Amory Lovins explains his plan for transforming our energy,
transportation and industry sectors while at the same time growing
our economy and cutting dirty fossil fuels.
February 20, 2012 |
Amory B. Lovins is fond of referring to the Rocky Mountain
Institute, where he serves as chairman and chief scientist, as a
“think and do” tank, and it’s clear that to Lovins the doing is
every bit as important as the thinking. Hardly lacking in confidence
or ambition, Lovins — in conjunction with his colleagues at the
institute — has published Reinventing
Fire, his step-by-step blueprint for how to transition to a
renewable energy economy by mid-century.
Impressive in both its scope and detail — Lovins discusses
everything from how to redesign heavy trucks to make them more fuel
efficient to ways to change factory pipes to conserve energy — the
book lays out a plan for the U.S. to achieve the following by 2050:
cars completely powered by hydrogen fuel cells, electricity, and
biofuels; 84 percent of trucks and airplanes running on biomass
fuels; 80 percent of the nation’s electricity produced by renewable
power; $5 trillion in savings; and an economy that has grown by 158
percent.
In an 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.”
Fen Montaigne: 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.
Montaigne: 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.
Montaigne: 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.
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.
Montaigne: You feel we’re in a period where fossil fuels
over the next decade or two are going to be increasingly like whale
oil?
Lovins: Yes.
Montaigne: 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?
Montaigne: 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.
Montaigne: 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.
Montaigne: 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.
Montaigne: 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.
Montaigne: 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.
Montaigne: 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.
Montaigne: In your book you are not counting on any sort of
miraculous silver bullet technologies.
Lovins: No, no new inventions.
Montaigne: 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.
Montaigne: 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.
Montaigne: 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.
Montaigne: 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.
Montaigne: 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.
Montaigne: 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.