the Energy Policy Act of 2005.4The United States certainly has enough financial resources to buildthe new power plants and the transmission infrastructure to meet theincreased demand. However, the costs would be huge since they would
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include capital costs, additional electricity costs for consumers, and increased environmental costs because fossil-fuel power plants would almost surely be the primary means for generating the additional electricity.Rather than building new power plants, the more rational course is to focuson power efficiency as a way to make our existing power base go fartherand thus reduce the need for new power plants.Power efficiency programs are already delivering annual energy savings of about 1 percent of total electricity and natural gas sales and “arehelping to offset the 20–50 percent of expected growth in energy demand insome areas without compromising the end users’ activities and economicwell-being,” according to the National Action Plan for Energy Efficiency.5The National Action Plan for Energy Efficiency, citing various studies,states that energy efficiency programs could (1) yield more than 20 percentsavings in total electricity demand nationwide by 2025; (2) create $20 billion per year in energy bill savings; (3) create net societal benefits of morethan $250 billion over the next 10 to 15 years; (4) defer the need for 20 gigawatts of power (40 new 500-megawatt power plants); and (5) reduce U.S.emissions from energy production by more than 200 million tons of CO2 ,50,000 tons of sulphur-dioxide, and 40,000 tons of nitrous-oxide annually.6California provides the best example of the substantial impact thatpower efficiency programs can have in reducing power demand and costs.Remarkably, California’s per-capita electricity consumption has been flatsince 1970 at about 7,000 kilowatt-hours per person. That stable electricity consumption usage is directly attributable to the power efficiencyprograms that California has implemented over the past 30 years. This remarkable achievement stands in contrast to the doubling of the overallU.S. electricity consumption from about 6,000 kilowatt-hours per personin 1970 to the current level of about 12,000 kilowatt-hours per person.California, through its energy efficiency efforts, has saved an estimated40,000 gigawatt-hours of electricity a year (which amounts to 15 percentof consumption), has reduced the state’s peak demand requirements by 22percent, and has deferred 12 gigawatts of peaking capacity over the past30 years, according to the Electric Power Research Institute.7The benefits of power efficiency, as identified by the National ActionPlan for Energy Efficiency,8 include:
r Lower energy bills, greater customer control, and greater customer satisfaction.
r Lower cost than supplying new generation from new power plants.r Modular and quick to deploy (as opposed to building new powerplants).
r Environmental benefits.r Economic development.r Energy security.
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Power efficiency clearly has an important role in solving the UnitedStates’s energy problems by reducing electricity demand, reducing theneed for more U.S. fossil-fuel power plants (thus reducing pollution andgreenhouse gas emissions), improving the grid transmission infrastructure, and alleviating problems such as brownouts and blackouts. In theremainder of this chapter, we will discuss three areas that are ripe forimprovement in power efficiency: efficient appliances, efficient lighting,and efficient buildings. In the next chapter, we discuss how to improveefficiency at the grid level through demand-response systems and smartmeters.
EFFICIENT APPLIANCESThere is huge potential for improving efficiency nationwide by requiringthat manufacturers build more efficient appliances in the first place. Basedon data from the Energy Information Administration, kitchen and laundryappliances by themselves account for about one-third of all household electricity usage.9 Appliances are a fertile area for power conservation.The federal government has been very active in pushing manufacturersto produce appliances that are more energy efficient. In 1992, the U.S. Environmental Protection Agency (EPA) and the U.S. Department of Energy(DOE) set up “Energy Star,” a voluntary labeling program designed to identify and promote energy-efficient products in order to reduce electricityusage, save money, and reduce greenhouse gas emissions.10Through its partnership with more than 9,000 private and public organizations, Energy Star provides technical information to the public to helpthem choose energy-efficient appliances. Energy Star provides recommendations for products in over 50 categories for homes and businesses. Inthe home appliance category, for example, there are recommendations forrefrigerators, freezers, dishwashers, clothes washers, and room air conditioners.When buying a new appliance, or even a light bulb, it is important tolook for the Energy Star label because it identifies an energy efficient product. Energy Star estimates that with their help, consumers saved enoughenergy in 2006 to avoid greenhouse gas emissions equivalent to 25 millioncars and at the same time saved $14 billion on their utility bills.11 Furthermore, the Energy Star label may also mean that the manufacturer will provide the consumer with a rebate for buying the product, and that generates additional savings for the consumer.12 When an investor is consideringan appliance manufacturer as a stock investment, it would be wise to seeif the company’s appliances are Energy Star compliant since those products are likely to grow in popularity as electricity prices rise and as the
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public becomes more conscious of the importance of saving electricity asa contribution to lower greenhouse gas emissions.
