One Family's Energy Evolution--How We Dropped our Utility Bills by 80%

Top red line is average cost/month for years '99-'03. Black line is average cost for years '04-'08. Bars at bottom are for individual years '09 - '13

In the year 2000, our family spent $2615 on our utility bill. For a family of five in a 2800 sq. ft. house we used on average 33.4 kilowatt hours (kwh) per day of electricity and 4.28 therms/day of natural gas. Our electricity consumption was almost twice that of the average household in our utility region (an area that includes most of California north of Los Angeles), though very close to the national household average. And our natural gas consumption was almost four times (!) that of the average household in our region. It was expensive! It was nuts.

We live in San Francisco where it never gets very hot or very cold. However, our house was built in 1935 with pretty much zero insulation. In 2000 most of the windows were original and single-paned and only a few walls had been insulated. We didn’t have air conditioning or electric heat, so no big electrical draws there, but when the wind blew and the fog rolled in, you could’ve flown a kite in the breeze down our hallway.

Looking back, I only hazily remember what we did to deal with that initial monster energy use. We put in a lot of fluorescent bulbs, got rid of an electric space heater, nagged the kids to turn off lights and stopped leaving outdoor lights on all night. That was also the year we got our first front-load washing machine and a new, more efficient refrigerator, both necessary replacements of dying ones. The next year our electricity use dropped nearly in half! Our natural gas use, however, was just about the same, and unfortunately that was the winter natural gas prices went through the roof in California.

Yellow lines are solar production. Bars are what we bought. Negative numbers mean we sold more than we bought that month.

Solar clothes dryer

The next year I paid more attention to our programmable thermostats, experimented with the house temperature dropping a few degrees at night, and began hanging my laundry outside to dry. That resulted in a 10% drop in therms. At the beginning of the following year, we had a big remodeling project that involved, among other things, replacing fourteen single-pane windows with double-pane ones and insulating the walls of about a third of our house. Our natural gas use dropped 25% the following year! In 2004, both electricity and natural gas consumption crept back up, as energy use is wont to do. We added more insulation to the attic (there was a minimal amount already), and, for the next four years, our natural gas ran about 2.5 therms a day and electricity around 21 kwh/day. Things had definitely improved. But energy prices had also crept up. Even though we were using a third less electricity and 40% less natural gas than in 2000, we were spending $2000 per year on energy. 

Red line=avg '99-'03. Black=avg '04-'08. Bars='09 - present

  

(Side note: another huge benefit of adding wall insulation and replacing single-pane windows with double-pane ones is that it makes the interior of the house much quieter, a big plus in a city with street noise.)

Solar panels east

 Then I started reading about climate and energy issues. That was the point we began to tackle energy efficiency and renewable energy in earnest. In 2009 we installed solar panels on our roof. Our roof breaks east-west and is partly shaded in the winter by a taller building directly south, so seven panels ended up facing east and eight faced west on the sunniest half of the roof. Not optimal, but so it goes. To deal with vampire loads, I went around like a maniac unplugging every unnecessary gadget and wall wart I could from wall sockets in every room of our house. (It’s amazing what gets plugged in and stays there, drawing power year after year for no benefit whatsoever!) I plugged our media equipment into a power strip and turned it off at night. I put in ultra low flow showerheads (1.5 gallons per minute). I bugged my kids about taking shorter showers and using towels at least twice before putting them in the wash. My oldest went off to college, so there was some less energy use, but I still had two active teens at home gobbling energy with showers, piles of laundry and electronic media gadgets.

Solar panels west

I turned down the heat. Boy did I get howls about that. I would point out to my kids that since they didn’t live Hawaii, they should expect to wear slippers and sweaters in the winter. This was not popular. I pointed out I wore wool and was willing to have the house even colder while home alone during the day. (Though I do admit it’s hard to sit still for any length of time in a house colder than 59 degrees.) Eventually we reached a compromise that 64 degrees was a reasonable ambient temperature when they were home. 

