Me and Energy

You can hear me read this while watching my horses in the pasture here. It doesn't really sound like me. I think the microphone on my camera is bad.

Much as I would like to think it isn’t so, the cliché that the acorn doesn’t fall far from the tree is probably true. Like my dad, I started my career in energy as a petroleum engineer. He kicked off his career in Romania in the 1930s. Back then Romania was one of the world’s leading oil producers and one of its leading economies. Dad got his degree in petroleum engineering from the University of Bucharest and then took a job with Shell Oil in Ploesti, Romania. Fortunately, his job was considered essential to the Romanian war effort in World War Two because the battalion he would have joined fought the Russians in St. Petersburg and was decimated. My father liked to tell stories of the Allied bombers bombing the refineries where he worked. He and his girlfriend would hop on his motorcycle and ride off into the hills to watch the resulting fireworks. It wasn’t all good times though; they often got short notice of the impending air strikes and found themselves running for their lives.

He survived but the postwar peace in Romania was tense. Fortunately his family was well-connected in Romanian politics, and after the war his great uncle, Peter Groza, was appointed premier of Romania’s coalition government. Uncle Peter saw the writing on the wall—communist Russia would soon completely dominate Romania—and he managed to get my father a job in the Romanian legation in the U.S. Soon after my mom and dad arrived here, they defected, becoming political refugees. Out of work and foreign, Dad struggled to find a job. He wound up working again for Shell Oil developing oil fields in the jungles of Venezuela, leaving my mom in New York City pregnant with my brother. Eventually Dad returned to the U.S., where he attended graduate school and got a job. Many years later, I graduated from Duke University’s engineering school and took a job working for Shell in New Orleans as an oil-field engineer. Thus began my career in energy.

Since then I have worked in almost all aspects of the energy business, from oil production to energy trading to energy efficiency. I chose the energy industry because I thought my work would offer social value. And working for Shell was actually pretty fun. I lived in New Orleans, had an expense account and a lot of responsibility, and learned from one of the masters of the industry. I saw the oil industry in its heyday booming with the run-up in oil prices in the late seventies and early eighties. High oil prices meant more drilling and more business opportunities for companies like Halliburton that worked as subcontractors to companies like Shell and Exxon. With control of multimillion dollar budgets for oil platforms and gas plants, my Shell buddies and I would get wined and dined at New Orleans’ best restaurants by these companies eager for our business. It was rare when we paid for our own lunch and not so rare when one of us would go back to the office after lunch tipsy.

Much to my chagrin, after three years in New Orleans, I was transferred to Bakersfield, California. Back then, Bakersfield was an oil and agricultural town with not much else going on. I lasted there about five months before I quit my job to attend Harvard Business School. It was in Bakersfield that I first faced the griminess of the oil business. It was not at all like what I had seen in New Orleans where much of our work was in the Gulf of Mexico and Shell maintained a high level of safety and operations. In Bakersfield, Shell had just acquired an oil field from another company that hadn’t been run to nearly the same standards. There were horsehead oil pumpers and steam generators scattered everywhere in this desert environment at the southern end of the San Joaquin Valley where the Tule fog periodically descended, making everything look even worse. Oil was spilled on the ground, old equipment lay randomly on the side of the road, and the natural environment was depleted and barren.

I am sensitive about our environment. Almost my entire life I have owned and ridden horses. Whether I lived in the city or the suburbs, I have always had a reason on a nearly daily basis to escape from the concrete jungle into the countryside of America where my horses lived. This maintained a connection for me with nature and the environment that the typical American lifestyle has lost. Today over 90 percent of American life is lived indoors which means more buildings and less countryside. The places where I can ride are rapidly disappearing under the spread of suburbia that’s fueled by relatively cheap gasoline and big comfortable cars.

With a growing concern for energy’s impact on the environment, I moved my career focus away from energy production to energy efficiency where I have focused for the past seventeen years. That choice relegated me for a long while to “Birkenstock” status in the realm of liberal do-gooder hippies and left-wing Democrats. That characterization, which has changed, was unfortunate because the truth of the matter is that energy efficiency is the Occam’s razor of the global energy and environmental crisis that is sure to hit our planet as its population continues an upward spiral and developing countries accelerate their quest to match the standard of living in the U.S. and Europe. (Remember Occam’s razor is the principle that the simplest explanation is probably the best.)

The use of energy in our country has grown much more rapidly than the energy efficiency of the equipment which uses it. Had it been the reverse right now we could be enjoying our travel, big air-conditioned houses, super-malls, and mega-office buildings worry free. But our designs focused on size and style rather than efficiency. Look at the car industry. In the its early days, the big players used what was known as “the annual style change,” a modification in the look or style of the car to keep new competitors from getting a toehold in the business. Before introduction of the annual style change, starting a car manufacturing business was relatively easy and did not require a large amount of capital. However, the practice of annual style changes meant changing tools and dies before they were worn out. Expenditures on large-scale advertising were needed to alert consumers to the new designs each year. The established larger firms could spread the cost of these changes over more vehicles, thus lowering their unit costs. Dealer networks with specialized maintenance abilities and parts inventories had to be cultivated. Up until then parts had been standardized and interchangeable. By the early 1960s, the overall cost of annual style changes was estimated to be 25 percent of the cost of a new car. Unfortunately, annual style changes were just that. They didn’t include improvements to fuel efficiency, safety or environmental protection.

That’s just one example of how our technology to use energy hasn’t kept pace with how we use it. As a result, our consumption of energy has exceeded our capacity or will to produce it and our nation is gripped by volatile energy prices, environmental strife, and the associated political and economic ramifications. We assume every oil supply disruption and price shock is a fluke and that things will return eventually to normal. But the truth is that we don’t really know what normal is because we have never been in this position before. Instead of watching our oil supply swirl away like water draining out of a tub, why don’t we develop a strategy to use oil only for what we absolutely need it for and alternative fuels and efficient technologies for everything else? There is no way we have even come close to exploiting the range of energy efficient technologies and ingenuity that is possible. After all, this is America. We can do anything when we set our minds to it.

Energy efficiency doesn’t just save energy. Fossil fuels contribute to global warming, and climate change causes death, disease, floods, droughts, ecological harm, rising seas, intense storms, and increased heat waves. Using energy more efficiently also saves the environment. Maybe it’s time to set our hearts right on energy use and choose energy efficiency. It’s simply the best solution.

