National security is also at risk because 13 percent of the oil we usecomes from the Persian Gulf (which holds two-thirds of the world's petroleumreserves). Buying the fastest and cheapest replacements is urgent. But replacinginsecure foreign oil with insecure new domestic energy sources doesn't help. Wewill have a secure supply of energy only when we have both displaced Mideast oiland shifted the basic architecture of our domestic energy infrastructure. Energysystems don't become secure by being located in this country--unless widespreadfailures are made impossible and local failures benign.
Consider the current fixation on drilling for oil in the Arctic NationalWildlife Refuge. The 800-mile-long Trans-Alaska Pipeline System (TAPS), the onlyway to ship Refuge oil south, presents such a fat terrorist target--worse thanthe Strait of Hormuz choke point--that former CIA Director R. James Woolsey, anormally oil-favoring Oklahoman, testified against Refuge oil as too vulnerable.TAPS is not only accessible to attackers; it's often unrepairable in winter. Ifkey pumping stations or facilities at either end were disabled, at least theabove-ground half of the pipeline's nine million barrels of hot oil could congealin one winter week into the world's largest Chap Stik. The U.S. Army, the GeneralAccounting Office, and the Senate Judiciary Committee have said that TAPS is indefensible. It has already been incompetently bombed twice, sabotaged, and shotat on more than 50 occasions. On October 4, 2001, a drunk's rifle shot piercedit, interrupting one-sixth of U.S. oil output for 60 hours. Two years ago, adisgruntled engineer's sophisticated plot to profit from oil futures trading wasluckily thwarted before he blew up three critical TAPS sites. Senators who havemade Refuge oil the centerpiece of their whimsically titled National EnergySecurity bill have obviously not connected the dots.
The 24-year-old TAPS also suffers from corrosion, erosion, stress, and meltingof the supporting permafrost--all raising maintenance costs, which may becomeunaffordable within this decade. Management deficiencies also persist. In 2000,TAPS suffered two serious accidents and its Valdez oil terminal narrowly escapedanother. On September 22, 2001, for the seventh year in a row, a botched routineprocedure 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 achieveenergy security by using less energy far more efficiently to do the sametasks--and then by supplying what is still needed from sources that areinherently invulnerable because they're dispersed, diverse, and increasinglyrenewable. These options reduce the need to transport energy by vulnerablelong-distance pipelines and transmission lines, and usually cost much less thanexpanding those links.
Security at a Profit
In the case of tasks now reliant on oil, the change would be relativelyeasy. Energy efficiency is the rapid-deployment resource, and huge amounts of itare available. Just a 2.7-mpg gain in the fuel economy of this country'slight-vehicle fleet could displace Persian Gulf imports entirely, and this is nopipe dream. The National Academy of Sciences reported last year that the fueleconomy of conventional cars and light trucks could be raised vastly more thanthat without compromising safety, performance, or affordability. Similarly, theDefense Science Board recently showed how the Pentagon--the world's largest oilbuyer and the nation's largest energy user--could save billions of dollars' worthof fuel annually while greatly improving its war-fighting capability. Efficiencyis an energy resource that is uninterruptible and already delivered, immune toboth foreign potentates and terrorism. It also stabilizes prices, protectsclimate and environment, and provides good jobs nationwide.
As for new fuels to replace oil, we already know how to produce themcost-effectively from renewable sources. Farm, forest, industrial, and urbanwastes and certain soilreplenishing crops can yield clean transportation fuels,fertilizer, and substitutes for petrochemicals (often with heat and electricityas convenient by-products). If these are produced near where they're used, giantrefineries and vulnerable pipelines can be bypassed. Done right, the use of suchbiofuels would also spread jobs, preserve rural culture, enrich topsoil, enhancefarm income, and protect global climate.
Coherent policies to mobilize these secure and proven resources, best buysfirst, could displace insecure foreign and domestic oil promptly and profitably.
Supplying secure and affordable electric power issimilarlyfeasible. America's electricity now comes mainly from big power plants thatstopped getting more efficient in the sixties, cheaper in the seventies, biggerin the eighties, and built in the nineties. The ones we already have willcontinue to serve us for a long time, however, and should at least start reusingthe waste heat they now throw away--as much energy as Japan consumes foreverything. 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 moreregulators 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 deliverysystems cost even more than the stations, and the grid causes almost all thepower failures.
On-site and neighborhood micropower generated in or near customers'premises can solve both problems, offering diverse, decentralized, and thusnearly invulnerable supplies of electricity. Because microgeneration is also moreflexible and quickly built than large power plants--and because it benefits fromthe valuable financial and engineering advantages of electric sources that arethe right size for the job--it is favored in the market as well.
