HOW WORKING FROM HOME CAN SAVE THE WORLD

In my previous two posts I outlined what I think is the main issue with our energy crisis -- that we simply consume too much.

What I propose here is one possible solution to curtail what I call "unnecessary consumption".

One of the ways is changing the way we work (at least those working office jobs) -- by spending most of our time working from home.

It certainly is a radical idea, but not far-fetched.

Think about it.

You spend 1 - 3 hours a day commuting to and from your office, either stuck in a car, or squished like a sardine on some train.

You get to your office or cubicle. You then proceed to spend most of your day in front of a computer, answering your phone, or listening in on some conference call. Colleagues or supervisors may pop their head in to say hello, chit-chat, or to discuss something work-related - but do so simply because they're in the office with you (i.e. how much less productive are you if your boss is out of town on business and checking in with you via phone/email, or physically popping in casually if (s)he happens to be in the office?).

In many organizations, they've managed to outsource so many functions overseas because it's cheaper. But what outsourcing has also shown is that you don't need to be physically in the same place to perform a lot of the duties in an organization, since so much "office work" is conducted via email, phone, instant messaging, and so forth.

For most office jobs from the admin assistant all the way up to the CEO's office -- you are spending most if not all of your time and effort using your computer or your phone to do your job. You are communicating with your colleagues for the most part via email (the dreaded cc: ) or phone anyhow, even if you're on the same floor! And a lot of the casual face-to-face could probably also be substituted for electronic communication (even if it's video teleconferencing).

It may not be realistic to have a completely virtual organization where no one ever shows up in the company's offices, but even if companies allowed its office staff to work 3 - 4 days out of the week from home -- the benefits to the employees, company and the environment could be tremendous.

Let's start with the environment.

So much of rush hour traffic is taken up by people going to and from work (duh!). Most would rather not be commuting.  So if a significant percentage of office staff were allowed to work from home the majority of the time, there would be less cars on the road during rush hour, which means less traffic and lower total energy consumption. Of course this doesn't account for every single person who has to get up and go to work everyday, but the office staff across various companies in any municipality make up a big enough percentage of the total workforce that their absence on the roads will have a positive impact on traffic and pollution.

By allowing its office staff to work mostly from home, companies reap two big benefits. First, there is less need for so much office space and infrastructure to support employees on-site, ranging from actual square footage to utilities (yet another environmental benefit) - some rather mundane but important cost items that can add up to significant savings. More importantly though, since there is less need for employees to be physically present on the premises to do their job, companies aren't limited to hiring employees locally. Much like outsourcing has shown that certain job functions could be handled virtually, the company's market for employees expands from mostly local to mostly global (or at the minimum, mostly regional). This expands the pool of talented employees that a company can hire and retain (without requiring the employee to relocate).

From an employee perspective, working mostly (if not exclusively) from home on a permanent basis can be a godsend. While a company's pool for talent has expanded because of telecommuting, so would an employee's job prospects. An accounting professional may not need to relocate from one city to another simply to take on another job. Moreover, by taking out the commute, one's morale and productivity will likely be higher - which is mutually beneficial for the employee as well as the employer. Put it this way -- a lot of us are plain cranky from having to commute, and while it may be hard to measure the effect of long commutes on worker productivity, anyone who has had to sit in horrendous traffic is probably not as productive as (s)he could be by the time (s)he arrives in the office, nor are they particularly enthusiastic about doing anything once (s)he gets home after work.

Moreover, the time spent commuting is mostly "dead time" - time where you're not really doing anything other than being in transition from one place to another. That is, unless you are on a conference call, texting your kids, and eating your breakfast burrito simultaneously as you sit in traffic. And this dead time adds up to anywhere from 1.5 - 3 hours a day.

