Energy Forever

The world is dangerous. America's energy policy
makes it
more so. In 1981 we wrote for the Pentagon what is still the definitive
unclassified study of domestic energy vulnerability. We found, and government
and industry experts later confirmed, that a handful of people could shut down
three-quarters of the oil and gas supplies to the eastern states overnight
without leaving Louisiana. A similar group could cut electric power to any
region or kill millions by sabotaging a nuclear power plant or crashing an
airliner into it. Little has changed since then. Most existing U.S. energy
supplies--and the additional ones proposed in the current House energy bill--are
highly vulnerable to attack.

National security is also at risk because 13 percent of the oil we use
comes from the Persian Gulf (which holds two-thirds of the world's petroleum
reserves). Buying the fastest and cheapest replacements is urgent. But replacing
insecure foreign oil with insecure new domestic energy sources doesn't help. We
will have a secure supply of energy only when we have both displaced Mideast oil
and shifted the basic architecture of our domestic energy infrastructure. Energy
systems don't become secure by being located in this country--unless widespread
failures are made impossible and local failures benign.

Consider the current fixation on drilling for oil in the Arctic National
Wildlife Refuge. The 800-mile-long Trans-Alaska Pipeline System (TAPS), the only
way to ship Refuge oil south, presents such a fat terrorist target--worse than
the Strait of Hormuz choke point--that former CIA Director R. James Woolsey, a
normally oil-favoring Oklahoman, testified against Refuge oil as too vulnerable.
TAPS is not only accessible to attackers; it's often unrepairable in winter. If
key pumping stations or facilities at either end were disabled, at least the
above-ground half of the pipeline's nine million barrels of hot oil could congeal
in one winter week into the world's largest Chap Stik. The U.S. Army, the General
Accounting Office, and the Senate Judiciary Committee have said that TAPS is
indefensible. It has already been incompetently bombed twice, sabotaged, and shot
at on more than 50 occasions. On October 4, 2001, a drunk's rifle shot pierced
it, interrupting one-sixth of U.S. oil output for 60 hours. Two years ago, a
disgruntled engineer's sophisticated plot to profit from oil futures trading was
luckily thwarted before he blew up three critical TAPS sites. Senators who have
made Refuge oil the centerpiece of their whimsically titled National Energy
Security bill have obviously not connected the dots.

The 24-year-old TAPS also suffers from corrosion, erosion, stress, and melting
of the supporting permafrost--all raising maintenance costs, which may become
unaffordable within this decade. Management deficiencies also persist. In 2000,
TAPS suffered two serious accidents and its Valdez oil terminal narrowly escaped
another. On September 22, 2001, for the seventh year in a row, a botched routine
procedure overpressurized the pipeline, causing spills at three pumping stations.
Even in a terrorist-free world, extended reliance on TAPS would be imprudent.

Fortunately, there are faster, cheaper, and surer alternatives. We can achieve
energy security by using less energy far more efficiently to do the same
tasks--and then by supplying what is still needed from sources that are
inherently invulnerable because they're dispersed, diverse, and increasingly
renewable. These options reduce the need to transport energy by vulnerable
long-distance pipelines and transmission lines, and usually cost much less than
expanding those links.

Security at a Profit

In the case of tasks now reliant on oil, the change would be relatively
easy. Energy efficiency is the rapid-deployment resource, and huge amounts of it
are available. Just a 2.7-mpg gain in the fuel economy of this country's
light-vehicle fleet could displace Persian Gulf imports entirely, and this is no
pipe dream. The National Academy of Sciences reported last year that the fuel
economy of conventional cars and light trucks could be raised vastly more than
that without compromising safety, performance, or affordability. Similarly, the
Defense Science Board recently showed how the Pentagon--the world's largest oil
buyer and the nation's largest energy user--could save billions of dollars' worth
of fuel annually while greatly improving its war-fighting capability. Efficiency
is an energy resource that is uninterruptible and already delivered, immune to
both foreign potentates and terrorism. It also stabilizes prices, protects
climate and environment, and provides good jobs nationwide.

As for new fuels to replace oil, we already know how to produce them
cost-effectively from renewable sources. Farm, forest, industrial, and urban
wastes and certain soilreplenishing crops can yield clean transportation fuels,
fertilizer, and substitutes for petrochemicals (often with heat and electricity
as convenient by-products). If these are produced near where they're used, giant
refineries and vulnerable pipelines can be bypassed. Done right, the use of such
biofuels would also spread jobs, preserve rural culture, enrich topsoil, enhance
farm income, and protect global climate.

