* The Economic Imperative of Energy Efficiency Exploring the Exergy Link to Economic Productivity * John A. “Skip” Laitner In Conversation with the Business Council for Sustainable Development Lisbon, Portugal November 23, 2017 * In the spirit and tradition of Nobel Laureate and former Caltech physicist Richard Feynman, in his 1959 visionary talk, “There’s Plenty of Room at the Bottom.” See, http://www.its.caltech.edu/~feynman/plenty.html.

“We shape the world by the questions we ask” Physicist John Wheeler

Five Questions to Loosen Up Our Thinking… How much CO2 have we dumped globally since 1750? What is $3.6 trillion in lost energy savings? What is the automobile’s social rate of speed? What is the Bekenstein Bound? What is the record fuel economy for a research vehicle? The weight of ~13 trillion refrigerators. My estimate of U.S. energy that could have saved since the 1992 Rio Summit. And for Portugal? About 5-7 MPH. Perhaps even in Portugal. . . A 1972 calculation that suggests we may be able to store 1055 times more data on our storage devices than we now do. About 12,665 miles per gallon.

The Immediate Conclusion? The inefficient use of energy and other resources creates a fiscal burden that weakens our social and our economic well-being, even as it also creates a very big climate problem.

At the Same Time We Should Note: If we create the policies, programs and new business (regulatory) models that will greatly increase—at scale and in China time—the productive use of energy and other resources, we are more likely to ensure a robust and sustainable economy, even as we approach near-zero carbon emissions by 2050.

The good news? Portugal is still more energy-efficient than most nations! The bad news? Portugal’s energy productivity has been declining somewhat rather than improving!

Growth in Real GDP Per Person Over a Longer Period 1980-2015 and through 2030 Source: IEA Data and OECD Economic Outlook Database, November 2017.

Exploring Portugal’s Real Per Capita GDP Trends 1980-2016 What might this chart suggest for Portugal’s long-term social and economic well-being? More critically, how might the inefficient use of resources account for a lagging economic robustness?

Real total gross fixed capital formation (as Percent of GDP)

Low-Energy Future Based Upon What might we imagine for Portugal? Energy Efficiency Opportunities Are Larger than Generally Believed—Evidence from the U.S. Typical Pre-1980 Forecasts AEO 2005 Projection U.S. Primary Energy Use in Quads AEO 2017 Projection Enabled by ICT, new materials, new technologies, and innovative behaviors Catalyzed by Smart Policies, New Business Models, and Productive Investments Actual Historical Consumption Low-Energy Future Based Upon 1980 DOE Analysis and ACEEE 2012 Sources: DOE 1980 Policy Analysis, AEO 2005, AEO 2017, ACEEE 2012, and Laitner 2017. What might we imagine for Portugal?

And finally, this thing called “Exergy”

We Begin with Two Views on Energy Typical: Energy as commodities that are sold on the market (e.g., barrels of oil or kilowatt-hours of electricity) – tracked by the various governmental agencies. More Vital: Energy as the capacity to do useful work, necessary to transform matter into the requisite goods and services for a local economy, and to distribute or make them available as required. Result: To ensure the appropriate development of innovation that ensures sustainable economic activity, the emphasis needs to be on energy as work.

Exploring Energy as Work Energy = Exergy + Anergy = Constant Source: Kümmel (2011) Work = Exergy * Efficiency Source: Ayres and Warr (2009), and Laitner (2015) Waste = Exergy * (1-Efficiency) Source: By definition

Energy = Exergy + Anergy = Constant Useless Anergy High Quality Exergy Drawn neither to scale nor shape

Energy = Exergy + Anergy = Constant Useless Anergy High Quality Exergy As high quality exergy is used up, there is more waste (anergy), but the total energy remains constant. . .

Commodities” Reported Comparing reported energy, applied exergy, and useful work Total “Energy Commodities” Reported Total Applied Exergy Useful Work Completed Where the difference between the useful work that is completed, and the total exergy that is consumed, amounts to waste. . .

The U.S. Today The 1970s

What might this look like for Portugal? The U.S. Tomorrow? What might this look like for Portugal? The U.S. Today The 1970s

Conventional assumptions about the efficiency potential And for Portugal? Exploring the full energy efficiency potential: ~250 billion barrels of oil equivalent for the United States through the year 2050. Sufficient to reduce total U.S. energy consumption by half! MORE BY WASTE THAN INGENUITY? With the prospect for a more robust, a more resilient and a more sustainable economy. . . . . . an anemic 16% energy (in)efficiency Source: Long-Term Energy Efficiency Potential. http://www.aceee.org/press/2012/01/aceee-report-us-better-thinking-big-

Turning Existing Reality into New Opportunity “Individuals have a natural tendency to choose from an impoverished option bag. Cognitive research in problem solving shows that individuals usually generate only about 30 percent of the total number of potential options on simple problems, and that, on average, individuals miss about 70 percent to 80 percent of the potential high-quality alternatives (emphasis in the original).” Dr. Jeffrey S. Luke Catalytic Leadership: Strategies for an Interconnected World, 1998

Perhaps Our Ultimate Economic and Energy Efficiency Resource? Recalling the comment of early Twentieth Century UK essayist, Lionel Strachey, who remarked: “[Too many people] guess because they are in too great a hurry to think.” Jerry Hirschberg, founder and former CEO of Nissan Design, who noted that: “Creativity is not an escape from disciplined thinking. It is an escape with disciplined thinking." And Henry Ford once said, “Thinking is the hardest work there is which is the probable reason why so few engage in it.”

A Final Thought on a New Reality?? The complete economic recovery and robust development of the World’s long-term prosperity will not be possible without large increases in purposeful investment and greater levels of resource and energy efficiency – enabling the significant reduction in the full costs of energy services, and motivated by informed attitudes and more productive behaviors. It can be done. The opportunities are there. But they require imagination, effort, and new business models together with new ways of managing resources.

The difficulty lies not with the new ideas, but in escaping the old ones. . . John Maynard Keynes

Selected References Ayres, Robert U. and Benjamin Warr. 2009. The Economic Growth Engine: How Energy and Work Drive Material Prosperity. Northampton, MA: Edward Elgar Publishing, Inc. International Energy Agency. 2014. Energy Efficiency Market Report. Paris, France: OECD/IEA. Kümmel, Reiner. 2011. The Second Law of Economics: Energy, Entropy, and the Origins of Wealth. New York, NY: Springer. Laitner, John A. “Skip.” 2015. “Linking Energy Efficiency to Economic Productivity: Recommendations for Improving the Robustness of the U.S. Economy.” Wiley’s Energy Environ 2015. doi: 10.1002/wene.135. Laitner, John A. “Skip”, Steven Nadel, R. Neal Elliott, Harvey Sachs and Siddiq Khan. 2012. Long-Term Energy Efficiency Potential: What the Evidence Suggests. http://www.aceee.org/press/2012/01/aceee-report-us-better-thinking-big-

Contact Information John A. “Skip” Laitner (@EconSkip) Principal Economist and Consultant Economic and Human Dimensions Research Associates Senior Research Economist Russian Presidential Academy of National Economy and Public Administration (RANEPA) Tucson, Arizona 85750 c: (571) 332-9434 Email: EconSkip@gmail.com