Article updated at 7:07 p.m. EST.
In October, the Department of Energy made a little change to how it values renewable energy on the electric grid. It immediately resolved a tussle between the electric grid and the natural gas grid over efficiency standards, with the electric utilities scoring a strategic win.
But that's just the start of its consequences.
Decades from now, if renewable energy like wind and solar keeps up its rapid growth, it could make electricity more appealing than gas as a means to curb carbon emissions and boost the electrification of all kinds of appliances. It could make the economic case for renewable energy stronger, while also boosting technologies and techniques that lower emissions, like energy storage and efficiency.
And it could prompt a fundamental rethinking of the United States' energy math, in ways that could have the country legitimately claim a big rise in energy productivity and an even more dramatic drop in energy use.
At issue is a little-known metric — the source-to-site ratio — that calculates how much energy goes into making electricity. The ratio compares the amount of energy from a power plant (the source) to the electricity actually received at a building (the site). Four decades ago, during the energy crisis of the 1970s, energy planners made a sweeping assumption about the source-to-site ratio for renewable energy, like hydro, wind and solar power.
Their curious answer: exactly as much as an average power plant running on fossil fuels.
That assumption, called fossil-fuel equivalency, made sense in the 1970s, when the goal was to get the United States off oil. But it seems out of place today, when oil is plentiful and one of the main advantages of renewable energy is that it burns no fuel and causes no carbon emissions.
"It's a really, really important number," said Keith Dennis, a senior principal at the National Rural Electric Cooperative Association, which, along with other electric utility lobbying groups, asked DOE to take a hard look at the issue.
How the government values one energy source versus another is crucial for every player on the electric grid, from nuclear to coal to solar power, and the source-to-site metric is just one way to do it. But this particular version of it has woken up from a decadeslong slumber and into a lively debate over the future of electricity, natural gas and carbon emissions.
The fact that the electric utility industry put a unified lobbying effort behind the change is itself significant. Utilities for years have been reluctant to embrace renewable energy. But now, as the pull toward wind and solar becomes irresistible, it has realized that correcting DOE's 1970s assumption could be a boon. Using the new ratio, its products look better from an emissions perspective compared with appliances that can also be powered by natural gas, like furnaces and water heaters. And the more renewables the industry adopts, the bigger the advantage will become.
"It's been in use for so long that nobody really knew where it came from," Dennis said of the fossil-fuel equivalency ratio. "It got so embedded in so many things."
Power of the ratio
The new site-to-source ratio, called captured energy, in essence puts renewable energy plants on a different footing than fossil fuel plants. It reports the amount of electricity that a renewable energy plant transmits, rather than the energy it takes to make that electricity. When dispensing of the assumption that a renewable energy plant burns fuel like a fossil fuel one, renewable energy becomes nearly three times as efficient.
Captured energy will become a basis for some of the government's most important efficiency metrics. It will be used as underlying data for market reports for products like LED lightbulbs, in efficiency calculations of appliances, and in energy benchmarking for homes and commercial and government buildings.
U.S. EPA will start to use the new metric in its Energy Star Portfolio Manager, a widely used tool that calculates energy use and carbon emissions in buildings, according to Enesta Jones, an agency spokeswoman. Meanwhile, the U.S. Energy Information Administration, which creates some of the country's most essential energy data, will start to include the captured-energy metric as a new item in its monthly reports starting in the spring, according to Stacy Angel, an EIA analyst. This change to federal energy standards and data will also become the de facto standard for many states.
The most intriguing question about the new captured-energy ratio is whether it will catch on at EIA, whose monthly and annual reports are one of the country's go-to sources of energy data. Toy with this new ratio and things start to get strange.
The old ratio (fossil-fuel equivalency) and the new ratio (captured energy) are like two sets of goggles, neither of which is particularly better than the other. They are just two of many pairs of goggles that DOE uses to evaluate the energy landscape, attempting to match the goggles to what the department wants to learn. But these two goggles provide dramatically different views of America's energy use over the next several decades.
In its October white paper, DOE compared the two scenarios. If one wears the captured-energy goggles, and if the country gets to 50 percent renewables — which, according to EIA, could happen at some hazy date after 2040 — the country would use 93.5 quads of energy. (A quad is 1 quadrillion British thermal units.) Use the fossil-fuel equivalency goggles, and the same scenario results in the country consuming 107.4 quads of energy. That's a difference of 13.9 quads. To put that in perspective, the entire coal industry contributed 15.7 quads to the grid last year.
The diverging stories extend to energy productivity, which is measured in dollars per million Btu. Use the fossil-fuel equivalency metric, and the country's energy productivity stands at $329 per million Btu. Use the captured energy metric, and that number rises to $378.
EIA's use of the new ratio could also deprive the wind and solar industries of a compelling narrative. Both take pride in their growing role on the grid, with solar accounting for 0.6 percent of electricity generation in 2015 and wind for 4.7 percent. But looked at through the prism of the new ratio, the presence of both would be slashed by two-thirds, diminishing solar to 0.2 percent and wind to just above 1.5 percent.
The unknown, of course, is whether this new data set will survive the arrival of President-elect Donald Trump.