We had an energy audit by an energy efficiency company. Out of this we decided to have insulation blown into our uninsulated walls (over half the house), we had the attic sealed and more attic insulation installed, and we had the downstairs heating system optimized and its ductwork sealed. Later that year we also had six very leaky single-pane windows in my daughters’ bedrooms replaced. It was after this that I got brave enough to turn our inefficient upstairs heating system off entirely. (Luckily the laws of physics proved correct and heat really does rise.) 

The combination of all these actions dropped our electricity usage by one fifth, down to 14.4 kwh/day. On average we produced 11.7 kwh/day from our panels and bought 2.7 kwh/day from our utility. (In the summer we produce more electricity than we use and sell some back to our utility. In the winter we use more than we produce and so buy.) The insulation, heating system optimization, new windows, and cooler house temperatures made a dramatic impact on our natural gas use, which dropped by 40% to 1.7 therms per day. And yet there was more to do.

Solar hot water panels

The following year we installed a solar hot water system that dropped our natural gas another half therm/day. It went on the east-facing side of our roof, which is fine since most of our hot water use (showers, dishwasher, laundry) is in the morning. (Morning is also when electrical rates are cheaper.) Because the back up warming element of the solar hot water system is electric, it did bump up our electrical use an average of 2 kwh/day.

On demand hot water

The year after that, when remodeling our decrepit downstairs bathroom, we installed an on-demand hot water system to replace our downstairs hot water heater, decreasing both water and natural gas use. We are down, now, to an average of less than one therm of natural gas per day, but it does vary depending on how cold our winter temperatures are. For both electricity and natural gas we rarely use amounts above our baseline quantity, which keeps the energy we do buy at the lowest rate.

As we progressed along on our energy journey, we made a few step-level technology changes but, more importantly, we also made many, many little changes that added up in a big way. This is why I call it an evolution. It took time, experimentation, and a failure here and there to achieve our results, plus a willingness to change habits.

Solar hot water guts

Over the years energy prices have increased, more steeply-tiered electricity rates have been introduced, and the baseline quantity for both electricity and natural gas has shrunk. (The number of kilowatt-hours or therms included in the baseline rate—a number that both rate structures hinge on—varies in California per geographical area. Curiously, this baseline definition has shrunk more in San Francisco than in other parts of our utility provider’s district. It ends up being a mostly invisible, though I have to admit clever, form of rate hike.)

The result is that energy, especially electricity in San Francisco, is quite a bit more expensive than it was in 2000. I calculate that if in 2012 we’d used the same amount of electricity as back in 2000, we would’ve paid $2402. (Back in 2000 we paid $1350 for this energy.) And if we’d used an equivalent amount of natural gas, we would’ve paid $1680 at today’s rates. Put the two together, we would’ve paid $4082 for energy last year. That means we’ve dropped our energy bills from what we would’ve paid by $3581 a year, or 87%! 

What we’ve invested (after tax credits and incentives): solar PV $12,000; solar hot water $5600; wall insulation, more attic insulation, house sealing, HVAC duct sealing and optimization $8000; repairing decorative paint on walls after insulation blown in $800; on demand hot water $1200; new windows not part of remodel $6000; various light bulbs, low flow showerheads and power strips $400. Total $34,000. (Am not counting appliances or windows we had to replace anyway or insulation mandated by building code during various remodels.) I figure we’ve already recovered $15,000 of our investment in savings. If energy prices increase by only two percent per year, we’ll recover the rest in six years. If energy prices increase by three percent per year, we’ll recover it in five.

Also in 2008 we got rid of our minivan, leaving us just our 2004 Prius. Our annual gasoline purchases dropped from $2300 per year down to $1250. The average price for a gallon of gasoline in 2008 in the US was $3.16; in 2012 it was $3.63. That means we bought 728 gallons of gas in 2008 and 344 gallons in 2012. If we’d used as much gasoline in 2012 as in 2008, we would’ve spent roughly an additional $1400.