Coherent policies to mobilize these secure and proven resources, best buys
first, could displace insecure foreign and domestic oil promptly and profitably.

Supplying secure and affordable electric power is
similarly
feasible. America's electricity now comes mainly from big power plants that
stopped getting more efficient in the sixties, cheaper in the seventies, bigger
in the eighties, and built in the nineties. The ones we already have will
continue to serve us for a long time, however, and should at least start reusing
the waste heat they now throw away--as much energy as Japan consumes for
everything. In principle that could cut America's total fuel usage by one-third,
halve net generating cost, and save a trillion dollars per decade if more
regulators allowed it here as they do in Europe. But big power stations can't
supply really cheap and reliable electricity, for two reasons: The power delivery
systems cost even more than the stations, and the grid causes almost all the
power failures.

On-site and neighborhood micropower generated in or near customers'
premises can solve both problems, offering diverse, decentralized, and thus
nearly invulnerable supplies of electricity. Because microgeneration is also more
flexible and quickly built than large power plants--and because it benefits from
the valuable financial and engineering advantages of electric sources that are
the right size for the job--it is favored in the market as well.

Doubled-efficiency, combined-cycle, gas-fired power stations, each producing
hundreds of megawatts, swept the market in the 1990s. Now becoming obsolete,
they're starting to be displaced by swarms of microturbines, engine generators,
and fuel cells that are a thousand or even 10,000 times smaller but equally or
more efficient (and can more easily recapture waste heat). Manhattan's
Condé Nast Building, for instance, was designed to use half the energy of
an ordinary office building; and with the saved construction costs, the
developers were able to equip it with the two most reliable known power
sources--fuel cells and solar cells. This ultrareliable on-site electricity
helped them win in the real-estate market by recruiting premium tenants quickly
at premium rents.

Dispersed, renewable electricity sources are the fastest-growing in Europe.
Local windmills already provide one-sixth of Denmark's power and are on track to
provide half in 2030. In fact, wind power has lately added more megawatts
worldwide than nuclear power averaged throughout the 1990s, and it dominates
Europe's plan to make 22 percent of its electricity from renewables by 2010
(twice today's U.S. fraction). According to government experts, wind power could
cost-effectively more than meet all of the world's electricity needs--or
America's--at constant prices now edging below 3 cents per kilowatt-hour. Solar
power is enjoying a similar boom, lately growing 26 percent to 42 percent a year.
In Sacramento five tract developers offer, as standard equipment, house roofs
that make solar electricity. (After a referendum shut down the troubled nuclear
plant that had provided nearly half Sacramento's power, investments in
efficiency and new, diverse, and often decentralized and renewable supplies
replaced it reliably at lower cost. Moreover, university analysts found that five
years' investments in electric efficiency had boosted county economic output by
$185 million and added 2,946 employee-years of net jobs.) Around the country,
leading home builders are planning hundreds of grid-linked solar-powered
subdivisions.

The benefit to national security is not what sells micropower. Yet as
Assistant Secretary of Energy David Garman says, "Aside from its obvious
environmental benefits, solar and other distributed energy resources can enhance
our energy security." Garman adds:

Distributed generation at many locations around
the grid
increases power reliability and quality while reducing the strain on the
electricity transmission system. It also makes our electricity infrastructure
less vulnerable to terrorist attack, both by distributing the generation and
diversifying the generation fuels. So if you're engaged in this effort, it is my
view that you are also engaged in our national effort to fight terrorism.

Meanwhile, micropower's explosive growth further raises the financial risk
of building big (and vulnerable) power plants, because fast and agile competitors
can idle them even before they're finished. In the mid-1980s, California shifted
from power scarcity to glut in just two years by deploying efficiency and
decentralized supplies. In 2001 it took only half a year--and the efficiency and
micropower installers are still back-ordered.

Efficiency and micropower are natural partners. With very efficient use of
electricity, a new house can run on so few solar cells that they cost less than
connecting to the grid, let alone paying subsequent utility bills. In our own
house, high in the Rocky Mountains, such efficiency saved 99 percent in space-
and water-heating energy, cut electricity use by 90 percent, and paid for itself
in 10 months--all with 1983 technology. Other people have built houses that are
comfortable with no airconditioning at up to 115 degrees Fahrenheit yet cost less
to construct than conventional houses. Such large reductions in the energy
needed make microgeneration particularly attractive and will speed its spread.

