The Possible Achilles’ Heel of EVs and Energy Storage

  • Battery technology is progressing slowly and advances in lithium-metal are not yet commercially available
  • Federal EV battery incentives pertain to countries with US free trade agreements: Australia, Canada, and Chile
  • Battery supply is constrained by metal mining and production is limited by complex and costly process technologies
  • More research and product production methods are imminently needed

Battery production for electric vehicles should be a concern. For one, the US has neither the resources nor the production capacity to meet the demand of EV manufacturers. Second, as a national security concern, not having the requisite production infrastructure to support energy transformation leaves the US vulnerable to economic decline and energy price increases. Third, to navigate energy transformation it’s imperative to establish battery production for grid stability and resiliency, particularly when introducing renewable energies.

Currently, lithium-ion batteries are the core foundation for EVs and most vehicle manufacturers are planning to transition to all elective vehicles in the near future. California might ban the sale of new cars running only on gasoline by 2035. The issue is the production of EVs is inextricably linked to the availability of batteries that are limited by supply constraints in both battery metals and production capacity. Our focus is on battery supply chains and production.

Battery Supply Chains

The big issue around EV batteries is assuring an adequate supply of materials at a reasonable price.  To better understand the EV supply chain let’s look at the common raw materials namely metals and their associated costs. The four primary metals in a lithium-ion battery commonly used in most EVs are lithium, nickel, cobalt, and manganese. EV batteries use nickel-manganese-cobalt cathodes, with 60% nickel and 20% of cobalt and manganese.

The Possible Achilles’ Heel of EVs and Energy Storage – MarketScale

Why EVs, Digital Transformation and Crypto will Impact Utility Grid

The US utility grid, comprised of electric generation, transmission (high voltage long distance transport) and distribution (last mile connection to end user) consumes approximately 3.8 trillion kilowatt hours (kWh) with 1.28 trillion kWh in commercial use or roughly 34% of the grid.

In 2021, Electric Vehicles (EV) represented approximately 3% of the registered vehicles in the US. The U.S. Department of Transportation’s Federal Highway Administration states the average person drives around 13,500 miles every year. The average electric car consumes 34.5 kWh per 100 miles. This works out as 0.346 kWh per mile. https://ecocostsavings.com/electric-car-cost-per-mile/ That amounts to 36 billion kWh or 1% of the electric grid.

Vehicle manufacturers are projecting substantial migration to EVs which will increase the impact on the grid. When EVs account for 25% of total vehicles, an additional 7% of grid capacity will be required. 

The required grid buildout will be complicated further by the adding huge numbers of physical EV charging locations. The Federal Government has just allotted $5 billion to assist states that have aggressive charging station construction plans. Bottom line: the EV transformation will have a trillion-dollar impact on the economy — driven by the 30%-to-60%  energy efficiency gain of EVs over internal combustion engines.

Currently, there are over 160,000 fueling locations around the country such as gas stations and convenience stores. EV charging units, not individual locations, just a power connector, are estimated to be at around 36,000. What is important to note is that the majority of these legacy EV charging systems are Level 1 and Level 2 type requiring charge times of an hour to go 100 miles. These legacy EV charging systems are not conducive for vehicle commuting behavior. Who can wait an hour to charge their vehicle?

The trend is for next generation fast charge (FC) and extreme fast charge (EFC) EV charging systems that are capable of extending range and providing faster charge times more indicative of the average gas refueling time.  The limitation is that the number of FC and EFC charging locations is minute. Tesla operates over 20,000 Supercharger connections globally but only 908 physical US locations

The bottom line is that the buildout to support fast charging EVs will require extensive capital investment and generation capacity that is further complicated by managing distributed energy resources such as DC power conversion, energy storage and renewable energy.

While EVs are changing the utility landscape, digital transformation – where greater reliance is required by expanding data centers that consume substantially more energy than manufacturing facilities – is consuming energy at an even faster rate.  The economics of cloud computing, machine learning, AI chips, and analytics-driven business models are only accelerating this digital transformation and dependence on data centers. When one adds crypto currency mining to the mix, the utility grid will predictably undergo substantial change.  At current growth projections, Green Econometrics forecasts that EVs, data centers and crypto mining will require an additional 11% energy generation and grid capacity by 2027.

