Energy in Transition, 1985-2010 Final Report of the Committee on Nuclear and Alternative Energy Systems (1980) / Chapter Skim
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2 Slowing the Growth of Energy Consumption
2 Slowing the Growth of Energy Consumption
Pages 75-127
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From page 75... ...
As prices rise in the coming decades, more such opportunities will appear. Until only the past few years, falling real prices and the availability of new sources made energy supplies seem virtually inexhaustible.
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From page 76... ...
, comfortably warm or cool buildings, and industrial heat can be provided by much less energy than has been customary. In the future, if current trends in the cost of energy continue, the amount of energy consumed to provide a given economic product will gradually decrease As the economy moves toward a new economic balance between the costs of energy and those of capital, labor, and other factors of production, it will surely come to produce goods and services with much improved energy efficiency.
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From page 77... ...
The economy's adjustment to higher energy prices thus depends largely on the replacement of capital goods and consumer durables with more efficient models as the old ones reach the ends of their useful lives, and only secondarily on such immediate consumer responses as driving less or turning thermostats down. The response of energy consumption to changes in price is usually specified by a number called the price elasticity of demand, defined as the ratio of a percentage change in consumption to the percentage change in the price of energy that evokes it.
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From page 78... ...
It is enough to say here that the elasticity value one chooses makes the difference between negligible and profound reduction in GNP growth as a result of large reductions in the energy intensity of the economy. The larger the price elasticity in absolute value, the more it is possible to moderate energy demand without depressing economic growth.
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From page 79... ...
Mandatory standards applied to manufacturers and calculated to minimize life cycle costs (at some increase in initial cost) could serve the need for conservation while actually saving money for consumers in the long term.t DEMAND AND CONSERVATION PANEL RESULTS The Demand and Conservation Panel of this study developed a range of energy demand projections for the period 1975-2010.3 They vary from a long-term decrease in per capita energy consumption to a large increase, and were the products of a series of scenarios embodying different assumptions about movements in energy prices.
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From page 80... ...
In general the movement of primary energy prices tends to be greater than that of prices to the consumer. For example, the 100 percent rise in average primary energy prices between 1970 and 1978 corresponds to only a 30 percent average increase in final energy prices.
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From page 81... ...
Over the first decade of its projections, the panel used in addition conventional econometric analysis, which relies heavily on empirical evidence from the recent past and from international comparisons. Consumption, price, income, and other data were used in calculations that reflect the characteristics of existing capital stock, population, and economic activity.
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From page 84... ...
This could offset the large expected increase in the amount of transportation, and in turn lead to total energy consumption of, for example, 27 quadrillion Btu (quads) for transportation in the Demand and Conservation Panel's scenario B', in which real energy prices double and GNP rises by an annual average of 3 percent (corresponding to a total GNP 2.8 times higher in 2010 than in 1975)
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From page 85... ...
Gains toward one make gains toward the other more difficult. The potential for energy conservation in replacing today's automobiles with more efficient ones after their 10 15 years on the road is so great that total annual fuel consumption by automobiles could remain relatively constant over the next 30 years, over which time the total national mileage driven can be expected to increase by 50 100 percent.
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From page 86... ...
, the per capita air travel demand would increase 58 percent. The total energy consumed in scenario A would be 1.0 quad, compared to a 1975 consumption of 1.2 quads.9 For a doubling of energy prices (scenario B)
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From page 87... ...
In scenario A energy prices quadruple by 2010, and public policies accelerate the response to this energy conservation incentive. As a result, present federally mandated standards for automobile fuel efficiency are met and superseded by new standards.
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From page 88... ...
88 ENERGY IN TRANSITION, 1985 2010 TABLE 2-3 Scenalios,,t Encrgy Dentand R>l Traltsportatiolt A`~-uge Dcli\cred l2'~rg~ I'~ice i,, 2()
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From page 89... ...
This trend would have to be reversed if significant energy savings were to be realized from new living patterns.'3 It is difficult for a dispersed population to achieve significant energy savings through public transit. Direct shift of travel demand from the private auto to public transit has relatively little benefit in terms of energy conservation.
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From page 90... ...
Today buses, van pools, and car pools, because they can make flexible use of an already existing network of roads and highways, are the most effective means of reducing energy consumption in commuter travel, ~ 6 BUILDINGS AND APPLIANCES The demand for energy by residential and commercial buildings is expected to grow more slowly from 1975 to 2010 than in the past few decades, as population growth slows and some demands become saturated. Rising energy prices, aided by mandatory building and appliance standards, could foster wider use of such well-known measures as heat pumps, better insulation for buildings, larger heat-exchange surfaces for air conditioners and refrigerators, and passive solar building design.
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From page 91... ...
