The problem of energy

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Introduction:

On almost a daily basis, we hear that energy prices are going up. Media sources, the government, energy producers, consumer and environmental groups provide a constant stream of reports, articles, interviews, and opinions on the subject. A lot of information from different sources, sometimes with their own agenda...who do you trust? This paper will try to pull together reliable facts, citing the sources and providing links to the source documents, that will answer the following questions:

-- What is the problem?

-- How does it affect each of us?

-- How can I avoid it, or is there a way I can benefit?

-- What are my options?

-- How do I do this?

-- What will it cost me?

-- How do I pay for it?

-- When do I need to take action?

Background:

Energy resources are used for generating electricity, for transportation, for manufacturing, and for heating. Renewable energy sources (biomass, hydropower, geothermal, wind, and solar) provide for only 6.1% of US energy consumption. Nonrenewable resources (fossil fuels and nuclear power) provide for the remaining energy consumption, and within this group, fossil fuels provide for 85%.1

Projections from the DOE's (Department of Energy) International Energy Outlook 2006 indicate continued and strong growth for worldwide energy demand for the forseeable future. Fossil fuels will continue to provide for most of this demand.

What is the problem?

There are a couple. First, there's a limited supply. At 2003 consumption levels, there are 44.6 years of oil and 66.2 years of natural gas supply remaining.2 The growth in oil consumption, in part due to new economies in China and southeast Asia, has taken up much of OPEC's spare production capacity.3 Over 68% of the world's oil producing countries show declines.4

The second problem is the location. A breakdown of proven world oil reserves shows the Middle East with 65%, South and Central America with 10%, Africa with 7%, the U.S. and former Soviet Union with 6% each, Asia Pacific with 4%, and Europe with 2%.5 The World Coal Institute reports that there is enough coal to last over 155 years. A breakdown shows the U.S. with 27%, Russia with 17%, China with 13%, and India with 10% of the world's recoverable reserves.6 The top producers of natural gas, the cleanest burning fossil fuel (proven reserves) are Middle East with over 40%, the former Soviet Union with over 30%, 27.5%, the , the U.S. with 3.1%, Africa with around 6%, the U.S. and Canada with 4%.7 As you can see, most of the world's proven reserves are located in OPEC countries, some of which are involved in external and internal struggle, or are thought to provide funding for terrorist activities. Venezuela, owner of Citgo Oil Corporation, is transitioning into a socialist form of government. Its leader, Hugo Chavez, is friendly with Iran and is a vocal critic of the U.S. The question becomes "Is the money we spend on energy funding terrorist and other activities, and if so, how much?"

Once you get beyond the supply and location of the resource, you have to get it to market. The Middle East conflict, Iran's increasingly militant stance, and the ease at which terrorist organizations can move throughout the Mideast, could potentially choke transportation through the Red Sea and Strait of Hormuz. Transportation of LNG (liquified natural gas) provides its own challenges due to numerous environmental and safety concerns. Coal requires mining, either in surface "strip" mines or underground through use of tunnels.

Finally, you need to take a look at how you're going to use it. Most of the natural gas and coal is used to generate electricity, while most of the oil is used in transportation and manufacturing. Demand for electricity is increasing worldwide with estimates as high as 40% by 2030 in the U.S.

How it affects each of us:

There are 3 major effects; higher prices, increased greenhouse gases (and global warming), and a limited supply that will eventually run out. There is no way to get around these given our current pattern of use.

The Energy Information Administration's Annual Energy Outlook 2007 with Projections to 2030 (Early Release) predicts a slow decline from 2006's $69 per barrel to around $50 per barrel in 2014, then rise towards $59 per barrel in 2030, based on 2005 dollars. The wellhead price for natural gas is projected to decline to just below $5 per thousand cubic feet in 2015 and then increase to around $6 per thousand cubic feet in 2030. A potential problem is that imports of LNG (liquified natural gas), new production in Alaska, and new production from unconventional sources may not offset increased demand. Coal prices will rise to around $36.38 per ton. Electricity will follow the same trend but rise to around $0.13 per KwH in 2030. When adjusted for inflation the cost of these resources may be significantly higher.

When sunlight heats the earth, some of this heat is trapped in the atmosphere, just as heat is trapped in a greenhouse at your local florist's. Instead of a roof, heat is trapped by clouds, water vapor, carbon dioxide, and other pollutants, commonly called greenhouse gases. Production of these greenhouse gases are largely due to human activity. As the concentration of these gases increase, global warming theory says that the earth's temperature rises creating health hazards and loss of life, increased demand for cooling (more energy use, causing still more greenhouse gases), and the potential of irreversible environmental damage, such as reduced crop production, increases in acid rain, hurricane and typhoon strength, and melting of the polar ice caps, resulting in flooding of low lying areas.