Energy Efficiency is a Strategy not a Virtue

According to Chevron’s CEO, David O’Reilly, energy efficiency is the cheapest form of new energy we currently have.( “Chevron’s CEO: The Price of Oil,” Fortune, November 28, 2007). The Prius is a great example of the types of energy efficiency options that are available to us and the people who are trying to bring them to us. But you might not think about the Prius when you think about energy efficiency because there is a lot of confusion about what energy efficiency is. Most people have that Dick Cheney view of it as energy conservation, usually typified by the image of Jimmy Carter shivering in a cardigan back in the late 1970s. Energy conservation is any behavior that results in the use of less energy—turning off the lights, turning down the heat, driving less, walking more, eating less—all of them positive activities; but if you don’t want to do them, they are seen as being uncomfortable. Energy conservation is widely viewed as being a step backward in our technological and societal progress, and that’s why proponents work hard to differentiate energy conservation from energy efficiency. I personally advocate both but am also very disinclined to do anything that creates personal discomfort.

It is not the goal of energy efficiency to cause discomfort. If anything, energy efficiency creates a higher degree of comfort and well-being because it requires more productivity from the energy we use via smarter technologies. Above all else, energy efficiency represents progress—technological, social, environmental, and cultural progress. And progress is what America is all about. The introduction and rapid adoption of energy in America, particularly electricity, was fueled by society’s perception that using it was a step forward into a future in which we controlled nature and disease and our children lived happily ever after. In the twentieth century, energy use drove the American dream in the form of cars, the modernization of the home, and information, communication, and entertainment technology. In the twenty-first century, energy efficiency will be fundamental to continuing that American dream in a cleaner and more secure national environment.

In a nutshell, energy efficiency is the use of technology that requires less energy to perform the same function. A better way to think of it is that energy conservation is a virtue and energy efficiency is a strategy. In my experience, it is far easier to be strategic than virtuous, which is why I am an advocate of energy efficiency. Energy efficiency means doing more, and often better, with less energy—the opposite of simply doing less or worse or without. To me, the iPod is the perfect example of this. If you consider the history of the ability to listen to music whenever you wanted in the absence of a live performance, it started with Edison’s invention of the phonograph. Back in the day, this music-playing device, known as a gramophone or Victrola, was a big wooden box with a hand crank. Here is a photograph of one I downloaded from Wikipedia (http://en.wikipedia.org/wiki/Phonograph):

Here is another photograph of a phonograph, from Wikipedia:

This is actually a phonograph cabinet built in 1912 out of Portland cement. The speaker, or amplifying horn, is behind the human figure.

The music listening device evolved to (also from Wikipedia), a portable record player in the 1930s. It played records that were flat round disks the player rotated on a table. The hand crank used a mechanical device to store energy so that the player did not need to be connected to an electrical source. A record could hold several songs on it, depending on the length of the songs. Music lovers accumulated large libraries of records, which had to be well-protected to maintain the quality of the sound. Over time, technology continued to evolve and people grew to like listening to their personal selection of music wherever they went, whether in their car or at the beach or in the gym. With that desire came the invention of the eight-track tape player and tape, the popularity of which grew rapidly when in 1965 Ford introduced dealer-installed eight-track players for their cars, and RCA Victor introduced fifty Stereo-8 Cartridges of prerecorded music from their label of artists. The players and tapes became very popular and home players and portable players—“boom boxes”—were created to enable the use of the tapes wherever people went. However, with the introduction of the compact cassette in the early 1970s, the eight-track quickly lost ground, because its size compared to the compact cassette made it unwieldy. The compact cassette required a cassette player. So most of us threw out our eight-tracks and players and bought cassettes and cassette players.

Then in 1982 the compact disk was introduced and once again how we listened to music on the go was transformed. Standard CDs have a diameter of 120mm and can hold up to eighty minutes of audio. The CD and its extensions have been extremely successful: in 2004, worldwide sales of CD audio, CD-ROM, and CD-R reached about thirty billion discs. By 2007, about 200 billion CDs had been sold worldwide.( http://en.wikipedia.org/wiki/Compact_Disc) Portable CD players were introduced in the 1980s and took off in the 1990s when the technology improved. With the choice of cassette tapes and CDs, music listeners had the option of purchasing and maintaining two media for their libraries. Many of us maintained both because each had its advantages and disadvantages. Part of the choice for many depended on what kind of player you had in your car.

In the late 1990s, the digital audio player device was introduced, which most of us think of as the MP3 player. I have owned several of these over the years. The very first ones offered sixteen MB of storage, which is meager. But over the last few years, several companies have competed to improve the capabilities. Today, an Apple iPod the size of a very large postage stamp is the most popular MP3 in history, not that there is much MP3 history. The Nano sold its first million units in only seventeen days. Today’s Nano can hold up to eight GB of digital media, including music and video like movies and television shows you can rent or download from Apple’s iTunes Web site. Eight GB can hold up to 2,000 songs or 7,000 photos or eight hours of videos. They are powered by small lithium ion batteries that are rechargeable. MP3 player batteries typically need three to five watts to charge, which means it costs between about thirty-six cents and sixty cents every time you charge your iPod for an hour. If you are like me and leave it plugged in endlessly, it costs a lot more.

Here is an iPod with a hand cranked charger:

http://blog.makezine.com/archive/2005/03/hand_powered_ip.html

The iPod, as one example, represents the type of technological design and engineering of which our society is capable when we are fueled with the desire to make something happen. This ability to carry the performances of all of Beethoven’s greatest symphonies in one’s pocket to listen to whenever one wanted was beyond belief 100 years ago when people had trouble envisioning the need for telephones.

Take the Energy Efficiency Decisions Out of the Hands of Real Estate Developers

This is my next topic. Stay tuned.

When Is A Building Considered Energy Efficient

Here is a good article. As far as I am concerned a building should not be certified as green or efficient until its performance is verified in actual use.

Lots of Buildings, Lots of Energy

In 1979, the Department of Energy (DOE) estimated that there were 3.8 million commercial buildings in the United States; twenty-five years later there were nearly five million commercial buildings larger than 1,000 square feet in size and more than seventy-one billion square feet of commercial floor space in the U.S., or about 2,600 square miles of commercial floor space. If you laid out all that commercial floor space, it would cover about 1 percent of the state of Texas, which happens to be larger than any nation in Europe except Russia.

Most of those buildings are used for education, retailing, offices, and storage. Altogether, those activities use about 60 percent of the total commercial floor space and 51 percent of buildings in the U.S. The construction business that builds these buildings itself generates more than $531 billion in annual revenues and employs more than 1.7 million workers (2002), with an annual payroll of nearly $62 billion. More than 1.8 million residential houses and buildings (2003) and approximately 170,000 commercial buildings are built and about 44,000 commercial buildings are demolished annually. Almost seventy-three million Americans, including 68.5 million children, spend their days in approximately 117,000 public and private primary and secondary schools (2000). While our kids are in school, the rest of us are in some other structure—house, office, store, or hospital, as on average, according to an EPA study on indoor air quality, Americans spend 90 percent or more of their time indoors. Buildings and homes account for 40 percent of total U.S. energy consumption and 70 percent of total U.S. electricity consumption. Consumption is pretty evenly split between homes and commercial buildings. All that energy consumption means that buildings in the United States contribute 38 percent of the nation’s total carbon dioxide emissions.