EFFICIENT LIGHTINGIncandescent BulbsEfficient lighting is a very important area for capturing power savings since22 percent of all the electricity used in the United States is for lighting.13About 42 percent of lighting in the United States involves incandescentbulbs, which means that incandescent bulbs consume about 9 percent ofall electricity used in the United States.Unfortunately, the incandescent bulb is a very inefficient source oflight because about 90 percent of the electricity used by the bulb is radiatedaway as heat rather than as light. The incandescent bulb has been aroundsince Thomas Edison invented the first practical bulb back in 1879. Sincethen, the fundamental design of the incandescent bulb has not changed.An incandescent bulb creates light by passing an electrical current througha thin filament mounted inside an evacuated glass globe. The electricitycauses the filament to heat up so that it glows and produces light. Thesealed globe prevents oxygen from reaching the hot filament because thatwould destroy the filament.
Halogen BulbsThe halogen light bulb was a step forward, but it is still an incandescentbulb. In a halogen bulb, the filament is also sealed inside a globe, but theglobe is filled with a halogen gas such as iodine or bromine. This makesthe halogen bulb a little more efficient than a regular incandescent bulband therefore a little cheaper to operate. In addition, a halogen bulb lastslonger than a regular incandescent bulb. However, a major disadvantageof a halogen bulb is that it operates at a very high temperature and specialprecautions are therefore necessary to prevent a fire, such as a protectivegrille or a glass or metal housing.
Compact Fluorescent BulbsA more recent improvement in lighting is the compact fluorescent bulb,which is a twist on the long, tubular-shaped fluorescent bulbs that havebeen around for years. Fluorescent bulbs have two major advantages:longer life and significantly lower electricity consumption. Up until the
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FIGURE 10.1 Compact Fluorescent Lamp (CFL)Photo Credit: Rob Banks.
1980s, fluorescent bulbs were in the shape of long tubes. These bulbs aremainly used in commercial and industrial locations because many peopleconsider the light to be too harsh for personal or home use and because thefixtures are not particularly attractive. Over the years, however, the colorof fluorescent light has been changed to make it softer and more like thecolor of the incandescent bulb. Other improvements were the eliminationof the annoying flicker of the bulbs and their slow start.In the 1990s the compact fluorescent lamp (CFL) was introduced tothe market (see Figure 10.1). In addition to its new globular shape, manufacturers were able to improve the color of the light to make it even softerand thus more appealing for home use. They were also able to eliminate or
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reduce the problem of slow start. They were also able to reduce the size ofthe bulbs so they would fit into most existing light fixtures. Furthermore,the CFL bulb was made with either a screw or bayonet fitting so it could beused as a direct replacement for an incandescent bulb in most existing lightfixtures. As a result of the improvements, the new CFL type bulb becamefar more acceptable as a replacement for the incandescent bulb.Still, it is taking a long time for CFLs to gain wide acceptance by thegeneral public. When they were first introduced, the price of a CFL wasin the $15 to $20 range. Furthermore, the early bulbs had many of the oldfluorescent problems like flicker and harsh light. Since then, however, theprices have dropped into the $5 to $10 range and even lower at some of thebig retailers. Wal-Mart recently announced a huge campaign to get CFLsout into widespread public use. GE tripled its manufacturing capacity in2005 and then tripled it again in 2006.14The compact fluorescent bulb has two very important advantages overthe incandescent bulb. One is that it uses much less electricity. A CFL usesonly about 20 percent to 25 percent of the electricity consumed by an equivalent incandescent bulb. For example, a CFL bulb that provides about asmuch light as a regular 150-watt incandescent bulb (i.e., about 2,700 lumens) uses only 42 watts