Green is the new black, for three reasons identified by The Economist:
 

A green-home boom is getting under way, thanks to:

1.  Rising energy prices

And rising …

2.  New standards (the European Union’s Energy Performance of Buildings Directive, Britain’s Code for Sustainable Homes and California’s Green Building Standards Code, to name three recent examples), and

Not just a good idea …

… it’s now the law

3.  Improved technologies.

By a mixture of economics and social conscience, green is grabbing market share:

Many of these technologies have been around for a while, but they are now ready for the mainstream. In 2007 McGraw Hill Construction, a research firm, reported that 40% of all renovation in America included some green features, mostly windows and heating/cooling systems. The company predicts green homes will account for 10% of all building starts in America by 2010, with new green homes worth $20 billion in that year. When housing arises from its torpor, it could find itself transformed.

Where there is cost, there is innovation:

JEFF ROGERS welcomes visitors at the door of his newly renovated house, atop a sandy ridge on Cape Cod, Massachusetts. From outside the two-storey building seems unremarkable: its neat white trim, pale-yellow clapboard siding and shingle roof have been the local style for centuries.

But the house that Mr Rogers finished last year is anything but traditional.  It uses no fossil fuel and generates its own electricity.  

Rogers, keeping cool

As we’ll see, Mr. Rogers built his home as a demonstration, not an economic bench test, and the home is a good place to start, for, as Mr. Rogers’ company notes:

In the United States alone, buildings account for:

65% of electricity consumption,

36% of energy use,

30% of greenhouse gas emissions,

30% of raw materials use,

30% of waste output (136 million tons annually), and

12% of potable water consumption.

Breakthroughs in building science, technology, and operations are available to designers, builders, and owners who want to build green and maximize both economic and environmental performance. Source: www.usgbc.org

It contains few toxic materials—adhesives, paints and insulation are all free of formaldehyde and contain low levels of volatile organic compounds, and nothing in the house produces carbon monoxide.

Not just the President, he’s also a satisfied customer

Despite housing a family of four, the house uses less than a third of the typical amount of water, thanks to modern appliances, dual-flush toilets and low-flow taps and showers. A geothermal heat pump heats and cools the house using groundwater; even though it has no air conditioning, the house is cool in the Cape’s muggy summer heat.

Nice try, Economist, but Cape Cod is not muggy.

Sandy, yes; muggy, no

On the roof, photovoltaic solar panels sit next to arrays of water-heating tubes. Inside, the bright, warm lights recessed into the ceilings are low-energy light-emitting diodes (LEDs). Even the most traditional-looking elements are unusual: the roof shingles are made of recycled plastic and sawdust. This innocuous house on a quiet lane is, in fact, one of the greenest homes in America.

Not the cheapest, to be sure, for Mr. Rogers is no ordinary homeowner:

Although Mr Rogers runs a firm called New England Green Building, his house is within the budget of many homeowners.  It is typical of a new generation of green homes that have a dramatically reduced environmental impact, but do not require big changes in their inhabitants’ lives.

Mr Rogers says his 2,100-square-foot house—just under the average for new homes in America—cost $75,000, or 23%, more to build impeccably green than it would have otherwise.

Given that Mr. Rogers is a builder, I expect his total cost excludes his labor and probably that of his company.  He also had some meaningful financial help:

He expects to recoup [his net costs] in avoided energy costs within five years.

In energy consumption, payback is a tricky thing to calculate, depending as it does on both financing terms and energy prices:

Given the recent spike in energy prices, it may not take that long.

Or if energy pries fall, as they are now with the capital markets shakeout [$63 per barrel on October 25! – Ed.], it could take longer.

All we can predict is their unpredictability

However it’s determined, once the payback works, the network works.  And government can influence that payback dramatically, especially in the energy field, both through regulated energy prices, and with subsidies and tax credits:

He received $35,000 in rebates and incentives from state and federal governments.

Although purist economists shudder at the prospect of influencing markets through incentives, the fact (which causes the shudder) is that they work – incentives channel capitalism.

Must not be an economist

When there are non-economic externalities (like people’s desire to reduce their energy consumption out of concern for the planetary ecology), incentives have the effect of putting a number on the unquantifiable. 

The result, in recent years, has been a veritable explosion of improved technologies:

Electrochromic glass, with changeable opacity, is one new avenue of exploration. Some of the most promising is produced by a fir called Sage Electrochromics, based in Minnesota. Its product, which consists of sheets of glass with a metal-oxide coating, was first used in skylights in 2003. When a voltage is applied across the coating, the window darkens, allowing less light to enter but still permitting a view. America’s Department of Energy (which developed low-e coatings in the 1970s) has used this glass, along with an insulated sash, to develop a “zero-energy” window that saves more energy in reduced heating and lighting than it needs to operate.

