In mid-2005, Rocky Mountain Institute
launched a three-year effort to
implement Winning the Oil Endgame
(www.oilendgame.com)—our detailed
2004 roadmap for getting the United
States completely off oil by the 2040s,
without needing new taxes, subsidies,
mandates, or federal laws. We felt this
$3.6-million effort could be led by
business for profit, because saving or
displacing oil would cost only $15 per
barrel (in 2000 dollars)—far below oil’s
price. It might seem foolish to expect
to shift such gigantic sectors as oil and
cars. But by taking markets seriously, we
saw leverage in “institutional acupuncture”:
find meridians and points where
the business logic is congested and not
flowing properly, then stick needles into
carefully chosen sites to get it flowing.
Some farsighted donors and foundations
backed this ambitious experiment.
Two and a half years later, it has
exceeded expectations. Of the six sectors
that must change to set the United
States firmly on the journey beyond oil,
I believe at least three, perhaps four,
have already passed the “tipping point”
beyond which the major efforts still
required will become ever easier.
The hardest and slowest sector is cars.
But building on 17 years of patient
effort, our acupuncture is now driving
big and accelerating shifts. The tsunami
of “creative destruction” we foresaw in
2004 is now breaking over the industry
and changing the managers or their
minds, whichever comes first. Chrysler,
like many leading automotive suppliers,
has been bought by a private equity
firm; two of the Big Three firms’ CEOs
are newcomers to automaking; and
Toyota just pulled neck-and-neck with
GM as the world’s biggest automaker.
Figure 1. Toyota's impressive 1/X carbon-fiber concept car (2007) has the interior space of a
Prius midsize hybrid, but is three times lighter and twice as fuel-effcient. Its half-liter flex-fuel
engine, tucked under the rear seat, is supplemented by grid electricity via 20 extra kg of batteries. The plug-in hybrid's remaining curb mass, 400 kg, is exactly what I'd claimed in 1991 (to
much industry mirth) a good carbon-fiber four-seater could weigh.
Our book urged Detroit to emulate
Boeing’s breakthrough competitive
strategy, based on an efficiency leapfrog
integrating ultralight materials,
advanced manufacturing, and wholesystem
design. Matching our playbook,
in September 2006 Ford hired Alan
Mulally, head of Boeing Commercial
Airplanes, as its new CEO. I now work
with Ford’s leadership team as a charter
member of Chairman Bill Ford’s Transformation
Advisory Council.
On 10 October 2007, Toyota announced
the industry’s best-yet
Hypercar®-class concept car— the 1/X
(pronounced “one-Xth”—see Fig. 1)
shown at the Tokyo Motor Show 26
October. Many concept cars never get
to market. But a day earlier, Nikkei had
reported that Toray, the world’s biggest
carbon-fiber maker, plans a $0.3-billion
factory in Nagoya to mass-produce
carbon-fiber body panels and other auto
parts for Toyota, Nissan, and others. Together,
these two announcements signal
strategic intent. Toyota is a proven
gamechanger: in the U.S., its Prius
hybrid, shown as a concept car in Tokyo
in 1995, outsold in 2007 even Ford’s
Explorer—the top-selling SUV for over
a decade. In 2007 alone, U.S. Prius
sales soared 69 percent to 181,221,
while Explorer sales fell below onethird
of their 2000 peak of 445,000.1
Toyota reported 2007 U.S. hybrid sales
totaling 257,760—76 percent of the
national hybrid market. Now practically
all automakers are selling or urgently
developing hybrids to try to catch up
with Toyota.
During 1987–2006, the average
light-duty vehicle sold in the U.S. got
29 percent heavier; cars alone got 17
percent heavier and 12 percent denser;
but only 30 percent of the fleet’s weight
gain (and none in recent years) was
caused by bigger cars or by shifts to
SUVs, vans, and pickups. Instead, the
obesity came from materials and design.