How can IoT sensors help businesses achieve sustainability goals

https://marketscale.com/industries/industrial-iot/putting-iot-to-work-for-u-s-sustainability-goals/

MarketScale Podcast with Daniel Litwin

Why More Energy Storage Investments are in Everyone’s Best Interest

MarketScale Podcast

Why More Energy Storage Investments are in Everyone’s Best Interest – MarketScale

https://marketscale.com/industries/energy/why-more-energy-storage-investments-are-in-everyones-best-interest/

Disruptive Innovation – Why Energy Storage is Crucial Infrastructure

From the inception of the Industrial Revolution several core ingredients enabled the transformation and growth of industry.  Among these core building blocks of the Industrial Revolution namely: access to risk capital, visionary entrepreneurs, available labor, technology, resources and energy.  Technology and energy play a crucial role in not only growing industry but enable scale.   Technology can open new markets and provide advantage through product differentiation and economies of scale.  Energy is literally the fuel that scales operations.

Today technology, built from knowledge and data, is how companies compete. Energy now emerges as even more integral in scaling operations. Just as James Watt developed the first steam powered engine in 1606 commencing the Industrial Revolution, it was the access to available coal with the use of the steam powered pump, invented by Thomas Savery in 1698, that allowed greater access to coal that gave scale to industry.

Most recently, the pending transaction of Salesforce’s (CRM) acquisition of Slack (WORK) after acquiring Tableau last year serves as a reference in valuing the importance of technology is to sustaining market value.  The market value of seven companies accounts for 27% of the approximately $31.6 trillion for the S&P 500.  Evaluating the industry and market impact of innovative technologies can be viewed through the lens of stock valuations, particularly as it applies to mergers and acquisitions.  This article reviews the companies and the technologies from the perspective of market sales opportunity and the economic impact of the technologies based on the price/performance disruption to the industry.

So why are we focusing on energy and data today?  Energy, predominantly hydrocarbon fuels such as oil, natural gas and even coal is how people heat their homes and buildings, facilitate transportation, and generate electricity to run lights, computers, machines and equipment. In addition, there is substantial investment focus on the digital economy, Environmental and Social Governance (ESG), and innovative technologies. A common thread among these themes is energy and data.

Data and Energy are the pillars of the digital economy. Energy efficiency can reduce carbon emissions, thereby improve ESG sustainability initiatives. Innovative technologies around energy and data are opening new markets and processes from formulating new business models to structuring and operating businesses.

The climate imperative and investing in energy infrastructure and environmental ESGs are predicted on energy efficiency and relevant performance metrics to evaluate investment allocation decisions. Therefore, our initial emphasis begins with a background on energy consumption with focus on electric consumption trends, carbon footprint, Green House Gas (GHG) emissions, sustainability, electric grid resilience, and technologies that impact energy including Electric Vehicles (EV), energy storage, and Autonomous Driving (AD).  Data technologies encompass cloud architecture, Software as a Service (SaaS), Machine Learning (ML) analytics, and the importance of data as the digital transformation gives rise to the digital economy. 

Digital Economy Performance Metrics

Before we dive into the financial and competitive analysis, let’s review business models that are disruptive to the status quo. That is are innovative technologies capable of rapid scale and efficiency gains that change the economics of the market and business profitability.  In addition, disruptive events, driven primarily by technology, often appear as waves as the adoption of innovative technologies expands through the market.

Prominent technological waves such as the personal computer (PC), followed by the internet and smartphones and most recently social media and cloud computer all manifested themselves in engendering new business models and creating new market opportunities that dramatically changed the status quo among leading companies at the time. We will use the internet and mobile technology waves to explain how the introduction of innovative technologies offering vastly improved means of commerce enabled the development of new services that changed the business landscape.

Most recent advances in technology appear as waves and give rise to new business models and markets. The internet is one example. The internet enables the connection and process of communication over a new channel.  The internet allowed one-to-one and one to many communications and the ability to engage, transact and scale using a digital platform that tremendously lowered the cost of engagement. Scale is among the most important attributes of the internet because the cost of digital replication is close to zero.

Mobile and smartphones began a new era in the digital world.  The smartphone allowed a large portion of the world to interact with the internet for the first time on a mobile device. The mobile wave provided platform that enabled the introduction of a host of new business models.  The introduction of the Apple iPhone gave way to several new services and industries all from your cell phone.

Let’s review the business model impact of innovative technologies as it applies to cost structure.

Cost Structure and Disruptive Innovation

As explained by ARK Investment Management’s Catherine Wood, the rate of cost decline can be used as a proxy for evaluating the disruptive impact of innovative technology. Cost structure improves as unit production expands. As first postulated by Theodore Wright, an aerospace engineer, who postulated that “for every accumulated doubling of aircraft production, costs fell by about 20 percent”. Wright’s Law as it is now known is also called the Learning Curve or Experience Curve and it is found across industries that experience different rates of declining costs.

