RMI Experts Answer Your Questions, Volume 2
We Field Questions from the RMI Community on Everything from Carpooling to Hurricanes
On December 1, 2017, RMI CEO Jules Kortenhorst and RMI Managing Director Miranda Ballentine held a live video discussion about RMI’s efforts to think bigger, act boldly, and scale globally to support our efforts to mitigate the effects of climate change and create a clean, prosperous, and secure low-carbon future. If you missed it, you can watch the discussion here. They did not have time to answer all the questions attendees asked, so staff from across RMI have stepped up to answer some of the most intriguing. Thanks so much for your interest, keep the great questions coming, and stay tuned for future Facebook Live streaming events!
Questions have been edited for clarity and length.
Q: What kind of business model(s) should electric utilities be pursuing if they are seeking to pursue financial sustainability while working toward positively contributing to climate change aversion and other environmental targets?
A: Early evidence from industry, as well as RMI’s own research and analysis, show that utilities should pursue performance-based and service-based business models to optimize their financial performance while meeting environmental and climate change targets. Performance-based business models specifically alter the earnings allowed by investor-owned utilities, aligning these earnings with social, environmental, and reliability outcomes as well as system costs and utility capital outlay. Service-based business models create new sources of revenue for utilities when and where they are able to provide new and value-added services to their customers, such as financing for home energy improvements. It is important to note that, while utilities have many opportunities to proactively reform their business models, many, if not all utilities, will also face limitations and constraints based on state regulatory requirements, legislative requirements, and the structure of their local wholesale electricity markets.
—Leia Guccione, Principal, e–Lab
Q: Please describe carbon fee and dividend. Is that the solution for the U.S.?
A: Carbon fee and dividend is one proposed approach to economy-wide carbon pricing. The CO2 content of fossil fuels like coal, oil, and gas would be subject to an escalating fee per ton—thus pricing in the societal cost of carbon pollution and changing individual economic decisions. The money would be rebated directly back to all households. The purpose of the scheme is therefore not to raise taxes for other government spending, but specifically to create a carbon price signal that makes energy savings and clean energy more attractive. A number of leading economists, both Republican and Democrat, have endorsed this approach to climate policy.
—Paul Bodnar, Managing Director, Sustainable Finance
Q: What is the vision for the types and technologies of renewable energy that are right for rebuilding the British Virgin Islands and Antigua and Barbuda? [Both sustained severe damage from hurricanes in 2017.]
A: For rebuilding in islands that were severely damaged by hurricanes in 2017, a main objective is to rebuild the electricity system in a way that improves its resiliency. In addition, island residents need electricity that is affordable, sustainable, and reliable during normal operations. Each island can utilize its own local resources to provide a significant portion of its electricity needs. For the British Virgin Islands, Barbuda, and many other islands in the Caribbean, sunshine is typically an abundant resource, making solar PV a good option. Coupling solar PV with energy storage in the form of batteries results in a reliable source of electricity, and declining prices make this option increasingly cost competitive. Some islands also have good wind resources, making wind power generation an option at a scale appropriate for a given island. In rebuilding with an eye for increased resilience, it is important to increase both the diversity of resource types (rather than relying on one source such as imported diesel) and the diversity of resource locations (rather than having one central generation plant).
— Kaitlyn Bunker, Manager, Islands Energy Program
Q: I live in Puerto Rico, and the infrastructure needs a serious redesign, yet due to a lack of “funding” things are returning to business as usual, putting the power lines back up in the air so they can be blown over again, repairing coal and petroleum power plants…
A: We also recognize this as a serious issue. The Stafford Act requires FEMA to replace what was there before. This will prevent a new, more resilient electricity system that focuses on decentralized renewable microgrids where generating assets are closer to load. RMI is actively involved in aligning stakeholders in Puerto Rico to ensure a more cost-effective, cleaner, and more resilient electricity system is built as opposed to returning to business as usual.
— Justin Locke, Director, Islands Energy Program
Q: I am not a fan of nuclear power and have heard Mr. Lovins say it is not a cost-effective solution for reducing greenhouse gas emissions. Can you provide the official RMI position on nuclear power with supporting details?
A: RMI’s experts express their own evidence-based views and rarely take “official positions.” Their 2011 consensus on nuclear energy is at pp. 182–185 of Reinventing Fire. My two-page 2015 update confirms that new nuclear power (even with novel or smaller reactors) is several to many times costlier than efficient end-use or modern renewables, so its commercial collapse accelerates. Variable renewables’ reliable grid integration is straightforward, inexpensive, and easier without nuclear power’s inflexibilities and drawbacks, including reduced grid resilience.
Operating a nuclear plant saves less CO2 than investing its avoided operating cost in new efficiency or modern renewables instead, because those cheaper competitors avoid far more CO2 per dollar. Thus continuing to operate uneconomic nuclear plants (probably over half the 98-reactor U.S. fleet)—requiring vast new subsidies—causes more fossil-fuel CO2 emissions than least-cost choices. Huge capital costs make new nuclear plants of any type even less climate-effective.