Yet in recent months, strategy has
begun to go lean: integrative lightweight
design has emerged as an important
trend. In November 2007, Ford led by
announcing a 250–750-pound weight
cut in all cars starting in Model Year
2012 (as soon as production can shift)
to capture unexpectedly big design synergies.
(Mazda had already been quietly
lightweighting.) Two months later,
Nissan announced a 15 percent average
weight cut by MY2015, and China announced
an auto lightweighting alliance
aiming to cut 660 pounds out of the
average car by 2010. Lightweighting is
finally emerging as the hottest strategic
trend in the industry.
Unlike traditional improvements,
lightweighting can improve fuel
economy and performance and crashworthiness.
2 But this seemingly obvious
solution had lacked two key ingredients.
First, light materials looked costly. Th is
barrier is rapidly falling due to manufacturing
advances, both with familiar
light metals and with newfangled
carbon-fiber composites (led by RMI’s
spinoff Fiberforge, www.fiberforge.
com, whose high-speed manufacturing
technology recently entered industrial
service). Second, most automakers
still count costs per part or per pound,
yet customers care only about cost
per car. Since 1991, we’ve shown how
costlier parts or pounds can make cars cheaper to build. In 2000, our Hypercar
® spinoff (later renamed Fiberforge®)
and its Tier One industry partners
designed3 a 67-mpg uncompromised
midsized SUV that proved how cheaper
tooling, simpler assembly, and smaller
powertrain could off set costlier materials.
Winning the Oil Endgame (pp.
61–72) then showed how eliminating
53 percent of that car’s weight would be
essentially free: the 3.6×-more-efficient
SUV would be priced just $2,511
higher (2000 $), a two-year U.S.
payback—and would cost more only
because it’s hybrid-electric, not because
it’s ultralight.
To support the transition to such costbusting
integrative designs, in summer
2007 RMI led two automotive efforts,
either of which could transform the
industry—one partnering with a major
automaker, another with a consortium
of Tier One suppliers. Both turned up
trumps, and more are emerging.
Automakers now face relentless and
converging pressures from innovationhungry
auto dealers, financial analysts
and investors, the United Auto Workers’
Union, climate and security concerns,
and a 2007 U.S. law requiring 40
percent higher fuel efficiency within 12
years. “Feebates” (WTOE, pp. 186–190)
will further speed and reward the transition,
and a private Feebate Forum RMI
led in June 2007 is stimulating strong
industry interest. For all these reasons,
fundamental rethinking is spreading
rapidly, with lightweighting in the
vanguard. But lightweighting in turn
makes advanced powertrains, especially
those using electric traction, cheaper
and more advantageous.
In January 2008, RMI joined with
powerful industry partners to spin
off a new venture, Bright AutomotiveTM
(our third spinoff in addition to
two staff startups), focused on PHEV
technology development. In 2004, our
published menu for tripled-efficiency
cars didn’t yet include plug-in hybrids,
but by 2007, we’d devised technical and
business-model innovations that could
often give them a sound business case,
at least redoubling cars’ potential oil
efficiency. To push this further, we’re
developing the “Smart Garage”—an
intelligent interface between electrictraction
vehicle, building, and electric
grid. Plug-in hybrids’ distributed
battery storage, or fuel-cell cars’ distributed
fuel-cell generators, could become
important, even dominant, elements of
electrical supply, initially for peak loads
and later for wider needs—realizing the
“vehicle-to-grid” concept I invented in
1991.
Now let’s connect the automotive dots.
Drive your Prius-class car properly (not
the way Consumer Reports says to) and
you double a typical non-hybrid sedan’s
miles per gallon. Make it ultralight and
slippery and you can redouble its efficiency. Now fuel it with cellulosic E85
fuel (85 percent ethanol, 15 percent
gasoline) and cut its oil use per mile
by another fourfold, to ~1/16th of the
current level. Make it a plug-in hybrid
and cut oil use by at least half again, to
~3 percent of the original. Optionally, a
hydrogen fuel cell, competitive in such
an efficient vehicle,4 could replace both
the engine and its E85 fuel.