What is important from the perspective of investment firms such as Ark is that the magnitude of disruptive impact can be gleaned from these declining cost curves. Revenue growth can then be correlated from these declining cost curves. Essentially, demand elasticity and future sales can be derived from the rate of product cost declines. 

This is why price/performance and scientific metrics play an important role in evaluating products, services and company competitive positions. For example, the average cellular price per gigabyte (GB) of data is approximately $12.37 in 2020 according to Small business trends. Another example in science, is the physical performance of an LED light assessed by lumens the light output to the amount of energy consumed in watts such as lumens/watt (Lm/W). These metrics are points in time. For more context, the changes over time and magnitude of change provide insight into inflection points, trends, patterns and relationships.

As devices become complex, encompassing separate processors for communications, computing, power, video and various sensors, it is the integration and orchestration of the overall device performance that becomes of greater value to the user. So, price/performance, scientific understanding and economics become more attuned to relationships among these varied and interdependent components.

TAM Expansion Attribute

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Green Econometrics: Important Trends To Watch In 2021

Digital Transformation Becomes The Top Priority

by Charlie McHenry, COO, Co-Founder

The pandemic, and to a lesser extent, global climate change are accelerating digital transformation in business, industry, agencies and non-governmental organizations. This transformation is also a transition – to a new way of doing business on all levels; to a new way of looking at the impact and footprint of our business and personal activities; and to a new normal, that is not likely to look a lot like what we’re used to. This coming year will see a number of existing trends accelerate, and new developments which will underlie and drive major changes in business and operational models. 

This report will look at a number of industry sectors, as well as the impact of digital transformation on the public sector. In depth reports on each of these sectors are available by yearly subscription for $950 by request. 

We have to start somewhere, so let’s take a look at the rather dramatic and emblematic transformation now taking place in the automobile/truck manufacturing sector. 

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Why Analytics and Business Intelligence

Analytics and Business Intelligence provide a framework for process improvement that drives operating efficiencies and enhances business value.  Most business owners and managers want to increase business value to benefit shareholders, stakeholders, and investors.  Individual investors and investment professionals direct capital towards companies that can demonstrate sustainable value.  Changes to performance in revenues, margins, and risks can become a catalyst to invest or divest. Business value is often measured by three performance criteria – revenues, operating margins, and risks.  Therefore, factors that contribute to revenue growth, margin expansion, and risk mitigation become the overarching goals to improve business value.  We add that sustainable value includes resource conservation and efficiency.

Just how does analytics and business intelligence address revenues, costs, and risks in improving business value?  To understand the integration of analytics and business intelligence in improving business value, let’s look at two initiatives in formulating business strategy. 

 In his book Measure What Matters, John Doer describes how establishing goals and objectives along with the corresponding performance criteria provide a better method to assure that key metrics are aligned to goals and business objectives. This process of mapping performance metrics to business objectives defined as Objectives and Key Results (OKRs) determine what is relevant to measure and track.  Adding to OKRs is the balanced scorecard approach which pulls reporting data from each business unit and department and explained by Robert Kaplan and David Norton in their Harvard Business Review article “Using the Balanced Scorecard as a Strategic Management System” to provide an assessment of conditions and performance.  

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Analytics Framework for Sustainability

Why the analytics framework for process improvement can translate into substantial benefits around sustainability improvements and energy efficiency. The Coronavirus pandemic has upended social interaction – a new normal, with social distancing and protocols, and so why does sustainability play a crucial role in facilitating a smoother transition into the is new normal.  The reason is sustainability engenders confidence.  Knowing facilities are safe and that indoor air quality monitoring is vital for occupant health and safety builds confidence. Health and safety are also essential in generating the confidence that changes consumer behavior.  Therefore, the process by which you implement a sustainability plan plays an expanding role in orchestrating the activities that adhere to values and performance.

A sustainability framework provides the roadmap to monitor, measure and curate data thus enabling performance benchmarking of conditions and processes.  The analytics framework serves as a roadmap to utilize insight gained from data analysis.  Currently available tools such as data visual analysis, machine learning algorithms and cloud computing architecture enable cost effective approaches to achieve business and sustainability objectives.

A sustainability framework provides the foundation to drive business value across several dimensions and performance metrics.  The use of the sustainability process can drive business value, improve our environment, enhance customer loyalty, and better engage healthier and happier employees while rewarding shareholders and stakeholders with higher business valuations.