29 Retrofitting an existing structure for greater efficiency in energy use will not appear wise to many consumers, even as energy prices rise. Existing buildings offer less scope for energy conservation than do new ones, but some retrofit measures are generally economical.
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From page 92... ...
In scenario C, real energy prices remain constant, with the exception of natural gas prices, which double to compensate for past underpricing. The lagged response to public policies now in force brings about improved efficiency in new buildings and appliances through 1980, and to some extent thereafter as older stocks are replaced.
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From page 93... ...
a_ 1 1 1 1 1 500 ADDITIONAL C APIA AL COST ( 1975 dollars) 1 1 1 1 ,000 FIGURE 2-1 Space heating energy intensity of single-family residences (average 1970 energy intensity equals 1.0)
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From page 96... ...
27 In part this increased demand will be the result of substituting materials for one another to improve energy efficiency in Other products. For example, increasing the use of aluminum and plastics in automobiles will result in lifetime fuel savings considerably greater than the additional energy required to produce the materials, but this will, of course, be reflected in increased output of such materials.
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From page 97... ...
A number of tax and regulatory policies, however, still favor the use of materials from virgin sources rather than recycled materials; a systematic effort to identify and eliminate such economic distortions would result in additional energy savings that are difficult to estimate at present Many industries can reduce their requirements for purchased electricity by the use of cogeneration. This involves the use of the high temperatures available from fuel combustion to generate electricity, with the lower temperature exhaust heat from the generator used for industrial process heat.
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From page 98... ...
Today's typical primary industrial boiler is fabricated inexpensively and fired by natural gas. It requires little or no operating attention or maintenance to supply reliable low-pressure steam; the design and operation of cogeneration systems, by contrast, require highly skilled personnel.
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From page 99... ...
Energy Demand Projections for Industry in 2010 The Demand and Conservation Panel's projections of total demand for energy in the industrial sector in 2010, exclusive of the energy-producing sector itself, are summarized in Table 2-5. The last column shows the total energy consumed by the industrial sector, measured at the entrance to the factory, as it were, and ignoring losses in the energy sector associated with providing the energy.
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From page 100... ...
v: — E 5 ~ a 5 -1 ~ _ C ~ e ~ ' 1: o ~ o ~ ,, G _ ~ bye ~ ~ o ~ ~ ~ o C} sm .
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From page 102... ...
If the output of goods and services increases in all industries during a period of little change in relative energy prices and technology, the needed input of
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From page 103... ...
Thus the composition of consumption tends to change with changes in GNP, and energy intensity is not uniform. Even if energy prices remain constant, therefore, energy consumption and GNP do not necessarily change proportionately as GNP grows.
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From page 104... ...
Four groups of factors should be considered for their parts in explaining these long-term trends: the composition of national output, the thermal efficiency of energy use, the composition of energy consumption, and the behavior of energy prices in relation to those of consumer durables, producer durables, and other energy-using goods. Composition of National Output Energy requirements per dollar value of product vary for different types of production.
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From page 105... ...
of energy consumed per dollar of real gross national product for the United States from 18 50 to 1980 shows successive trends of rise, decline, and stability This plot excludes fuel wand, whose consumption exceeded that of coal into the 1880s. Single-year points that do include fuel wood are indicated for 1880, 1920, and 1950.
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From page 106... ...
Through its positive effects on productivity, electrification also enhanced the productivity of energy use, resulting in a decline in the amount of raw energy required per unit of national output. Taken together, improvement in the thermal efficiency of electricity generation and the enhancement of productivity due to the use of electricity were major factors in the decline of the energy/GNP ratio following World War 1.
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From page 107... ...
The broad downward trend in the energy/GNP ratio characterizing much of the historical record would, of course, have been even sharper if the thermal efficiency with which energy had been used in automotive transportation had also shown sharp increases. The Behavior of Prices It is of interest to examine the behavior of energy prices during the period of persistent long-term decline in the amount of energy consumed in relation to GNP.
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From page 108... ...
. Canada and the United States, where energy prices have in the past been markedly lower than elsewhere, are well above the line for most industrialized countries, while Sweden, West Germany, and Japan are well below.39 This variation is important, because reducing the energy/GDP ratio of the United States by, say, 30 percent could make an important contribution to reducing imports of oil.
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From page 109... ...
industrial sector forms a smaller fraction of total GNP than those of most other industrial countries, but the overall energy efficiency of its processes is relatively low. Sweden uses about 85 percent as much energy per unit of production, reflecting newer technology and design attention to historically higher fuel prices 42 Households American households consume more energy than foreign ones relative to income, even if one adjusts for climate.
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From page 110... ...
