 1993 DOE Standard, and the 2001 DOE Standard. The EPA had competitions for the company that has the more efficient refrigerator.
• How well are these incentives performing in different states? California is #2 and Arizona is #17 on this map. Connecticut is ranked #6. Massachusetts is #1.
• Why is California so good at responding to this despite their size?



American Council for an Energy Efficient Economy- State Ranking

• In California you have a huge energy efficiency effort. The historical energy concerns have been there. In 1973, one of the responses to the energy crisis was to setup a bureaucracy that responds to emergencies and promotes energy efficiency standards- the California Energy Commission (1974).  Jerry Brown appointed activists to the commission. California's utilities spend 3.2% of utility budgets ($1.189 Billion) on energy efficiency programs. 
• Structural Changes in the economy: we have moved from manufacturing into services economy (information communication technologies) that are less energy intensive
• Measurement bias: when people generate their own energy, that data is not captured by the Energy Information Administration. In 2014 when the DOE started making estimates on amount of household energy generation this was only 0.23%, but if the growth rate is 1% then this might be significant. 
• Conclusion: Big change in the notion of energy growth since economic growth can occur with less energy input (per $ of GDP). We have LED lightbulbs that use 15% energy as incandescent bulbs and people are learning more about their role. 

What exactly is PURPA? Listen to this brief description by Gary Newell.

Read more about Professor Richard F. Hirsh at his Virginia Tech website!

Watch his talk "Rethinking Rural Electrification" via the online webinar

Listen to his lecture at the Institute for Advanced Study at University of Minnesota.