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The Internet of Things (IoT) How Big Data and Analytics Translate into Lower Costs and Higher Productivity

The value of IoT is its ability to monitor, control, and compile data. Data derived from IoT sensors when combined with analytics can lower operating costs, enable new business models, and improve productivity. Embedded sensors monitor, measure, and manage connected devices with limited human interaction. Less human interaction translates into higher productivity. Sensors that can monitor and control devices can also minimize maintenance costs, reduce energy costs, optimize resources allocation and process flow.

For instance, photo and occupancy sensors that can control lighting typically save 20% of a building’s lighting cost. On average, lighting accounts for 25% of the buildings energy costs or approximately $0.70 per square foot according to the DOE. When lighting controls sensors are connected to the Internet, they enable remote diagnostics, device control, and collect data.

By analyzing data from IoT devices, new business models can be created. Analytics play a crucial role developing these new business models. Uber uses analytics to know user demand by the minute. Palantir Technologies provides visual analysis using disparate transactional activities to detect fraud. IoT devices allow greater detail in data capture and faster timing responses. IoT sensors that enable device control and data capture will engender new business models.

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Update on Oil Consumption

The latest data on oil consumption suggest the dip in consumption that appeared in 2008 after the global financial crisis quickly reversed. The contraction in oil has now turned to expansion with consumption up 4% y/y globally.

According to the latest reported information from the Energy Information Administration (EIA), EIA oil consumption is up 4% for 2010 from 2009. The data oil consumption data suggests the global economy has recovered from the financial crisis and is translated into higher oil demand.

Figure 1 Global Oil Demand Oil

WE have seen economic contraction result into declines in oil demand before. Oil demand dropped in the 1979 to 1983 period with of a 10% decline per year. On a global basis, oil demand declined approximately 2% in 2009 from 2008, but is not up nearly 4% in 2010

In the US, oil demand dropped 5.7% in 2008 and 3.7% in 2009 with demand in 2010 increasing 3.8%. The oil consumption trend in the US suggests the decline in oil demand was cyclical as apposed to any structural changes in US consumer demand.

Figure 2 US China & India Oil Consumption US Oil Demand

The real story is the growing demand for oil from China and India. According to data from The Centre for Global Energy Studies (CGES) , the demand for oil from China is up 100% from in the last ten years. China’s oil consumption rate has grown from 4.8 million barrels per day (MBPD) to 9.6 MBPD amounting to half of the total US consumption. In 2010 the growth in oil demand in China is up 17%.

The demand for oil in India is also increasing. Oil consumption in India is up 58% in the last ten years and up 8% in 2010.

Figure 3 China and India Oil Demand Global Oil Demand

The bottom line is that is demand for oil continues to increase and we expect further increase in oil prices.

2010 Update on Oil Consumption and CO2 Levels?

The worst global economic recession in since the Great Depression seems to be abating. Given the severity of the financial crisis, it might serve to review what impact the recession has had on oil consumption. In addition, what impact did the decline in oil consumption have on atmospheric CO2 concentration levels?

Since 2006, global oil consumption declined by 1.1 million barrels per day (BPD) from 85.2 in 2006 to 84.0 in 2009. Oil consumption in the US declined 9% to 18.8 million from 20.7 million BPD in 2006. Europe experienced a decline of 7% over this same period with a drop of 16.5 million to 15.2 million BPD. However, over this same period, oil consumption in China and India increased 16% and 13%, respectively. This data was complied from the US Department of Energy Information Administration (EIA) and is displayed in the following charts.

To measure how significant the impact has been, the following charts provide some insights in evaluating how deteriorating world economies may have impacted oil consumption and secondly, whether reduced oil consumption has mitigated heightened CO2 levels.

Figure 1 Global Oil Consumption Global Oil
Source: EIA

From Figure 1, the impact of the global financial crisis is depicted with the decline in global oil consumption. When a comparison is applied to oil consumption between the US China, and India, the relative drop in oil consumption is less discernable.

Figure 2 US, China, and India US China & India
Source: EIA

Figure 2 provides a summary of oil consumption of the US, China, and India. A measurable decline in oil consumption can be seen, but only in the US market.

Figure 3 China and India China and India
Source: EIA

Figure 3 demonstrates the steady and pronounced growth in oil consumption for China and India. Despite the global financial crisis, oil consumption significantly expands in China and India due to secular growth from rapid industrialization in both countries. When measured with respect to the European market, China and India have grown from 15% of the oil consumption rate of Europe in 1980 to over 74% of the consumption level in 2010.

Figure 4 CO2 Levels CO2
Source: NOAA

With the decline in global oil consumption, perhaps a positive benefit would be a fall in CO2 levels. The atmospheric CO2 readings in part per million (PPM) where taken from the National Oceanic and Atmospheric Administration (NOAA) from the Mauna Loa CO2 Levels monthly measurements. Figure 4 illustrates the average annual atmospheric CO2 concentration readings in Mauna Loa, Hawaii from 1980 through 2010.