Integrated, superefficient design is the crucial factor. It can often make
very large energy savings cost less than small or no savings. That's been
demonstrated in a wide range of technical systems, uses, and economic sectors. In
a typical industrial pumping loop, for example, an improved design cut power use
by 92 percent, cost less to build, and worked better. This was achieved not by
any new technology but solely by better design that used fat, short, straight
pipes rather than skinny, long, crooked ones. It's not rocket science--just good
Victorian engineering rediscovered.

Fast-Forward to Hydrogen

The next step will integrate efficiency with a shift from hydrocarbons to
plain hydrogen. We've already made progress in reducing the carbon burning that
harms the climate; today, two of every three fossil-fuel atoms we burn are
hydrogen, the other one carbon. The emerging hydrogen economy eliminates both the
burning and the rest of the carbon by using pure hydrogen in fuel cells. Remember
the high-school chemistry experiment in which an electric current splits water
into hydrogen and oxygen? A fuel cell reverses this process, chemically
recombining these gases to produce electricity, pure hot water, and nothing else.
Fuel cells are the most efficient, clean, and reliable known source of
electricity.

Initially, the hydrogen that they need will be made mainly from natural gas,
but that's no obstacle. An already mature hydrogen industry has developed ways
to do this economically at all scales, though smaller is often cheaper as well as
less vulnerable. Hydrogen is cost-competitive today in many uses. Moreover, the
buoyant, clear-flame gas is safer to use and store than gasoline, and new
research suggests that its refueling infrastructure would be cheaper.

Nor is there need to worry about the natural gas running out: Even as the
hydrogen economy grows, it will probably use less natural gas than we do now. In
the long run, hydrogen will most likely be made from water, using renewable
electricity or possibly just sunlight. Or it may be extracted from oil and
perhaps even coal, without releasing the carbon into the air. All these options
are evolving rapidly and will compete vigorously.

This isn't science fiction; speeded by micropower's special economic benefits,
it's already starting to happen. Hundreds of U.S. buildings, from New York's
Central Park police station to an Omaha credit-card data center, are powered by
fuel cells. Fuel-cell buses are on the market. Experimental fuel-cell-powered
cars are on the road, and Energy Secretary Spencer Abraham announced on January 9
a federal-Big Three collaboration to speed them to market. The heads of seven
major oil and car companies have announced the start of both the Oil Endgame and
the Hydrogen Era--a more profitable venture in which they're strongly investing.
In Royal Dutch/Shell's latest planning scenarios, the business-as-usual case has
the world getting one-third of its energy and all its increased energy from
renewable sources by 2050; the other, more radical scenario envisages an
accelerated shift to hydrogen, with oil use stagnant until 2020 and falling
sharply thereafter. Ex-Saudi Oil Minister Sheikh Yamani is the latest of several
energy experts to say that "the Stone Age did not end because the world ran out
of stones, and the Oil Age will not end because the world runs out of oil."

Hypercars

The efficiency revolution's latest surprise squarely targets oil's main
users and its dominant growth market: cars and light trucks. New American cars
average 24 mpg, a 20-year low. But an industry-wide transition is under way.
Toyota's Corolla-class Prius hybrid-electric five-seater gets 48 mpg; Honda's
CRX-class two-seat hybrid, 64 mpg. A car fleet as efficient as the Prius would
save 25 Arctic Refuges, but it's just the start. Ford, DaimlerChrysler, and
General Motors are already testing family sedans at 72 mpg to 80 mpg. Almost
every automaker at the recent Tokyo Motor Show displayed good hybrid-electric
prototypes, some getting more than 100 mpg. Volkswagen already sells Europeans a
78-mpg, four-seat nonhybrid subcompact and plans a two-seat city car for 2003
that will get 235 mpg (not a typo; VW is even testing a diesel version that gets
the equivalent of 282 mpg). When cars are so fuel-frugal, powering them with
fuel cells becomes a near-term option using current technology.

