Energy Conservation

1. Energy Conservation November 27, 2005 Andy Yu

2. Outline • The wealth of Nations • GDP, Population and energy consumption • GE ratio, A measure of efficient energy usage • Of CO2 emission, global warming and hurricanes • Causal effect not clear cut, but … • Environment impact from CO2 • Efficient use of energy • A Coherent Energy Policy from the government? • Transportation, housing, cooking, cleaning, etc.

3. GDP, Population and Energy Consumption The driver of economy is energy *kg of oil equivalent per capita

4. GE Ratio • “GE” Ratio = GDP/EnergyConsumed • A rough measure of energy usage efficiency [larger is better]

5. Global Warming • The higher frequency and intensity of hurricanes may be due to the increase in ocean temperatures caused by global warming.

6. CO2 Emissions: US is the worst offender 1. Metric Tons, 2000 data 2. Mega-Tons, population data from 2004

7. Carbon Emission

8. CO2 emission per capita

9. Climate Change • The Kyoto Protocol • An international treaty on climate change • As of September 2005, 156 countries have ratified the agreement. Notable exceptions include the United States and Australia. • The Bush administration does not intend to submit the treaty for ratification. "The Kyoto Protocol is a legal agreement under which industrialized countries will reduce their collective emissions of greenhouse gases by 5.2% compared to the year 1990 (but note that, compared to the emissions levels that would be expected by 2010 without the Protocol, this target represents a 29% cut). The goal is to lower overall emissions from six greenhouse gases - carbon dioxide, methane, nitrous oxide, sulfur hexafluoride, HFCs, and PFCs - calculated as an average over the five-year period of 2008-12. National targets range from 8% reductions for the European Union and some others to 7% for the US, 6% for Japan, 0% for Russia, and permitted increases of 8% for Australia and 10% for Iceland."

10. Kyoto Protocol [2]

11. U.S. Crude sources Daily oil consumption: about 15 million barrels Petroleum imports account for 35% of U.S. trade deficit

12. Various Commodity prices When does it make sense to switch from gasoline to ethanol? *production cost: $1.10; all subsidies: $1.36 gives $2.46 per gallon

13. Gasoline price around the world Source: New York Times [4/30/2005] “The $6.66-a-Gallon Solution; Oil-Rich Norwegians Take World's Highest Gasoline Prices in Stride”

14. Recent World Gasoline prices Source: DOE Energy Information Administration; 11/14/2005

15. Gas Price

16. Oil and Politics • US Middle East Policy • Treat Middle East countries as Cheap Gas stations • Be good to Israel • Otherwise, do whatever they want • Iraq War • Human tragedies and monetary Cost • Windfall profit Tax of Oil companies?

17. Oil and Politics (cont.) • Major Oil companies Q3 Profits: $33 B http://finance.yahoo.com/q/bc?t=1y&s=XOM&l=on&z=m&q=l&c=xle%2Ccvx&c=%5EGSPC

18. China’s Foreign Policy • Search for Natural resources • Not just Oil, but other commodities also • China will be the largest auto market • 250+ M autos by 2025 [from 12M, 2004] • Environmental impact of gas guzzlers autos • Implications of below market gas price • China Global Hunt for Energy • Foreign Affairs [Sept/Oct. 2005] • Taiwan

19. US Oil Supply Risks • Saudi-Arabia • Venezuela • Natural Disaster • Terrorism • Increased competition (China, India)

20. A Coherent Energy Policy • The “Moon Shot” of the 21 century • Alternatives to Oil • Ethanol: Mid-West rather from Middle East • How much does one gallon of Ethanol cost? • Renewal energy • Solar, Wind, geothermal, Nuclear Energy, etc. • Independence of Foreign Oil • High oil price funds terrorists indirectly • How to “Kick” the Oil habit? • A 500 MPG Vehicle • Energy Efficiency/Conservation • A 500 MPG vehicle

21. A commoner’s Daily Energy Use • Cooking • Bathing, cleaning • Dryer/washer • Lightings • Heating/Air Conditioning • Transportation • Entertainment • TV, Computers, etc.

