Editor’s note: Part I yesterday described Krebs’s work to level the playing field against the Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE). Today’s post continues by examining how EERE modeling skews the results towards “deep decarbonization” (electricity over gas, via appliance regulation).
Q. What are some “tricks” by DOE’s Office of Energy Efficiency and Renewable Energy for finding “net benefits” to imposing stringent efficiency standards on gas appliances?
A. EERE’s “determinations” have come from highly subjective life-cycle costing (LCC) analyses. Remember: these modelers are in the business of finding different answers from what self-interested consumers are determining. They make their models “smarter” than the market for mutual benefit.
Tricks include inflated energy-price forecasts (for the disfavored energy, gas), lowballed maintenance costs for favored appliances (electric), and so on. Modeler bias has traditionally been aided and abetted by using exclusive, expensive and/or proprietary software that can be easily gamed by modelling staff to “determine” that forecasted LCC benefits exceeded costs.
A whole new cost/benefit modeling approach is required. James Broughel (Mercatus Center) commented:
The problem with this approach is that from an economic standpoint, it makes much more sense to look for the option with the most benefits in excess of costs, thereby achieving the most bang for consumer and business bucks. Instead, DOE interprets its legal obligations as meaning it should identify the most stringent option with any benefits over costs—no matter how small the difference might be.
Q. The modeling should not be done at all, probably. But how to correct such an exercise?
A. More realistic, transparent and robust variables, which if honestly utilized by EERE, would cancel benefits and produce negatives. Analytical variables and assumptions thereof are supposed to be transparent and routinely tested for sensitivity per the Code of Federal Regulations (CFR) under 10 CFR Appendix A to Subpart C of Part 430. But they are not, making analysis very difficult for anyone wanting to challenge EERE’s regulatory hegemony.
Q. Has gas been victimized?
A. Regarding my involvement, the American Gas Association in 1997 asked the President of my company (Laclede Gas, at the time) if I would represent the gas utility industry on EERE’s newly formed “Advisory Committee on Appliance Energy Efficiency Standards” (ACAES, since disbanded). I agreed and was appointed by DOE Secretary Penà for my first term and reappointed by Secretary Richardson for a second term.
During that time, I endeavored to get EERE to start analyzing consumer energy savings potential as they occur based upon reduced consumption as reflected by utility billing structures. We called it Consumer Marginal Energy Rates (CMER). This approach provided an accurate cross-check to EERE’s overly complicated and opaque life-cycle costing (LCC) methodologies.
We also advised EERE to start using Monte Carlo analyses to implement more robust and transparent “what if” sensitivity analyses. While EERE published a draft report about CMER in 1999, they never really employed it for gas utility bills. Why? Because CMER methodologies to calculate consumer savings were consistently and significantly lower than savings “determined” by EERE’s gamed LCC methodologies which, in turn, enabled EERE to establish more stringent appliance energy efficiency standards.
Q. Are factors not in favor of electric-over-gas just being ignored also?
A. Yes, EERE doesn’t include what it should re cost effectiveness. Such is the case of reality checking LCC “determinations” against simple paybacks. Spires’s review for NAS ver FEB102020 provides a real-world methodology that anyone can follow for calculating their own utility-based energy savings potential from appliance efficiency upgrades, no software or computer scientists necessary.
One thing EERE did implement was the ACAES’s recommendation to use Monte Carlo analyses. Well, kind of anyway. They did so in a manner that weaponized it to defy transparency and game the system to further artificially bolster economic benefits. For example, in the case of commercial boilers, EERE assumed consumers are unconcerned with maximizing investment paybacks.
Mark Krebs, a mechanical engineer and energy policy analyst, has been involved with energy efficiency design and program evaluation for more than thirty years. He has served as an expert witness in dozens of State energy efficiency proceedings, has been an advisor to DOE, and has submitted scores of Federal energy-efficiency filings. Mark’s first article was published in the Public Utilities Fortnightly and was entitled “It’s a War Out There: A Gas Man Questions Electric Efficiency” (December 1996).
For more about Mark, see his MasterResource archive.