This menu doesn’t yet count diesel
engines, which are more efficient than
normal Otto engines and have half
the European market today. In 2004,
we weren’t sure diesels could meet
future fine-particulate air standards,
so we didn’t include them. But in
2007, a small Colorado firm (www.
sturmanindustries.com) demonstrated
a radically new digitally controlled
engine that promises above-diesel effi
ciency, cleanly burning any fuel on
the fly, yet with lower cost, size, and weight. Successful development of this
concept could quickly bring internalcombustion
engines to and beyond fuel
cells’ efficiency range—itself a moving
target—revolutionizing both vehicular
propulsion and stationary micropower
systems. Alternatively, MIT researchers
have shown how a tiny, timely squirt
of ethanol into the engine can suppress
knock even at tripled compression
ratio, permitting half-size, same-torque
engines about about one-fourth higher
efficiency. Th at could stretch today’s
modest ethanol supplies to cover the
whole fleet.
Of course innovation continues to
emerge, encouraged by RMI’s continuing
conversations with
automakers worldwide.
More will come from India
(p. 12), where Tata just
launched the most important
clean-sheet car design
in decades (the $2,500
Nano) and from China, where University Press will publish Winning
the Oil Endgame in 2008. But existing
technologies are clearly more than
adequate to get the world profitably off
oil, and they’re getting ever better and
cheaper, while oil is getting scarcer and
costlier.
Meanwhile, the first three sectors
to have reached the tipping point are
continuing to accelerate their transformations.
Let’s start with aviation,
the fastest-growing oil user. In 2004,
Boeing got outsold by Airbus, but
launched a bold riposte: the 20 percentmore-
efficient, same-price, greatly
simplified, easier-to-build-and-run,
50 percent-carbon-composite-by-mass
airplane called the 7E7, later renamed
the 787 Dreamliner. As we expected, it
proved wildly successful. By 24 February
2008, Boeing had sold 885 of these
airplanes (892 firm, 38 pending) and
430 options, the fastest order takeoff
of any jetliner in history. Production is
sold out well into 2017. Boeing now
plans to add similar innovations to
every airplane it makes before Airbus
can catch up. Boeing will also presumably
apply its momentum and cashflow
to aggressively develop even more efficient designs to consolidate its competitive
advantage. So far, Boeing’s strategy
looks like one of the great turnaround
stories in business history: it took only
two years (or five years from 2004 start
to delayed 3Q09 first delivery) to move
Boeing from trouble to triumph. RMI
is discussing with airframe makers some
ways to accelerate such progress within
a profitable competitive and climate
strategy. And in February, Sir Richard
Branson’s Virgin Atlantic Airways successfully
tested a novel non-food-cropbased
A380.
Winning the Oil Endgame showed how
to triple the efficiency of heavy (Class 8,
18-wheel) trucks through an integrated
suite of improvements, mainly in aerodynamics
and tires, with a juicy internal
rate of return around 60 percent. On
discovering that major truck buyers
didn’t know this was possible, we began
facilitating conversations between one
such firm and its suppliers. They soon
discovered that the first 25 percent fuel
saving was free. The buyer said, “Free
isn’t good enough: I want to invest for
a return. What can you do for me?”
Dramatic and lucrative opportunities
quickly emerged. In October 2005,
the firm announced that its new truck
purchases would soon become 25
percent more efficient (it now expects
near-completion by late 2008), and
that it would double its fleet efficiency
by 2015. The firm is Wal-Mart (see
p. 9), the world’s largest company. It
will save billions of dollars’ net present
value and is strongly motivated. Wal-
Mart’s immense “demand pull” will
bring doubled-efficiency trucks into the
marketplace where everyone can buy
them. In the U.S. alone, that’ll save 6
percent of total oil use. Now RMI is
working to enroll more buyers, speed
suppliers’ innovations, and demonstrate
tripled-efficiency designs, which Wal-
Mart’s CEO has also acknowledged as a
realistic goal.
