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Energy conservation attacks the energy problem by reducing energy demand instead of increasing energy supply. With 4 percent of the world’s population, but 25 percent of the world’s energy consumption, the United States needs to reduce its energy demand. Europe has a larger gross national product with a similar population and standard of living, but with half of the energy consumption per capita. Reducing U.S. energy consumption by half is a realistic goal. But government leadership is needed; the free market will not get it done, particularly in the short term.

Total U.S. energy consumption in 2006 was 99.52 quads (1 quad equals 1015 Btuh).3 Of the 73.5 quads of non-transportation energy, electric end use accounted for 12.48 quads, while, at 31.5-percent electrical efficiency, electrical losses accounted for 27.2 quads. Reducing non-transportation energy consumption by half would save 36.7 quads.

Energy conservation in buildings has been around for years, but the fact Europe’s energy consumption per capita is half of the United States’ shows how much potential there is. To become truly energy-efficient, the United States needs to implement economic incentives.

A massive energy-conservation program would slow the need for new energy supplies. For example, during the early 1980s, conservation reduced electricity demand to the point new power plants were delayed for several years.

To be effective, an energy-conservation program would have to be implemented on a national scale, much like the interstate-highway program was during the 1950s and ’60s. A massive energy-conservation program could be phased in quickly because of the availability of proven technology and production. It would provide jobs and be cost-effective, as the initial cost of retrofitting would be paid for with energy savings.

Conservation is the lowest-cost energy solution.

SOLAR ENERGY
Despite its popularity, solar energy is not a practical energy solution. The question of its viability as a national energy policy is important. For an in-depth discussion of the economics of solar energy, see the expanded edition of this article. Following is a summary of the main points:

• A solar-thermal domestic-hot-water-heating system is the most economical solar system, but in a typical location, such as New Haven, Conn., it saves only 1.4 gal. of oil per square foot per year; in New Mexico, which has the greatest amount of solar energy in the United States, it saves only 2.2 gal. of oil per square foot per year. Space heating requires substantially more energy than domestic-hot-water heating; however, space heating generally is required only four months out of the year, so the amount of usable solar energy available for space heating equates to only 0.47 gal. of oil per square foot per year in Connecticut. Photovoltaic (PV) solar provides usable electricity throughout the year; however, current commercial PV-solar efficiencies are 10 to 15 percent, compared with 60 percent for thermal solar. (Efficiency is the amount of usable solar energy compared with the amount that hits the earth.)

PV solar’s annual utilization rate is 14.5 percent (1,252 equivalent full-load hours). With an installed cost of $9,000 per kilowatt and 10-percent, 30-year financing, the break-even cash-flow electricity cost is 62 cents per kilowatt-hour. That is the minimum cost utilities will need to be reimbursed by rate payers.

There are additional questions about service life, annual maintenance, backup power, and the need for new transmission lines and a “smart grid.” Further, PV solar has electrical-efficiency losses of 25 percent.

• PV solar has theoretical limits that cannot be improved upon. For example, the most popular solar cell is a single-crystal silicon cell with an average commercial efficiency of 15 percent, a top commercial efficiency of 18 percent, a laboratory-best efficiency of 25 percent, and a maximum theoretical efficiency of 31 percent.4

• The material requirements of PV solar—solar cells, module housing, balance of system (wiring, inverter, switchgear)—are substantial. It is unlikely materials to supply even 25 percent of the United States’ generating capacity or 3.6 percent (25-percent generating capacity times 14.5-percent annual utilization rate) of the country’s electricity consumption by 2050 can be obtained. As solar production increases, material demand increases, creating shortages and increasing the first cost of systems.

• PV solar is energy-intensive, with an estimated average payback of four years. Thus, as production costs increase, so will first costs.

It is unlikely solar energy will ever be more cost-effective than it is today.

The high solar-energy costs arising from the new economic-stimulus bill’s mandate that utilities provide 10 percent of their electricity from renewable sources by 2012 and 25 percent of it by 2025 will be passed on to rate payers.

WIND POWER
It is estimated that 6 percent of the contiguous United States could satisfy more than 11/2 times the country’s current electricity consumption with wind energy. The average wind-energy location has a utilization rate—total annual electrical output divided by peak kilowatts—of 30 percent, while the best wind-energy locations (Texas and the heartland) have utilization rates around 40 percent.5 The average installed cost in 2008 was $1,920 per kilowatt, for a break-even cash flow of 7.4 cents per kilowatt-hour.

In addition to capital costs, wind turbines have annual operating costs, including land-lease costs. Further, they are complex machines requiring regular maintenance over their 30-year lives.

Wind energy is the most cost-effective renewable-energy source because its installed costs are near those of standard electricity generation, and its utilization rate is much better than solar’s. However, it still requires substantial tax credits or government mandates.

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