EE & McKinsey

by Heather Rae

E&ETV covered a May 17th presentation by McKinsey Global Institute on their recent report, “Curbing Global Energy Demand Growth: The Energy Productivity Opportunity.” You can view the presentation via E&ETV (subscription required). On the future of global energy demand, Diana Farrell, director of the Institute, said: “Demand side may be the most fruitful area for focus.”

Since my personal and professional life is consumed these days with energy consumption of old homes, I went straight to the residential section of the report which states: “The residential sector is not only the largest single energy end-use sector, accounting for one-quarter of global demand; it is also where the largest energy productivity opportunities are waiting to be seized.”
And…”High energy prices will have very little impact on residential energy consumption – whether the oil price is at $50 or $70 a barrel. This is due to a range of market imperfections, including subsidizing pricing, principal/agent problems between renters and owners, and the difficulties inherent in measuring savings. These mean that residential energy consumers demand a very high rate of return on energy-efficiency investments.”

May 17th, the day of Farrell’s presentation, was my forty-somethingish birthday, and I whisked myself from this old house project to a spa to wash the plaster out my hair and to soothe some sore muscles.

I also needed to reevaluate my plan to replace the 78% AFUE oil-fired forced-air furnace (that’s in the unvented crawlspace) and a 50-gallon electric water heater (that’s in the make-shift kitchen) with a 96% AFUE condensing propane-fired on-demand boiler. The new boiler, being direct vent, would mean I would not need to spend $1700 to line the deteriorating chimney through which the furnace now vents. The chimney could even go away along with the water tank and the leaky ductwork. The basement would be cleared of obstructions and easier to remediate and insulate.

The plan was not looking good. I had a ballpark estimate for the job – including installation of the boiler and a new distribution system with sleek wall-hung radiators. I entered data about this old house in software called Targeted Residential Energy Analysis Tool (TREAT). (Its algorithms associate building volume with heat and cooling loads with vented and unvented spaces with stack effects and occupancy levels and fuel prices and so on.) I entered data about the HVAC improvement, and clicked, ‘Calculate Model.’

The numbers do not look good for the super-energy-efficient boiler. Yes, it’s fuel switching (from an oil furnace and an electric water heater to propane). Yes, the price of propane per BTU is much more than oil these days. Yes, the model accounts for the changes in water heating baseload consumption. Yes, yes, yes, but the results were unexpectedly awful: I need to show the bank a positive savings to investment ratio in order to get a loan (MaineHousing has 1% and 3% secured loans for energy efficiency improvements.) No loan, no new system.

It’s commonly said in the home performance/green building sector that energy efficiency competes with granite countertops and mud rooms and cherry wainscoting. In my case, the money for what I had hoped would be an energy-efficient and pocketbook-pleasing boiler is competing with framing out and insulating walls and moisture remediation in the basement, all of which have energy consumption implications. I could have a cleaner burning, more energy-efficient system, but one that will cost more in the long haul. These are my trade-offs.

McKinsey’s report finds: “Key areas for policy makers to examine include building shells, more efficient appliances and water heating, compact fluorescent lighting (CFL), and small appliance standby-power requirements. The removal of price subsidies would, we estimate, capture 10 to 20 percent of the available energy productivity opportunity.”

Home performance gets to all of McKinsey’s recommendations, except for removal of price subsidies, and there’s not much I, individually, can do about those. So instead of relishing the idea of a new boiler and hydronic heat on my birthday, I took the cash my dad sent and bought an electric lawn mower and a massage. (Thanks, Dad!)

Other Goings On This Week
Joe Lstiburek of Building Science Consulting lived up to his reputation as an arrogant SOB last Wednesday, and I enjoyed every minute of it, except, perhaps, when he took aim at ‘that lady from the testing company.’ He was referring to me…it through me off…he mocked me before a roomful of architects, taking aim at home performance and building diagnostics. An intuitive genius, Lstiburek can scoff at diagnostics; the rest of us plodders will peer into manometers and take stock of our building experience and books. Among the many Lstiburek-isms of last Wednesday was this gem: ‘fight AlQuaeda, tighten up a home.’ He’s got the cajones to say it. Thanks goodness somebody does.

Heather Rae, a contributor to, manages a ‘whole house’ home performance program in Maine. In 2006, she built a biobus and drove it from Colorado to Maine. In 2007, she begins renovation of an 1880 farmhouse using building science and green building principles.

1 reply
  1. Anonymous
    Anonymous says:

    Hello, Ms. Rae,How are you? My name is CK and I am a UC Presidential Fellow. I am quite intrigued about the profitability of "green" investments, not to mention how they are transforming the way our businesses are run. This is why I joined force with the organizers of "Opportunity Green" to explore the opportunities in this shifting trend: What kind of innovation, models, and delivery methods are there? How do we quantify the opportunity and in what time frame do we quantify it?Your blog is one of leading authority in internet space. Do you have any suggestions for us to put together a conference that will both inspire and inform the attendees? I'd appreciate your input very much . look forward to hearing from you,ckcklin_at_engineering_dot_ucsb_dot_edu

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