Worldwide, 30 to 40 percent of all primary energy is used in buildings that in turn produce approximately 30 percent of the greenhouse gas emissions. That won’t change much over the next twenty years without extensive retrofitting of existing building stock, because, due to their long life cycle, buildings that will be operating in the decade of 2030 have in the majority already been built. Energy use in buildings is strongly related to the building’s construction, its purpose, and the climate where it is located. There are five phases of energy use in a building’s life cycle: (1) the manufacturing of the products and components that make up the building; (2) the transportation of these products and components to the construction site; (3) the construction itself; (4) the ongoing operation of the building after it is built; and (5) the final demolition and recycling of the building.

The operating phase is the most energy intensive, with the use of heating, cooling, and lighting. But the other phases aren’t insignificant. For example, buildings are large users of materials that have a high content of embodied energy. Embodied energy is the energy that is consumed when building materials and components are produced. This includes the mining and manufacturing of materials and equipment, especially materials with high embodied energy content such as aluminum, cement and steel, the production of which usually depends on the use of fossil fuels, resulting in CO2 emissions. Cement plants alone account for 5 percent of global emissions of carbon dioxide. Each year, three billion tons, more or less, of raw materials—40 to 50 percent of the total flow in the global economy—are used in the manufacturing of building products and components worldwide.

Housing accounts for the major part of energy consumed in buildings; in developing countries the share can be over 90 percent. In the low-income rural areas of Africa, India, and China the main energy source for more than 70 percent of the population is wood, animal dung, and crop waste; and kerosene and paraffin are still widely used for lighting. Surprisingly, even today, around 2.4 billion people depend on wood, agricultural residues, and dung for cooking and heating; that number is expected to increase to 2.6 billion by 2030. According to a forecast presented by the IEA (2002), in 2030 biomass use will still represent over half of residential energy consumption in developing countries. The use of biomass does not necessarily contribute to climate change as biofuels are renewable unless harvested in an unsustainable way, but it often causes serious indoor pollution.

It is believed that building construction costs typically increase by 3 to 5 percent due to the introduction of energy efficient solutions. The reduction of energy use in one system can affect the energy use in another system. For instance, lighting savings can lead to significant reductions in the energy used for cooling and ventilation systems even in countries like Sweden, where typical modern buildings require cooling even at an outdoor temperature of -10°C. Commercial buildings enjoy a net Heating Ventilation and Air Conditioning (HVAC) benefit from lighting savings because of the considerable internal heat generated by the lighting. A rule of thumb is that about one watt of air cooling energy savings result from every three watts of lighting energy savings.

In the U.S., the perceived increase in the cost of energy efficiency discourages investment in it and building codes often do not require it. Building codes are intended to protect public health, safety, and general welfare as they relate to the construction and occupancy of buildings and structures; but we don’t have a standard national building code or national energy code. Building codes vary by state and municipality, but because the codes are expensive to structure they are frequently set on a model code put out by various industry associations and government funded entities. In the case of energy use in buildings, the Department of Energy has a Building Energy Codes Program that works with federal agencies, national code organizations, the building industry, and state and local officials to promote more stringent building energy codes.

Building energy codes currently are set in a complicated process. National model codes are updated every few years, typically with incremental improvements, by two independent organizations: the International Energy Conservation Code (IECC) from the International Code Council for residential buildings, and American Society of Heating, Refrigerating and Air-Conditioning Engineers better known as ASHRAE Standard 90.1 for commercial buildings. The DOE determines whether the amended model code saves energy. States set the actual building energy codes (except a few states that leave codes to local governments) based on the national models. States are required to adopt a commercial code at least as stringent as the national model within two years of DOE’s determination. For residential codes, states are required to look at updates to the national model and either adopt them or explain why they chose not to.

According to the DOE, twelve states in the U.S. have residential energy building codes that meet or exceed the standards of the latest IECC, which was released in 2006. Some have codes based on earlier versions of the IECC and some have codes that were developed prior to 1990. Just because a state has an energy building code doesn’t mean that the code is applied to all new residences. In many states, the codes are not broadly enforced and may be restricted to state or federally owned buildings or in municipalities that have chosen to adopt the state energy building code.

According to the Alliance to Save Energy, if model building energy codes were strengthened incrementally by 30 percent in 2010 and 50 percent in 2020—and if all states implemented the codes—by 2030 cumulative savings from these code improvements would reach 56 quads of energy, $435 billion (nominal 2003 dollars), and 889 million metric tons of carbon equivalent. The greenhouse gas emissions reductions would be equivalent to taking 32 million cars off the road for twenty years. In the year 2029 alone, the savings would be 6.1 quads of energy (about 5 percent of total U.S. energy use), $47.5 billion in consumer energy bills, and ninety-seven million metric tons of carbon equivalent. This is comparable to removing seventy million cars from the road for one year.

If the benefits are so great, why do we need the regulation in the first place? Why doesn’t the market just adopt these measures? There is no simple answer, although it is true that the building construction industry suffers profoundly from a lack of leadership when it comes to energy efficiency. There are a variety of reasons for this. Buildings and homes are becoming increasingly complex, with many more choices for materials and products. Those products and materials are chosen, assembled, and constructed by many different parties that frequently don’t work together on an ongoing basis. The building team is usually led by the least experienced member of the team—the owner or developer—who often knows the least about building, let alone running loosely knit impromptu organizations that are usually at each other’s throats. That is what building team is like. It’s a group of business parties glued together by contractual relationships that are usually contentious. Litigation in the building business is very common, with lots of finger pointing. (I know because my husband is a builder.) This is hardly the climate in which to create an innovative product. Besides the inexperienced and untrained owners coordinating contentious building teams, the local utility company often pushes energy consuming solutions because they make money by promoting energy use and not efficiency. Construction and permanent lenders do not distinguish between energy efficient and non-energy efficient buildings; and builders and architects are not well trained in the issues of energy efficient construction and design. Some say that architects’ roles in the past century have, for various reasons, devolved from that of master builders to stylists.

A case in point on the state of the construction industry is the Stata Center on the campus of the Massachusetts Institute of Technology. This $300 million building is one of the most celebrated works of architecture in years. MIT paid renowned architect Frank Gehry $15 million to design the building, which was completed in 2004. Three years later, MIT sued Gehry, alleging the building design causes leaks that lead masonry to crack, mold to grow, and drainage to back up. According to Gehry, “These things are complicated and they involved a lot of people, and you never quite know where they went wrong. A building goes together with seven billion pieces of connective tissue.” If one of the leading engineering schools in the world can’t work together with one of the leading architects in the world to create a building that doesn’t leak, what does this say about the possibility for creating energy efficient buildings?