ECONOMETRIC STUDIES BY THE MODELING RESOURCE GROUP The Modeling Resource Group of the CONAES Synthesis Panel, in examining the relation between energy consumption and economic growth, experimented with six computer models that attempt to characterize the response of the economy to various kinds of energy policy.44 The policy variables considered included moratoria or production limits on various energy sources, such as might be fostered by environmental concerns; relaxation of environmental standards now applied to coal and nuclear technologies; and "non-price-induced" energy conservation (due to mandatory standards, public education, and so on)
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From page 111... ...
For example, between 1972 and 1978 the consumption-weighted average primary fuel price increased in real terms by about 100 percent, but the price of net delivered energy averaged over all end-uses increased by only 30 percent. Roughly speaking, price elasticities measured relative to end-use would be expected to be 2-3 times those measured relative to primary energy (but this would tend to fall as primary energy prices rise to constitute a larger fraction of delivered prices)
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From page 112... ...
Thus, in the Modeling Resource Group's base case (no major policy changes, approximately doubled energy prices by 2010, GNP assumed to have tripled over the same period—a 3.2 percent average annual GNP growth) the ratio of energy to GNP is calculated to decline to about two thirds its present value by 2010.
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From page 113... ...
Limitations of the Modeling Resource Group Results The results of the Modeling Resource Group's work are evidently very sensitive to the value of price elasticity of demand that is assumed. This parameter represents the local slope of a log-log curve (in this case, one giving the relation between two rates)
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From page 114... ...
Thus, while the calculations made by the Modeling Resource Group involve major simplifications and assumptions, they suggest that a strong economy could well exist three or four decades hence with a ratio of energy use to GNP as low as half the present value. This conclusion is substantially reinforced by similar findings from the Demand and Conservation Panel's work, conducted by quite different methods.
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From page 115... ...
One would hope that the fact and prospect of higher energy prices would lead the private sector to develop and commercialize most of the technology required to achieve the energy efficiencies projected in the preceding sections of this chapter. Thus there is a question as to the appropriate roles of the federal government in stimulating research and development to promote energy efficiency and encouraging adoption of energy-efficient technologies.
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From page 116... ...
Close monitoring of the progress of energy-conserving technology in the private sector may demand some publicly supported research simply to properly inform government policy making. Examples of opportunities for research and development in support of energy conservation policy are listed in Tables 2-6 and 2-7, taken from the work of the Demar d and Conservation Panel.
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From page 117... ...
c o c o c~ o o ~ ~0 E _ _ ~ ~ E ~ ~ E 2 o oo o o C .t ~ o o o E U ·Cu Oo E e .
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From page 119... ...
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From page 120... ...
Although many differences help account for this vanance, past energy prices in the different countries are major factors. · The analyses of the Demand and Conservation Panel indicate that the energy necessary to produce a given unit of economic output can be substantially reduced by (1)
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From page 121... ...
However, because even accurate, widely noted market signals are sometimes insufficient to guide market decisions in the direction of energy conservation—as, for example, when the total cost of owning and operating a particular facility, appliance, or process is relatively insensitive to energy efficiency—price alone cannot carry the burden of effective conservation policy.* At a minimum, energy prices should rise smoothly to levels that reflect the incremental cost to society of producing and using additional secure sources of energy.
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From page 122... ...
Investment tax credits to encourage conservation investments would also be useful, especially for inducing more efficient use of oil and natural gas, as in cogeneration or integrated utility systems. Where energy prices are insufficient to induce the appropriate, economically rational responses from consumers—as they are, for example, in the case of the automobile they could be supplemented by nonpnce measures.*
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From page 123... ...
APPENDIX: A WORD ABOUT GNP GAP is a composite of many items that mean different things to different people the summation of apples, can openers, bus rides, homes, and other things. Its calculation is made possible by the use of their market prices, a rough reflection of their economic costs of production in quantities determined by the preferences and purchasing power of consumers.
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From page 124... ...
value imputed to housework and other nonmarket work Disan~enities ot urbanization Services of public and private capital, not included in GNr Additional depreciation of capital Measure of economic welfare for I year Investment needed to sustain per capita MEW over subsequent years as popuiation grows Sustainable MEW 55 -94 627 295 15 79 93 102 618 563 1343 1241 costs have therefore been reciassif cd from environmental to economic costs. Instances are the cost of stack gas scrubbers in coal combustion, or the higher pace of iow-sulfur coal and oil.
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From page 125... ...
. 3 National Research Council, 41tertarive Energy Demand Futures, Committee on Nuclear and Alternative Energy Systems, Demand and Conservation Panel (Washington, D.C.: National Academy of Sciences, 1979)
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From page 126... ...
Committee an Nuclear and Alternative Energy Systems, Synthesis Panel, Modeling Resource Group (Washington, D C.: National Academy of Sciences, 1978)
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From page 127... ...
44. Synthesis Panel, Modeling Resource Group, op.
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