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September 19, 2009

Electricity Isn’t an Energy Source

Unless you're tapping lightning bolts, electricity isn't a source of energy – it's a way of transporting energy from where it's generated to where it's used. So, when we have to decide whether it makes sense to use electricity for an application like lighting, transportation, home heating, or something else, we have to know where that electricity is coming from, what fuel is used to make the electricity, and what it's going to cost to use electrically-transported energy versus an on-site energy source like oil.

For lighting we've decided not to use kerosene and candles (other than for camping and romance). For transportation we did have lots of electric trolleys but they got replaced by diesel busses and gasoline cars. Oil was cheap and sticking to wired routes was limiting. Now importing oil is an economic and strategic risk; battery technology is better than ever before; electronic controls are cheap; CO2 emissions are a concern; and electricity is close to making a comeback in transportation.

What fuel your electric car is actually running on depends on where the electricity comes from that you use to charge your batteries. Maybe your electric vehicle is running on coal –very likely in the US where coal is the biggest source of electrically-transported energy. Here in Vermont, if you charge up off-peak, your car is some combination of hydro-powered from Hydro Quebec and nuclear from Vermont Yankee. If you charged up on-peak , your car is probably running on electricity generated at least partly from natural gas.

It makes economic and environmental sense to use electricity to charge your electric car even if the electricity is generated by burning oil. It is so much more efficient to burn oil in a power plant than in a car that, despite losses in transmission and storage, less oil gets burned overall to move you a mile on your way. Moreover, pollutants can better be captured at a power plant than from your tailpipe.

By the same logic, it makes sense to consider electrically transported energy for home heating here in Vermont where 70% of our homes are heated with oil or propane. North of us, as you drive to Montreal in the winter, you don't see smoke coming from houses. Our neighbors are warming themselves with very cheap (for them) hydro power. This hydro power from Canada is also available to us (albeit at a somewhat higher price). We can use it cleanly and efficiently to warm our homes – so long as we don't use it during peak times because, at peak times, there isn't enough transmission capacity to bring us any more than we already buy.

Residential electric rates in Vermont are around $.16/kwh. This is roughly equivalent to $5/gallon oil for home heating. So right now it is cheaper to heat with oil than with electricity. However, if there were an OFF PEAK electric rate of $.07/kwh and if electricity were only used for heating off peak, than it would be just as cheap to heat with electrically-delivered energy as with oil. In fact, at that rate and current propane prices, the average Vermont household could save $750/year by displacing 75% of its propane consumption with electricity. It's probably a good assumption that it will soon be much cheaper to heat with off peak electricity than heating oil as the world's economy and thirst for oil recover together.

Strategically, we are much better off buying Canadian hydropower than oil from the Middle East and other volatile and often hostile places. Environmentally, we'd generate both less traditional pollutants and vastly reduce our carbon footprint. The good news is that there is about to be a lot more Canadian hydro power available since Hydro Quebec has begun a vast expansion program. The bad news, for the moment, is that we can only take more electricity from there off peak because of transmission constraints. Energy from Vermont Yankee is also strategically sound and is currently cheaper than hydro; it certainly doesn't generate sulfur dioxide and CO2. But it's also unlikely that we can get more power from Yankee than we already are.

So what are the obstacles to greener, cheaper, electrically delivered hydro power for our cars and homes?

  1. We need off peak rates with large discounts (but not larger than the underlying economics justify. This isn't a subsidy).
  2. We need to add electric STORAGE heating capability to our current fossil-fueled heating systems (retaining the fossil-fuel furnace for power outages and periods of prolonged peak demand).
  3. We need cheap electric cars.
  4. We need to rethink our mindset that electric heat is bad (formed when oil was cheap and we couldn't assure that we wouldn't draw electricity for heating during peaks).

The smart grid that Vermont utilities are building (with or without stimulus money) can deliver dynamic rates that assure electricity is only used off peak for heat – essentially that we use nuclear or hydro power for heating. That's going to happen.

Electric storage heat added to a conventional oil or propane furnace system costs between $3000 and $4000 installed for the average home. The payback when switching from propane (assuming off peak rates) is already less than five years – a good investment. My prediction is that the economics will soon be favorable for replacing oil as well.

Cheap electric cars may take longer than cheap electric storage heat. Batteries are still big, heavy, and expensive. My prediction is that we'll displace oil in heating faster than in transportation.

The biggest obstacle may be an anti-electricity bias which equates electrical use with waste regardless of the source of the electricity and whatever else it is displacing. In fact, more use of electrically-transported energy may be just what the economist, the strategist, and the environmentalist ordered.


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