— Amory Lovins, Chief Scientist and Co-founder
Q: What can be done to inspire/enable individuals to make the small daily and bigger life choices to utilize bicycling, carpooling, living closer to work, etc. and break out of our crazy societal norm of millions of lonely single-occupancy-vehicle drivers living unsustainable car-bound existences?
A: It’s all about user value. When individuals make a decision to adopt a new product or service (especially a decision resulting in behavior/habit change), they inherently make a values assessment comparing the new product/service to the incumbent one. In fact, behavioral economics research shows that such habit change may require an increase in value of two to four times of the newer product/service in comparison to the incumbent. In transportation, despite the “craziness” of our car obsessions, car driving—when compared to other transportation alternatives—provides unparalleled value for users in the form of convenience, flexibility, privacy, comfort, simplicity, relative affordability, and often lowest travel time. We need more and better alternatives that can compete with cars on all of these value axes, providing a highly valuable user experience tailored to each user’s value set. Policy can play an important role in helping these alternatives become better (e.g., dedicated lanes, parking, pickup/dropoff locations, and subsidies and discounts).
For example, in 2015, Panasonic moved its North American headquarters to a downtown Newark office building colocated with a major rail/bus hub, Newark’s Penn Station. Simultaneously, Panasonic began offering subsidized transit passes to employees while charging employees $200 a month to drive and park. In other words, Panasonic created a valuable alternative to driving (a more direct, cheaper, simpler transit option) while also making driving a less valuable proposition (the new parking costs). The result? Employees commuting to work by transit jumped from 4 percent to 57 percent. Now, moving an entire office is not a replicable solution but Panasonic’s experience demonstrates the principle that behavior can change with the right combination of better alternatives, incentives, and penalties that prioritizes user value.
Transportation alternatives may not be able to create more value than driving a car, highlighting the importance of incentives and penalties in reducing the value gap to make those alternatives desirable. A balanced carrot-and-stick approach would include incentives such as monetary rewards, discounts, or prizes through “gamification” combined with penalties such as congestion pricing or market-based parking prices that make car driving less valuable.
Few people will change their behavior to an alternative that reduces value for them, whether it’s less convenient, takes longer, costs more, or is more complex. Both the public and private sector have important roles to play through policy and service innovations, respectively, to create that value.
— Lynn Daniels, Sr. Associate, Mobility Transformation
Q: The role of U.S. states, cities and corporations somewhat redeemed the failure of our national government—but how effective will these sectors be in actually reducing greenhouse gas (GHG) emissions in the face of federal policies to the contrary? And were they welcomed in Bonn?
A: States, cities, and businesses (or corporations) have demonstrated significant leadership on addressing climate change, both historically and particularly in the days and weeks after the White House announced its intent to withdraw the U.S. from the Paris Agreement. These sectors can have a significant impact on reducing greenhouse gas emissions, both given their direct proportion of total emissions, as well as their ability to influence markets and the broader economy. Looking first at cities and states supporting the Paris Agreement, we find that these groups represent over half of the U.S. GDP and over one-third of total U.S. emissions. Many of these states, cities, and businesses are already taking meaningful action toward reducing their own GHG emissions. There is also the potential for states, cities, and businesses to continue to lead the decarbonization of the U.S. economy. This is happening by setting aggressive policies that drive broader changes, demonstrating the technical and economic viability of clean technologies that others will adopt, and helping to drive further investment in the clean technologies of the future. Given the role of states, cities, and businesses in driving the decarbonization of the global economy, they were warmly welcomed at COP23 in Bonn.
— Koben Calhoun, Manager, Buildings Practice
Q: The electrical engineers are starting to take center stage with technologies like solar and storage but how do you see the workhorses of mechanical engineering keeping pace under the hood of energy supply and demand (efficiency in particular)?
A: While considerable focus has been on new, advanced technologies in electrical engineering, storage, solar, and information technology, 54 percent of the world’s energy use is still tied up in the industrial sector. Within this sector, 77 percent of energy use is via direct combustion of coal, natural gas, and petroleum fuels. While new information technologies may help improve efficiency here, the most significant gains come from improved process, facility, and designs. As the world looks to decrease CO2 use, the products from the industrial sector never lose their importance—materials for electric cars and batteries have to be processed and refined somewhere after all! Ensuring that these industrial systems are properly designed to optimize production while minimizing energy use is the purview of mechanical engineers, who ideally have been trained well in the ways of integrative design to create the maximum value across a whole system. Never forget the importance of mechanical engineering in making sure the physical necessities of our world are processed efficiently and effectively!
— Robert McIntosh, Manager, China Program, Mobility Transformation
We’re always looking for new ways to engage with our partners and supporters, and will be scheduling our next virtual discussion soon. In the meantime, we encourage you to subscribe to Spark so you don’t miss an update. Also, you can follow us on Facebook, Twitter, Instagram, and/or LinkedIn where you can pose a question to RMI experts and followers using #AskRMI.