The bottom line is even while global oil consumption declined during the recession, growth in China and India remained unabated and subsequently, CO2 concentrations in the atmosphere continue at elevated levels.

In memory of Jamie Kotula – loved by family, friends, teammates, and school.

Should we be Concerned over Elevated CO2 levels?

With the oppressive heat and appalling humidity along the Eastern Seaboard, one considers the possibility of climate change and the impact of that greenhouse gases may have on our environment. Without developing statistical regression models to gleam any semblance of understating of carbon dioxide’s impact on climate change, let’s just look at some charts that illustrate the changes of CO2 levels though history.

While industry experts and scientist debate whether elevated CO2 levels have an impact on climate change, the scientific data taken from ice core samples strongly suggests CO2 levels have remained in a range of 180-to-299 parts per million (PPM) for the last four-hounded thousand years. Scientists have developed models to suggest that rising CO2 levels contributes to global warning which are subsequently followed by dramatic climate changes that lead to periods of rapid cooling – the ice ages.

Scientific theories suggest that rising global temperatures melts the Polar ice which allows substantial amounts of fresh water to enter the oceans. The fresh water disrupts the ocean currents that are responsible for establishing a nation’s climate. As oceans warm near the equator, the warmer water travels towards each of the Polar areas. The cooler water near the Polar areas sinks and travels towards the equator. These ocean currents allows for stable climates. The issue is that fresh water is less dense because it is not salty like seawater. Therefore, the fresh water does not sink like the cold salinated seawater thereby disrupting the normal flow of the ocean currents.

Figure 1 CO2 Ice Core Data – illustrates the level of CO2 over the last four-hounded thousand years. The Vostok Ice Core CO2 data was compiled by Laboratoire de Glaciologie et de Geophysique de l’Environnement.
Ice Core Data

Figure 1 CO2 Levels – Vostok Ice Core CO2 Ice Core
Source: Laboratoire de Glaciologie et de Geophysique de l’Environnement

If this Ice Core CO2 data is correct, then the current data on atmospheric CO2 levels is quite profound. CO2 data is complied by the National Oceanic and Atmospheric Administration NOAA at the Mauna Loa Observatory in Hawaii. The latest trend indicates CO2 levels for June 2010 are at a mean of 392 ppm versus 339 in June 1980 and 317 in 1960. Clearly these CO2 levels are elevated. The question is what is the impact on our environment.

Aside from the catastrophe in the Gulf of Mexico and the dire need to find an alternative to our dependence on oil, should we not accelerate our efforts to find an alternative energy solution and as a way to mitigate the impact of CO2 on our environment? Maybe investment into alternative energy could help solve multiple problems.

Figure 2 Mauna Loa CO2 Readings  Mauna Loa
Source: Source data published by the National Oceanic and Atmospheric Administration (NOAA)

The bottom line is that we need to consider the possibility that elevated CO2 levels in our atmosphere could potentially have a detrimental impact on our climate. In any event, limiting our dependence on fossil fuels, the main contributor to CO2, should be paramount. Let us not forget oil is supply-constrained – there are no readily available substitutes aside from electric vehicles, and without a strategy to embrace renewable energy, supply disruptions will have a painful impact on our economy, national security, and environment.

Energy Perspective

After reviewing oil data from the Energy Information Administration (EIA), Global Petroleum Consumption , it may be helpful to put energy consumption into perspective. Most of us are quite familiar with alternative energy such as solar and wind, but the reality is, even if solar and wind could supply all of electric energy needs, the majority of our energy needs is still predicated on access to oil.

While industry experts and scientist debate whether more drilling will ameliorate the energy challenge we face, let’s look at a couple of data points. Figure 1 US Oil Field Oil Production and Drilling Rigs – illustrates that higher drilling activity as measured by Baker Hughes Rig Count data does not necessarily correlate to more oil production as measured by US Oil Field Production by the EIA. Higher drilling activity does not produce more oil.

Figure 1 US Oil Field Production and Drilling Rigs US Oil Demand
Source: Energy Information Administration and Baker Hughes research

Despite the large investment in drilling rigs that more than doubled from 1,475 in 1974 to over 3,100 in 1982, US oil production remained relatively flat. Moreover, even the most recent drilling expansion activity that again more than doubled from 1,032 rigs in 2003 to over 2,300 rigs in 2009, resulted in relatively flat oil production, suggesting that on the margin unit oil production per drilling rig was declining. Perhaps even more disturbing is that the most recent drilling activity in the US was accomplished through extensive use of technology. Seismic imaging technology is being used to better locate oil deposits and horizontal drilling technologies are employed to more efficiently extract the oil, yet oil production still lags historic levels. While on the margin, newly announced offshore drilling could add to domestic oil production, extraction costs of oil will continue to rise adding to further oil price increases.