Energy conservation will come, I think, through these auto-adjusting systems.

An even bigger leap may come from refining an older idea. Sheets of glass separated by a vacuum could bring windows’ insulating properties up to par with insulated walls, yet allow them to be nearly as thin as single panes of glass. The idea of vacuum-insulated panes has been around for nearly a century, and NSG/Pilkington, a Japanese firm that is one of the biggest glassmakers in the world, has sold such panes since 1996. But they remain a technical challenge: the difference in temperature causes the inner and outer sheets of glass to expand by different amounts, so that NSG/Pilkington’s windows can be used only where the temperature difference is less than 35ºC [for you Americans, that 63º, which means that if it's going to be 72 inside, it can't be colder than 10 outside], which rules out many homes in need of insulation.

Thermopane windows have been around for thirty years in affordable housing.  They almost always crack and fog.

Once the home has been duly sealed, the flow of air, moisture and heat in and out of it can be carefully controlled. Mr Rogers’s home features a heat-recovery ventilator—a device in his basement that filters incoming air and exchanges heat between incoming and outgoing air. Such devices can remove stale air from a home while retaining 85% of its heat.

Yes, but recall Padfield’s Law of construction complexity:

Steve Harris, a principal at ZEDfactory, an architectural firm based near London that designs green residences, prefers to use a special heat-exchanging wind cowl his company has developed. It uses no electricity, yet is able to recover 70% of the heat of outgoing air. The device, an angular scoop on the top of a home, has become a signature of the firm’s style, and will soon be commercialised for broader use.

Don’t laugh, they save money

The less precisely the technology has to be calibrated, the better.

The best-known green-home technology must surely be the compact-fluorescent light bulb, the very icon of green living.

We’ve all got used to seeing these, and seeing by these

Compact fluorescents use about one-third as much electricity as incandescent bulbs to produce the same amount of light.

High-precision in manufacturing, low-precision in maintenance – that’s the path to sustainability.

Yet the technology that will eventually eclipse it now makes economic sense, with the long-anticipated arrival of LEDs—a 40-year-old technology—in home lighting. But new LEDs use just 12% and can produce light of similar quality to warm halogen bulbs.

A bright future?

The classical incandescent bulb is horribly inefficient, pumping out much more heat than it does light.  Finding technologies that generate light efficiently, with minimal excess heat loss, holds the promise of vast energy savings.

With lifetimes measured in decades, they are a clear improvement over incandescent bulbs. “It’s the difference between a cellphone and the old rotary phones,” says Gary Trott, an executive at Cree, an LED manufacturer in North Carolina.

Some of us learned our dialing on these black beauties

Last year Cree began selling a dimmable LED version of common recessed ceiling fixtures. The firm estimates that under typical conditions, these lights could pay for themselves in five years, and save hundreds—or, where lights are left on more, thousands—of dollars over their lifespan.

The LED is poised to revolutionise the lighting industry. Philips, a big Dutch electronics firm which claims to have made one out of every four lights worldwide, says sales of LED lighting grew by 30% last year in an overall market that was worth €700m ($960m). Thanks to a string of acquisitions, its “green lighting” sales grew by 17% last year, with the strongest growth, tellingly, in home lighting.

There’s just one weak link to engineer: the wetware thermostat.

That’s what tax credits are for.

Reader, you are the weakest link: goodbye.

Send post as PDF to

Give people choices, and by golly they’ll make them — and maybe make better ones than you’d expect.

That’s the implication behind this story on a novel approach to utility consumption and payment described in this story from The Wall Street Journal:

Peter and Suzanne Price haven’t paid a monthly electricity bill since June 2006, but not because they’re living off the grid. They’re participating in a pilot program in Sacramento, Calif., that lets them buy electricity on a prepaid basis.

As we’ll see in just a moment, the Sacramento program contains two ideas, one about credit (the prepayment plan) and one about consumption.

The program is part of a growing trend in which U.S. utilities are experimenting with pay-as-you-go service that is supposed to encourage energy conservation — but also has raised fears about abrupt service shut-offs.

‘Fears of shut-offs’?  That’s worth examining, as it could happen for either of two reasons:

·         The customer runs out of cash (to top up the card).

·         The customer has no idea he’s running low.

Now, about that utility bill …

Mr. Price, a retired computer programmer, drops by the office of his local utility, the Sacramento Municipal Utility District, every six to eight weeks and pays enough to cover a month or two of service.  

Prepayment involves cash management in a way that borrowing does not.  That defect could be corrected if SMUD [Did the utility really want that as its acronym? -- Ed.] treated it as a deposit and paid interest on it — or, if not a true checking account, offered a bonus credit. 