Home building isn’t much different. Much of the residential construction is now done by stock builders who repeat ten or twenty designs ad infinitum, meaning they repeat the same mistakes and same inefficiencies ad infinitum as well. The stock builders have learned that they don’t make money adding options or customizing existing plans, so energy efficient improvements in the homes they build don’t often happen. For individuals choosing to build a home on their own, hiring an architect is often an expensive proposition—usually 10 percent or more of the projected building cost. And when you use an architect you have to make lots of decisions that you don’t have to make when you buy an off-the-shelf house or even off-the-shelf house plans. For the decision and design challenged like me, the prospect is daunting at best and at worst purported to be a proven destroyer of marriages. My husband and I built a house recently and remain married; but we both have experience in the development and building industry, so we were well prepared for the task. We rejected design proposals from well respected architects due in part to the cost and in part from the knowledge that we would go crazy making all the additional decisions that go with designing something. We wound up using stock building plans we bought online for a house we saw featured in a book. Then we used the book to help us make aesthetic decisions, my experience to make decisions regarding energy efficiency and my husband’s construction experience for the rest. Even so, and despite the fact that the home builder we used was both pleasant and honest, it was apparent to me that had we left the decisions regarding energy-using equipment, insulation, windows, etc., in his hands, our home would have ended up as yet another energy hog.

The building industry is very fragmented and there are few barriers to prevent any Tom, Dick, or Harry from entering the business. The many small firms mean that no one company dominates the market, competition between builders is ferocious, and profits are slim. Licensing exists, but it is not a significant barrier. Education, particularly in home building and design, seems to more by experience than through formal training, with the result that innovation and progress in energy efficient design and construction is close to nonexistent. Meanwhile, with building growth rampant, there are an overwhelming number of new products being introduced into the marketplace, but builders are not trained or motivated to sort them out to decide what’s best. Builders are a cautious lot and not known for being innovative. Because there is little corporate size or presence in the industry, corporate research dollars are scant. Builders rely mainly on owners and architects to tell them what to do. Commendably, some builders are cleaning up their own acts from a waste and efficiency standpoint. They have a lot to clean up. Industry studies show that up to 46 percent of time spent on job sites is wasted.

The process of building home or commercial buildings is pretty much the same. The owner or developer sets the program. They decide how many bedrooms or conference rooms are needed, where the building will be located, and what the budget will be. Frequently this owner will not be the entity or person who ultimately uses the building or home. The home-building industry has constructed about 13.5 million single-family homes since the mid-1990s. For the past few years, nearly 20 percent of single-family home buyers have been purchasing newly constructed houses. In recent years, the difficulty of getting things built has made business harder for small, local builders and easier for big companies, with their greater resources, to gain control of the housing market. Over one-quarter of the homes built today in the U.S. are built by home building companies such as Pulte, Centex, or Toll Brothers. They build the homes according to their interpretation of what the market wants and then sell the homes to people looking for a place to live. Frequently, commercial space is built by a developer who then either sells or leases the space to a company or individual who uses it for their enterprise needs. In both cases, the party responsible for the building has little interest in the long-term operating characteristics of the home or building they construct unless either the customer or regulation demands them to take an interest. Since that so far hasn’t been the case, the resulting structure usually isn’t energy efficient. At Toll Brother’s developments, the average customer spends $103,000 on special extras like additional bathrooms and prime locations. According to Toll, buyers choose visible flourishes over pragmatism every time. During the energy crisis of the late 1970s, for instance, one option was a higher grade of insulation but no one bought it. Instead, everyone spent their extra money on moldings.

Even in a good housing market when profits are healthy, most home builders don’t build energy efficient homes. How good are their profits? According to the New York Times, in one of Toll Brothers’ developments the actual cost of building a single 2,700 square-foot home, including infrastructure, land, labor, and materials, was around $300,000. The houses went on the market in the spring of 2003 at $424,000. Most recently the same house now costs $695,000, yielding a profit per house of $395,000.

A small group of players in the building industry, having recognized its negligence, organized a program called Leadership in Energy and Environmental Design, or LEED. LEED is a voluntary program now over a decade old. In that time period, approximately 1,025 buildings have been LEED certified. These are not the only energy efficient buildings that have been built, but of the million or so buildings built in the past ten years, less than one-tenth of 1 percent have been LEED certified. Part of the reason for this is the amount of paperwork required to certify a building for LEED. I know this because I developed software to help document the information required for certification. Another reason is the perception, true or not, that it costs more to build a LEED certified building. And for many architects, who sit in the passenger seat of the building development process next to the owner/driver, the LEED guidelines often lead to a constricted idea of what sustainability and energy efficiency means.

In Europe, where green architecture is more prevalent, architects have expanded the notion of energy efficiency and sustainable design beyond compact fluorescent lightbulbs, solar panels, and sod roofs. It is unfortunate but we Americans have become laggards in architectural design trends, unlike the days of architects like Frank Lloyd Wright. In Europe, the building industry, particularly architects, have come to see that the sustainability and energy efficiency of buildings come from integrating forward thinking design with much broader stakeholder participation that takes into account energy consumption, the organization of the home or workplace, building location, and transportation. This is unlike programs such as LEED, which present a long checklist of items that, to those of us long in the energy industry, have almost become cliché and discourage the innovation, invention, and leadership needed to mobilize the broader community of people looking to build.

The truth is that people like good design and would respond to sustainable energy-efficient design that pleases the eye. That design does not have to be out of the reach of the pocketbooks of all but the very rich. If Martha Stewart is available to the K-Mart shopper and Isaac Mizrahi and Michael Graves to the Target shopper, then good architecture that is energy efficient and sustainable should be available to the home and commercial building customer.

An alternative to LEED is the Energy Star program, a jointly managed program developed by the U.S. EPA and DOE. Unlike LEED, Energy Star programs focus solely on saving money and energy through energy efficient products and practices, with a direct reduction in greenhouse gases. In fact, Energy Star certification is one of the requirements of achieving LEED certification. However, Energy Star is a more robust program with higher brand awareness, much wider acceptance and adoption, and far more bang for the buck. Energy Star certification can be achieved for new construction and existing buildings, factories, and homes. Energy Star also certifies products based on their energy use so you know that when you are buying a new refrigerator, computer, washing machine, etc., you are buying the most energy efficient model available. The Energy Star label simplifies the buying decision for many of us looking to be more energy efficient. Its advantage at this point is its high brand awareness among average consumers. For buildings and homes, Energy Star recognizes the best performing ones in the country based on an energy management program developed by the EPA. Energy Star has partnered with over 12,000 organizations representing almost 15 percent of the commercial building market to improve their energy performance. Similarly, they have signed up over 3,500 home builders who have built over 725,000 Energy Star qualified homes since the program’s inception.