However, what is most profound is our dependence on oil for most of our energy needs similar to how wood was used for fuel construction material during the 1300’s and 1600’s. If we translate energy consumption into equivalent measuring units such as kilowatt-hours, we can compare and rank energy consumption. Although electricity is captured through consumption of several fuels most notably coal, a comparison of energy usage between oil and electric provides an interesting perspective.

Figure 2 Energy Perspective – provides a simple comparison of the consumption of oil and electricity measured in gigawatt-hours (one million kilowatt hours). A barrel of oil is equivalent to approximately 5.79 million BTUs or 1,699 KWH and the US consumed approximately 19.5 million barrels per day equating to 12 million gigawatt-hours a year. The US uses 4 million gigawatt-hours of electric energy annually. The critical point is that even if solar and wind supplied all of our electric energy needs, it would still only comprise 30% of our total energy needs. Therefore, without an energy strategy that facilitates migration towards a substitute for oil, particularly for transportation, we are missing the boat.

Figure 2 Energy Perspective Oil
Source: Energy Information Administration and Green Econometrics research

It’s not all doom and gloom. Technologies are advancing, economies of scale are driving costs lower, and the economics for new approaches to transportation are improving. From hybrids and electric vehicles benefiting from advances lithium-ion batteries to hydrogen fuel cell vehicles getting 600 miles on a tank of fuel. These advanced technologies could mitigate our addiction to oil, however, without formulating an energy strategy directing investments towards optimizing the economics, energy efficiency, environment, and technology, we may miss the opportunity.

The bottom line is that oil is supply-constrained as there are no readily available substitutes, and therefore, without a means to rapidly expand production; supply disruptions could have a pernicious and painful impact on our economy, national security, and welfare.

Formulating an Effective Energy Efficiency Strategy with Measurement and Verification Copyright © 2009 Green Econometrics, LLC

The development of an energy efficiency strategy incorporates analysis of energy expenditures and energy consumption. The energy strategy must incorporate dynamics between costs, budgets and the consumption of energy including the monitoring of kilowatt-hours (KWH) of electricity and liquid hydrocarbon fuels consumed. By analyzing both the financial and the energy consumption components we are better positioned to frame the scope of the energy efficiency projects.

We start with a comprehensive energy audit analyzing energy consumption and expenditures. After determining which activities offer the fastest, cheapest, and greatest economic impact we are then able to define the scope of energy efficiency projects. The next step in the energy strategy process is to assess, rank and specify energy saving opportunities. At this phase, we have a broad understanding of the scope of energy efficiency projects within the appropriate budgetary considerations.

Conduct Energy Audit and Analyze Energy Spending

Upon analysis of the energy expenditures and the appropriate budgetary considerations, we commence with an energy audit to examine the dimensions of energy consumption. The energy audit establishes an energy efficiency baseline for buildings and vehicles. In the energy audit, energy consumption is measured by source and activity using monitors attached to branch circuits, gas pipes, and fuel lines. In this manner, energy consumption is evaluated from a financial and physical perspective and baseline usage patterns are established for electricity and other fuels.

During the energy audit, an analysis of energy intensity is measured. For buildings, energy consumption is measured in kilowatt-hours per square-foot to identify which activities consume the most energy. The energy intensity measurements are then ranked by consumption activity and compared to actual energy expenditures.

The purpose of the energy audit is to establish a baseline of energy consumption and the energy intensity associated with each building, department, vehicles, and/or activity usage category. By constructing an effective energy efficiency strategy that identifies and measures energy demand by activity, a better understanding of economic- and financial-impact is established. The critical component to the energy audit is measurement and verification were wireless Internet-based energy monitoring provide data before and after energy efficiency projects commence. The energy audit and energy monitoring systems together with financial analysis of energy consumption serve as the framework to rank and assess energy efficiency projects.

Heuristically, energy consumption in buildings is tied to lighting; and heating, cooling, and ventilation systems see Energy Intensity . The following chart, Figure 1 serves to illustrate which activities contribute most to energy consumption in buildings.

Figure 1 Kilowatt-hours (KWH) per Square Foot KWH sq ft

According to information provided by the DOE, lighting, cooling and ventilation alone account for nearly two-thirds of all energy consumption in a building. For perspective, electric energy demand is increasing at an annualized rate of 1.6%. According to the Energy Information Administration (EIA), demand for electricity grew 21% between 1995 and 2006.