22. Transportation • Public Transportation • US vs. Elsewhere in the world • The largest automobile market: China, India • A major source of Air pollution • The other major source: Power plant • Had the transportation industry kept pace with the computer industry, today we could travel coast to coast in 5 seconds for 50 cents. -anonymous

23. Hybrid Vehicles • The gasoline-electric hybrids offer • Better Gas Mileage • Earth Friendly • No SMOG Check until 2010 in CA • Use the vehicle as a back up generator* • US Energy Policy Act of 2005 • Tax Credit up to $3,400 to hybrid owners • Car Pool Lane use of I-highway during rush hours in certain states (e.g. CA, FL, VA) • Tax deduction of $2,000 in 2005 for a hybrid purchase. Deduction reduced by $500 from 2006.

24. Hybrids Currently Available • Ford • Ford ESCAPE, Mercury Mariner • GM • Opel Astra (Diesel Hybrid, Europe only) • Honda • Insight (International Engine of the year 2000) • Civic, • Accord • Toyota and Lexus • Prius • Motor Trend car of the year 2004 • International Engine of the year 2004 • European car of the year 2004 • North American Car of the year 2004 • RX 400h, • Highlander

25. AutoMakers Financial Health

26. What Makes a Hybrid HotBusinessWeek November 14, 2005

27. 2005 Toyota Prius

28. Economics of a Prius Purchase • My Assumptions; your mileage may vary… • Drive 10,000 miles annually • Hybrid 40MPG vs non-hybrid 20MPG • Capital expense: $1,500 • Gas price $2.00 - $3.00/Gallon • No tax rebates, but can drive in car pool lane • Annual Gasoline savings: 250 Gallons • Bottom line: • It takes about two to three years to break even. • Moreover, a hybrid is very earth friendly!!!

29. Ford Escape Hybrid • First SUV Hybrid, Launched in 2004 • License a number of patents from Toyota • Sanyo of Japan builds the battery pack • Aisin AW, partly owned by Toyota, supplies the continuously variable transmission (CVT).

30. Lexus RX-400H • 2nd Mass Produced SUV [2006 model ]. http://www.lexus.com/models/rx_hybrid/index.html

31. RX-400H [Hybrid] MSRP: $44,660 Horsepower: 268hp@5600rpm EPA MPG: city 33/highway 28 Regular unleaded, 17.2 Gallon Weight: 4901 lbs Range in miles City 568 Highway 482 RX-300 [non-hybrid] MSRP: $36,370 Horsepower: 223hp @5600rpm EPA MPG: city 19/highway 25 Regular unleaded, 19.2 Gallon Weight: 3860 lbs Range in miles City 365 Highway 480 RX-400H vs RX-300 Assume 10,000 miles driven/year, gas price $2.00-3.00/gallon, It takes 23-34 years at the gas pump to make up the premium.

32. Notable facts about Hybrids • Free Parking in City of San Jose*, LA • Prius fuel tank Capacity is 11.9 G. Range up to 600 miles. • Prius Battery Pack has 100,000 miles or 8 years warranty. It is extended in CA: 150,000 miles, or 10 years. [ditto Lexus RX-400H.] • Some states, e.g. CA, exempts hybrids from biennial smog inspection * Purchased from City of San Jose dealers

33. Hybrid Vehicles Summary • At least near-term to mid-term solution • Perhaps long term solution too! • CO2 emission reduction • Duration for Gas savings to make up cost premiums • SUV [Lexus RX-400H]: > 20 years • Little economic incentive • Passenger Car [Prius]: 2-3 years • Economically and environmentally sound

34. Housing • Insulation • Heating and Air conditioning • Lighting • Fluorescent vs. incandescent light bulb • Battery • Cost 1000 times/kWh of PG&E’s • Re-chargeable battery • Cost 10 times/kWh of PG&E’s