If we continue to build homes and buildings for the next 140 million Americans the way we have for the last twenty or thirty million, we will waste an enormous amount of energy. We can’t afford to do that. But the bad news about how buildings are built is good news for the retrofit business. Unlike cars, buildings are pretty easy to retrofit for meaningful energy savings. The truth is that, while we can make sure new construction is built to high standards of energy efficiency, retrofitting existing building stock is equally, if not more, important. Every year the commercial building stock grows by about 3.5 percent. Unless it is retrofitted with energy efficiency improvements, that means that over 90 percent of the building stock remains energy inefficient.

According to a study by the American Council for an Energy Efficient Environment (ACEEE), the average energy savings to be had in the U.S. by retrofitting existing homes and businesses with energy savings improvements is 33 percent. If we just made what would be considered cost effective improvements, we would save about 21.5 percent of our current energy use. Of course that cost effectiveness analysis presents a whole different kettle of fish. Consider the investment analysis to install energy efficient lightbulbs. When making a cost effectiveness calculation, you could count in not only the reduced energy bills but also saved operating and maintenance costs—high efficiency light bulbs have a longer life, so they don’t need to be changed nearly as frequently as regular light bulbs, which saves the cost of labor, planning, and shipping, and the saved costs of environmental cleanup because fewer light bulbs need to be made, less emissions are generated from the energy used, and fewer light bulbs will need to be disposed of. But those latter costs are often considered to be “societal,” not on the individual making the decision, and thus are usually not considered in the investment decision. If and when a carbon emissions market is put in place in the U.S., these costs may be factored into the investment decision, because theoretically the owner could sell the carbon credits that are created to someone who needs those credits. Or the maker and retailer of the high efficiency light bulb could embed the value of the carbon credit into the light bulb, thus lowering the cost of the bulb to the owner.

Energy retrofitting requires the knowledge, analysis, and experience to know what can be retrofitted and how to do it, and investment to implement it. One vehicle for accomplishing these retrofits is via a method called performance contracting. Under the performance contracting model, money now being paid to the utility for energy that is wasted by running inefficient equipment can be redirected through a special financing vehicle known as a performance contract to fund new equipment that uses less energy and costs less to operate and maintain. The performance contracting business model has been around for the past twenty or more years but has seen limited adoption for a variety of reasons, not the least of which is the lack of interest and understanding on the part of potential users, the poor marketing skills of companies offering the contracts, and poor performance by some contractors. Today most energy retrofits occur via utility demand side management (DSM) programs or when energy services companies, which are privately owned companies organized to offer energy savings contracts, enter a market.

The organization Rebuild America estimates that between the years 2000 and 2030, growth-related and replacement development in America will increase by more than two-thirds the buildings and homes existing in the U.S. in 2000. All told, perhaps $25 trillion in construction will occur, maybe more. A significant portion of that construction will be to replace existing structures, although the majority will be for new ones. This window of time offers an opportunity for us to shape imminent construction into something more energy efficient than would otherwise occur, thus improving the nation’s quality of life.

References:

2002 Economic Census. Census Bureau, U.S. Department of Commerce. http://www.census.gov/econ/census02/advance/TABLE2.HTM.

Annual Housing Starts (1978-2003). Census Bureau, U.S. Department of Commerce. September 2004.

http://www.census.gov/const/www/newresconstindex.html. C-Series Reports. Manufacturing and Construction Division, Census Bureau, U.S. Department of Commerce. 1995.

The Total Exposure Assessment Methodology (TEAM) Study, EPA 600/S6-87/002, U.S. Environmental Protection Agency, 1987, http://www.epa.gov/ncepihom.

“Emissions of Greenhouse Gases in the United States, 2002,” DOE/EIA-0573(2002), Energy Information, Administration, U.S. Department of Energy, October 2003, http://www.eia.doe.gov/oiaf/1605/ggrpt/index.html.

http://www.energycodes.gov/implement/state_codes/state_status_full.php (accessed October 22, 2007).



Proceedings of the 2004 ACEEE Summer Study on Energy Efficiency in Buildings, the Technical, Economic and Achievable Potential for Energy-Efficiency in the U.S.—A Meta-Analysis of Recent Studies, Steven Nadel, Anna Shipley, and R. Neal Elliott, American Council for an Energy-Efficient Economy.

Living Large: America and Its Energy Use aka We're on a Treadmill but Getting Fatter

People, houses, cars, and energy use have grown substantially in the past few decades. According to the National Association of Home Builders, the average size of a new home now tops 2,400 square feet, up from 1,645 square feet in 1975. Today, adult men and women are roughly an inch taller than they were in 1960 and nearly twenty-five pounds heavier on average. The average weight for men rose from 166.3 pounds in 1960 to 191 pounds in 2002, while the average weight for women increased from 140 pounds in 1960 to 164.3 pounds in 2002.

We aren’t just getting bigger; there are more of us as well. Incredibly, in a little over my lifetime, the U.S. population, at about 300 million, has doubled since 1950. There are more than 120 million homes in the U.S., up from sixteen million in 1990 and forty-three million in 1950. These homes account for about 22 percent of the energy used in the U.S. and 74 percent of the water. In the last several decades, the number and size of new houses and the land area taken up by new houses have increased. More than 3,000 square miles of land is converted annually to residential development over one acre in size. One could argue that the lifestyles that were envisioned by entrepreneurs, government planners, and business leaders at the beginning of the twentieth century when there were so many less of us are not appropriate for twenty-first century America.

According to James Howard Kunstler in his documentary The End of Suburbia, “The project of suburbia is the greatest misallocation of resources in the history of the world. America has squandered its wealth in a living arrangement that has no future.” Suburbs in the U.S. have grown by low-density development that rigorously separates people’s homes from where they shop, work, learn, pray, eat, and socialize. As America grows, its sprawl increases. Each American effectively occupies about 20 percent more developed land (for housing, schools, shopping, roads, and other uses) than they did 20 years ago. With the dearth of public transportation infrastructure, this form of development has forced us to rely almost entirely on automobile transportation to lead our lives. Doing so costs more, because homes, offices, utilities, and other features are farther apart (requiring more roads paved with more asphalt, more pipe for public water and sewer, more power lines, more wires, more street signs, and on and on), because each commercial and institutional structure requires its own acres of parking and because much of the utility infrastructure duplicates the existing infrastructure in nearby older communities. Society’s overall consumption of metal, concrete, asphalt, and energy is higher than it has to be. Worse yet, this design forces us to spend great amounts of precious time commuting from place to place.

