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Negawatts and Megawatts – When Less Makes Money

The views expressed are those of the author and are not necessarily those of Scientific American.


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Note: Many statements contained in this piece are the result of an in-person interview between the author (Melissa C. Lott) and Chevron Energy Solutions’s President, Jim Davis in the fall of 2011.

In the future, the world will demand more energy than it does today. While the exact amount might be disputed, with a global population expected to hit 9 (perhaps even 10) billion people by 2050, it is easy to see that the world’s demand for resources – including energy – will almost certainly increase. How society chooses to supply these megawatts of additional energy demand will have many impacts on the long-term sustainability of the world’s energy systems. And, the best way to supply the megawatts that society demands could be to not supply them at all.

In the heart of San Francisco, on the 18th floor of 345 California Street lives a division of the second-largest energy company in the United States (ExxonMobil currently holds the top spot). Its parent company is one of the world’s largest producers and suppliers of oil and gas, but in this division more energy isn’t better – instead, less makes money. With its focus on energy efficiency (negawatts) before generation, Chevron Energy Solutions has found ways to successfully reduce the energy and environmental footprint of not only its parent company’s worldwide buildings, facilities and processes, but also government and public-sector facilities around the nation. And, since its creation in 2000, this company has demonstrated how energy efficiency can be a winning and profitable business model.

Over the past 11 years, Chevron Energy Solutions has completed hundreds of projects that represent billions of dollars in energy savings. As a result, the company has helped to eliminate millions of metric tons of greenhouse gas emissions and saved the country millions of gallons of water – all the while raking in a solid profit for Chevron shareholders. Examples of these projects can be found around the country.

One such project was completed in Colorado in 2009. Here, at the state’s Capital Complex facilities in Denver, Chevron Energy Solutions engineered and installed energy efficiency improvements including building envelope and lighting retrofits, energy management systems, and HVAC system upgrades on 20 of the state’s government buildings. These retrofits, combined with the ground source heating and cooling at the Governor’s mansion and a more than 100-kW in solar PV installations, led to an overall reduction of the state’s energy demand for these buildings more than 30%. Since their installation, these upgrades have been responsible for reducing the state’s carbon dioxide emissions by more than 8,000 metric tons per year. Perhaps even more impressive, this project turned historic landmarks that were constructed in the late 1800s and early 1900s into some of the most energy efficient buildings in the nation (five are now LEED certified).

 

Photo: Night Shot of Colorado's Capital Complex

Very different examples of Chevron Energy Solution’s projects can be found in California and Maryland, where a greater portion of the final design was dedicated to clean energy generation. At California’s Pierce College, Chevron Energy Solutions effectively combined generation and efficiency by not only installing a 360-kilowatt (kW) cogeneration system, but also including waste heat recovery for use in heating the college’s outdoor pool. At Maryland’s Fort Detrick, reliability and resource use efficiency were the focus in a design was prepared for a new Central Utility Plant (CUP). This facility now provides efficient high reliability electricity, steam, and chilled water to facilities owned by the Army, Department of Homeland Security (DHS), and the National Institutes of Health (NIH).

Photo: Inside of Fort Detrick's Central Utility Plant (CUP) in Maryland

In total, Chevron Energy Solutions has completed hundreds of projects for customers around the United States. But, its biggest customer is its parent company – since 2000, the Energy Solutions division has delivered over $430 million in savings to its parent company through efficiency measure and clean generation technologies at its facilities around the world. And, with each project, this small division living within an oil giant has demonstrated the power of negawatts versus megawatts.