Of course the expense of owning a car is only partly the gasoline. All the other costs to operate it come to far more. Though our van was totally paid for by the time we offed it, if we’d kept it we would’ve spent an additional $500 on car insurance, $3000 on repair and maintenance (van was getting old and falling apart), $170 on car registration, $150 on tires, $200 on parking, tolls and the rare carwash. This comes to $5420/year in car expenses avoided.

Electric-assist grocery getter. Carries 5 bags uphill, no sweat!

Without the extra car we did spend about $220/year on City Carshare (car rental by the hour), and about $1200 on family transit. However, at least two-thirds of that transit cost would’ve happened even with a second car as I wouldn’t have wanted to drive my kids around much more than I ended up doing anyhow. Although my husband and I mostly travel around town by regular bicycle, because we live up a ginormous hill, we also spent $800/year to buy and maintain two electric bikes. (Initial cost + maintenance + 1 battery replacement for each bike at year 3, with this total amortized over six years.) And we now spend $360/year for a storage locker on the island where we go on vacation every summer to hold stuff we formerly hauled there annually in our van. So net, our yearly savings are $3640. On top of this, by our teens not getting driver’s licenses between the ages of 16 and 21, we’ve saved on average $2000 per kid per year, which adds up to $20,000 so far and counting. (Thanks, kids! The money went to your college tuition.) And also, no kids driving meant no kids crashing, which meant no shelling out-of-pocket to pay the deductible on insurance claims, no increases in car insurance rates due to accidents, etc.

What we learned on our energy evolution: cutting energy use in half the first time is pretty easy, especially if your use is high to begin with. The things that have the biggest bang for the buck are actually quite cheap—replacing incandescent bulbs with fluorescents (although at this point I would replace with LEDs,) attic insulation, unplugging useless stuff, unplugging second refrigerators, putting in power strips to deal with vampire load, and whenever you replace an appliance spending a few percent more to get the most energy-efficient one possible. And anytime you remodel, take advantage of open walls to insulate like crazy and put in the most efficient fixtures you can. (You will thank yourself later.) Cutting energy use in half the second time requires more investment, but if you take your savings from the first energy drop, you’ll have some money to play with. Cutting use in half the third time takes even more money per therm or kilowatt saved and has less monetary return unless you expect energy costs to keep rising (which I do.) 

But we are not done! Future goals are to install a ductless heat pump, deal with our drafty fireplace with some kind of insert, eventually replace all of our leaky single-pane windows, and, if we ever get our house tight enough, install a heat-exchange ventilator. With middle child now in college, we expect our vehicles miles travelled (VMT) to drop another 20 percent this year. Perhaps once we finish paying for college for all three kids (Done with one! Two left to go!) we’ll consider an electric car, but like everyone else I’m concerned about range issue for long trips. In addition, even minimal use of an electric car would raise our electricity consumption by at least a third, so we’d need to install more solar panels on our roof. If there were a medium-speed train that took less than ten hours to get from San Francisco to Seattle (heck, that’s only 80 mph—European trains do double that), I think we’d go car-free altogether and just rent a car when we needed to.

The End of the Age of Oil Has Arrived

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Sunset or Sunrise?

Perhaps rather than the end of the age of oil, we should say this is the century of reinventing our relationship with energy. How we create it, how we consume it. How we squander it, how we husband it. Whether we have enough or whether we have shortages. And what harm it does (now and in the future) as it is created and consumed. 

For most of the last sixty years, energy was like garbage, something most Americans paid little attention to. For a small monthly sum waste magically disappeared, energy magically appeared, and we didn’t have to worry our heads about either. With a supply of energy seemingly infinite and a price close to free, all but the poorest could use as much as they wanted, entirely unconscious of how it underpinned modern life.

The end of this feast is close upon us. Our relationship with energy is destined to profoundly change, and not in someone else’s lifetime. In ours. Soon.

But this can’t be! Almost every day we hear of new sources of oil and how the US will shortly be the new Saudi Arabia. And if not us, then the Canadians, who are our good buddies, especially when we want something from them. We will have all the energy we could ever want. Forever.