My husband and I sometimes work out at our local gym. We drive eight miles round-trip in his American gas guzzler to burn off, if we are lucky, 400 calories apiece on the treadmill and Nautilus machines. As we head into middle age, both of us are fighting our weight (though I have a bigger battle to wage than he does). I can’t help thinking that if we would walk to the gym instead of drive we would burn an additional 400 calories each. In fact, we wouldn’t have needed to go to the gym at all. Had we walked to the gym, we could each have had a piece of chocolate cake as a reward without gaining any weight. Instead we spent approximately $3.88 (8 miles at the IRS mileage rate of @@@Is this still current?48.5@@@ cents per mile) to transport ourselves to the gym. On top of that, we pay for two gym memberships that we use infrequently. One of the reasons we don’t walk is that there are no sidewalks where we live. We would have to walk on the berm of a four-lane highway—a situation I find pretty scary. That’s also one of the reasons I ride my bike a lot less than I should.

The whole situation really doesn’t make any sense when you think about it. We seem to be caught in this trap of eating more, driving more, using more energy, getting fatter and more dependent on offshore sources of fuel, and not getting any happier. We are on a treadmill but getting fatter.

Would it really be better for us to walk to the gym instead of drive? To me, there is no doubt; but I have found arguments to the contrary. According to one analysis on the Internet, walking actually uses more fossil energy than driving, if the calories burned from walking come from a typical American diet. The essence of this claim is that the North American food system is so dependent on fossil fuels—for manufacturing fertilizer and pesticides, running farm machinery, transporting food from farm fields to stores and homes, and powering refrigerators and stoves—that walking a mile actually uses more fossil fuel than driving. (I found this tidbit of analysis so compelling that I have devoted a later chapter to the energy consumption in food production.) This claim doesn’t take into account the health benefits of walking or that, unlike cars, we don’t adjust our food consumption directly proportional to our physical expenditure of energy. If we did, we would probably be thinner, healthier, and have fewer food producers, thus using less fossil fuel. But the premise has some validity: the energy efficiency of walking is not that much different than that of driving.

A study by the University of Michigan Center for Sustainable Systems and the Earth Policy Institute found the U.S. food system consumes about 10.25 quadrillion British Thermal Units (Btus) in fossil fuels per year, equivalent to about three quarters of a gallon of gasoline for every American every day. This means that the food system burns six to seven times as many calories of fossil fuel as are in the food supply itself. A 150 pound person walking a mile burns about forty-three calories above and beyond what the body would burn lying in front of the TV set. Doing the math and accounting for the fact that about three food calories are wasted for every seven that are actually consumed, the 150 pound person who walks a mile burns the equivalent of about seventy-five mpg, or about 160 percent of what the average Prius burns per mile.

If you look at it another way, walking is actually less efficient in per-passenger terms than driving a car. An SUV that gets fifteen mpg with all five seats filled has the same fuel efficiency as five people walking together. Of course, this is a very misleading way of exercising the facts and points more to the problems in our food production system than anything else. But while we’re at it, let’s consider the fuel efficiency of my horse, Boozer. Assuming he carries a 165-pound rider with a saddle and all the associated gear and covers fifty miles in six hours, he will burn 18,300 calories. Typically, a horse is approximately 60 percent efficient in processing its feed, so Boozer would have to eat 30,500 calories to replace the energy he expended, meaning he would require 610 calories per mile. Converting this into an equivalent mpg, a gallon of gasoline has 31,000 calories; so to trot fifty miles in six hours, Boozer’s fuel efficiency is fifty mpg. This isn’t necessarily analogous to the previous analysis comparing humans to cars because I am not sure of the fossil fuel required to produce the food Boozer eats. But I am an equestrienne and find the analysis interesting. Given that I drive a good deal of the time alone, Boozer does get better mileage than my Lexus RX400h.

Unfortunately, riding Boozer isn’t an option for most of my transportation needs. Modern life in America requires more than a horse for transportation in most communities. Our lifestyles, which have been crafted over the past century, offer us little choice but to consume fossil fuels in ways both obvious and not at all obvious to us. And while I will try to avoid saying that I think this lack of choice is bad in and of itself, I think it is bad in that we have little real understanding of the options and alternatives to this lifestyle and how to value them.

Speaking of valuing energy alternatives, I should share a story about my own approach to analyzing the data that I present. I am not an economist; I was educated as an engineer, with a bachelor’s degree from Duke University and a master’s in business administration from Harvard University. The MBA provided me a sufficient understanding of economics to realize that there is a lot I don’t know about that science. One of my engineering professors, though, taught me about the difference in how engineers and economists look at things by relating this story: An engineer and an economist were standing on the beach in North Carolina. They were told that a beautiful naked woman was waiting for one of them on a deserted island not from the shore. Whoever got to her first could “have” her, but to get to her they would be able to advance to her successively at half the distance they had previously advanced. The economist declined the offer because according to those rules he would never reach her. The engineer, on the other hand, accepted the challenge, thinking that he could get close enough to her for “all practical purposes.”

That, in a nutshell—as sexist as it sounded to me—pretty much summarizes my approach to analysis. I am motivated to analyze to get close enough for my purposes, recognize the limitations of my analysis, and, when necessary, dig further. But I am definitely not into analysis for the sake of analysis. And unlike the economist above, I am not afraid to dive in. America’s energy situation is critical and we all need to take part in the dialogue—economists, engineers, business people, and the educated general reader. This blog aims to help that process.

Getting back to energy consumption, the U.S. government develops and maintains data for all varieties of purposes, from tracking terrorists to understanding how U.S. households spend their money. As a way to see how much money we spend on energy versus other household needs, I checked the Department of Labor’s U.S. Bureau of Labor Statistics Consumer Spending report published in June 2005. According to this report, U.S. households on average spent $44,300 annually on all their household needs in 2003. Of this amount, $1,064 was for electricity, $424 for natural gas, $121 for other household fuel, and $1,598 for gasoline and motor oil.

Of those total expenditures of $44,300, which doesn’t include taxes, the cost of all the energy we buy to run our homes and the gasoline and motor oil we buy to run our vehicles each amounted to about 3.7 percent, or in total about 7.4 percent of our household expenditures. That was a lot less than other expenditures, like food. Maybe that’s why we haven’t been too worried about energy efficiency.

On average, gasoline is far from the biggest expenditure we make. The average household spent more on federal, state, and local income taxes, food, apparel, services, healthcare, shelter, furniture and equipment, and entertainment than it did on either household energy or gasoline and motor oil. Now it’s true that the cost of household energy and gasoline is more painful for lower-income households because, in part, those costs are inelastic; people with lower incomes have to drive the same distances and heat their houses the same as households that spend more overall. In addition, since energy-efficient equipment tends to be more expensive up front, lower income households can’t afford to install it. And in rental housing, landlords, who typically aren’t responsible for utility costs, have a tendency to install heating and air conditioning equipment that has a lower initial cost and a higher operating cost, mainly because the landlords don’t pay the operating costs, the tenants do. Statistics show that rental housing generally uses more energy on a per square foot basis than owner-occupied housing.