Trump has said he thinks climate change is a hoax, is fiercely opposed to regulating carbon emissions and has said he wants to dismantle EPA. On the other hand, he hasn't weighed in on wind and solar, both of which are adding jobs at a rapid clip. And it's possible a metric that makes it appear that the United States is using less energy, more productively, could have an irresistible appeal to the country's first reality TV president.
A burning question
The source-to-site issue emerged during the 1970s in the aftermath of the Arab oil embargo. Planners at DOE had an urgent mandate to replace fuel-oil power plants, which then made up a substantial slice of America's electricity. Hydropower dams were an attractive option.
But number crunchers had to answer a strange new question: How do you compare a dam, which runs on water, to a traditional power plant, which creates electricity by burning something?
Evidence of their thinking can be found in a long-buried footnote, which Dennis of NRECA unearthed from a 1995 energy manual. It appears those DOE planners concluded that if there were a catastrophic drought and a dam failed, it would take a fossil fuel plant to pick up the slack.
Thus, the fossil-fuel equivalency metric was born.
The key to calculating it is the heat rate, which measures how much energy a power plant uses to create a kilowatt of electricity. Another is the Btu, which is the amount of energy needed to increase the temperature of 1 pound of water by 1 degree Fahrenheit. Those 1970s energy planners arrived at the calculation that renewables used the same heat rate as an average fossil fuel power plant, which today stands at 9,510 Btu per kilowatt-hour.
The alternative that DOE adopted last month, the captured energy approach, isn't a crazy idea; it is the ratio used by the International Energy Agency, which is the de facto international standard. It accounts for the amount of electricity coming out of a power plant, rather than the amount of energy going in to make the electricity. It measures the heat content of the electricity actually produced, which is 3,412 Btu per kWh, slightly more than a third of the fossil-fuel equivalency number.
Many other metrics — or goggles — exist that would make renewable energy appear less efficient. Neither fossil-fuel equivalency nor captured energy takes into account the energy required to make solar panels or wind turbines, or includes the fact that renewable energy generally is far less efficient at turning its "fuel" — solar or wind — into electricity than coal or natural gas are. Some of these metrics were suggested to DOE by the natural gas industry but rejected.
Handy as this fossil fuel metric may have been decades ago, it has emerged as a headache for today's energy planners.
Part of the problem is that, without anyone intending it, the metric ended up applying to other forms of renewable energy that use no fuel, such as solar and wind power. Another is that the fossil-fuel equivalency number is essentially meaningless. "The fossil-fuel equivalency approach does not represent any real market quantity," EIA wrote in a discussion of the topic in 2010, when it first flirted with the idea of a new approach.
Fossil-fuel equivalency also proved to be a useless lever in the hands of the Obama administration, which has made it a high priority to reduce carbon emissions on the electric grid. DOE and EPA have tried to encourage renewable energy but have been encumbered by a metric that makes wind and solar power appear to produce far more emissions than they actually do.
End of an error
DOE took up the ratio again last year, after four decades of inactivity, because of an obscure department report on standards for gas furnaces. As it was being prepared, the country's electric utility lobbying groups realized that the fossil-fuel equivalency ratio was putting them in a bad light.
The reasons have everything to do with combustion. Natural gas is piped into a home and combusted there, under a cooking pot or in a water heater. Electricity is produced at a distant power plant. The more fuel that is combusted at that plant, the more inefficient the government deems it compared to gas. However, renewables — which burn nothing — are an ace up the electric utility industry's sleeve.
Or would be if the government could be persuaded to retire the fossil-fuel equivalency metric.
Last year, the biggest groups representing electric utilities asked DOE to reconsider the captured energy approach, including Edison Electric Institute, which represents investor-owned utilities; the American Public Power Association, which works for municipal electric companies; and NRECA, which represents electric co-ops. They signed a letter alongside the Natural Resources Defense Council, which wants to reduce carbon emissions to fight climate change and realized that it and the electric utilities could make common cause.
"The electrics were aware that their fuel mix is really changing, and will be changing more drastically over the next couple of decades," said Robin Roy, a consultant with NRDC who helped lead the effort. "There was a recognition that their industry is moving into a time when getting these accounting issues right will really matter to their business."
Natural gas lobbyists objected to at least parts of the change, including the Gas Technology Institute, which does research and development for the natural gas industry; the American Public Gas Association, which represents natural gas utilities; and the National Propane Gas Association, which represents the propane industry. They urged DOE to either spurn the captured energy metric or to use it sparingly so it wouldn't weigh against natural gas.
"The captured energy approach could be misused to promote electrification of the grid," APGA wrote in a comment to DOE.
In the end, DOE decided to retire fossil-fuel equivalency in some instances and take up captured energy instead, with potentially wide consequences.
Over the years, it could bend the grid toward lower-emission sources, without any additional action required, as long as renewables continue to grow. "What that might mean more operationally is clearer policy support for low- or non-emitting energy sources, and on opportunities for energy efficiency, demand management, energy storage and grid flexibility where that reduces costs and environmental impacts the most," Roy wrote in an email.
Furthermore, it adds momentum to a path that many climate activists are thinking could de-carbonize the grid: Add renewables as quickly as possible, and electrify everything. "The result will be a step towards folks evaluating electricity as an environmentally preferred choice over end-use of gas/other fossil fuels. As more renewables come online, this will become more important as the metric will point more people to electricity," NRECA's Dennis wrote.
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