The all-the-energy-we’ll-ever-need version of the future looks something like this, a recent forecast by the International Energy Agency (IEA):

  

Hey, the world supply of oil is ever increasing and by 2035 will reach 100 million barrels a day! No need for concern.

This forecast, however, only faintly resembles the reality actually approaching. To examine unvarnished reality we must untint our rose-colored glasses with the following five steps.

First step. Let’s turn that bar graph into a continuous line graph, courtesy of Antonio Turiel, a scientist at the Institut de Ciencies del Mar del CSIC in Barcelona, who created all the following graphs and published them in a post here, in Spanish. A translation of his excellent original article can be found here. (The blog post you are reading is largely a reinterpretation of his points for those who may not be familiar with the concepts and vocabulary that energy specialists are wont to use.)

So let’s look at what we have. The black wedge at the bottom shows world crude oil currently in production (real data through 2011.) The light blue shows production that will come from crude oil reservoirs known about but not in production. The medium blue is crude oil from reservoirs yet to be discovered. The magenta represents natural gas liquids. The yellow represents all non-conventional oil except shale oil, and the red represents shale oil. The green represents refining processing gains. So there you have it. Up, up and away. We'll all be zipping around in flying cars before you can say, “Frack, baby, frack.”

Step two. Now we must consider that what’s important about an energy source is not how much space it fills (such as a barrel) but how much energy it possesses per volume. And it turns out that not all “oil” is equal in this regard. All non-conventional oils have lower energy per volume than crude oil—roughly 70%. (Corn-based ethanol has only 66% of the energy of oil. This is why your car gets worse gas mileage when you fill the tank with ethanol-blended gasoline.) So a barrel of non-conventional oil should count for 70% of a barrel of crude, not a full barrel as the IEA counts it. Step two takes care of this.

Step three. Refinery gains are not energy gains and should not be double counted as additional energy. It takes as much energy in the refinery process (these days usually provided by natural gas) to create the additional volume of oil you get from these so-called gains. So what the IEA counts as a gain is just translating one form of energy for another (and losing some in the process) rather than creating additional energy.

After adjusting our rosy glasses with steps two and three, our view of oil reality now looks like this:

Taking into account energy content and refinery gains

A little less exuberant, though seemingly no cause for concern. After all, the overall trend is still up. Notice, however, that the IEA claims that in 2011 the world produced 86.2 million barrels of “oil” per day (mb/d). But when we apply steps two and three and translate this production into the energy equivalent of a true barrel of oil, we end up with only 79.5 mb/d. (This is part of the reason why oil prices are still high even though we constantly hear about oil production going up.) In addition, after applying steps two and three, the forecast for 2035 drops from 100 mb/d to 87.5 mb/d. This is starting to look a little tight, but, hey, no worries. Someone will think of something, and nothing much will change. Except we still have steps four and five ahead.

Step four. We have to consider Energy Returned on Energy Invested (EROEI). This isn’t a difficult concept to understand, but it is quite different from how we thought about energy for pretty much the entire twentieth century.

It takes energy to make or capture energy in a form we can use. Back when you could practically stick a straw in the ground in Texas and get oil to spout out, we could produce 100 barrels of oil energy for just one barrel expended. What a deal! Over time, the easy oil was all sucked out. Over time, that left the more difficult oil to extract. Today we get about 20 barrels of oil energy for every barrel expended. But still, that means we only lose 5% of the energy. Not too bad.

But now even that moderately difficult stuff is declining and we’re forced to go after oil that has an EROEI of around 5 or so. So with this oil we lose 20% of the energy in just getting it. This is why this oil didn’t get used up first—it’s not as profitable.

