In an essay in the latest issue of Foreign Affairs and a recent interview with Yale Environment 360, Amory Lovins discusses his latest book, Reinventing Fire, written with his colleagues at the Rocking Mountain Institute, which looks at what a transition away from an economy and energy system based on fossil fuels towards one based on renewable energy would look like.
"Weaning the United States from fossils fuels would require two big shifts," writes Lovins at Foreign Affairs, naming "oil and electricity" which he says are "distinct." He points out, "In the US, three-fourths of electricity powers building, three-fourths of oil fuels transportation, and the remaining oil and electricity run factories. So saving oil and electricity is chiefly about making buildings, vehicles, and factories far more efficient." This, admits Lovins, is "no small task."
Dwelling on the scale of the challenge, however, is not where Lovins devotes his energy. Instead, he looks at other "epochal energy shifts" that have occurred in history, like the end of the whale oil industry in the mid 19th century, where in just thirty years the whale oil industry went from bringing lighting to nearly every American household in 1850, to being essentially snuffed out by 1879, when Edison's electric lighting hit the scene. "Whales," writes Lovins, "had been accidently saved by technological innovators and profit-maximizing capitalists."
The point, of course, is not that we should look to 'profit-maximizing capitalists' to lead us to a clean energy future (though they will certainly play a role). The point is that we should definitely not expect whaling captains to lead us. And in this era, the whale ship captains are the captains of the big oil, coal, and gas companies and the politicians who do their bidding.
"The chief obstacle is not technology or economics," concludes Lovins, "but slow adoption." He writes:
Helping innovations catch on will take education, leadership, and rapid learning. But it does require reaching concensus on motives. If Americans agree what should be done, then they need not agree why. Whether one cares most about national security, health, the environment, or simply making money, saving and supplanting fossil fuels makes sense."
"Wise energy policy can grow from impeccably conservative roots-- [...]
Moving the United States off oil and coal will require Americans to trust in their own resourcefulness, ingenuity, and courage. These durable virtues can give the country fuel without fear; help set the world on a path beyond war, want, or waste; and turn energy from worrisome to worry-free, from risk to reward, from cost to profit."
A Clean Energy Plan
In the interview with Yale Environment 360 senior editor Fen Montaigne, Lovins discusses how business and society can pull off this transformation even if the U.S. Congress keeps failing to act, why climate change need not even enter the discussion, and why the oil industry will ultimately forego fossil fuels and jump aboard the green bandwagon. “One system is dying and others are struggling to be born,” says Lovins. “It’s a very exciting time.”
Yale Environment 360: Given that we’re in the midst of what could only be described as a fossil fuel boom, with the discovery of new unconventional sources and new oil sources being found all over the world, how do you speed this transition and get from here to there?
Amory Lovins: Well, I’m not sure what boom you’re talking about. When I read the Wall Street Journal, I see a headline a few weeks ago about coal running out of steam.
e360: China is consuming tremendous amounts of coal.
Lovins: Hang on — I look at the data and I find that in the United States, coal’s share of the electrical services market, which is 95 percent of its market for fuel, has fallen by a quarter from 2005 through 2010, displaced by cheaper gas, efficiency, and renewables. And then when you look in the forward prices and the options market, that spread is going to keep widening. And when I hear how cheap natural gas is, I remember that it’s also very volatile. This has nothing to do with the many uncertainties around fracking, which will take a decade to resolve — if they work out well, we’ll be satisfied with a new option; if they don’t, that’s okay because we won’t need that much gas, so we won’t be very disappointed.
e360: Certainly in China, India, and the developing world there is a fossil fuel boom going on.
Lovins: But in a global context, there is a remarkable boom in efficiency and renewables in China, the world leader in five renewables. Part of the story in China is that the extraordinary vitality of renewables is coming very largely from the vibrant private sector, while all of the nuclear and half the coal business are the old state enterprises. So the story of incumbents and insurgents is partly the story of the reshaping of the Chinese economy from the old and rather bureaucratic command organizations. That is, I think, an encouraging trend.
We must use our most effective institutions to end-run our least effective institutions. Last I looked a couple of years ago, the private sector in China was something like 50 to 70 percent of the profits, the growth, and the new jobs. Of course there is still a lot of momentum in the coal bureaucracy in China and India, which together burned half the world’s coal and account for about three-quarters of the projected increase, but I think those projections are looking quite dubious. In China, for example, they have lately retired over 70 gigawatts of inefficient coal plants, so that their coal plant fleet is now more efficient than ours. In 2010, 59 percent of their net new [electricity] capacity was coal. It used to be much higher.
e360: You feel we’re in a period where fossil fuels over the next decade or two are going to be increasingly like whale oil?
e360: You’ve got the president of Shell writing a foreward to your book. There are prominent quotes from the president of Texaco in one section of the book. How do you persuade these oil companies that are making billions of dollars now and into the foreseeable future to get on board with this renewable energy revolution? What is going to persuade them to be on what you see as the right side of history?
