(Editor’s note: this piece originally appeared in Roll Call on Nov. 9, 2009, in a slightly different form.)
In his remarks at the United Nations climate change conference in Copenhagen in December, President Obama did say (to my delight) that climate solutions advance both prosperity and security, but he hadn’t time to rebut in detail the “sign error”—the widespread fallacy that climate solutions are intrinsically an economic burden.
Now that the post-Copenhagen dust has settled and it’s time to refocus on what we should be doing and get back to work, here are eight convenient truths to consider and share about climate and energy.
1. For all world citizens who want a richer, fairer, cooler, and safer world, here’s a heretical suggestion: whether you want to reduce greenhouse-gas emissions should not depend on your view about the reality and risk of climate change.
More importantly, your opinions about climate science shouldn’t change what you should do about energy. Whether you care most about national security, or jobs and prosperity, or climate and environment, exactly the same energy actions make sense and make money regardless.
Thus, if we focus on outcomes, not motives, we can build a wide and rapid consensus on what to do, even if we differ about why to do it.
2. We needn’t debate how much it will cost to reduce emissions, nor whether that cost is worth paying, nor who should pay—because protecting the climate is not costly but profitable. Saving fuel is cheaper than buying fuel: energy efficiency costs less than the fuel it saves, as thousands of practitioners prove daily.
Many people get confused because economic theorists don’t count the money we save by needing less fuel. In fact, as many business leaders understand and apply, energy efficiency is one of the highest-return and lowest-risk investments in the whole economy.
- Dow Chemical has saved $9 billion by investing $1 billion in energy efficiency.
- DuPont made billions by cutting its greenhouse-gas emissions 72 percent during 1990–2004, and is now expanding that cut by another 15 percent: the firm uses 7 percent less energy now than in 1990 despite 40 percent higher production.
- Interface doubled its profits and grew its business by two-thirds while cutting its greenhouse-gas emissions 72 percent and offsetting another 27 percent.
We should therefore be talking not about cost, burden, and sacrifice, but about profits, jobs, and competitive advantage. This simplifies and sweetens the politics. Once we start debating the allocation of benefits, not costs, any remaining resistance to climate protection should melt faster than the glaciers.
3. Profitable energy efficiency can drive the business-led journey beyond oil and coal to cheaper, cleaner, inexhaustible, secure, all-American, climate-safe resources.
Since 1975, America has doubled the productivity of using oil and energy, and tripled the productivity of directly using natural gas. But today’s smarter technology can redouble our oil and gas productivity at about a fifth of those fuels’ price, and can probably quadruple our electric productivity at an eighth of its price. This would save hundreds of billions of dollars a year, helping rebalance our national and personal budgets, and put American industry back in the forefront of global competitiveness.
4. Oil dependence is a problem we needn’t have, and it’s cheaper not to. The last time we paid attention to oil, in 1977–1985, GDP grew 27 percent, oil use fell 17 percent, oil imports dropped 50 percent, and oil imports from the Persian Gulf plummeted 87 percent. OPEC’s exports shrank 48 percent, breaking the oil cartel’s pricing power for a decade: it had less market power than America, the Saudi Arabia of negabarrels, because we could and did save oil faster than OPEC could conveniently sell less oil. But today’s technologies are far more powerful. What could they do now?
My team’s 2004 Pentagon-cosponsored roadmap "Winning the Oil Endgame" detailed how to eliminate U.S. oil use by the 2040s at an average cost of $15 per barrel (2000 $). A $180-billion investment to retool the vehicle industries and build a modern biofuels industry could return $70 billion a year net (even at one-third today’s oil price), a million new jobs (75 percent in rural and small-town America), a million at-risk jobs saved (mainly linked to auto making), and 26 percent less carbon (burning oil emits 43 percent of U.S. fossil carbon). Our war fighters could also get negamissions in the Persian Gulf—Mission Unnecessary—by not needing to fight over oil we no longer use.
Now the Wall Street Journal reports that ExxonMobil agrees with many private and government forecasters that U.S. gasoline demand peaked in 2007 and is headed permanently down; Cambridge Energy Research Associates says the industrialized countries’ oil demand peaked in 2005; and Deutsche Bank says world oil demand will peak by 2016, then head down.
5. Coal dependence is also an unnecessary and uneconomic problem, thanks to a twin revolution in electricity, whose generation emits 40 percent of U.S. and roughly 41 percent of world fossil carbon, nearly all from coal.
First, electricity-saving technologies are getting better and cheaper faster than we’re applying them, so efficiency is an ever bigger and cheaper resource. New techniques for integrative design can even make very big savings cost less than small or no savings, yielding not diminishing but expanding returns. (No official forecast yet reflects this proven potential—not even the excellent McKinsey analysis showing how to cut global greenhouse-gas emissions in 2030 by 70 percent at an average cost of just $6 per ton of CO2.)
Second, electricity production is shifting rapidly and profoundly from giant coal- and gas-fired and nuclear plants to “micropower”—cogenerating electricity together with useful heat in factories and buildings, plus renewables (not counting big hydro dams). Micropower in 2006 made one-sixth of the world’s electricity and one-third of the world’s new electricity. The U.S. lagged with just 7 percent, but a dozen other industrial countries made from one-sixth to more than half their electricity with micropower.