Now let’s consider the petroleum yet to be discovered. Why hasn’t it been discovered? Because this oil is the stuff no one wanted to go after until the price of oil was high enough to make it worth it. These reservoirs (which geologists think are likely there, but again, haven’t been confirmed) are mainly in deep waters, are trickier to find, to drill, to pump out, and have high rates of decline. They also have more problems with maintenance and shutdowns. (Think hurricanes.) The petroleum that might be in the Arctic is fraught with even more difficulties. The result is that the EROEI for this yet-to-be-discovered oil sinks down to 3. We will expend a full third of the energy just getting the oil out. If we’re lucky.

Biofuels (especially corn-based ethanol) have an EROEI of 1 or less. (It takes a heck of a lot of energy to grow corn and then process it into fuel. Worse, with the Midwest drought we are quickly reaching a point where we need our arable land to actually produce food again.) Shale oils have an EROEI of 3 or less. Again, the IEA numbers ignore the energy in part and just count the energy out.

Put all the EROEI considerations together and we get a net oil energy picture that looks like:

Taking into account EROEI

With our glasses de-rosified, we see that as oil becomes more and more energy-intensive (and expensive) to get out of the ground, oil production peaks in 2015 and then sinks to 79.7 Mb/d in 2035. Not so rosy after all.

Now at this point you might be asking why can’t we count oil that was essentially created from natural gas (via refinery gain or ethanol) even if there is no energy gain or a small loss? If we have plenty of natural gas, is it so bad to use it to create the oil we desire? The first problem with this is that there won’t always be as much natural gas available as there is now. In fact, in the US, natural gas comes in boom and bust cycles. During boom years when the price is high, companies start drilling like crazy to get in on the profits. Soon we have so much natural gas, it becomes dirt cheap! But then all the companies that drilled like crazy begin losing money and cut way back on drilling. (This is where we are now.) Since the wells have high decline rates, natural gas production drops dramatically within a few years. Then, as supply falls and the price shoots up, the cost-effectiveness of turning it into “oil” plummets, refineries stop using it as an energy source, ethanol (unless wildly subsidized by the government) disappears altogether, and the cycle starts again. In addition, since natural gas is not infinite, it should be put to the best possible use, arguably electricity generation in place of coal. We also have to consider that the EROEI for natural gas is not great—only about 10 when we include shipment/transportation to the end user—and appears to be falling. Add on to that, there are environmental problems with fracking, and add on to that, even natural gas contributes to climate change, so within the next couple decades we need to wean ourselves from it as an energy source as well. In the end we have to comprehend the energy available to us as an entire whole. By pretending that converting one source of energy into another creates new energy, we double count the energy and distort both our understanding and our decision-making.

We have one more step to truly clear our vision: the fifth step, which has multiple parts.

The IEA projections of oil production include an optimistic 3.3% decline rate per year from current wells. The observed historical decline rate is 5%. Which decline rate should we be counting on? Step five says use historical precedent.

Some of the oil projected to be produced is of a form so costly to refine or in areas so difficult to extract that this oil will ultimately stay in the ground because no one will pay the price it takes to produce and/or refine it. Reserves aren’t reserves if, for example, gasoline needs to be $30 a gallon to make the economics work out. If gasoline did rise to $30 a gallon, very little would be sold because it would leave households with no money for anything else. So the really difficult stuff just isn’t ever going to see the light of day. Step five subtracts them off.

The IEA projections assume a profoundly unrealistic pace of discovery of as-yet-unknown reserves, a rate four times greater than what has actually occurred over the past 20 years. (And this while oil prices quadrupled.) In addition, oil companies have proven to have less appetite for risk and investment during times of economic uncertainty, making them less likely to go after high risk plays that may or may not pay for themselves. Step five fine-tunes the projections in line with historical precedent.

A substantial amount of projected “oil” production is natural gas liquids. But only one third of these “liquids” (they are actually gases) can be refined into gasoline.  (And they can’t be refined at all into diesel.) So they are overstated as “oil” by two thirds. In addition, due to shale oil’s dramatic decline curves, intense water usage, and cost of horizontal drilling, Turiel believes the IEA’s optimistic estimates of how much shale oil will ever be produced are overstated by half. Step five corrects these overstatements.