Negawatts refer to units of energy demand that are removed using energy efficiency. In the United States, negawatts represent some of the cheapest and most abundant sources of energy currently available. In the 2009 report by McKinsey and Company on “unlocking energy efficiency in the United States,” it was estimated that the US economy could shed non-transportation energy consumption by 23% by 2020, representing more than $1.2 trillion in savings for $520 billion in upfront investments. But, according to this report, the ability of the nation to achieve these savings will only be possible if it can overcome some significant barriers. In particular, the US is in need of an integrated strategy that:

  1. Recognizes energy efficiency as an important energy resource
  2. Formulates and launches a portfolio of proven, piloted, and emerging energy efficiency technologies and strategies
  3. Identifies ways to provide the capital necessary to fund energy efficiency projects
  4. Forges alignment between utilities, regulators, government agencies, manufacturers, and energy consumers
  5. Fosters innovation in the development and deployment of next-generation energy-efficiency technologies to ensure ongoing gains

This strategy would undoubtedly help to pave the road for widespread energy efficiency in the United States. And, over time, this strategy could prove to be a winner for more sustainable energy systems design. But, in the private sector, an oil giant has shown that, while a federal energy efficiency strategy could be widely beneficial, reducing the nation’s energy use can already be profitable.

At Chevron Energy Solutions, President Jim Davis and his team of just over 300 employees (about one-third are degreed engineers) see energy efficiency as one of the sharpest and strongest tools in our toolbox in meeting future energy needs. And, in using energy efficiency before implementing clean generation technologies, this energy services company shows the economic argument for first reducing demand. To understand how Chevron Energy Solutions has shown the power of economic energy efficiency projects in the United States, let’s look at their work in terms of the 2009 recommendations from McKinsey & Company.

1. Recognize energy efficiency as an important energy resource

Chevron Energy Solutions is built upon a business plan developed by its President long before he joined the ranks of the oil and gas giant. In this plan, Mr. Davis looked at energy customers in a holistic manner, from both a supply and demand perspective. Utilizing his business and commodity trading background and experience working in the middle of the deregulation of natural gas wellhead prices in the late 1980s, Mr. Davis took his understanding of how demand impacts a company’s bottom line and turned it into a successful business that focuses on efficiency first – and generation second.

If you ask Mr. Davis why Chevron Energy Solutions prioritizes energy efficiency, his answer is clear – his company thinks in terms of decades, not quarters and it recognizes the fact that energy efficiency is not only the cheapest resource available but also one of the most abundant. He does not think that there is much sense in putting solar panels all over a building with an inefficient building envelope or overblown lighting designs. And he will show you, through your pick of the company’s hundreds of projects, how efficiency before generation led to a better outcome for the facility’s occupants.

2. Formulate and launch an integrated portfolio of proven, piloted, and emerging energy efficiency technologies and strategies

In each of its projects, Chevron Energy Solutions is technology agnostic. Since it acts almost exclusively as a general contractor in outside projects (most of the actual construction is contracted out) and it does not directly supply the building materials or technologies that it installs, the company’s engineers focus on what technology will work best, not which is “in-house.” In this evaluation process, each of the technologies that the company implements is evaluated and tested before it is used on large projects, often through demonstrations on Chevron’s own facility sites. Over the past decade, the company has used technologies from solar thermal and PV to fuel cells, and less sexy options like more efficient pumps and motors for water supply systems and simplified lighting design. The company is constantly evaluating new technologies to meet the demands of changing work environments and project requirements.

3. Identify ways to provide the capital necessary to fund energy efficiency projects

Simple –

  • Step 1: Identify available rebates and grant programs applicable to the project.
  • Step 2: Determine the amount of internal funding that is already available (for example, existing bond funds)
  • Step 3: Find financing – Prepare a Request for Proposals and send this request to financial institutions for bids.

Each step is completed with the help of the Chevron Energy Solutions finance staff. Granted, this work is not altruistic – the company makes money when a project is executed successfully.

4. Forge alignment between utilities, regulators, government agencies, manufacturers, and energy consumers

Unlike many Energy Service Companies (ESCOs), Chevron Energy Solutions’s external projects are almost exclusively in the public sector and federal markets. According to President Jim Davis, this decision was made because these organizations typically do not have the budgets and internal staff to handle sweeping efficiency overhauls.