Lovins: Mainly risk management, and as a member of the National Petroleum Council, having worked in this industry for 38 years, I’ve seen a lot of concern about risk. Oil is like airlines. It’s a great industry and a bad business. Look at its fundamentals. It is extremely capital-intensive, long lead time, based on a wasting asset of which you only own about 6 percent and the rest can be taxed away or confiscated at any time. It is a business overflowing with all kinds of risk — technical, political, financial. It is unpopular politically. Its subsidies are at some political risk in this country. Put all that together and you have a magnificent recipe for headaches. Why would you want to be in a business like that?
e360:You’re making huge profits at this point.
Lovins: Well, sometimes yes, and sometimes it gushes red ink. So the smarter leaders in that industry have been trying to get out of the business since at least 1973, and have constructed some pretty intelligent portfolios of both activities and options that are getting rather rapidly diversified. Some companies that were not very foresighted, even though they were operationally excellent, are starting to smell the coffee.
I think there is a bright future for what we now think of as the oil industry in the new energy era, using its formidable capabilities and assets, but in different ways. A lot of refineries will turn into biorefineries; a lot of drilling will go to geothermal, possibly carbon sequestration and other pursuits. The fuel logistics will diversify into hydrogen — which of course is mainly a business of the oil industry right now and it’s a very big business — and into electricity and biofuels. Shell is already the world’s biggest distributor of biofuels. The average cost of getting our U.S. transport system off oil is about $18 a barrel for the efficiency and electrification part, or if you include the biofuels to run the trucks and airplanes to the extent they’re not on hydrogen, it might be at most about $25 a barrel. So I don’t much care what the world oil price is, this is a better bet and it very much better manages the risks.
e360: In the spheres that you write about — transportation, electricity generation, industry — what pieces of the puzzle need to be put in place in the coming decade or so to do this massive scaling up that’s going to be required to attain your vision of an economy that by 2050 is primarily powered by renewable sources?
Lovins: Broadly we need to pay attention to allow or require full and fair competition, preferably at honest prices. And to use our most effective institutions to end-run our least effective institutions.
e360: For example?
Lovins: Well, we use private enterprise, co-evolving with civil society and sped up by military innovation, to end run Congress. The transition we describe requires no act of Congress. It’s led by business for profit.
e360: So you want the private sector to end-run the dysfunctional political system?
Lovins: At the federal level, yes. There are policies required to unlock or speed the transition we described, but they could all be done administratively or at the state level, where most of the action is.
e360: From a technological point of view, how do you scale up wind and solar to the point where it can be generating the volume of electricity that you envision by 2050?
Lovins: The way we’re scaling it up now. U.S. photovoltaics have doubled each of the last two years. World [photovoltaic] growth last year — a difficult year for many industries — was 70 percent. And 68 percent of Europe’s new capacity last year was solar and wind. Wind, for example, is generally competitive without subsidy, even though the global wind industry will of course shift its projects in a given year to wherever they get the most subsidy, as you would expect. But even without subsidy they have a very strong business case.
e360: So you foresee in the U.S., Europe, and China a steady accretion of this scale and volume for these new sources?
Lovins: Yes, and China is leading the plummeting cost and rocketing volume of most of the renewables. They’re the world leader in five. They aim to be in all. The ones they lead are photovoltaic, wind, small hydro, biogas, and solar thermal for hot water.
So this is actually quite a big business. Clean energy was a $260 billion investment flow in 2011. Europe has now more than one million new renewable jobs. The big winner is Germany. They have more solar workers than America has steel workers. [German Chancellor Angela] Merkel bet that it would be smarter to send their energy money to their own engineers, manufacturers, and installers than to keep paying it to [Russia’s] Gazprom. She’s right, and it was a winning bet.
e360: In your book you are not counting on any sort of miraculous silver bullet technologies.
Lovins: No, no new inventions.
e360: But do you think there will be within a matter of decades technologies we can’t envision that could even further accelerate this transition?
Lovins: Oh, yes. I think there will be many, and actually although we’re not counting on any new inventions, we do give examples of emerging technologies in the lab about to get to market that are going to be quite powerful.
For example, windows whose ability to transmit or block heat is a function of the temperature of the glass, and that’s a passive property. It doesn’t require any control system. That sort of thing is so revolutionary we haven’t even figured out how to use it yet. Or as another example, Tsutomu Shimomura, the computer security expert, has invented a way of controlling LED lighting in big buildings that gets rid of almost all of the wire and power supplies and controls, but gives superior control flexibility. And that should ultimately cut by manyfold the installed cost of those LED lighting systems and thus help them take over even faster in both new and old buildings. Fuel cells have already beaten the cost targets that we had expected. The list goes on.
