While it may be more dramatic to announce a new power plant or drill for oil in the Arctic National Wildlife Refuge, the quickest way to solve the current power crisis is simply to stop wasting energy. So says Amory B. Lovins, the charismatic 53-year-old advocate of clean power and co-founder of the Rocky Mountain Institute (RMI) in Old Snowmass, Colo. ``Efficiency goes straight to the bottom line,'' he declares, adding that U.S. businesses could easily cut their utility bills by half. Not only are efficient operations more profitable but they are also kinder on the environment.
A Harvard- and Oxford-educated physicist, Lovins burst onto the scene in the early 1970s warning of foreign-oil dependency and insisting that nuclear power was uneconomic. He also envisioned a new kind of power grid in which homes and businesses could generate their own electricity. Well, the last nuclear plant orders in the U.S. were cancelled in 1978, and analysts now predict that by 2010, 20% of U.S. electric generation could come from such on-site ``distributed power'' systems.
But power production is only half the equation. Conservation is the other. And Lovins has made a career of proving that it's a lot cheaper to save energy than buy it, coining the term ``negawatt'' to describe energy-saving technologies. Efficiency services have become a multibillion dollar industry, with companies such as Chevron, Enron, and Duke Energy entering the field.
In the midst of a globe-trotting schedule consulting for utilities, auto makers, energy companies, and the U.S. military, Lovins sat down with BusinessWeek writer Janet Ginsburg at RMI's solar-powered offices to talk about energy and the future.
Q: In your latest book, Natural Capitalism, you write about a new resource-friendly business model. How does it work?
A: There are four principles: increasing the productivity of natural resources, modeling industrial processes after biological systems to minimize waste, selling service-based solutions rather than products, and reinvesting in natural capital. [Do this] and you make more money with less risk and provide better service at lower cost.
As a small example, carpet maker Interface figured out how to cut its raw materials input by almost 100%, using ``remanufacturing.'' [The company leases carpets, then takes back worn goods and recycles the materials.] Interface cut capital input by about 90%. Twenty-seven percent of their operating profit is from eliminated waste. Their goal is to produce a floor-covering service that is superior in every customer attribute--and at a lower cost and higher margin. They lease the carpet, so it's even tax-deductible to the customer. How on earth can you compete with that? It has added $143 million to the bottom line.
Q: What about industries, such as computer chips, where energy is just a small fraction of production costs?
A: Only about 2% of the cost of a chip is energy. If you do a good job retrofitting your existing plant, you can save probably half. So what? Well, it makes your operation work better. You'll have higher yield, throughput, shorter setup time, and greater flexibility in switching production. There's a direct effect on energy bills. And very valuable side benefits. In fact, these are often worth 10 times more than the fuel savings themselves.
Q: Energy prices are near all-time highs, and there are rolling blackouts in California. How much of that can be solved by greater efficiency?
A: How much energy do we need? Very, very little if we use it in a way that saves money. It's not just electricity. The same is true for oil and gas. Most of the energy we use now is wasted in both an engineering and an economic sense. This enormous overhang of unbought efficiency is so much bigger than any potential increase in supply that it only takes a few percent to be captured in order to crash the market and put the suppliers out of business.
I see all the same ingredients that led to the 1986 price crash. It took nine years for President Carter's fuel-efficiency standards to work their way into the fleet, but they were largely responsible for an 87% cut in imports from the Persian Gulf. Then President Reagan came in, right after the second and more severe oil price shock in '79, and started pushing supply again. The combination produced a gusher of efficiency, a glut of energy, and bankrupted many of the energy suppliers the Administration had been trying to help.
Q: Some are blaming the power crunch on heavy consumption by the technology sector. Don't we need to build power plants to keep up with demand?
A: All the computing and network equipment, other than telco switches, might consume as much as 2% of U.S. electricity. And if you include every kind of office equipment and all the energy it takes to make the stuff, you would get about 3%. If it were more, you would expect to see enormous growth in electricity usage. It's not in the data.
However, the high-quality power required by digital equipment and the amount of power required are two very different things. About 99% of power failures in the U.S. are not due to inadequate generation but to problems with the grid. If you need digital reliability, the central station model doesn't work because there are so many problems getting the power to you reliably.
Q: So on-site power generation--what has been called ``distributed power''--works better?
A: Yes, the rapid shift we see in the market toward distributed generation is entirely rational. Three-quarters of the residential customers in this country don't need more [capacity] than, I believe, 1.5 kilowatts (kw). And three-quarters of the commercial customers don't need more than an average of 10 kw. So why make the stuff a million kw at a time [in central plants]? It was a magnificent technical achievement, but it's just too expensive to deliver. The delivery now costs more than the juice itself. And it's too unreliable to meet digital needs.
Q: Damage to natural-gas and petroleum pipelines in the U.S. has contributed to the current supply problems. How fragile is the grid?
A: In a book I co-wrote with my partner, Hunter Lovins, in 1981 for the Pentagon, we pointed out that three-quarters of the oil and gas supply to the eastern U.S. could be cut off in one evening without even leaving Louisiana. The reasons for that kind of vulnerability to accident or malicious act are built into the architecture of a highly centralized system. [Power] could be cut off for about a year and then, as soon as it was fixed, cut off again. And the electric grid is more vulnerable than that. However, in a more efficient, diverse, dispersed, and renewable energy system, major failures become impossible.
Q: There has been a lot of talk about hydrogen-powered fuel cells as a clean, abundant energy source. But they're expensive. That brings me to your idea for a Hypercar, which is both a car and a portable power plant. It generates electricity that you can then sell into the grid. Tell us about this.
A: Fuel cells will first be used in buildings, which consume two-thirds of all the electricity in this country. ``Waste heat'' [excess heat from power production in the fuel cell] provides additional space- and water-heating, which helps pay for the hydrogen that the fuel cell consumes. All in all, the net effective cost turns out to be quite competitive.
When the price of fuel cells falls to about $100 per kilowatt, you can afford to put the fuel cells into Hypercars. The Hypercar is about three times lighter and lower in drag than a heavy steel car, so you need only a third as many kilowatts of fuel cell to run the vehicle.
When they are parked, the cars can [be jacked] into a building's hydrogen supply [and provide extra power to the building]. They become a profit center, selling power to the grid at a time and place where it's most valuable--namely, offices in the afternoon.
Q: It sounds like science fiction.
A: The things that I'm talking about are happening. The technical and economic logic behind them is so compelling that I have no doubt whatever that they will succeed. Yes, I have dreams. And they tend to come true.
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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