How do energy expenditures compare with other expenses that the government’s consumer spending survey does not track? The average cost of household energy in 2005 was $1,902; in 2004 it was $1,561. In comparison, in 2004, according to the North American Association of State and Provincial Lotteries, the annual sales per capita for lottery tickets in the U.S. was $183.20. On an individual state basis, the good people of Rhode Island spent $1,370.95 per capita on lottery tickets in 2004! In South Dakota the per capita expense was $874, Delaware $781, West Virginia $720, Massachusetts $621, and Georgia $312. That means that, using the Consumer Spending Report’s estimate of average household size of 2.5 person, the average household in Rhode Island spent $3,427 on lottery tickets in 2004! Each household spent more than double on lottery tickets than it did on gasoline and motor oil, with little if any complaint. Gambler’s Anonymous must be drooling.

Household spending on prescription drugs in the U.S. was $2,212.50 in 2005, again more than what was spent on household energy or gasoline and motor oil. The per capita federal tax burden in 2004 was $6,285. That amounts to $15,712.50 per household. However, a per capita determination of tax burden is misleading, because not everyone pays income taxes. That in itself is not surprising. What I did find surprising is how many people don’t pay any income taxes. During 2006, it is estimated that roughly 43.4 million tax returns, representing ninety-one million individuals, had a zero or negative tax liability. That’s out of a total of approximately 136 million federal tax returns filed. Adding to this, roughly 121 million Americans—41 percent of the U.S. population—were completely outside the federal tax system in 2006. This total includes those who pay no tax and those who pay some tax up front and are later refunded the full amount of the tax paid, or more.

Why look at these comparisons? Because it’s one way to understand our attitudes about energy use and energy efficiency. Though consumers (and politicians) are sensitive to gasoline prices, our energy costs haven’t been as high as other expenditures we routinely make, necessary or not. For those hoping to shock the American public out of driving by cranking up gas prices, how high do these prices have to get, compared to other expenses, to make people drive less? How much will those other expenses go up when gas prices go up so that the difference in cost does or does not become significant? And, of course, the ultimate question is how much is it really in consumers’ control to change their driving habits? Often, driving isn’t a choice, nor, for many, is public transportation.

Would we be so aware of the price of gasoline if the service station signs weren’t screaming them out at every corner? Probably not. I certainly can’t say off the top of my head how much I am paying on a per kilowatt-hour basis for electricity, though I do have a rough idea of our monthly bill. What rankles me about the cost of energy is our apparent lack of choice or control in what we do pay and to whom. We get angry when prices go up, relieved when they go down, and oblivious to them the rest of the time. And there are other costs associated with the consumption of energy that aren’t actually energy costs, like the type of car you drive or the type of heater in your home or the light bulbs you burn or whether you leave the light on when you leave a room or how old your refrigerator is or at what speed you drive your car, that we often ignore.

Mean Body Weight, Height, and Body Mass Index, United States, 1960-2002, Advance Data No. 347, October 2004 (PHS 2005-1250), www.cdc.gov

U.S. NATIONAL REPORT ON POPULATION AND THE ENVIRONMENT, 2006, by Victoria D. Markham with Nadia Steinzor, Center for Environment and Population (CEP), 7.

A household was defined as (a) occupants related by blood, marriage, adoption, or some other legal arrangement; (b) a single person living alone or sharing a household with others who is financially independent; or (c) two or more persons living together who share responsibility for at least two or three major types of expenses—food, housing, and other. Students living in university-sponsored housing were also included in the sample as separate households.

The North American Association of State and Provincial Lotteries (NASPL) Web site, http://www.naspl.org/rankpercap.html

The Northeast-Midwest Institute Web site,

Thursday, January 01, 2009

The Primrose Path: What Next for the Electric Utility Industry?

Another thought piece I wrote several years ago as I was musing on my future which at that time was closely linked to the electric utility industry.

From my well meaning beginnings in the electric industry in the humble field of demand side management, I witnessed and became part of the deregulation movement, the rise of Enron, the turning of the industry from its slow quasi-governmental and collegial operations toward competitive and streamlined business. The industry began thinking and talking differently. To some, a customer was no longer a meter, a collection of customers no longer a rate base but a market segment, the utility next door no longer golfing buddies. Customer Information Systems were replaced, Y2K issues resolved, trading systems installed. Mergers have taken place, companies have gone bankrupt, merchant generation strategies have come and gone. Energy services subsidiaries have been started up and shutdown, telecom strategies have been initiated and terminated, diversification efforts have been diverse, from appliance servicing to nuclear plant maintenance. Everyone had a different approach or so they thought.

But where is the industry heading now? Uncertainty abounds. Deregulation in many places has slowed as a result of the California experience and the collapse of Enron. The objectives of deregulation, ostensibly to obtain lower prices for consumers and improve consumer decisions regarding energy usage by giving them access to market based pricing, have not yet been met. Will they ever, who knows? But we do know they will take a long time. Perhaps all the time and effort we spent pursuing deregulation would have been better spent promoting more noble objectives, such as investing in more alternative generation resources, or improving air pollution controls in power plants or increasing rather than decreasing DSM (demand side management) budgets. It appears those consumers aren’t too enthralled with the prospect of customer choice. Shame on me for saying this as one who has spent the last twelve years of her life promoting the concept of customer choice, but maybe consumers are sick of all the choices they have to make on a daily basis and don’t want another one, particularly one as silly as deciding who has the best electron.

Forgive me comrades, but really didn’t we learn in science class that all electrons are the same? Isn’t it bad enough that we have to deal with the cable company, the ISP, the local phone company, the long distance phone company, the intrastate phone company, the cell phone company, the power company, the gas company, the demands of our children for more, and our own needs? Who wants to marketed or telemarketed by another group of sad people trying to sell you something you don’t really care about in order that they can make (barely) a living.

In retrospect, was the pre-deregulation electric utility industry such a bad thing? Didn’t it tend to provide a venue to promote social and environmental good? Wasn’t it a friendly place to work? Weren’t many of the people who worked in them because they weren’t measured based on quarterly results inclined to seek the optimal result, not the lowest cost shortest term result? Is the spot where we now find ourselves vis a vis this industry in no small part the result of the ambition and manipulation of more than a few Harvard MBA types who sought the fallow ground of an industry for the most part untapped by raw capitalism? Doesn’t Jeff Skilling epitomize this? Were the aims of the deregulationists really noble? Can we really apply the lessons learned from one or two other industries that were deregulated to decide the impact of deregulation on our industry? It certainly wouldn’t seem that we would be basing our decisions on statistical samples.