In 2007, U.S. windpower additions exceeded total U.S. coal-power additions for 2003–07, and exceeded global nuclear additions. So did wind additions in Spain and in China, which had distributed renewable capacity seven times bigger and growing seven times faster than nuclear capacity. In 2008, distributed renewables worldwide added 40 billion watts and got $100 billion of private investment, while nuclear added and got zero; the world invested more in renewable than in fossil-fueled generation. This revolution already happened—sorry if you missed it!—because these decentralized competitors make cheaper electricity, build faster, and have less financial risk than big, slow, lumpy power plants, so they can better attract private capital despite their generally smaller subsidies.
Legislators confronted with the nuclear industry’s ever-escalating wish-list for lavish taxpayer subsidies—such as the unlimited, no-accountability blank check offered by the Senate—should first consider the verdict of the marketplace. From August 2005 to August 2008, the U.S. nuclear industry enjoyed the most robust political support and capital markets in history, plus new subsidies (on top of old ones) rivaling or exceeding new plants’ total construction cost; yet it couldn’t attract a penny of private equity investment in any of 33 proposed projects. That’s because there’s no business case for building nuclear plants—nor other central power plants.
Of the 56 nuclear plants under construction worldwide, 13 have been so listed for over 20 years, 24 have no official start date, most are late, 40 are in just four centrally planned systems (China, Russia, India, South Korea), all are bought by central planners (generally with a draw on the public purse), and none are competitive free-market purchases. Nuclear power requires central planning, but even the world’s most impressively planned nuclear enterprise, in France, suffered 3.5-fold real capital cost escalation and nearly doubled construction times (1970–2000): doing exactly as nuclear advocates urge does not prevent spiraling costs and bad economics.
6. Nuclear power’s global commercial collapse is good for both our wallets and our security (because it can help smoke out proliferators of nuclear weapons by removing the ambiguity created by “civilian” do-it-yourself bomb kits). To the surprise of many, nuclear power’s collapse is also good for climate protection. New nuclear plants could save carbon, but two to 20 times less per dollar, and 20 to 40 times less per year, than buying the market winners instead—micropower and efficiency. If greenhouse-gas emissions are a problem, we need the most solution per dollar and per year; anything less will reduce and retard climate protection. We need judicious, not indiscriminate, investment—best buys first. We don’t need everything, we can’t afford everything, and every dollar and year we spend on one choice excludes other choices.
7. At Rocky Mountain Institute we are Reinventing Fire™—mapping and driving the business-led transition from oil and coal to efficiency and renewables. Our most novel effort is an in-depth exploration, with utility partners, of the shape, stability, economics, and business models of the emergent distributed and renewable power grid.
This is as big a step from today’s century-old utility business as wireless telephony is from Ma Bell. But disruptive technologies now make it inevitable, and the new competitive landscape will sort utilities between the quick and the dead.
In this new world of IT-driven electricity systems, an encouraging surprise is emerging. Just as better alternatives displaced Victorian steam locomotives, mainframe computer centers, and giant relays-and-copper phone exchanges, so we no longer need to keep building big power plants to keep the lights on. They are the traditional and an effective way to do so, but no longer the only nor the cheapest way. Both steady renewable sources (geothermal, small hydro, waste-and-biomass combustion, solar-thermal-electric, etc.) and variable ones (wind and photovoltaics) can be diversified in type and location, forecasted, and integrated so they power a modern society with even greater reliability and resilience than today.
We often hear this will need far more storage, backup, and transmission than we have now. I doubt it. More efficient use, demand response, and distributed generation will massively free up grid capacity. Solar energy varies less than twofold between the cloudy Northeast and the Southwestern desert; massive wind resources off both coasts and in the Great Lakes are near the main load centers.
Storage and backup capacity, too, may well be less than what now manages the intermittence of big thermal plants. U.S. utility operators are starting to discover, as their European counterparts have, that integrating many smaller and variable generators is different but no harder and not materially costlier than the way they’ve always coped with the 10 percent to 12 percent failure rate of big power plants and with fluctuating demand: it requires different operating methods and rearranging mental furniture will be required, but not new technologies or equipment. And total cost is also looking comparable or lower: windpower continues to meet or beat wholesale power prices, and the actual price of new U.S. windpower (“firmed” so you can have it whether the wind is blowing or not) is about half what utilities report for new coal power or a third that of new nuclear power.
Getting off coal is now feasible at costs ranging from negative to modest. The rough percentage of U.S. coal-fired electricity that can be displaced is:
- 100 percent to 150 percent by using electricity in a way that saves money (even compared with just running an old coal plant even if the plant and grid were free)
- 50 percent by building the windpower now stuck in the interconnection queue
- Over 400 percent by building all cost-effective windpower in available sites
- About 40 percent by allowing industrial cogeneration (plus more by cogenerating in buildings)
- Over 100 percent by putting photovoltaics on 7 percent of U.S. structures
- Probably over 50 percent from exploiting other renewables
- About 35 percent, immediately if desired, by running coal plants less and existing but underused combined-cycle gas plants more, at an extra cost (around 2¢/kWh) less than one-fifth that of building new nuclear plants. That should be a rich enough menu to create a profitable and politically attractive portfolio.
8. I’d like to see an economically conservative, market-based national energy strategy. It would allow and require all ways to save or produce energy to compete fairly, at honest prices, regardless of their type, technology, size, location, or ownership. I wonder who wouldn’t be in favor of that.
Amory B. Lovins is Cofounder, Chairman, and Chief Scientist of Rocky Mountain Institute.
--Published February 2010