By creating a more virtual workplace, salaried employees can also better manage their time. There is no more "face time" at work - you simply do whatever it is you need to do, and can schedule your day more effectively and efficiently. For workers who have children to raise, this can also help make the tradeoffs between raising kids and having a career less steep and more manageable. For example, you may have a conference call at 8am, but can leave the work of marking up a draft presentation until 10pm when the kids are in bed, so your subordinate gets your markups first thing in the morning. Rather than being forced to do most of your work in the 8-10 hour block that you're in the office, you can break up your workload into different chunks across the entire day (and how many office workers particularly senior managers are already doing some of their most productive work after they get home from work anyhow?).

While there is no substitute for human contact, the reality is, interpersonal contact in the office is becoming more impersonal, with face-to-face communication increasingly being replaced with email and conference calls. If workplace communication is going that route and there isn't a way to stop it, then there is less of a reason to be physically all in one cubicle farm in the first place.

WHY ALTERNATIVE ENERGY SOLUTIONS AREN'T ENOUGH

The current policy debate these days relating to energy policy seems to be focused on the search for alternative fuels.

In reality, the global warming crisis and energy problem isn't truly a supply issue.

We've gotten to this point because of escalating demand around the globe. Not just China or India (though both play a big part). But in all the developed world.

Simply put, we use more electricity and we drive more than we used to a generation before. 

There are more big screen TVs, home theater systems, computers and other electronic devices in our homes now.

The communications infrastructure in most businesses -- from servers, workstations and all the telco equipment -- has ballooned as the cluster of wires snaking through office complexes take up more and more space (but still hidden from our view in the T-bar ceilings).

We spend more time in our cars and traveling greater distances commuting to and from work.

We fly out of ever busier airports than we used to. Congestion in the skies as well as on the roads.

Our economies continue to produce more and more "stuff" (or "output" if you want to stick to jargon) each year - toys, disposable cameras, packaged foods, office supplies, and so forth. We've never had more selection in our stores or more retail options than we do now.

The energy required to produce all of this has to come from somewhere.

And this doesn't even count the Chinese and Indians who have only caught wind that "hey, I want air conditioning, cars, big screen TVs, and the ability to make stuff just like you guys do."

Demand has simply grown a lot faster than our ability to find supply. And this has become especially a problem in the last few years.

Even if we do rebalance our sources for energy, we will still have a problem if we don't find a way to be more judicious about our energy consumption.

It's as much about changing our behavior as it is about finding alternative supply.

Consider the following:

(1) Right now, roughly 60% of our global energy consumption comes from oil and gas. This is not only used to drive our vehicles, but also to generate so much of our electricity; so even if we all switch to 'electric cars', that electricity still needs to come from somewhere - as long as much of our electricity is generated from oil and gas, we really don't solve the problem of depleting oil reserves as well as stemming climate change.

(2) Coal is the 2nd largest source of energy worldwide at 25%. It's extremely plentiful too. However, even with "clean coal" that won't produce the black plumes of Victorian England, there is a problem of CO2 emissions. So even if we substitute away from oil for more coal, we still face the impact of climate change.

(3) So 85% of our global energy consumption comes from oil, gas and coal. The remaining 15% comes from nuclear, hydro, biofuels, wind and solar -- some of which are more practical than others as primary energy sources.

(4) Nuclear power has the potential to be a great source for energy. The biggest hurdle isn't a technical one, but a political one. First, in democratic countries, the NIMBY (Not In My Back Yard) syndrome is a huge political hurdle. Every one wants the cheap and plentiful energy, but no one wants the facilities or the disposal in their neighborhood. Even if scientists could explain how spent fuel rods could be safely disposed, few if any home owners will want it. And for good reason - even if residents believed it to be safe, by building a nuclear facility and disposal site in your neighborhood, the property prices in that neighborhood immediately adjust - downwards. The government has basically taken out a big chunk of equity in your house to pay for electricity generation that benefits citizens beyond your little neighborhood. It would be political suicide for elected officials to advocate this. So what you're left with is finding virgin territory or land. Problem is, there isn't much of that left.