Imagine if the industry and everyone associated with it hadn’t expended a substantial amount of its capital particularly its intellectual capital on deregulation. Perhaps we could have averted this current war of terrorism that we are in. A good deal of our foreign policy is driven by our need to protect and defend our sources of oil overseas. And a good deal of the anger towards the US stems from the steps we take to protect those interests at times perhaps at the expense of our sensitivity to other peoples and cultures. Don’t get me wrong, I am not saying I believe we deserve what we got because I don’t. But I am definitely of the belief that if we can find an equally feasible model of energy supply that is self-generating and self-sustaining, then why go mucking around in other people’s countries. We can do plenty of mucking around at home and muck things up just as badly.

Jeff Skilling and Me

Remember Jeff Skilling? He was the CEO of Enron Corporation which collapsed in December 2001. Skilling had resigned in August 2001. He was later convicted of multiple federal felony charges relating to Enron's financial collapse, and is currently serving a 24-year, 4-month prison sentence at the Federal Correctional Institution, Englewood in Lakewood, Colorado. I wrote this after his resignation and while Enron was in its final throes.

Jeff Skilling and I have a few things in common. We were both born and raised near Pittsburgh around the same time. We both attended southern private universities and then Harvard Business School. We both worked in the energy industry. I met Jeff Skilling on an elevator in the Houstonian a number of years ago at a Harvard Business School Global Alumni Conference on Energy. I thought he was quite charming. Just the two of us on the elevator, he spoke to me -- very enthusiastic, almost bubbly, and gregarious. He wasn’t hitting on me. He was just a friendly guy. He was interested in understanding what area of the energy industry I was working in -- energy efficiency -- and eager to share his ideas about its value as well as his business card in case my company ever required financing to build an energy efficiency project. I found his card the other day in my pile of stuff and wondered but realized very quickly that the card had no value as a collectible. Millions of people must have Jeff’s business card.

I probably should have realized then and there that something was wrong with Jeff. I admired Jeff and Enron. They were trying to be the different energy company. But they failed and I should have known they would. In the first place, when I did eventually call him a few months later albeit for a different purpose -- help on a consulting project -- his secretary was instructed to help me. That is the one and only time I have ever gotten such assistance from the head of a major energy company. Just the other day I called to follow up on a letter I had sent to the head of a utility on the east coast, a fellow Duke alumni, to whom I had been referred by a mutual acquaintance and that I had contacted in advance by letter. Not only did this guy’s secretary tell me that he had no interest in talking to me but she proceeded to tell me while chuckling that she had been instructed not to throw away my letter but to file it in case he may someday be interested in talking to me. Was Jeff expecting to compete with the likes of this guy? I should mention that I have received plenty of help from other utility company executives though none at the CEO level. Perhaps they should take note if they are aspiring to the highest level in their organization.

I ended getting help from Enron on my consulting project, help that served to effectively launch a new and at times profitable business for me in the energy industry. The Enron execs that I spoke to pointed out to me the value of energy efficiency in a market where energy was traded. Though the trading markets have yet to seriously deal in energy efficiency credits, the industry at that time started its drive towards a competitive deregulated marketplace in which many players sought to sell energy solutions and remake themselves to a great extent on the model of an energy services company. This launched quite a few new careers for those of us who had some background in the energy services industry, moving our fortunes from those who performed work primarily as result of government regulation to moving to the forefront of a drive to better know and understand energy customers and sell them all sorts of stuff.

Many benefited especially when the internet and E-COMMERCE (see neon lights flashing) came on -- consultants, software companies, investment bankers, trading houses, lawyers. As these people saw Enron’s vision of the industry with all the possible money to be made, the mantra of competition and deregulation grew fast and furious. Rather than focus on what the options were for improving the industry as a whole and investigating those options, rather than considering the impact of deregulation on other domestic issues such as energy security, and perhaps in the absence of true national energy policy (and in the presence of Enron-driven and like minded corporate donor driven energy policy) we all greedily embraced the promise of a deregulated energy industry as the source of wealth and happiness. I dare say that none of us created wealth from it to the degree that Jeff Skilling and his associates did. They spread their largesse widely and in fact another Harvard MBA benefited from it in his quest for the US presidency. That would be George W. Bush.

Do I think that Jeff knowingly defrauded thousands of employees and stockholders of their savings? That he duped Ken Lay and the rest of the Enron employees, the lawyers at Vinson and Elkins, the accountants at Anderson, and countless others? He is the guy who left very suddenly resigned his position as CEO of Enron to start his own company called Veld Interests that is purported to have made lots of money from shorting companies like AES and Calpine that would be hurt by the downfall of Enron. I know that veld means grassy plain or something like that but I see it as a veiled way of calling a company Veiled Interests, a clever play on words, but maybe too cute. It’s a name for me that invites suspicion, like the Star Wars names of the questionable Enron partnerships seem to have raised the suspicions of the US Congress when they began their investigations into Enron’s downfall.

Jeff had a sort of Aw Shucks Midwestern way about him and big brown eyes that make me think he is deeply distraught about what has happened. (But I am prone to think the best about everyone. The occasions when I toyed with working for Enron, my friends warned me that I was much too nice to work there.) I don’t think he ever expected that the structures he created could have fallen so quickly. I also know though that he is a very smart guy and believe that at the very least he had to have intuited that there was a major structural problem at Enron when he left -- causing him to leave. He appears to be a guy who has lots of ideas -- I can relate to that -- and the fortune or misfortune to have had someone who was willing to bankroll those ideas. Someone like Ken Lay who seems to have taken on an almost fatherly relationship with Jeff and Rebecca Mark, cultivating a sort of sibling rivalry and encouraging their every idea. The result was a lot of deals that PERHAPS when viewed on an individual basis may seem risky but worthwhile for any variety of reasons but looked at in totality as an overall system made for an extraordinarily unstable system -- a house of cards, another Tacoma Narrows bridge.

Should Jeff have seen that? At times I wonder if that is like knowing whether one of your employees has a drug problem or is a wife beater or that your kid is one of those one-out-of-every-six-high-school-students-is-a-binge-drinker kids. But the fact of the matter is that he was doing the deals that made the company and taking pride as the visionary and leader, the guy that is sometimes referred to as the Big Swinging Dick. And he made the big bucks.

Why? Remember those Enron commercials with the metallic ladies voice asking “Why?” in an electronic tinny whine? It is said that the Enron guys liked their ladies and perhaps this is the idealized version of how they would sound. Now of course those commercials are prophetic.