In 2000, Hypercar, Incorporated ( TARGET="outlink">www.hypercar.com), a firm previously spun off
from our Rocky Mountain Institute, designed a manufacturable, competitive-cost,
midsize-SUV concept car. Supercomputers show it's as roomy, comfortable, and
sporty as a Lexus RX 300 or a Ford Explorer--and as safe even if it hits one,
although both are twice its weight. (The car's structure is made of ultralight
carbon-fiber composite, which can absorb up to five times more crash energy per
pound than steel.) Getting the equivalent of 99 mpg, it would drive 330 miles on
7.5 pounds of safely stored compressed hydrogen--about 600 miles on 14 pounds
using the latest tanks--because of the fuel cell's doubled efficiency and the
car's lightness and low drag: Driving at 55 mph would use no more power than a
normal SUV needs just for its air conditioner. Such superefficiency and a
radically simplified, software-rich design make the car ready for the hydrogen,
with fuel cells small enough to be affordable and hydrogen tanks small enough to
fit.

Hypercars(TM) could transform the world's trillion-dollar auto industry within
two decades. For the United States, such vehicles in all shapes and sizes could
ultimately save eight million barrels of crude oil per day. It's like finding an
inexhaustible Saudi Arabia by drilling in the "Detroit Formation." A global
Hypercar fleet could save as much oil as OPEC now sells.

Such cars should do an end run around the trench warfare between advocates of
high gasoline taxes and supporters of stiff efficiency standards. Policy
interventions to spur people to buy squinchy, sluggish, or unsafe cars won't be
needed to save fuel and reduce emissions: The new cars will sell simply because
they're better than current models. (Encouragingly, the popular Toyota Prius
hybrid was developed, marketed, and grown to profitability with no governmental
action.) In addition, the cars' manufacturers should enjoy a competitive
advantage because their needs for capital, parts, space, and assembly could be
as much as 10 times lower.

This potential is compelling. Since we put the basic Hypercar design into the
public domain in 1993 (so nobody could patent it--like free software), about $10
billion has been committed around the world to this general line of development.

Deployment can be speeded if the development of fuel
cells in
cars and buildings is integrated. For example, fuel-cell-powered cars can be
leased initially to people who work in or near the buildings where fuel cells
will by then have been installed for power generation and space-conditioning. The
cars can be designed to hook up to a nearby building when parked (about 96
percent of the time). They can then buy the building's surplus hydrogen and sell
back the electricity that the cars' fuel cells generate--at the time and place
where it's most valuable. This could well repay much of the cost of owning the
car. If all cars were Hypercars of various sizes, they could ultimately provide 6
to 12 times more generating capacity when parked than all electricity suppliers
now own; they would displace the world's coal-fired and nuclear power plants
many times over.

Both near-term and more radical energy savings would happen faster if
resources were properly mobilized and policies aligned. For example, auto buyers
could be charged a fee for inefficient new cars or paid a rebate for efficient
ones--with the fees used to pay for the rebates. The turnover of the car fleet
could be accelerated if the rebate for an efficient new car were based on the
difference in efficiency between the new car you buy and the old car you scrap.
(Scrapping and not replacing it earns a bounty.) By encouraging the premature
disposal of the least efficient cars, such "feebates" would create a strong
economic stimulus to the auto industry. The benefits for oil imports, balance of
trade, national security, air quality, climate, and equity also would be big and
fast.

This is only one of many innovative policy possibilities. We could also
desubsidize driving, parking, and roads; let noncar vehicles, like innovative
buses and bicycles, compete fairly; stop subsidizing and mandating sprawl; free
up gate and slot monopolies to increase airline competition so that direct
flights would replace unwanted stops in "fortress hubs"; and help heavy-truck and
commercial-aircraft makers rapidly double or triple their products' fuel
efficiency.

The policy menu need not be confined to an impoverished list of tax tweaks; it
can be rich, diverse, expanding, and appealing to all ideological tastes.
Outside the transportation sector, we could be teaching architecture,
engineering, and business students how to make the most of modern efficiency
potential. We could make markets in saved energy, so bounty hunters would pursue
it relentlessly. We could mobilize communities to install mass retrofits block by
block. We could promote radically fuel-saving businesses that instead of selling
more cars and gallons use less of both to provide convenient transportation
services. We could scrap inefficient technologies as vigorously as we introduce
new ones, rather than further impoverishing poor people and poor nations by
selling them our cast-off junk.

This last is not a minor point. America's energy policy primarily serves our
own needs, but it should also serve the world. Advanced energy efficiency and
competitive renewable sources offer extraordinary leverage for helping the
world's poor, especially the two billion people with no electricity, to achieve
the decent life without which even today's $11,000 per second spent on weapons
and warriors cannot keep us safe.