I guess they did …

My health club sells something it cutely calls ‘Club Cash,’ essentially a means of prepaying for court time, and gives me a little vigorish when I do.  So the Careful Shopper calculates the implied interest rate, assessed against the risk that we will never use the court time, and acts accordingly.  Decisions about prepaying almost always involve projections, explicit or implicit, of our future consumption.

The credit is loaded on a smart card that he uses to download information into his home electric meter.  The couple keeps track of the credit balance with the help of a small electronic display, located in the kitchen, which talks to the meter.

For that matter, there’s no intrinsic reason why the utility couldn’t simply tap Mr. Price’s bank account, in an autopay approach similar to standard electronic bill-paying.  Then it would be Mr. Price’s bank that could have a flexible overdraft policy … or not.

Here’s how we deal with your overdraft

In the early months of 1971, I was touring around Europe, staying in cheap hotels whose room heat was optional: shove a shilling in the gas fire, turn the dial, and you got a bit of radiant heat.  If you were poor, as I was then, you really rationed your shillings.

Feed me shillings, I will warm you

But that ancient pay-go gas fire lacked an important choice feature: consumption variability.  That problem can be solved with smart cards:

On a recent June morning, Mr. Price pushed buttons to see what the display box could tell him about his energy use.  It said his 1,650-square-foot stucco home was using nine cents of electricity an hour.  The home, built in 1969, had used $1.02 of power so far that day, $2.61 a day earlier and $62.52 the prior month.  Most importantly, it said he had enough credit remaining for about 28 days of use. “It tells you things you couldn’t have known before,” Mr. Price says of the box.

Knowledge is power, isn’t it?

Experimentation with prepaid-service meters is part of a broader trend that is changing the electric meter from a dumb recorder of kilowatt hours consumed into a conservation tool capable of helping people monitor their use and which will allow utilities to talk directly to customers.

Numerous experiments that confirmed that biofeedback works; show a person (say) his heartbeat and he can calm himself down.

Visualize lower utility bills … calmer now?

Utility electro-feedback is even more direct, because you can just turn the thermostat down or up, slide the window closed or open, or flip the light switch off.  In short, by making the connection between use and cost manifest, you invite conservation.

Billions of dollars are being spent by utilities to install advanced meters that track the amount of energy consumed at different times of the day…

That knowledge is a two-edged sword, for it also empowers the providers, the utilities, to use variable pricing.

Run meter and pay 10 times amount shown

… a capability that is expected to lead to rate plans that include higher prices when wholesale energy costs are higher and cheaper prices at times of slack demand.

Load balancing and demand pricing is a coming thing.  I type this here in an oversold aircraft, surrounded by people no two of whom probably paid the same ticket price I did, and not surrounded by a few other overbooked people who wanted the seat I now occupy but were persuaded to take a later flight because of their ‘flexible travel plans’ (as the gate agents chirp) plus the inducement of a ‘free round-trip anywhere we fly in the continental United States.’

How much electricity do you want, and when do you want it?  That’ll determine what you pay. 

Still, reducing consumption has its side benefits:

But it’s also possible that utilities trying to reduce carbon-dioxide emissions from power plants in response to looming global warming legislation could use the meters to encourage conservation.

Policymaker alert: rules invite subversion; incentives invite compliance.

We have no tee-shirts for you in our system

If more people paid for electricity in advance, like they do for gasoline, they might want to make it stretch further.

Salt River Project, a Phoenix utility with the largest prepaid program in the U.S., said it has observed a conservation effect among its prepaid customers, with a 12% reduction in average bills.

12% savings would be worth something, wouldn’t it?

In the next few years, some experts expect prepaid electric service to become a standard feature of U.S. utilities, as it already is in the U.K., China and South Africa.

We have to separate the two initiatives — prepaid credit from real-time consumption monitoring. 

Just try prying apart the monitoring from the credit scoring

The fact is you can do either alone, and of the two, real-time monitoring is preferable.  It adds benefit (creating an option) with no new risk (shutoff rules are the same as before).

Whereas prepaid credit, as we’ve observed, is a blessing much more mixed, one that invites questioning the offeror’s motives:

Some customers, however, are wary that the prepaid service could leave them in a lurch if they are late on their bills. Steven Smalley, another participant in the Sacramento program and a retired employee of the state’s foster-care system, says his electricity was cut off after he lost track of his account balance.  

He’s good enough, he’s smart enough, and doggone it, he can manage his finances

“Now I worry about being shut off,” he says. “It was so much easier to just write a check once a month.”

Mr. Smalley says he doesn’t like going to the utility office to reload his smart card.