So here is the final graph of world oil net energy that awaits us looking through our reality-based glasses that are now clear of distortions:

Net Oil Energy Reality

This is possibly the most important graph you will look at this year. What we have is a very serious downward slope that starts very soon. In fact, it’s started all ready. 

Oil provides 36% of the energy that the US consumes. We import 48% of the oil we use. (Energy-wise, not barrel-wise.) Oil currently powers 96% of our transportation. We are less than 5% of the world’s population but use 22% of its oil. At the moment the world produces only about 70 mb/d of real oil energy, and by 2018 this output will likely drop by almost a fourth. Even more ominous, oil-exporting countries such as Saudi Arabia, Mexico, Russia, Iraq, Canada, Algeria, and the UAE are using more and more oil domestically, leaving less for importers (like the US) to buy on the world market. (In 2012 there was 5% less oil available on the world market for importers to buy than in 2006.) And last but not least, there are a number of up and coming countries (like China, India, Vietnam, Brazil, and Turkey) who historically have used very little oil per person, whose use has increased the last five years, and who want to use a whole lot more. If it weren’t for some European countries dropping oil consumption like a rock (UK, Spain, Greece, Italy, Portugal—they’ve all dropped consumption by 6 – 11% in 2012 alone) the US would already be in a world of hurt (even though we’ve also dropped our consumption slightly.) But the time is not far off. 

The good news is that in the US we waste energy like crazy, so we could cut our energy use in half and still have a comparable standard of living. The good news is the EROEI for solar PV has been rising so it’s now close to 7, and the EROEI for wind is over 20. The good news it’s easy to drop energy consumption with house insulation, whole house fans, ceilings fans, heat pumps, bicycles, trains, rail freight, LED lights and living close to shops and jobs. The bad news is we’ve waited to the last minute to do all this, so the change is necessarily going to be dramatic and uncomfortable. The other bad news is that this decline in oil consumption won’t save us from increasingly violent climate change. It’s going to take the world getting off both coal and oil and a worldwide program of massive reforestation to do that.  

Perhaps the most obvious bad news is that cars with internal combustion engines (99% of all vehicles on the road) are going away in the US, likely half of them by 2018. Currently the average household has two cars. By 2018 this will drop to one. Currently the average household travels 19,652 vehicle miles/year. By 2018 this number will be under 10,000. Though this may seem unimaginable, the fact is internal combustion engines are an extraordinary waste of good gasoline. Our cars fritter away a full 3/4ths of the energy in every gallon, largely in the form of heat. Gasoline is amazing stuff. Each gallon is easily equal to three weeks of human labor. If we paid its value in minimum wage, the price at the pump would be $870.00 per gallon. As the amount available decreases, you can bet its dense, portable energy will be applied to far more efficient, productive uses than propelling 5000 lbs of metal to the grocery store in order to transport 8.4 lbs (a gallon) of milk home.

But won’t everyone just drive electric cars, you might ask? Right now in the US 37% of our electricity comes from coal. Not only can we not increase our electricity consumption, we need to decrease it until enough solar PV and wind can be built out to replace the electricity coal produces. (We also need to seriously upgrade our nation’s electrical grid infrastructure.) If we try to power electric cars with coal we will turn this planet into a crispy tostada. Yes, some rich people might have electric cars (along with a very large home solar array) but for the bulk of the population it’ll be at least a 10 – 15 year wait before enough electricity that won’t destroy the planet will be available to power even one electric car per household to go 8000 miles a year. In an energy-limited world you can count on transit and rail (far more energy-efficient than private cars) to predominate for long trips. (We won’t even mention the enormous difference in energy it takes to maintain a vast road network versus rail tracks.) For short trips, since walking and biking win out hands down energy-wise, you can expect Americans to relearn what our legs are for.

If we’d started twenty years ago to prepare for the energy transition ahead of us, we’d be in much better shape. As it is, fasten your seatbelt, or (you bicyclists) hold on tight to your handlebars. The end of the age of oil means we’re in for bumpy ride.