The U.S. economy wastes 55 percent of the energy it consumes, and while American companies have ruthlessly wrung out other forms of inefficiency, that figure hasn’t changed much in recent decades. The amount lost by electric utilities alone could power all of Japan.
A 2005 report by the Lawrence Berkeley National Laboratory found that U.S. industry could profitably recycle enough waste energy—including steam, furnace gases, heat, and pressure—to reduce the country’s fossil-fuel use (and greenhouse-gas emissions) by nearly a fifth. A 2007 study by the McKinsey Global Institute sounded largely the same note; it concluded that domestic industry could use 19 percent less energy than it does today—and make more money as a result.
Economists like to say that rational markets don’t “leave $100 bills on the ground,” but according to McKinsey’s figures, more than $50 billion floats into the air each year, unclaimed by American businesses. What’s more, the technologies required to save that money are, for the most part, not new or unproven or even particularly expensive. By and large, they’ve been around since the 19th century. The question is: Why aren’t we using them?
The answer seems to be some kind of coordination failure:
The first barrier is obvious from a trip through ArcelorMittal’s [steel mill] four miles of interconnected pipes, wires, and buildings. Steel mills are noisy, hot, and smelly—all signs of enormous interdependent energy systems at work. In many cases, putting waste energy to use requires mixing the exhaust of one process with the intake of another, demanding coordination. But engineers have largely been trained to focus only on their own processes; many tend to resist changes that make those processes more complex. Whereas European and Japanese corporate cultures emphasize energy-saving as a strategy that enhances their competitiveness, U.S. companies generally do not. (DuPont and Dow, which have saved billions on energy costs in the past decade, are notable exceptions. ArcelorMittal’s ownership is European.)
In some industries, investments in energy efficiency also suffer because of the nature of the business cycle. When demand is strong, managers tend to invest first in new capacity; but when demand is weak, they withhold investment for fear that plants will be closed. The timing just never seems to work out. McKinsey found that three-quarters of American companies will not invest in efficiency upgrades that take just two years to pay for themselves. ...
The answer seems to be better regulation and more competition (which are not as paradoxical as they appear):
... industry’s inertia is reinforced by regulation. The Clean Air Act has succeeded spectacularly in reducing some forms of air pollution, but perversely, it has chilled efforts to reuse energy: because many of these efforts involve tinkering with industrial exhaust systems, they can trigger a federal or local review of the plant, opening a can of worms some plant managers would rather keep closed.
Much more problematic are the regulations surrounding utilities. Several waves of deregulation have resulted in a hodgepodge of rules without providing full competition among power generators. Though it’s cheaper and cleaner to produce power at Casten’s projects than to build new coal-fired capacity, many industrial plants cannot themselves use all the electricity they could produce: they can’t profit from aggressive energy recycling unless they can sell the electricity to other consumers. Yet byzantine regulations make that difficult, stifling many independent energy recyclers. Some of these competitive disadvantages have been addressed in the latest energy bill, but many remain.
Ultimately, making better use of energy will require revamping our operation of the electrical grid itself, an undertaking considerably more complicated than, say, creating a carbon tax. For the better part of a century, we’ve gotten electricity from large, central generators, which waste nearly 70 percent of the energy they burn. They face little competition and are allowed to simply pass energy costs on to their customers. Distributing generators across the grid would reduce waste, improve reliability, and provide at least some competition.
Opening the grid to competition is one of the more important steps to take if we’re serious about reducing fossil-fuel use and carbon emissions, yet no one’s talking about doing that. Democratic legislators are nervous about creating incentives for cleaner, cheaper generation that may also benefit nuclear power. Neither party wants to do the dirty work of shutting down old, wasteful generators. And of course the Enron debacle looms over everything.
If markets were efficient wouldn't someone have come in and picked up all the $100 bills that purportedly lie on the ground. Perhaps given the complications, the $100 bills are illusory.
Meanwhile, China has also moved forward with recycling energy:
... it was a surprise to drive toward a coal-cement complex in Zibo, a modest city of 4 or 5 million people in Shandong province, 230 miles southeast of Beijing, and see … no white haze. True, miners trudging along the street had blackened faces, and the city was dotted with 100-foot-high mounds of low-grade coal, previously trash but now worth picking over because of soaring world demand. But no white powder mixed with the black, and only wispy plumes of steam wafted from the fat, high smokestacks of the Sunnsy cement company (its name is from the Chinese shansui, or “mountain water”). Indeed, the fattest and somewhat rusty-looking central exhaust stack had been fitted with elaborate ductwork of obviously newer metal, which captured everything coming out of the stack and shunted it to a nearby new building.
Inside the new building was an electricity-generating plant, and what I was seeing was the handiwork of a Chinese engineer in his mid-40s named Tang Jinquan. Tang had never intended to get into the cement business. But when he graduated from the technical university in Harbin, in far northern China, the government was still assigning jobs to graduates—and his assignment was a cement-research institute in his hometown of Tianjin. “I am interested in heat generation, this place is about cement—no match!” he told me (through an interpreter) at the factory in Zibo. He spent nearly the next 20 years of his career in a long effort to make the dirty, wasteful, fast-growing cement industry less environmentally destructive.
The heart of his idea—easy to describe, tricky to implement—is capturing the enormous amount of heat normally wasted in cement making and using it to run turbines that generate electric power. This power can then be fed back into the factory, doing work that would otherwise require burning even more coal. The reduction of dust is a visible indicator of the more fundamental reduction of waste. Over the course of a long day, I heard about the many, many refinements Tang had made to this “co-generation” system since he first started working on it, in the mid-1980s. The punch line is that it now works well enough to cut the energy (mainly from coal) required to make clinker by 60 percent, and the overall power demands of the cement production line by 30 percent.