(5) Biofuels seem to be the wave of the future, but hold on. It's renewable and not as harmful as fossil fuels are for the environment. Plus, it shifts the balance of power geopolitically away from the oil rich Middle East and towards the wheat fields of the North American midwest. However, there is one big problem which we've already gotten a taste of -- higher food prices. Unless we colonize Mars, there is a finite supply of land on this Earth, with so much of the arable land already in cultivation.  By producing more corn or wheat (or whatever) for biofuels, you're producing less for food. Less supply even with constant demand (assuming populations stay constant) still means higher food prices. If there is one thing that will cause more political upheaval and panic than high energy prices, it's high food prices. The poorest of the poor don't drive much or use much electricity, but we all need to eat. And nothing spells doom for any government (democratic or authoritarian) than a mob of really hungry pissed off people. Most of us in the developed world can afford higher food prices if push comes to shove. But most people in the developing world cannot. So more biofuel means more starvation. Or we end up bankrupting the developing countries' governments who cannot afford a growing and permanent food subsidy for its citizens (and even if developed countries were to provide aid, that money has to come from somewhere - either in the form of taxes or higher biofuel prices).

(6) Hydro power is certainly a very promising alternate source that is already in use today - although it makes up such a small percentage of total consumption. We can certainly use a LOT more hydro plants in the world. The big problem though is the construction time and costs. Building more Hoover Dams is a gargantuan task with the actual construction time taking five years or more per dam. Not to mention the pre-planning process such as selecting the appropriate site, the environmental impact of the dam (i.e. concerns with China's Three Gorges Dam) as well as the political process of convincing voters in a local municipality that it's a good idea to build a dam that will benefit the rest of the state or country. Moreover, while the ongoing costs of maintaining a completed dam are relatively modest, the initial fixed cost of building one is huge. Who pays for it? Taxpayers? Private corporations? The money has to come from somewhere - and like nuclear power, everyone wants the benefit of cheap and plentiful energy that lasts generations, but few want to be the generation that foots the bill for it. 

(7) Solar and wind power are still relatively new, and at this point its efficiency still needs a lot of improvement before it can be used as a significant source of energy. The other issue is that both depend a lot on the elements. If it's cloudy, you don't get much. If it's not windy enough, you don't get much. Perhaps science will find a way to make these sources more efficient (and therefore more economically viable), but it will take years if not a decade or more before scientific discovery is converted into mainstream practical use. The same goes with other promising sources like wave power (capturing energy from the ocean waves) -- promising, but still not an immediate or even short-term solution.

My point in all this is that every single energy source has tradeoffs. There simply is no magic bullet.

Even if we are to shift towards alternative sources (and I think in spite of all the tradeoffs and hurdles I mentioned above, it will happen to some degree), we still have a demand problem.

We simply need to find practical ways of driving less and walking more. Using less lights. Making any electrical device more energy efficient. 

And finally, becoming less of a consumer-oriented world. We are simply manufacturing too much disposable stuff that we end up throwing away and replacing with more disposable stuff.

WHY HIGH OIL PRICES ARE GOOD

The beauty of the dismal science that is economics in some ways can help us solve the energy crisis.

High oil prices are great for the environment.

Let me repeat again.

High oil prices are great for the environment.

It's the cornerstone of a sensible energy policy in every corner of the industrializing and industrialized world.

High oil prices does two things:

(1) It makes alternative energy sources more viable because the cost differential narrows, or in some cases, the differential is reversed.

(2) It dampens demand.

We all need to feel the pain of high energy prices. Without it, there is no policy, subsidy, or tax incentive that will force us to find other sources while getting us to simply consume less.

High prices are a powerful way to change human behavior -- which is what we have to do to manage our resources from now until who knows when. When the price per kilowatt or the dollars per gallon is high, it forces us to be more efficient with our energy consumption - not just as a nation or as a community, but as individuals.

It all starts with individuals.

When prices are high, we can't afford to leave the lights on.

When prices are high, we can't afford to drive in our separate cars to the same restaurant.

When prices are high, we will think twice about turning up the heat or blasting the air conditioning.

When prices are high, we will more likely walk more, and drive less.

We will find ways to really change our lifestyle (which we have to do as individuals) in order to really have an impact on managing our energy resources.

Continued and sustained high oil prices is one of the best things to have happened for a greener world.