Photo: Chicago area classroom

For example, in a K-12 school district, staff members might be dedicated to identifying ways to build new classrooms or successfully teach the same number of children with fewer resources. But, it is rare to find staff assigned to identifying energy conservation and efficiency opportunities. Interestingly, by reducing utility bills, new classroom facilities could be easier to fund. As a part of Chevron Energy Solutions’s work, the company focuses on how to provide a comprehensive plan for these organizations. For example, the company can help to find ways to pay for replacing leaking roofs on your classrooms through energy efficiency savings.

5. Foster innovation in the development and deployment of next-generation energy-efficiency technologies to ensure ongoing gains

Chevron Energy Solutions often meets with venture capital (VC) firms to discuss potential up-and-coming technologies that it might be able to test on its facilities to establish if it might be a good fit for future project. While it does not directly invest in any of these companies, its sister company – Chevron Technology Ventures – does. And, even when Chevron has no hand in the capital behind new technology ventures, the company tries to be active in the design process for potentially beneficial technologies. According to President Jim Davis, his company prefers to be involved in the design processes early on, to help them foster their progress in a way that will increase the likelihood that Chevron Energy Solutions could use the technology in future projects.

Now, Chevron Energy Solutions is not an altruistic company whose sole aim is to help reduce society’s energy use and environmental impact. It is a business that’s first priority is to make a profit for Chevron’s shareholders. The results of this can be seen in the fact that Chevron Energy Solutions has chosen to focus primarily on the electricity side of the energy industry, effectively skirting many potential opportunities for reducing energy consumption.

In the electricity world, Chevron has relatively little to lose. Granted, a reduction in electricity demand in the US could result in less demand for natural gas or oil because both are used as electricity generation fuels. But, with natural gas sitting at $4 (per MMBtu) and oil only supplying 3% of the total annual generation in the US, the potential impacts are much smaller than if Chevron Energy Solutions focused on transportation efficiency.

So, when Chevron Energy Solutions designs proposals for its external customers that will reduce a building’s energy demand, their project is unlikely to lead to significant negative impacts on their parent company’s bottom line. By making this choice, Chevron Energy Solutions has been able to avoid internal turf wars. The company has also left many opportunities open for other businesses that might focus on energy efficiency strategies that directly reduce energy demand related to transportation sector activities.

Internally, the story is a bit different but the result is the same. At many Chevron facilities, the oil and gas that is produced on site is used directly to meet the energy needs in the facility. According to President Jim Davis, there is a strong motivation to reduce the amount of product consumed on site. Because, for every unit of oil or gas that is consumed instead of being shipped, Chevron has lost a piece of merchandise that could be sold.

Since it was founded in 2000, Chevron Energy Solutions has experienced an average growth rate of 20% per year. Perhaps the main message that this gives us is that an integrated strategy for pursuing energy efficiency can pay off. And, that the best unit of energy is often the one you do not have to supply at all.

Photo Credit:

  1. Photo of Colorado Capital Complex at night by Chevron and used with their permission.
  2. Photo from inside Fort Detrick’s Central Utility Plant (CUP) by Chevron and used with their permission
  3. Photo of classroom in Chicago area school by Chicago 2016 Photos and used under this Creative Commons License.
Melissa C. Lott About the Author: An engineer and researcher who works at the intersection of energy, environment, technology, and policy. Follow on Twitter @mclott.

The views expressed are those of the author and are not necessarily those of Scientific American.





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  1. 1. dwbd 10:03 am 11/2/2011

    What a joke. Chevron these are the guys that STOLE the NiMH battery patent, a battery that was developed with funds paid by the US Taxpayer, and since then they have sued anyone who tries to make the large format batteries for “tranportation or storage applications”. Since 2000, thanks to Chevron, the largest NiMH batteries you can buy are low output, size “F” 14 ah sells.