Doubled-efficiency, combined-cycle, gas-fired power stations, each producinghundreds 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 ormore efficient (and can more easily recapture waste heat). Manhattan'sCondé Nast Building, for instance, was designed to use half the energy ofan ordinary office building; and with the saved construction costs, thedevelopers were able to equip it with the two most reliable known powersources--fuel cells and solar cells. This ultrareliable on-site electricityhelped them win in the real-estate market by recruiting premium tenants quicklyat 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 toprovide half in 2030. In fact, wind power has lately added more megawattsworldwide than nuclear power averaged throughout the 1990s, and it dominatesEurope'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 couldcost-effectively more than meet all of the world's electricity needs--orAmerica's--at constant prices now edging below 3 cents per kilowatt-hour. Solarpower is enjoying a similar boom, lately growing 26 percent to 42 percent a year.In Sacramento five tract developers offer, as standard equipment, house roofsthat make solar electricity. (After a referendum shut down the troubled nuclearplant that had provided nearly half Sacramento's power, investments inefficiency and new, diverse, and often decentralized and renewable suppliesreplaced it reliably at lower cost. Moreover, university analysts found that fiveyears' 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-poweredsubdivisions.
The benefit to national security is not what sells micropower. Yet asAssistant Secretary of Energy David Garman says, "Aside from its obviousenvironmental benefits, solar and other distributed energy resources can enhanceour energy security." Garman adds:
Distributed generation at many locations aroundthe grid increases power reliability and quality while reducing the strain on theelectricity transmission system. It also makes our electricity infrastructureless vulnerable to terrorist attack, both by distributing the generation anddiversifying the generation fuels. So if you're engaged in this effort, it is myview that you are also engaged in our national effort to fight terrorism.
Meanwhile, micropower's explosive growth further raises the financial riskof building big (and vulnerable) power plants, because fast and agile competitorscan idle them even before they're finished. In the mid-1980s, California shiftedfrom 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 andmicropower installers are still back-ordered.
Efficiency and micropower are natural partners. With very efficient use ofelectricity, a new house can run on so few solar cells that they cost less thanconnecting to the grid, let alone paying subsequent utility bills. In our ownhouse, 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 itselfin 10 months--all with 1983 technology. Other people have built houses that arecomfortable with no airconditioning at up to 115 degrees Fahrenheit yet cost lessto construct than conventional houses. Such large reductions in the energyneeded make microgeneration particularly attractive and will speed its spread.
Integrated, superefficient design is the crucial factor. It can often makevery large energy savings cost less than small or no savings. That's beendemonstrated in a wide range of technical systems, uses, and economic sectors. Ina typical industrial pumping loop, for example, an improved design cut power useby 92 percent, cost less to build, and worked better. This was achieved not byany new technology but solely by better design that used fat, short, straightpipes rather than skinny, long, crooked ones. It's not rocket science--just goodVictorian engineering rediscovered.
Fast-Forward to Hydrogen
The next step will integrate efficiency with a shift from hydrocarbons toplain hydrogen. We've already made progress in reducing the carbon burning thatharms the climate; today, two of every three fossil-fuel atoms we burn arehydrogen, the other one carbon. The emerging hydrogen economy eliminates both theburning and the rest of the carbon by using pure hydrogen in fuel cells. Rememberthe high-school chemistry experiment in which an electric current splits waterinto hydrogen and oxygen? A fuel cell reverses this process, chemicallyrecombining these gases to produce electricity, pure hot water, and nothing else.Fuel cells are the most efficient, clean, and reliable known source ofelectricity.
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 waysto do this economically at all scales, though smaller is often cheaper as well asless vulnerable. Hydrogen is cost-competitive today in many uses. Moreover, thebuoyant, clear-flame gas is safer to use and store than gasoline, and newresearch suggests that its refueling infrastructure would be cheaper.