of electricity instead of 150 watts. That is a 72percent reduction in energy consumption for the same light output.The second big advantage of the compact fluorescent bulb is that it hasa life span of between 8,000 and 15,000 hours of use. That is far longer thanthe life span of a typical incandescent bulb, which is between 750 and 1,000hours. With normal usage, that gives a CFL bulb a life of about 7 to 8 yearsversus a life span of less than a year for an incandescent bulb. As a result,the total cost of ownership for a CFL is dramatically lower.There are a few disadvantages of CFL bulbs but they are not seriousenough to limit their use. Disadvantages of a CFL bulb include difficultyin operating at low temperatures, possible interference with electronic devices if it is place too close, a short warm-up period to get to full brightness, and incompatibility with some dimmer or three-way switches. Someof these disadvantages will be reduced or eliminated with further researchand development.Changing to CFLs can have a significant impact on electricity usage.According to the U.S. government’s Energy Star program, if every American home replaced just one incandescent light bulb with a CFL, Americacould save enough total energy to light more than 3 million homes for a fullyear, saving more than $600 million in annual energy costs and preventinggreenhouse gases equivalent to the emissions of 800,000 cars.15The advantages of CFL bulbs over incandescent bulbs have become soobvious, both for the consumer and for national electricity conservation,that a number of countries and other governmental jurisdictions around
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the world are banning the use of incandescent bulbs and are effectivelymandating the use of CFL bulbs. In early 2007, for example, Australia announced plans to ban incandescent bulbs by the year 2010 and replacethem with fluorescent bulbs.16 Ontario, Canada, in April 2007 announceda plan to ban inefficient light bulbs (i.e., incandescent bulbs) by 2012. Thegovernment said that banning inefficient lighting would reduce greenhouseemissions by the equivalent of removing 250,000 cars from the road.17 California is also considering such a ban. The movement to ban incandescentbulbs and move to CFL’s is likely to accelerate in coming years.The world’s three biggest light bulb manufacturers are all big playersin CFLs: General Electric (NYSE: GE), Philips Electronics (NYSE: PHG),and Sylvania through its Siemens parent (NYSE: SI). Unfortunately, thereare no smaller publicly traded companies that can be considered as stockplays on CFLs.
Light Emitting Diode (LED)The light emitting diode (LED) is another new form of lighting. An LEDinvolves applying electricity to a solid piece of semiconductor material inorder to produce light. Often the broad area of LED technology is referredto as “solid-state lighting.”LED technology was first demonstrated in the early 1900s when HenryRound of Marconi Laboratories discovered that semiconductor diodescould produce light. At that time, however, there was no practical use forthat discovery. Since then, numerous scientists have experimented withhow to make that phenomenon useful. In the late 1950s, working at TexasInstruments, two men, Dr. Robert Biard and Gary E. Pittmann, inventeda gallium arsenide phosphide semiconductor diode that glowed red whenan electrical current was applied. They received a patent for the device in1961. Unfortunately, since the red light was actually infrared, it was invisible to the human eye. The following year in 1962 Nick Holonyak Jr., ofGeneral Electric, invented the first visible red LED.18In the early days, LEDs could emit only red, yellow, or green light. Thena blue LED was developed and it became possible to create white light bycombining red, green, and blue LEDs. Later in 1993, a Japanese inventor bythe name Shuji Nakamura developed a blue indium gallium chip that wasable to emit white light from a single LED.19A light emitting diode is made of a semiconductor material, typicallyaluminum-gallium-arsenide, which has the ability to conduct an electricalcurrent. The material can be molded into different shapes and sizes, but anLED is generally no larger than about one-quarter inch in diameter, aboutthe size of the eraser on a pencil.