    The Toyota RAV4 EV’s are stilling running strong, for 10 yrs now using the Panasonic EV95 batteries, 95ah high output, which Chevron sued them blocking them from manufacturing or selling the batteries. A UC Davis study concluded that the large format NiMH batteries could be produced for $225/kwh, if made in automotive quantities. There could be millions of EV’s on the road today, as well as excellent energy storage applications, were it not for the despiccable actions of Chevron.

    By the way, Chevron was one of those companies that promoted “the Hydrogen Economy” and the Hydrogen Fool Cell vehicle as an alternative to the Electric Vehicle. They used that SCAM to convince the California Air Resources board to cancel the Zero Emission Vehicle mandate that would have put millions of EV’s on the road today. At one time Chevron called itself “the Hydrogen company” a big promoter of the NUTTY Hydrogen Economy SCAM and financed Mr. “hydrogen scam” “negawatts” Amory Lovins.

    Link to this
  2. 2. MoEnergySci 6:47 pm 11/2/2011

    @dwbd, I do not get the response to the article. Here, Chevron is doing something good (using energy efficiency in their business) in a way that is probably more sustainable (they are making money) than other programs out there. From the sounds of it this group in Chevron will probably be around a long time and will save lots of groups energy (reducing environmental footprints, etc). From what I know Chevron is the only player in big oil doing something like this. Why can’t we just celebrate the good stuff for a moment?

    Link to this
  3. 3. dwbd 8:40 pm 11/2/2011

    @MoEnergySci, the problem is that many of these Big Oil co’s, not just Chevron, Shell & BP as well, are promoting the icons of the Greenie (I would call it pseudo-Greenie) Religion. Namely Energy Efficiency, Wind, Solar, Geothermal, Biomass. And Big Oil knows damn well that as long as they can keep politicians and citizens in a delusional state of wide-eyed belief in those icons, their Energy Hegemony will remain unchallenged. Oil, Gas & Coal will continue to power our civilization, while feel-good gestures like energy efficiency will allow the gullible fool to convince themselves that something is being done to change the status quo.

    Energy Efficiency? If Chevron simply released the NiMH battery patent – which it is making ZERO dollars on as it is – that would do 1000X more to promote energy efficiency than Chevron Energy Solutions has done in its entire history. So obviously, this is just another part of Big Oil’s Bait-and-Switch SCAM. Wonderful Green Energy Solutions that trap the Gullible Fool, while the switch is you end up with the same old Fossil Fuel consumption – rising consistently as always.

    Nuclear Energy, Methanol/DME fuels, Electric Vehicles those are the Energy Solutions.

    Link to this
  4. 4. MoEnergySci 9:09 pm 11/2/2011

    @dwbd, I can not comment on the NiMH battery patent topic, since I do not personally know much about it. I will say that I would bet that “simply” releasing a battery technology would not be enough for a radical transition away from fossil-fuels for our vehicles. Without government intervention, it will take awhile for people to move to new cars. Not to mention the infrastructure requirements. I’m all for electric cars, and understand your frustration at barriers, but a transition will not happen over night.

    On nuclear energy, I don’t think that you can call it a “solution” when we can’t figure out how to handle the waste associated with fission and, even ignoring that, the water use for nuclear is huge. Sure, there’s a lot of salt water out there, but that is a whole different discussion.

    In response to your comments regarding “feel-good gestures” – from the sound of the article, this company is doing these projects because they make money, not because they want to simply look “better” or more green. Their shareholders are happy, because they are pulling in money and making a net profit. To me, this feels like a good sustainability move – they will likely be around in the future, because they are economically sustainable independent from any government subsidies.

    For me – bottom line on all of this is that efficiency is good and we should support it. If it’s a big oil company that’s pushing it forward, that’s cool. If it’s someone else or some other company, that’s cool too. As long as it gets done.