Nor is there need to worry about the natural gas running out: Even as thehydrogen economy grows, it will probably use less natural gas than we do now. Inthe long run, hydrogen will most likely be made from water, using renewableelectricity or possibly just sunlight. Or it may be extracted from oil and perhaps even coal, without releasing the carbon into the air. All these optionsare 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'sCentral Park police station to an Omaha credit-card data center, are powered byfuel cells. Fuel-cell buses are on the market. Experimental fuel-cell-poweredcars are on the road, and Energy Secretary Spencer Abraham announced on January 9a federal-Big Three collaboration to speed them to market. The heads of sevenmajor oil and car companies have announced the start of both the Oil Endgame andthe 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 hasthe world getting one-third of its energy and all its increased energy fromrenewable sources by 2050; the other, more radical scenario envisages anaccelerated shift to hydrogen, with oil use stagnant until 2020 and fallingsharply thereafter. Ex-Saudi Oil Minister Sheikh Yamani is the latest of severalenergy experts to say that "the Stone Age did not end because the world ran outof 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 mainusers and its dominant growth market: cars and light trucks. New American carsaverage 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'sCRX-class two-seat hybrid, 64 mpg. A car fleet as efficient as the Prius wouldsave 25 Arctic Refuges, but it's just the start. Ford, DaimlerChrysler, andGeneral Motors are already testing family sedans at 72 mpg to 80 mpg. Almostevery automaker at the recent Tokyo Motor Show displayed good hybrid-electricprototypes, some getting more than 100 mpg. Volkswagen already sells Europeans a78-mpg, four-seat nonhybrid subcompact and plans a two-seat city car for 2003that will get 235 mpg (not a typo; VW is even testing a diesel version that getsthe equivalent of 282 mpg). When cars are so fuel-frugal, powering them withfuel cells becomes a near-term option using current technology.
In 2000, Hypercar, Incorporated (www.hypercar.com), a firm previously spun offfrom our Rocky Mountain Institute, designed a manufacturable, competitive-cost,midsize-SUV concept car. Supercomputers show it's as roomy, comfortable, andsporty 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 ultralightcarbon-fiber composite, which can absorb up to five times more crash energy perpound than steel.) Getting the equivalent of 99 mpg, it would drive 330 miles on7.5 pounds of safely stored compressed hydrogen--about 600 miles on 14 poundsusing the latest tanks--because of the fuel cell's doubled efficiency and thecar's lightness and low drag: Driving at 55 mph would use no more power than anormal SUV needs just for its air conditioner. Such superefficiency and aradically simplified, software-rich design make the car ready for the hydrogen,with fuel cells small enough to be affordable and hydrogen tanks small enough tofit.
Hypercars(TM) could transform the world's trillion-dollar auto industry withintwo decades. For the United States, such vehicles in all shapes and sizes couldultimately save eight million barrels of crude oil per day. It's like finding aninexhaustible Saudi Arabia by drilling in the "Detroit Formation." A globalHypercar fleet could save as much oil as OPEC now sells.
Such cars should do an end run around the trench warfare between advocates ofhigh gasoline taxes and supporters of stiff efficiency standards. Policyinterventions to spur people to buy squinchy, sluggish, or unsafe cars won't beneeded to save fuel and reduce emissions: The new cars will sell simply becausethey're better than current models. (Encouragingly, the popular Toyota Priushybrid was developed, marketed, and grown to profitability with no governmentalaction.) In addition, the cars' manufacturers should enjoy a competitiveadvantage because their needs for capital, parts, space, and assembly could beas much as 10 times lower.
This potential is compelling. Since we put the basic Hypercar design into thepublic domain in 1993 (so nobody could patent it--like free software), about $10billion has been committed around the world to this general line of development.
Deployment can be speeded if the development of fuelcells incars and buildings is integrated. For example, fuel-cell-powered cars can beleased initially to people who work in or near the buildings where fuel cellswill by then have been installed for power generation and space-conditioning. Thecars can be designed to hook up to a nearby building when parked (about 96percent of the time). They can then buy the building's surplus hydrogen and sellback the electricity that the cars' fuel cells generate--at the time and placewhere it's most valuable. This could well repay much of the cost of owning thecar. If all cars were Hypercars of various sizes, they could ultimately provide 6to 12 times more generating capacity when parked than all electricity suppliersnow own; they would displace the world's coal-fired and nuclear power plantsmany times over.
Both near-term and more radical energy savings would happen faster ifresources were properly mobilized and policies aligned. For example, auto buyerscould be charged a fee for inefficient new cars or paid a rebate for efficientones--with the fees used to pay for the rebates. The turnover of the car fleetcould be accelerated if the rebate for an efficient new car were based on thedifference 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 prematuredisposal of the least efficient cars, such "feebates" would create a strongeconomic stimulus to the auto industry. The benefits for oil imports, balance oftrade, national security, air quality, climate, and equity also would be big andfast.
This is only one of many innovative policy possibilities. We could alsodesubsidize driving, parking, and roads; let noncar vehicles, like innovativebuses and bicycles, compete fairly; stop subsidizing and mandating sprawl; freeup gate and slot monopolies to increase airline competition so that directflights would replace unwanted stops in "fortress hubs"; and help heavy-truck andcommercial-aircraft makers rapidly double or triple their products' fuelefficiency.