The energy consumption audit provides a means to assess which activities should be further analyzed for energy efficiency projects. The baseline energy usage measured in KWH per square foot serves as the framework to evaluate that locations and activities could benefit from lighting retrofits, equipment upgrades, structural improvements, and energy monitoring systems.

As a consequence of increasing energy consumption in buildings, electric generation relies extensively on hydrocarbon fuels that carry adverse environmental effects. Figure 2 illustrates the proportion of coal and other hydrocarbon fuels that are used to generate electricity in comparison to renewable energy sources. Coal still accounts for nearly half of all electric generation while contributing the most in terms of harmful emissions such as carbon dioxide, nitrous oxide, and sulfur dioxide.

FIGURE 2: Electric Generation Method Electric

As part of the energy audit process for buildings, an energy consumption analysis of lighting and HVAC systems is evaluated along with the building’s insulation R-Value (resistance to heat flow where the higher the R-value, the greater the insulating effectiveness). In addition to lighting and HVAC systems, specialized equipment may also account for large energy demand. During our energy audit, we plan to identify and measure energy usage of special equipment in order to construct energy efficiency initiatives with clearly defined and measurable energy reduction targets.

Energy efficiency for transportation vehicles is one of the most significant factors to manage. The fact that there are no real substitutes for oil in the transportation industry illustrates two important points: 1) structural changes to driving patterns are required to see appreciable changes to oil consumption and 2) government authorities are vulnerable, with no readily available substitutes for oil, supply disruption could negatively impact transportation systems. Therefore, we emphasize fuel management systems for fleets and vehicles that monitor fuel consumption and efficiencies. DOE studies have indicated that changing driving habits could improve fuel efficiency by up to 30%.

Vehicle mounted devices that integrated fuel consumption feedback as the vehicle is driven promotes higher fuel efficiency. These off the shelf products are cost-effective, offering payback in months that dramatically improves fuel efficiencies. Aside from routine tune-ups, limiting weight, and checking tire pressure, augmenting driving patterns through gauges that provide feedback on fuel efficiency make the difference in saving energy.

In most situations, fuel management systems can be installed without significant mechanical aptitude. The ScanGaugeII from Linear-Logic is useable on most vehicles manufactured after 1996 including Gas, Diesel, Propane and Hybrid Vehicles and are designed to be installed by the consumer with plug-and-play instructions.

Identify and Measure Energy Demand by Activity

From the Energy Audit, the energy intensity of targeted buildings and fuel efficiencies of official vehicles are established. In buildings, it’s the lighting and heating, ventilation, and cooling that comprise the bulk of energy consumption.

Heating, ventilation, and cooling represent a significant portion of energy consumption in buildings and are a priority target for energy analysis. The Seasonal Energy Efficiency Ratio (SEER) is employed as an assessment of the equipment and analyzed in conjunction with building insulation. The efficiency of air conditioners is often rated in SEER ratio, which is defined by the Air Conditioning, Heating, and Refrigeration Institute and provides a standard unit measure of performance. The higher the SEER rating of a cooling system the more energy efficient the system is. The SEER rating is the amount of BTU (British Thermal Units) of cooling output divided by the total electric energy input in watt-hours.

For heating systems in a building, Annual Fuel Utilization Efficiency (AFUE) is used to measure and compare the performance of different systems. DOE studies have indicated that even with known AFUE efficiency ratings, heat losses defined as idle losses contribute to degradation in heating system efficiency,

To analyze energy consumption of heating and air conditioning systems (HVAC), we evaluate the building’s R-Value in comparison to the energy efficiency of the current heating and air conditioning systems. The energy demand evaluation includes a cost-benefit analysis comparing options in either HVAC system upgrade and/or improvements to the building’s insulation R-Value. By comparing the buildings R-Value in conjunction with HVAC efficiency performance, projects offering the greatest cost effectiveness are identified. The building’s R-Values can be measured using FLIR Systems infrared camera and software system. In this manner, the replacement cost of an HVAC system and costs to improve the building’s R-Value are analyzed to measure economic benefits. This information will allow the building owner to make an informed decision on whether any energy efficiency investment into HVAC upgrade or improvement to R-Value demonstrate economic benefit, i.e. positive financial return.

Consideration for heating and cooling systems upgrades are assessed by equipment SEER and AFUE ratings, installation costs, and efficiency payback. After equipment assessment is complete, proposals will be provided along with estimates for upgrade costs and payback analysis.