Consider the example of a good compact fluorescent lamp. It emits the same
light as an incandescent lamp but uses four to five times less electricity and
lasts 8 to 13 times longer, saving tens of dollars more than it costs. It avoids
putting a ton of carbon dioxide and other bad stuff into the air. But it does far
more. In suitable numbers--half a billion are made each year--it can cut by a
fifth the evening peak load that causes blackouts in overloaded Bombay, boost
poor American chicken farmers' profits by a fourth, or raise destitute Haitian
households' disposable cash income by up to a third. Making the lamp needs 99.97
percent less capital than does expanding the supply of electricity, thus freeing
investment for other tasks. The lamp cuts power needs to levels that make
solar-generated power affordable, so girls in rural huts can learn to read at
night, advancing the role of women. One light bulb does all that. You can buy it
at the supermarket and screw it in yourself. One light bulb at a time, we can
make the world safer.

Choice, Not Fate

America's energy supply industries have done a remarkable job of fueling
the world's greatest economy. They are vital, skilled, dedicated, and often
innovative. But energy policy is not about the past; it shapes the future. It
should create a structure for treating that future as choice, not fate.

When the market vaporized the supposed energy shortages on which the Bush
administration had founded and advertised its 2001 National Energy Policy plan
for 1,300 to 1,900 new power plants and oil drilling everywhere, a new political
opening was created. When the Kyoto Protocol, a plan to start protecting global
climate, was accepted by almost every other nation, potentially disadvantaging
U.S. firms that can't profit from its carbon trading, the politics shifted
further--especially given recent evidence that reducing carbon emissions can
accompany economic vitality. (From 1996 through 1999, the U.S. economy grew nine
times as fast as carbon emissions. The global economy in 1998 and 1999 grew 2.5
percent and 2.8 percent, respectively, while carbon emissions fell 0.5 percent
and 0.8 percent.) Meanwhile, nuclear power's failure in the capital market has
been sealed by fears about its vulnerability to terrorism, and conservatives have
joined environmentalists to oppose sweeping federal powers to override siting
decisions at the state level.

This is a ripe moment to re-examine America's energy opportunities, yet
Congress seems about to reach gridlock over old wish lists. Anticipating this,
two nonpartisan nonprofit groups--Rocky Mountain Institute and the Consensus
Building Institute--recently formed the National Energy Policy Initiative to
bring together a distinguished independent group of ideologically diverse
energy-policy experts. They will seek consensus on the objectives, principles,
and content of an energy policy that can command wide support. In February this
group's recommendations will be delivered to senior political leaders and
offered to all Americans.

We don't know and can't shape what those recommendations will be. However,
three decades of well-documented experience worldwide suggest that both fair
market competition and wise administrative decisions broadly tend to favor
certain outcomes. These include more efficient use, energy of the right quality
and scale for the job, flexibility, and transparency. A sound energy policy won't
pick winners, bail out losers, substitute central planning for market forces, or
forecast demand and then build capacity to meet it. Rather, it will bust the
barriers that now prevent the market from dispassionately picking the best
portfolio of investments in both efficiency and supply.

Informed consumers don't need bosses or nannies to tell them how to live their
lives; instead, they should get to choose among options that compete fairly at
truthful prices. Then energy demand won't grow, and this will actually help the
economy. (Starting in 1975, demand for oil nationwide didn't rise for 16 years,
while gross domestic product grew 63 percent; beginning in the late 1970s, per
capita demand for electricity in California remained stable for 20 years, while
the state's economy nearly doubled.) With stable or dropping demand--and the
time this buys for building next-generation energy supplies--it will be
practical to provide secure, safe, and clean energy services at least cost, for
all, for ever.

Inventor Edwin Land said that people who seem to have had a new idea have
often simply stopped having an old idea. The key old idea to stop having is that
traditional supply-side approaches make sense or money. A new, balanced,
market-driven energy policy can make both--if we gracefully let go of the past,
embrace what works, and do what most Americans want.


This is the second article in a two-part series. The HREF="/print/V13/2/lovins-a.html" TARGET="outlink">first
appeared in the January 28, 2002, issue of the
Prospect. For annotated
versions of that article and this one, go to TARGET="outlink">www.rmi.org.

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