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The material is called a semiconductor because it is a poor conductorof electricity in its pure form. To make it a better conductor, impuritiesare added to create “holes” through which the electricity can flow. Thisprocess is called doping. When electricity then flows through the material,light is given off. The device is called a diode because it made of two layersof material that force the electricity to flow in one direction from one layerto the other.LEDs at first could produce only very low levels of light, which meantthey could be used only for things like indicator lamps in laboratoryand electronic test equipment. Later they were used in TVs, radios, telephones, and calculators. As development continued, the LEDs becamebright enough to be used in relatively low-level illumination devices liketraffic signals, exit signs, and other specialty purposes. LEDs are now finding applications in automobiles for taillights and in airplanes for interiorlighting. Since LEDs are small, to make a larger light source, it is necessaryto assemble a number of LEDs into an array.LEDs are not yet broadly used for general lighting purposes becausethey generally cannot compete with more traditional light sources like incandescent or fluorescent bulbs on the basis of either performance or cost.More research is needed to improve the performance and decrease the costof LEDs. The Department of Energy says that while recent research has increased the output of LEDs to produce as much light as 50 to 150 wattincandescent bulbs, the cost of the LED light itself is much higher. Forcomparison, the cost of an LED light in 2006 was about $50 for a 1,000 lumen bulb (about the illumination of an incandescent 75 watt bulb), whilethe cost of an incandescent bulb of the same illumination was about $1.There are, however, several big advantages to using LEDs in many applications. One big advantage is that they use much less electrical powerthan conventional incandescent bulbs. The usual measure of a bulb’s efficiency is the number of lumens (the amount of light) emitted by the bulb foreach watt of electricity used. That measure is usually quoted as the numberof lumens per watt (lpw). For comparison, the Department of Energy saysthat an incandescent bulb produces 12 to 15 lpw, whereas the newer LEDsare producing almost 50 lpw. That makes an LED three to four times moreefficient than an incandescent bulb.Another big advantage of an LED is that it lasts much longer than anincandescent bulb. While some manufacturers may make claims of as manyas 50,000 to 100,000 hours of use, there is still no industry standard definingthe actual life of an LED. However, the Department of Energy estimatesthat the practical useful life of an LED is at least 35,000 hours. That is aboutfour years of constant use. LEDs do not actually burn out but instead justbecome dimmer. The 35,000-hour lifetime estimate assumes that the bulb
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is no longer useful after it has degraded to about 70 percent of its originaloutput.An LED’s long life makes it a good candidate to use when an incandescent bulb would be difficult or expensive to replace. For example, an LEDin a traffic light will last about four years whereas an incandescent bulbwill last only a matter of months. Using an LED in a traffic light producesbig savings on the costs of replacing traffic light bulbs and reducing trafficcongestion. An LED in a traffic signal also improves safety since an LEDdoes not ever really burn out. In addition, there is a big savings in electricity consumption. Furthermore, the lower energy consumption of LEDsmakes it possible to use solar power for traffic signals in remote locations,thus saving the cost of running a power line to the signal. All these factorsjustify paying a higher price for an LED light.Another advantage of an LED is that it can often appear much brighterthan an incandescent bulb. That is because an incandescent bulb puts outlight in all directions whereas an LED focuses the light more in one direction. This tends to make an LED appear brighter overall when viewed fromone direction. This makes an LED ideal for traffic lights, focused readinglights, and other directional light applications.It is also possible to combine a number of LEDs into various size panels. For example, there are big LED screens or signs in use in Las Vegas,at the Razorback Stadium at the University of Arkansas, and in Chicago’snew Millennium Park. In addition, Samsung has introduced a 56-inch TVscreen that uses LEDs and is said to rival a plasma TV in terms of contrastand brightness.A new LED area that is generating a lot of excitement is the development of the organic LED (OLED). An OLED is an LED that is constructedon a base made of organic materials rather than on a base made of liquid crystals. This new technology will make it possible to have a televisionscreen that is as thin as a piece of heavy-weight paper. There are even TVscreens being developed using OLED technology that will roll up like aprojector screen. In other research, whole room ceilings may be turnedinto one huge overall light source.20 Applied Materials (Nasdaq: AMAT), aspecialist in working with thin film semiconductor materials, is currentlyinvolved with Philips (NYSE: PHG) in an organic LED development project.To encourage the R&D in the lighting area, the U.S. Department of Energy has a program called solid state lighting (SSL), which focuses on ensuring the development of energy-efficient solid state lighting technologies(see www.netl.doe.gov/ssl/). The goal of the program is “to ensure thatsolid state lighting reaches its full energy savings potential, significantlyreducing building energy use and costs, and contributing to our nation’senergy security.”