Benchmark and Analyze Energy Intensity

After conducting the energy audit, and compiling data on energy usage by activity category, we benchmark and analyze energy projects offering the greatest opportunities. As illustrated in Figure 3, energy efficiency for lighting systems can be substantially improved by retrofitting legacy light fixtures with higher efficiency fixtures and bulbs.

The energy audit and analysis provide the framework to evaluate energy efficiency projects. By analyzing energy consumption and the economic benefits associated with the energy savings projects, the most efficient and economically beneficial initiatives are identified and ranked.

FIGURE 3: Energy Savings in KWH per Square Foot Figure 1 Kilowatt-hours (KWH) per Square Foot KWH sq ft

Establish Measurable Goals and Objectives

To establish relevant goals and objectives we are evaluating projects that are adhering to the SMART goal approach: specific, measurable, attainable, realistic and timely. Energy efficiency gains are most pronounced with lighting retrofits and energy monitoring in buildings in buildings and energy monitoring in vehicles.

After conducting an energy audit, analyzing energy consumption activities and the economics of energy efficiency projects, realistic and achievable energy savings goals are defined. Key performance metrics for energy savings are defined for buildings and vehicles. Key performance indicators are established for each project. For example, KWHs saved are defined for lighting retrofit projects, efficiency improvements for HVAC system upgrades, R-Value improvements for building insulation, and MPG gains for vehicles.

For each energy savings project, timelines are established with clearly defined milestones. Energy projects are presented with costs; expected energy savings measured in energy and dollar units, cost benefit analysis, and timelines.

Architect the Deployment of Energy Monitoring Systems

One of the first energy initiatives to consider in any energy savings project is the installation of an energy monitoring system for vehicles and buildings. Energy monitoring systems demonstrate the fastest and most economical pathways to achieving energy savings.

Energy monitoring systems for motor vehicles also demonstrate positive economic returns and real energy savings. The $180 energy-monitoring device with 10% fuel efficiency gain achieves breakeven at 14,500 miles with gasoline costing $2.50 a gallon.

Evaluate Feasibility of Renewable Energy Projects

Renewable energy projects such as solar and wind energy systems are often costly with long payback periods. Without tax incentives and grants, renewable energy projects are unable to demonstrate positive financial returns. However, utility rates for electric are expected to increase, improving the case for renewable energy projects. To improve the viability of alternative energy projects, energy efficiency projects such as lighting retrofit serve to lower energy consumption and therefore enhance the feasibility of solar and wind energy projects.

Oil Consumption Impacted More by Price than Deteriorating Economic Conditions

The fall in oil consumption was most dramatic following the escalating price of crude oil to $145.16 per barrel on July 14, 2008 then at any other point over the last several years. Price elasticity, a key concept in Economics 101, which measures the impact of price change to changes in unit volume sold, is helpful in determining which products have readily available substitutes or which, like oil are inelastic with no real substitutes.

As illustrated by Benjamin Graham and David Dodd in their book Security Analysis, 1940 edition, during the 1930’s the economy had a dramatic impact on spending and consumption particularly on discretionary items such as travel. In one illustration, the change in demand was most pronounced in railroad revenues where tickets purchased for railroad travel, declined 51% from 1929 to 1993 as measured by gross receipts for the railroad industry. Over this same period, spending on the consumer staples (inelastic demand), such as electricity encountered a decline of only 9%.

While almost everyone would agree that the current economic climate is one of the most challenging since the 1930’s, a quick review of oil consumption over the last several years illustrates that demand has not significantly contracted, suggesting driving habits only changed when prices escalated to over $100 per barrel. Oil consumption dropped only 4.9% from January 2008 through January 2009.

Figure 1 Oil Consumption Oil

As seen from Figure 1, the sharp drop in oil consumption in September 2008 of 8.3% appears as an aberration when measured over the whole year. The fact there are no real substitutes for oil in the transportation industry illustrates two important points: 1) structural changes to driving patterns are required to see appreciable changes to oil consumption and 2) how vulnerable we are as a nation with no readily available substitutes for oil in the transportation systems.

Figure 2 Oil Demand in China and India Wood Prices

With China and India undergoing significant structural changes as they rapidly migrate towards motor vehicles for transportation suggests the demand for oil should continue to grow relatively unabated. Until the price of oil climbs back over $100 per barrel, we will not see the structural changes necessary to develop alternatives to oil in the transportation market.

The bottom line: energy and in particular, oil has not experienced a dramatic drop in demand during 2008 suggesting driving patterns were influenced more by the price of oil then the struggling economy. We must begin to shift emphasis to alternative energies such as solar as well as hybrids and electric vehicles.