Although these major effects are certainly important, no less important are other, secondary effects such as increased global and socioeconomic instability, higher costs, and increased pollution. The financial consequences cannot be overlooked; a recent report commissioned by the British Government found that the cost of combatting global warming would be around 1% of gross domestic product per year and the cost of failing to act could be as high as 5% every year from now throughout the future.

How can I avoid it, or is there a way I can benefit?

While there is no way to avoid feeling the impact of increased energy prices, you can take action to reduce the amount of these resources you consume. By investing in clean energy and use of renewable resources, we can create new jobs, cut resource consumption, decrease environmental impact, and save money. Builders, resource suppliers, and service organizations can achieve improved profits and lower costs while improving the environment.

What are my options?

There are really only 3 courses of action to follow:

1.Continue on with your current use patterns, pay the going rate for utilities and other resources, and hope for the best.

2.Cut the amount of energy you consume by becoming more energy efficient.

3.Take action to increase use of recyclable, low impact materials, chemicals, and goods to decrease environmental impact.

How do I do this?

The best and most established program for energy efficiency is ENERGY STAR, a program developed by the EPA and DOE. The purpose of this program is to help all of us save money while protecting the environment through use of energy efficient products and services. In 2005 alone, Americans using this program saved enough energy to avoid greenhouse gas emissions equivalent to 23 million cars- and save $12 billion on utility bills. The ENERGY STAR website, at http://www.energystar.gov., provides a wealth of information for your use. If you need help beyond this, or don't have the resources available to dedicate time to this, you can get help from a variety of ENERGY STAR Service and Product Providers. There's a link at the website that will take you to a list of these organizations.

As for decreasing your environmental impact, there are a variety of environmental organizations that provide information and how-to assistance. The US Green Building Council, established in 1997, is an association of leaders from the building industry that work together to "promote buildings that are environmentally responsible, profitable, and healthy places to live and work."10 Their LEED (Leadership in Environmentally Efficient Design) program is the benchmark for high performance buildings. There are certification programs for both new and existing buildings. For more information, please visit their website.

As consumers of products and services, you can reduce environmental impact by using biodegradable and recyclable materials and employing service providers and other companies that use these products. Even such things as janitorial services can benefit by using these materials and processes. Look for products that are certified to be recyclable, biodegradable, and have little or no impact on building indoor air quality.

What will it cost me?

The cost of upgrading to an energy efficient and low environmental impact depends largely on what you decide to do. Many actions you can take have no cost, or are competitive with your current expenses. The ENERGY STAR program provides steps that will pay for themselves over time through energy savings, and the results are impressive:

-- Improvements in energy performance and employee comfort can increase income due to improved productivity, perhaps as much as 10 times as high as the energy cost savings produced by performing the upgrade.

-- Energy efficiency improvements provide savings for their entire product life, perhaps up to 20 years, well past the point where the savings have paid for the initial improvement.

-- Reducing energy use 30% in a commercial office building is equivalent to increasing net operating income and building asset value by 5% and lowers operating costs by $25,000 per year for every 50,000 square feet of typical office space.

Ask yourself, "How much new equipment could you buy from the dollars saved by installing energy efficient equipment now?"

How do I pay for it?

The ENERGY STAR program uses future cost savings to pay for energy efficiency upgrades today, without competing with other capital projects for funding.

If you do the project, you pay for itself through energy savings - and - if you don't do the project, you pay for it just the same through continued high energy costs.

But how is this possible? Analysis takes your cost of capital (rate at which you can borrow money), the square footage of your facilities, energy costs, your best estimate of % potential savings, term of the loan, and time value of money to provide an estimate of how much equipment can be bought without increasing your existing capital or operating budgets. The upgrade pays for itself and associated loan costs through future cost savings and provides the simple payback period. For an example of this, please refer to my article Improving Energy Efficiency Improves Bottom Line available online at Ezine Articles (www.ezinearticles.com) or from my company website at http://www.fps-fm.com.

As for decreasing your environmental impact, many new environmentally-friendly products are already cost competitive, and you can find detailed information at a variety of websites.

When do I need to take action?

Delay in taking action will only increase your operating costs, so taking action sooner rather than later is certainly the better choice. There is another reason to take action now; in August 2005, President Bush signed the 2005 Energy Policy Act into law. This measure provides for tax deductions for upgrades to commercial buildings that meet certain performance criteria. A copy of the IRS notice can be found on the BOMA International Web site at http://www.boma.org/advocacy.

Time is running out; these deductions go away on December 31,2007 although Congress may extend them during their next session.

But why wait? For all the right reasons, the time is now to improve your energy efficiency and help improve the environment.