35. How to save on heating bill • Almost 50% of home energy bill goes to heating and cooling. • Lighting and appliances take about 25% • The rest is from TV, PC, cell phone charger, etc. • Look for Energy Star qualified products. http://www.energystar.gov/ • Schedule a check up • Install a programmable thermostat • Plug up leaks • Add insulation, especially in your attic • Upgrade your appliances [tax credit starting 2006] http://yahoo.smartmoney.com/consumer/index.cfm?story=20031114

36. Compact Fluorescent Light Bulb • Much more energy efficient as compared to incandescent light bulb. • A 25W fluorescent light bulb gives similar “brightness” as a 100W incandescent light bulb. • Longer lamp life: up to 10 times longer. • CFL bulbs cost more, but save more energy in the long run.

37. Future: Solid State Lighting LEDs • Claimed to be the replacements of fluorescent/incandescent bulbs. • Consume much less the energy. • Used in Traffic Signals, night lights, etc. • CREE is a public company in this space.

38. Appliances Microwave Oven Conventional oven Refrigerator Washer Dryer TV, VCR, DVD players Hi-Fi Speakers Adapters for MP3 and cell phone Computers, etc. Power On, OFF and *Idling* are different!!

39. Cookings When preheating an oven, don't let it sit empty for longer than necessary, and don't open the door to check on food. Every time you do that, you lose 25% of the heat. Use a microwave oven instead of a regular oven. You'll burn about 40% less energy. Use the smallest pans possible. It takes energy to heat them. Use lids. They help the food cook more quickly by keeping steam inside. Use glass or ceramic pans in ovens. They heat faster than metal pans. Keep the inside of your microwave clean. It will cook your food more efficiently. Energy-Saving Tips[1]

40. Washing Machine, Dryer Wash and dry full loads, and don't over-dry clothes. Keep the dryer's lint filter clean. Wash laundry in cold water instead of hot, unless you're dealing with very dirty loads. Don't add wet items to a load in the dryer that has already been started. DishWasher Wash only full loads. It costs exactly the same to wash one dish as a whole load. If your dishwasher has an air-dry feature, use it. If you wash by hand, rinse dishes in groups rather than one at a time, and don't leave the water running. Energy Saving Tips [2]

41. Check refrigerator temperatures by putting one thermometer in a glass of water in the center of the fridge and another between packages in the freezer. You're losing money if temperatures are lower than 37-40 degrees for the main compartment and 0-5 degrees in the freezer. Cover and wrap food. Uncovered food and liquids release moisture and drive up electricity costs. Keep the freezer full. It's more efficient than an empty freezer. If necessary, fill up the space with plastic containers filled with water. If you have a second fridge that's not being used, unplug it. It can cost about $130 a year to keep it plugged in. Let hot food cool before putting it in the fridge. This way the fridge will use less energy to cool it down. Energy Saving Tips – Refrigerator [3]

42. Lower your water heater temperature from 140 degrees to 120 degrees. You'll cut your water heating costs by 10% to 15%, the EEI says. Unfortunately, if you have an older-model dishwasher that doesn't have a booster heater (a device that heats up the water to the temperature the dishwasher needs to clean the dishes), you should leave the water heater set to 140 degrees to make sure the bacteria on your dishes are good and dead. Insulate your storage water heater tank. You'll save 4% to 9% on water heating costs. Drain the sediment from the bottom of the water heater tank every one to three years. Install low-flow shower head and faucets. They use one-third to half the water used by regular shower heads. You can cut your water use and water heating costs by an average 15% to 30%, according to the EEI. Take short showers (and preferably, no baths — showers use less hot water). Energy-Saving Tips [4]water heater http://yahoo.smartmoney.com/dealoftheday/index.cfm?story=20051017

43. Recycle • Plastics • Aluminum • Glass • Paper • Yard Trimmings Getting off national mailing list [Reduce junk mail] ADVO Consumer AssistanceSend written request, full name, address, and signature to: Advo Consumer AssistanceP.O. Box 249Windsor, CT 06095Call: 1-888-241-6760