    Link to this
  5. 5. dwbd 10:07 pm 11/3/2011

    “…when we can’t figure out how to handle the waste associated with fission…”

    Waste? Only Nuclear actually contains its waste rather than freely dumping it into the air, land & water, as Coal, Oil & Gas gets to do. I will bury my one cup of Nuclear Waste generated if all my lifetime’s worth of Electrical Energy was generated by Nuclear (CANDU), on my property, if you bury your substitute 110 tonnes of radioactive Coal Solid Waste you generate during your lifetime on your property. And also you should bag up the 580,000 cubic meters of CO2 you will produce, and store it on your property. That will be a column of about 1 km high. Good luck on that. (We may give you a free pass on the SOx, NOx, mercury, arsenic, cadmium, lead etc that you will dump in the environment).

    Also, I don’t see why you should get away with burning up that 420,000 cubic meters of oxygen for free, whereas I don’t burn any for my Nuclear Power. How about a reasonable charge of $1 per cubic meter, that’s a bill to you for $420,000 for wasting the Earth’s Oxygen needlessly. Both Coal & Natural Gas release > 100X more radiation to the environment than Nuclear:

    http://www.scientificamerican.com/article.cfm?id=marcellus-shale-natural-gas-drilling-radioactive-wastewater

    http://www.ornl.gov/info/ornlreview/rev26-34/text/colmain.html

    “…even ignoring that, the water use for nuclear is huge…”

    No, water use for Nuclear is similar to Coal, and somewhat more than Gas Generation, not counting Fracking high water usage. Geothermal uses more water than Nuclear. Hydro uses 10X the water of Nuclear, due to evaporation from reservoirs. And Biomass uses ~100X the water of Nuclear, per unit Energy produced.

    “…this company is doing these projects because they make money, not because they want to simply look “better” or more green. Their shareholders are happy,..”

    NO they are a wholely owned subsidiary of Chevron – the ones who suppressed the NiMH Electric Vehicle battery, pushed the $50billion H2 fool cell & H2 economy SCAM down our throats, and fund anti-Nuclear greenie organizations and corrupt politicians to prevent any REAL SOLUTIONS to the Peak Oil, Global Warming, Imported Energy Job Losses, Terrorist Funding Energy Trade etc CRISIS. They DO NOT deserve ONE IOTA of credit for financing one of their puppets – Amory Lovins – Energy Efficiency GreenWashing Disinformation SCAMS.

    “… efficiency is good and we should support it. If it’s a big oil company that’s pushing it forward, that’s cool. If it’s someone else or some other company, that’s cool too. As long as it gets done…”

    Yep, it is getting done, and Big Oil, including Chevron is blocking it, a lot more than they are helping it – example the NiMH battery patent, and any fool can & does improve Energy Efficiency as I have done many times – because Energy Costs me, so who needs Chevron? Your plan to reward & honor the equivalent of DRUG DEALER KILLERS because they give jobs to neigbourhood kids is REPREHENSIBLE.

    Link to this
  6. 6. MoEnergySci 9:13 pm 11/7/2011

    Regarding water use for nuclear power versus coal or natural gas, if you just look at the power plant step (when electricity is generated) nuclear power consumes about 1/3 more water than goal, and more than twice the amount of water used by natural gas.

    http://www.ucsusa.org/assets/documents/nuclear_power/20071204-ucs-brief-got-water.pdf

    Now, certainly, the stuff that is put into the air by fossil fuels being burned to make electricity is not good – agree with you there. But, it is over-simplifying the problem to say that nuclear power’s only “problem” is that it produces solid waste.

    Link to this
  7. 7. MoEnergySci 9:17 pm 11/7/2011

    Also – in the United States we do not get a “free pass” on the “SOx, NOx, mercury, arsenic, cadmium, lead etc” that are put into the environment by burning fossil fuels for energy. There are many regulations for each of these (check out the EPA’s website for details). They are not banned completely but they are definitely restricted because we (society) has pretty much agreed that we do not like things like acid rain and smog.

    Link to this

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