Despite our woeful underinvestment in efficiency R&D, the technical progress here and abroad continues to accelerate with no end in sight and it’s not just in widgets. It’s also progress in new business models, new designs, ways of combining technologies more effectively to get expanding returns, not diminishing returns, new delivery channels that are rapidly maturing, new regulatory models. These things all together I think have put us irreversibly on the path to a new energy era, and a lot of it is an incumbents-versus-insurgents play where the incumbents have many intelligent ways they can respond and some dumb ways, one of which is called ostrich.
e360: Your book, in each of the main chapters, lays out detailed prescriptions — down to diagrams of factory piping — of how to improve efficiency and make advances. What has the reaction been to the book from corporations, from politicians?
Lovins: The reaction I have seen has been uniformly favorable, partly because it’s a trans-ideological approach that focuses on outcomes, not motives. Whether you most care about profits, jobs, and competitive advantage, or about national security or environmental stewardship and climate and public health — regardless of the reason, you’ll still want the outcomes. They’ll still make sense and make money, so let’s just do what we all agree ought to be done for whatever reason, not argue about what reason is most important, and then a lot of the stuff we may not agree about becomes superfluous. The military is very strongly on this track already — with both efficiency and resilient electric supply — for their own good reasons. We are not seeing so far political resistance to these ideas and we’re getting a very warm welcome in the business community.
One system is dying and others are struggling to be born. It’s a very exciting time. e360: How big an impediment to your vision of how to go forward is the fact that many of the leaders of the Republican Party not only deny the existence of climate change, but belittle renewable energy. Is the political gridlock on this issue a big impediment to maybe moving forward?
Lovins: I don’t see it as a big impediment because we’re not relying on Congress to do anything. Again, you don’t have to believe climate science to think that the outcomes of Reinventing Fire are desirable. If you care about either making money or national security, either of those suffices; you may even care about both together. Then you’re twice as motivated. We are counting in the analysis all externalities — carbon [reduction] and otherwise — as worth zero, a conservatively low estimate. And we still get a $5 trillion surplus from getting the U.S. completely off oil, coal, and nuclear energy and a third off natural gas by 2050, with a 2.6-fold bigger economy. That, I think, is an attractive outcome regardless of your political beliefs.
e360: Let’s say there’s a President Santorum or a President Romney, do you think that they could be persuaded once they’re in office to embrace a vision like this?
Lovins: I don’t know, but I don’t much care. Rocky Mountain Institute is non-partisan, and we observe that most states, including many strongly Republican states, have renewable portfolio standards. The renewable leader in the nation is Texas, which is not noted for being environmentally minded, but does care a lot about making money and is very good at it. That’s fine.
e360: On the issue of climate change, do you believe the climate movement has made a strategic error by focusing so much on the issue of warming and its impacts rather than on the positive economic message you propagate in the book?
Lovins: I think you could make that case. In fact, to go back to the beginning of the modern climate debate, I think that when the bogus studies were issued claiming that climate protection would be very costly, the environmental movement fell into a trap of saying it won’t cost that much and it’s worth it. What they should have said is, “No, you’ve got it wrong. Climate protection is not costly but profitable because it’s cheaper to save fuel than to buy fuel.”
So the whole climate conversation has been distorted by this error of mistaking cost for profits and that has blocked international negotiations, because it’s so much harder to talk about cost burden and sacrifice, what is it worth to save the climate and who should pay for it, than to talk about profits, jobs, and competitive advantage, which should have been the subject all along.
I think it’s partly for this reason that climate leadership has shifted from international negotiations and national policies to the private sector, and many companies are racing to pocket the real profits while the politicians and theoretical economists argue about how big the costs are. Dow [Chemical], for example, invested a billion dollars in efficiency and so far has $19 billion of savings to show for it. I don’t think they are terribly concerned about what some theoretician says this will cost. They’ve added $18 billion net to their bottom line. They’ve very happy about it and their competitors have to catch up or lose share.
e360: When you look at your 2050 vision, yet you also look at all the carbon that’s still being burned, how do you reconcile the two?
Lovins: Well, one system is dying and others are struggling to be born. It’s a very exciting time, but I think the transitions that we need in how we design vehicles, buildings, and factories, and how we allow efficiency to compete with supply, are well under way. Most of the key sectors are already at or past their tipping point. And it’s clearest for oil, but will become clearer for coal that the stuff is becoming uncompetitive even at relatively low prices before it becomes unavailable even at high prices. It’s the whale oil story all over again. They ran out of customers before they ran out of whales.