Having analyzed and advocated military
energy efficiency for two decades
and served as an independent member
of two U.S. Defense Science Board task
forces advising the Secretary of Defense
on this issue, I’ve long urged military
leaders to start valuing saved fuel at its
delivered value—delivered to platform in
theater in wartime.
at “fully burdened” cost
many times the $13-
billion cost of undelivered
military fuel in FY2006.
e cost in blood is also
huge: about half of all
U.S. theater are related to
convoys, which mainly haul inefficiently
used fuel. Tying down whole divisions
hauling fuel and guarding convoys also
diverts and degrades combat capability.
Field experience of fuel logistics burdens
has created a unique opportunity for
switching to efficient platforms that
radically trim fuel logistics. Winning
the Oil Endgame in 2004 estimated a
practical long-term scope for tripling
the average fuel efficiency of military
platforms and installations. Today that
estimate looks realistic, perhaps even
conservative. Th e resulting DoD R&D
emphasis on light-and-strong materials,
advanced propulsion, etc. will help to
transform the civilian car, truck, and
plane industries toward tripled fuel efficiency, much as past military R&D led
to the Internet, the Global Positioning
System, and the jet-engine and microchip
industries. Th e Pentagon is thus
emerging within the U.S. Government
as the leader in getting the nation off oil
so nobody need fight over oil.
This new source of off -oil leadership became publicly visible on 13 February
2008 with the release of the Defense
Science Board panel’s report. Its Appendix
E revealed an important policy
created 10 April 2007 by the Under
Secretary of Defense: “Effective immediately,
it is DoD policy to include
the fully burdened cost of delivered
energy in trade-off analyses conducted
for all tactical systems with end items
that create a demand for energy and
to improve the energy efficiency of
those systems, consistent with mission
requirements and cost effectiveness.”
A pilot project is now refining and
field-testing this policy. Another new
directive, approved by the Joint Staff
in 2006, will selectively apply to new
weapons systems an Energy Efficiency
Key Performance Parameter—a core
metric that drives requirements-writing
and acquisition. In May 2008 I hope to
start helping the Defense Acquisition
University, which trains all DoD purchasers,
to apply these vital concepts.
And as soon as we can find funding, I
intend to expand RMI’s efforts to help
the civilian and uniformed leadership to
embed energy efficiency irreversibly in
the Services’ cultures and processes.
Important changes are also well underway
in the fuels and finance sectors.
From cellulosic ethanol to butanol to
algal oils, a portfolio of exciting new
biofuel options is moving from lab to
market, including breakthroughs not
yet announced. (RMI recently helped
the National Renewable Energy Laboratory
to redesign a cellulosic ethanol
plant to save half its steam, three-fifths
of its electricity, and a third of its capital
cost; some other emerging advances can
cut costs even more drastically.) And
the global financial sector made $117
billion of new “clean energy” investments
in 2007 alone.
In summary, RMI’s “institutional
acupuncture” is hitting the right points
and starting to elicit potent responses.
Th rough fruitful collaborations with
DoD, five Fortune 500 firms, and key
business and government players in one
state (Hawai‘i), plus formation of two
new companies and the other actions
summarized above, we’ve already multiplied
the $3.6-million received in grants
and donations into at least $375 million
in measurable benefits. Now we’re now
seeking another $3 million to build on
these successes (see summary on pp.
8–9).
Please contact developers@rmi.org
if you’d like to help RMI make oil no
longer a strategic commodity—much as
refrigeration (notes former CIA Director
Jim Woolsey) did to salt. Nations
once warred over salt. Now they just use
an occasional pinch and pay it no mind.
At RMI, we’re experiencing a rush of
pre-nostalgia just thinking about the
richer, fairer, safer world beyond oil.