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The following companies are involved in the LED light industry.
r Philips Electronics NV (NYSE: PHG). Philips Electronics is currentlythe world’s largest LED manufacturer thanks to its acquisition of Lumileds (www.lumileds.com) in 2005. In June 2007, Philips extended itslead by buying Color Kinetics (formerly, Nasdaq: CLRK) for €592 million in cash. Color Kinetics was an attractive acquisition target becauseof its heavy R&D work in LED lighting and its patent and licensing portfolio.r Cree, Inc (Nasdaq: CREE). Cree produces semiconductor materialsand devices based on silicon carbide, gallium nitride and related compounds. The company focuses on the LED market and provides colored LEDs for use in gaming equipment, consumer products, and otherelectronic equipment. The majority of the company’s sales come fromits LED chips that are sold to other manufacturers to assemble intoLED packages using industry standard processes. The company alsoprovides high-power products including power switching, radio frequency and microwave devices. The company’s LED products produced 81 percent of their total revenue of $423 million in fiscal 2006.r Nexxus Lighting, Inc. (Nasdaq: NEXS). Nexxus Lighting, formerly Super Vision International, Inc., is now concentrating on the emergingmarket for advanced lighting systems and controls using LED technology. Until the strategic shift, the company derived much of its revenuefrom commercial architectural and swimming pool lighting productsand from fiber optic lighting cables. The company says that it will nowfocus on designing and manufacturing a new line of LED light bulbsto replace conventional incandescent and halogen light bulbs for commercial white light applications. The company began operation in 1993and in 2006 had revenue of $11.0 million.
Solar LightingMany buildings are designed to allow sunlight to enter the building throughwindows and skylights to help light the building and thereby reduce thenumber of lighting fixtures that are needed. However, new technology, Hybrid Solar Lighting (HSL), is providing a much more sophisticated way ofdirecting sunlight into a building.21 This technology is currently in the research stage and has yet to be commercialized.In a Hybrid Solar Lighting system, sunlight collectors are placed on theroof of a building so that visible sunlight is directed into flexible opticalcables that are strung into the building and connected to special light fixtures. The light fixtures can contain a regular electric bulb as well that canautomatically adjust its output up or down depending on how much solar
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light is being delivered, thus maintaining a constant amount of overall lightfrom the fixture. The Hybrid Solar Lighting system can provide substantialelectricity savings by substituting sunlight for electric bulbs.In addition to providing light, the Hybrid Solar Lighting system can alsodirect infrared light from the sun into a concentrating thermo-photovoltaiccell that converts infrared radiation directly into electricity. The electricitycan then be fed into the building’s electricity system to be used whereverit is needed.There is a second, completely different application for Hybrid SolarLighting Systems that involves the operation of a photobioreactor, the purpose of which is to absorb CO2 being emitted from a power plant or otherindustrial plant. This will be covered in the Chapter 16, which discussescleaner coal.
EFFICIENT BUILDINGS—GREEN BUILDINGSImproving building efficiency is another key solution to reducing the needfor electricity and reducing greenhouse gas emissions. According to theU.S. Environmental Protection Agency (EPA), commercial and industrialbuildings in the United States account for a hefty 39 percent of total primary energy use, 70 percent of total electricity consumption, and 12 percent of total water consumption.22 The term green building is now usedto refer to the whole area of reducing the environmental footprint of buildings. The EPA defines “green building” as “the practice of creating healthierand more resource-efficient models of construction, renovation, operation,maintenance, and demolition.”23 Green building refers not only to the efficient use of electricity, but also to the efficient use of heating/cooling, natural gas, and water. The term also includes measures to reduce exposureof humans in buildings to toxic materials and fumes.The green building movement officially began with the founding ofthe U.S. Green Building Council in 1993. In 2000, the Council publisheda set of building standards, Leadership in Energy and Environmental Design (LEED). The standards were designed so that architects and builderswould have a standardized set of tools to use for designing new buildings and renovating existing buildings. The standards have been widely accepted and a number of cities have incorporated them into their buildingcodes for new and renovated buildings.Buildings that meet the LEED standards are designated as LEED certified. The standards are based on a point system and buildings fall into oneof four categories: certified, silver, gold, or platinum. Since the programstarted, the number of LEED-certified buildings has gone up every year.
