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|  | AUGUST 23, 2004
Amory Lovins' Leaner, Greener World Energy efficiency shouldn't mean sacrificing the comforts of a high-wattage lifestyle, says the Rocky Mountain Institute physicist Amory Lovins has a simple message: Saving energy is easier than finding more. It's a point that certainly resonates with environmentalists. And businesses increasingly are drawn to his mantra, since conserving energy saves money and improves competitiveness. Trained as a physicist at Harvard and Oxford, the 54-year-old head of the Rocky Mountain Institute (RMI) in Old Snowmass, Colo., is helping to spread the word that, with energy conservation, less truly can be more. And he believes that innovation in a range of energy and transportation technologies will help achieve these gains. He recently spoke with BusinessWeek's Industries editor Adam Aston. Here are edited excerpts: Q: As the U.S. economy becomes less industrial, it's also becoming more energy-efficient. Each dollar of gross domestic product requires less energy than in the past. How much farther can this go? A: The U.S. now uses 43% less energy and 50% less oil per dollar of real GDP than in 1975, mostly because of better technical efficiency rather than changes in the composition of GDP. Yet this efficiency revolution has only just begun. We can profitably save over half our oil and gas, and nearly three-quarters of our electricity -- far cheaper than buying it, and often cheaper than just its short-run marginal supply cost. This efficiency revolution will be at the core of competitive advantage, and laggards will suffer. Q: How seriously are executives and policymakers taking the need to move away from fossil fuels? A: It has been taken very seriously by many state, but few federal, policymakers and in much of the private sector, including smart financiers. Even some leading coal companies are quietly begging for a climate policy because they can't stand the uncertainty. Leaders in the transition beyond fossil carbon are earning startling returns. Such firms as DuPont (DD ), IBM (IBM ), and STMicroelectronics (STM ) are routinely cutting their energy intensity 6% a year, with retrofit paybacks of typically two or three years. Since saving fuel is clearly cheaper than buying fuel, why continue to assert that protecting the climate is costly? The issue is sharing not pain but profits. Q: Natural gas and petroleum prices are historically high. How much can the effect of this be mitigated through efficiency? A: Straightforward electricity- and gas-demand response could return natural gas to healthier supply-demand balance and $3 to $4 per million Btus [British thermal units] in just a few years, down from its current price of $5 to $6. Electric-load management is the key, particularly during periods of peak demand. Almost all peak power is produced in extremely inefficient gas-fired combustion turbines. So during peak demand, reining in consumption in even a small percentage of users can lead to disproportionate savings in energy and costs. Saving 5% of U.S. electricity, including peak periods, would save nearly 10% of total U.S. gas consumption, dropping the price by about $2 and saving the economy over $50 billion a year. Ultimately, smarter uses of natural gas could cut 2025 U.S. gas use by half. Today's best technologies, if fully applied, can also save half the oil at less than half the cost of buying it. This may well decrease oil prices, too -- though not enough to undercut efficiency's cost-effectiveness. Q: Does your latest book go into more detail on how savings like this could be won? A: On Sept. 20, RMI will publish Winning the Oil Endgame. This is a detailed, business-led roadmap for getting the U.S. completely off oil over the next few decades, and at a profit. To do this, we propose innovative business models and public policies that steer markets without taxing fuel, and speed innovation without issuing mandates. Plus, they should reduce federal deficits and probably won't even need federal legislation. Q: What innovations are available to help to achieve these sorts of dramatic savings? A: Most important are new technologies for radically improving the efficiency of our energy usage in nearly all applications. Using known technologies, it's possible to improve the efficiency of cars and light trucks by up to five times, with no compromise of safety, size, or performance. This means an ultralight, ultrasafe, superefficient vehicle, such as a 70-miles per gallon midsize hybrid SUV. The technology is already being commercialized to automate mass-production processes to make ultralight carbon-composite automotive structures at a competitive cost. That's just a beginning. For heavy trucks, we could double their efficiency; aircraft, three times. In buildings, we could achieve 5 to 10 times the efficiency we currently see, and do two to four times better in heavy industrial processes. In high-tech, semiconductor fabs could boost their efficiency by up to eight times, data centers by nine times. All this could be done at comparable or lower capital cost than we see today, with better performance. Efficiency gains of this magnitude make most supply problems go away.
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