Adam Grosser and Steve Vassallo

Adam Grosser and Steve Vassallo

6/03/2010 @ 6:00AM

Clean Energy's Dirty Secret

With oil continuing to wash ashore in the Gulf of Mexico, 11 senators and 35 representatives are demanding a ban or moratorium on offshore oil drilling. Hearings are underway to investigate the Massey Mine disaster, which killed 29 miners and reminded America of the risks and costs of coal extraction. The Department of the Interior’s approval of Cape Wind’s application to harness wind off the coast of Massachusetts has detractors pledging to tie the process up for years in the courts–an effort on which they’ve already spent $20 million. In California’s Mojave Desert, momentum on what could be the world’s largest solar farm may be stalled over the need to protect the endangered desert squirrel.

From fossil fuels to renewable energy, it’s clear that additional megawatts of power–even clean ones–will be hard to find.

Ultimately, we will need new sources of supply. But with promising new supplies requiring significant time and capital to design, build and install at any meaningful scale, the search for more energy needs to begin with a search for more efficiency.

By 2030 the world will need 28 million megawatts annually–28 trillion watts–to meet anticipated energy needs. We also have to curb carbon emissions so rising global temperatures don’t wreak havoc on life on earth. To meet these twin challenges, we have to fill the gap between what the majority of scientists accept as the most carbon-based energy we can safely use and the total amount of energy the world is going to need. That gap is estimated to be 14 million megawatts–equal to the amount of energy the world now consumes annually.

In the near and mid-term we won’t be able to get non-carbon based energy to scale fast enough to fill that gap. The only way to close that gap is through negawatts–power that never had to be produced or used to begin with. Negawatts are also the easier, cleaner, cheaper way to “produce” energy. The cost of an investment in efficiency is on average five times less than an investment in new supply. There are huge new markets available.

Yet last year alone the venture capital industry invested more than $2.6 billion in supply-side technologies. While these investments may pay dividends in the long run, they dwarf the $400 million of VC investment in efficiency that can yield dividends today.

According to the Energy Information Administration, America’s demand for energy compared to our GDP makes us the 137th most energy-efficient country in the world. The good news is that it’s not hard to find energy waste, and many of the tools and technologies we need to become more efficient already exist.

Our current electrical grid leaks roughly two-thirds of the energy generated in conversion and transmission. But we can’t find the waste and stop it because we don’t know where we lost it. So we force our utilities to produce more electricity than we need. Smart grid technologies that exist today, however, can give us the information to make our grid dramatically more efficient.

Another issue: The electricity that does make it into our homes and businesses doesn’t always stay there. About 5% of all the energy used in the U.S. literally goes right out the window. That’s roughly 160 large coal-fired power plants worth of energy–lost into thin air. According to Dow Chemical’s CEO Andrew Liveris Andrew Liveris , the average U.S. home has 2.5 miles of cracks in it, leaking enough air every day to fill two Goodyear Blimps. Yet we make windows much as they were made in 1865, when the first double-pane window was produced, even though we have technologies to make windows 10 times more energy efficient than the ones we use now.

There are an estimated 100 million poorly insulated homes in America. If we weatherized those homes, we would save the energy equivalent of more than 500 million barrels of oil–never mind the tens of billions of dollars those homeowners will save on utility bills, or the 600,000 jobs it would create in the process.

We also need to give consumers a window into their own consumption, something existing home-energy-dashboard technology allows us to do. Studies by the U.S. Department of Energy have shown that people use up to 15% less electricity just by seeing how much they’re using.

We also have the ability to spread out demand and reduce what’s called “peak demand”–the roughly 100 hours a year (usually the afternoons of the hottest days) when more people are drawing large amounts of power. Peak demand forces utilities to turn on “peaker plants” to meet that need. These tend to be inefficient generators that run on diesel fuel–the dirtiest, most expensive capacity we have. Shifting peak load to off-peak hours is the single cleanest step we can take in meeting our energy challenges–and, again, it’s an efficiency step that we have the ability to take today. There are companies operating now, such as EnerNOC , that help utilities do just that.

It’s no secret that burning fossil fuels for energy is dirty. Clean energy sources also have a dirty little secret: They all require massive amounts of new infrastructure, time and capital. Recent events have made clear just how hard it will be to build any new energy infrastructure–clean or dirty.

No energy source, no matter how clean, is easier to bring on line or better for the environment than the option of reducing demand and doing more with less. That’s the energy we should be investing in today.

Adam Grosser and Steve Vassallo are partners at Foundation Capital, a venture capital firm that invests heavily in clean technology companies and demand-side management.

See Also:

The Case For Home Efficiency Retrofits

Making Every Plug Talk

The Energy-Neutral Home

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