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There are LEED projects in all 50 states and 24 foreign countries. In 2007,the value of all “green building” construction, including the buildings thatmeet LEED standards, is expected to exceed $12 billion, according to theU.S. Green Building Council.24The main goal of the fast-growing green-building movement is toincrease the efficiency of electricity usage for lighting and heating/ventilating/air conditioning (HVAC) in new and existing buildings. Building owners are well aware of the rising cost of electricity and are eager tocut their electricity and HVAC expenses.Awareness is growing about the importance of building efficiency asa solution to power efficiency and climate change. Former President BillClinton raised the visibility of building efficiency with his “Clinton ClimateInitiative” (see www.clintonfoundation.org). Part of the Initiative is towork with the C40 Large Cities Climate Leadership Group (www.c40cities.org) in finding ways to help the world’s largest cities reduce greenhousegas emissions. An important part of the Clinton Climate Initiative is toform a partnership of large building efficiency companies and banks tofinance projects with the goal of carrying out major building retrofits inthe major cities of the world to boost HVAC and electrical efficiency andreduce a city’s overall power needs and greenhouse gas emissions.
COMPANIES INVOLVED IN BUILDINGEFFICIENCYThe following companies are involved in building efficiency.
r Johnson Controls, Inc. (NYSE: JCI)—Johnson Controls is the largestplayer in the area of building efficiency. Johnson Controls can be considered the world’s first building efficiency company since Professor Warren Johnson started the company in 1885 to commercializehis invention, the room thermostat. Johnson Controls has a buildingefficiency division that will account for about 38 percent of its revenuein fiscal 2007 (fiscal 2006 revenues were $32 billion). Johnson Controls’ other two segments are automotive interiors and the automotivebattery market (including hybrid batteries).Johnson Controls acquired York International Corp. in December2005 for $3.1 billion to build its lead in the HVAC and building controland management space. Johnson Controls, with its building efficiencyprograms, can reduce energy consumption for building customers by10 percent to 50 percent depending mainly on the extent of previous
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improvements. JCI has saved customers over $32.7 billion in energycost savings from 1990 to 2005, according to company information.At an equity analyst meeting in June 2007, Johnson Controlsstressed the following strategic goals: (1) maintain and extend its leadin the complex building market (i.e., skyscrapers, hospitals, arenas,etc; (2) focus on developing products for mid-market buildings (e.g.,buildings of less than 10 stories); (3) roll out its “Metasys” buildingmanagement software which provides building management with theability to integrate and optimize various building systems includingelectricity usage, HVAC, fire monitoring, and video security surveillance; and (4) extend its lead in emerging markets such as China(where Johnson Controls already has 3,600 employees).r Lime Energy (OTCBB: LMEC)—Lime Energy (www.lime-energy.com), with 2006 sales of $8.1 million, is an emerging technology, engineering and installation company that focuses on improving lightingand HVAC (heating, ventilating, air conditioning) efficiency for existing commercial, industrial and office buildings. Energy efficient lighting upgrades by Lime typically involve retrofitting older-model lightfixtures with state-of-the-art lamps, fixtures, ballasts and lighting controls, that provide customers with substantial savings in electricity,maintenance, and cooling costs. Typical retrofit projects improve lighting levels by 10–50 percent while reducing energy costs by up to 70 percent resulting in project paybacks of 1–3 years depending on hours ofuse, location, utility rates and rebates, according to Lime. Customerscan also claim various federal tax breaks and cash rebates in statessuch as California, which further reduce the payback period. Lime Energy also has proprietary HVAC control equipment called the “eMac,”which can substantially reduce heating and cooling costs.As a sample case study, Lime completed an energy efficient lighting upgrade for the Associated Food Stores’ Distribution Center in FarrWest, Utah.25 The project reduced the Center’s electricity consumptionby 4.7 million kilowatt-hours and saved the company about $260,000per year in electricity costs, according to Lime. The payback periodfor the project was less than 1.2 years. The upgrade project reducedelectricity consumption for lighting by well over 50 percent and at thes