The policy menu need not be confined to an impoverished list of tax tweaks; itcan 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 efficiencypotential. We could make markets in saved energy, so bounty hunters would pursueit relentlessly. We could mobilize communities to install mass retrofits block byblock. We could promote radically fuel-saving businesses that instead of sellingmore cars and gallons use less of both to provide convenient transportationservices. We could scrap inefficient technologies as vigorously as we introducenew ones, rather than further impoverishing poor people and poor nations byselling them our cast-off junk.
This last is not a minor point. America's energy policy primarily serves ourown needs, but it should also serve the world. Advanced energy efficiency andcompetitive renewable sources offer extraordinary leverage for helping theworld's poor, especially the two billion people with no electricity, to achievethe decent life without which even today's $11,000 per second spent on weaponsand warriors cannot keep us safe.
Consider the example of a good compact fluorescent lamp. It emits the samelight as an incandescent lamp but uses four to five times less electricity andlasts 8 to 13 times longer, saving tens of dollars more than it costs. It avoidsputting a ton of carbon dioxide and other bad stuff into the air. But it does farmore. In suitable numbers--half a billion are made each year--it can cut by afifth the evening peak load that causes blackouts in overloaded Bombay, boostpoor American chicken farmers' profits by a fourth, or raise destitute Haitianhouseholds' disposable cash income by up to a third. Making the lamp needs 99.97percent less capital than does expanding the supply of electricity, thus freeinginvestment for other tasks. The lamp cuts power needs to levels that makesolar-generated power affordable, so girls in rural huts can learn to read atnight, advancing the role of women. One light bulb does all that. You can buy itat the supermarket and screw it in yourself. One light bulb at a time, we canmake the world safer.
Choice, Not Fate
America's energy supply industries have done a remarkable job of fuelingthe world's greatest economy. They are vital, skilled, dedicated, and ofteninnovative. But energy policy is not about the past; it shapes the future. Itshould create a structure for treating that future as choice, not fate.
When the market vaporized the supposed energy shortages on which the Bushadministration had founded and advertised its 2001 National Energy Policy planfor 1,300 to 1,900 new power plants and oil drilling everywhere, a new politicalopening was created. When the Kyoto Protocol, a plan to start protecting globalclimate, was accepted by almost every other nation, potentially disadvantagingU.S. firms that can't profit from its carbon trading, the politics shiftedfurther--especially given recent evidence that reducing carbon emissions canaccompany economic vitality. (From 1996 through 1999, the U.S. economy grew ninetimes as fast as carbon emissions. The global economy in 1998 and 1999 grew 2.5percent and 2.8 percent, respectively, while carbon emissions fell 0.5 percentand 0.8 percent.) Meanwhile, nuclear power's failure in the capital market hasbeen sealed by fears about its vulnerability to terrorism, and conservatives havejoined environmentalists to oppose sweeping federal powers to override sitingdecisions at the state level.
This is a ripe moment to re-examine America's energy opportunities, yetCongress seems about to reach gridlock over old wish lists. Anticipating this,two nonpartisan nonprofit groups--Rocky Mountain Institute and the ConsensusBuilding Institute--recently formed the National Energy Policy Initiative tobring together a distinguished independent group of ideologically diverseenergy-policy experts. They will seek consensus on the objectives, principles,and content of an energy policy that can command wide support. In February thisgroup's recommendations will be delivered to senior political leaders andoffered 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 fairmarket competition and wise administrative decisions broadly tend to favorcertain outcomes. These include more efficient use, energy of the right qualityand scale for the job, flexibility, and transparency. A sound energy policy won'tpick winners, bail out losers, substitute central planning for market forces, orforecast demand and then build capacity to meet it. Rather, it will bust thebarriers that now prevent the market from dispassionately picking the bestportfolio of investments in both efficiency and supply.
Informed consumers don't need bosses or nannies to tell them how to live theirlives; instead, they should get to choose among options that compete fairly attruthful 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, percapita demand for electricity in California remained stable for 20 years, whilethe state's economy nearly doubled.) With stable or dropping demand--and thetime this buys for building next-generation energy supplies--it will bepractical to provide secure, safe, and clean energy services at least cost, forall, for ever.
Inventor Edwin Land said that people who seem to have had a new idea haveoften simply stopped having an old idea. The key old idea to stop having is thattraditional 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 firstappeared in the January 28, 2002, issue of the Prospect. For annotatedversions of that article and this one, go to www.rmi.org.