Soon neither he nor any other prepaid user will have to.

A utility manager said he agrees that broader deployment hinges on giving consumers a way to deposit money in their accounts via telephone or the Internet, options not currently available under the tiny pilot program.

Throughout these posts I highlight convergence — trends that are intersecting as the revolution in information technology makes so many more services omnipresent through cyberspace.  Convergence is arriving in people’s homes: as the Web grows in bandwidth, ever more things can be done in the home, and probably more time will be spent in the home. 

The maker of the meter used by the Sacramento Municipal Utility District, Ampy Technology Inc. of Peterborough, England, is working on a meter that will have the two-way communication capability needed for remote payments, such as over the Internet. A company spokeswoman said it’s not far off.

In this little utility program, consumption and banking meet, in the unexpected venue of the home.

One reason prepaid service is gaining support among utilities is because it can help relieve an accounts-receivable problem when customers consume more energy than they can afford.

Those of you unfamiliar with affordable housing may not appreciate what’s hiding within that euphemism.   If a property gets in trouble, many an owner or manager simply allows the payables to run up, and the decision as to which payables to pay, and which to ignore, depends largely on economic pragmatism — whose goodwill do I need more?

From the standpoint of rental owners and their cash management and shutoff risk, all utilities are not created equal.  Electricity flows continuously over wires; natural gas hisses steadily through pipes.  However, oil heat (an anachronism with a large installed base here in the Northeast) must be delivered in great big oil trucks.

You want my oversized load deliver, you gotta pay me to show up

It’s well-nigh impossible for a large public utility to cut off the gas or electric — someone has to physically order the shutoff, and whoever does is excoriated in the newspapers — but it’s very easy to shut off the oil; the man with the truck simply declines to fill it and drive to your property.

With prepaid service, the customer is in control and doesn’t face a monthly surprise when the bill arrives.

Information = choice.

If an account zeroes out, the flow of electricity stops. (Most utilities keep power flowing on nights and weekends, but people usually aren’t allowed to get more than a couple of days behind before service shuts off.)

So, as one expects, there is a grace period.

Experts say people quickly learn to ration their use, just as people learn to eliminate unnecessary car trips when gasoline is expensive.

Eco-feedback.

We’re so happy you’re willing to accept being cold.

Earlier I mentioned the costs of prepayment — you the poor person deposit money with me the rich utility, and I give you no interest for doing so.  That reverses the normal flow of cash.  But there’s some good news too:

Utilities typically eliminate an array of annoying fees. For those on prepaid service, there usually are no security deposits, late fees, disconnection fees or reconnection fees.

Once a therm is fired or a kilowatt lit, it is lost forever, so the credit provider (the utility) has no collateral to recover.  Prepayment simplifies the credit decision, and that’s a big deal because prepayment enables a utility to extend credit without doing a complex credit check. 

Salt River Project says it has 55,000 of its 920,000 metered customers on prepaid service. It initially offered the program to customers who were having trouble paying their bills. As an alternative to being shut off, customers were given the option of prepaid service, and the standard security deposit of $240 was waived.

That brings people in to the system, as saving precedes borrowing.

“We have some customers who owe us $1,000 or more,” says Hugh Fowler, a customer service manager at the Sacramento district. “But none of our prepaid customers is behind.”

Another form of eco-feedback — a customer cannot get very far in debt without knowing it, and without some elements of auto-interrupt that discourage further borrowing.

Now, some people are asking for prepaid meters because they can buy electricity in increments as small as $1 or $5 at some 62 kiosks in the Phoenix area. “We think this gives people their dignity back,” says Ms. King. “It gives them more control over their use and payment than they ever had before.”

More convergence; Salt River is no longer just in the utility business, it’s in the banking business.  In fact, it’s become a microlender, albeit with guaranteed repayment (because the customers will use the power).

Not only have I an energy aura, I’m also in the banking business

So far, it’s mostly municipal utilities that are offering prepaid service, in part because they do not need approval from state utility commissions to bypass the usual rules governing disconnections.

That’s the bad-debt collection euphemism returning.

Many states restrict shut-offs for nonpayment, for example, during periods of extreme heat or cold.  Thus, utility regulators will need to decide whether prepaid customers should retain that protection.

Back in 1971, I was willing to shiver (and wear two sweaters to bed) because I was poor, and had to live cheap.  Today, Nancy’s got the entire house set and set back to use as little energy as possible, because though we’re not poor, we’re still both cheap. 

Pick any two?

People can choose if they have information, understanding, and genuine freedom of options.  If they have those three things, they will choose. 

Children are told what to do and not to do.  Adults, of whatever background, education, and income, should have the right to their own choices.

Give me a chance, and I will.

Send post as PDF to