Q&A: An Energy Crusader Talks Business

Not since the oil shocks of the 1970s has the nation been so focused on power. But after a winter of rolling blackouts in California, record-high natural-gas prices in the Midwest, and tight heating-oil supplies in the Northeast, consumers are looking for better energy options. And at the Energy Dept.'s National Renewable Energy Laboratory (NREL) in Golden, Colo., they've got quite a few.

NREL staffers claim that 100% of U.S. electricity needs could be met by installing just 17 square miles of rooftop solar panels in each state. Or it could be done with wind turbines. Over in the lab's biofuels refinery, they're busy brewing petroleum alternatives made from farm waste. Meanwhile, other teams of NREL scientists are hard at work developing fuel-miser hybrid electric cars and hydrogen-powered fuel cells. At the lab's Center for Buildings & Thermal Systems, the goal is efficiency by smart design. Strolling through the labs, it's easy to wonder: Energy crisis? What energy crisis?

NREL was established by an act of Congress in 1974. The lab opened its doors three years later as the Solar Energy Research Institute. Its mission--"to secure a sustainable energy future for the nation"--was a direct response to the OPEC oil embargo. Although funding cuts during the Reagan Administration severely curtailed operations, the lab was renamed and upgraded to national status under President Bush in 1991. Today, NREL is considered one of the premier labs in the world for renewable technologies.

But cutting-edge research is only half the story. The real challenge is getting the technology to market. So the lab works with 250 industry partners. Some are large corporations, including the Big Three auto makers and Enron Corp. (ENE), now the largest wind turbine producer in the U.S. But most partners are smaller companies in emerging industries for whom NREL provides essential research and development.

In 1997, retired Vice Admiral Richard H. Truly took over the helm at NREL. The former shuttle astronaut and NASA administrator says that renewables are not only a sustainable energy solution, but a clean one--and it's important to keep the home planet in good shape. Truly recently sat down with BusinessWeek writer Janet Ginsburg to talk about NREL's work.

Q: Renewables, not including large hydroelectric projects, provide less than 4% of U.S. energy. Do the current problems provide a "marketable" moment?

A: This is a marvelous and critical juncture. The public conversation has changed a great deal recently. It's become more bipartisan. Renewable energy, rather than being what I would call a "religion," is being seen as a business opportunity. A lot of people at NREL fervently believe in renewable energy. But, in fact, it will never win the day unless markets are developed. And that gets right to business.

Q: Today, Japan leads the world in solar sales and Germany leads in wind. Both are multibillion-dollar industries growing at more than 20% annually. What role did NREL budget cuts during the 1980s play in terms of slowing the development of these industries in the U.S.?

A: I think we missed an opportunity to reap the benefits of stable support for new technology. As you mentioned, for example, photovoltaics is one of the fastest-growing industries. I wouldn't say an opportunity was lost. But there was an opportunity to steadily fund this technology for the last couple of decades, and that did not happen. Frankly, one of the most amazing things to me is that as the funding line has gone up and down over the years, NREL has managed to assemble and keep some of the best researchers in photovoltaics, biomass conversion, wind energy, and advanced vehicle hybrid-electric engines. The center of gravity of some of the best science in the world is within a few hundred yards of this office. The bottom line is that NREL exists to get our technologies and ideas into American business.

Q: How large and how fast do you see the market growing?

A: If you were to plot U.S. energy consumption every 50 years, in 1850 you would have bet on wood. In 1900, you'd have bet on coal. In 1950, you'd bet on petroleum and natural gas. Renewable energy is just a tiny sliver of the energy chart. But in 1900, petroleum was a tiny percent. In 25 years, I believe renewable energy is going to be well on its way to a very big share of the market.

Q: NREL's origins go back to the Arab oil embargo in 1973. But now we're more dependent on foreign oil than ever. What's the solution?

A: Over 50% of the petroleum in the U.S. is imported. And if you look out over just 20 years, it's going to be 65%. To tell you the truth, there's not much we can do about it. A lot of U.S. fields are depleted. It's a major national security issue. Efficiency is a real key. In this country we use more petroleum than the next five consumer nations on earth combined. The things we're doing at NREL are both on the supply side and demand side of the equation. For example, we're looking into the conversion of agricultural waste and biomass--such as wood chips--into fuels. Today, gasoline is one of the cheapest products produced by oil refineries--they also produce very high-value chemicals. Our refineries will take biomass waste and turn out not just ethanol but other chemicals.

Q: The Big Three auto makers have partnered with NREL to develop hybrid electric-car engines. Can't these big companies afford to do their own R&D? Some say this is a form of corporate welfare.

A: That's a fair question. As a matter of fact, I asked it myself when I came here. But NREL makes a huge contribution to various industries, providing seminal science. What would the space business be without NASA? I think we're crucial. There's nothing like having a nest of nurtured people, all of whom have the same goal. I don't believe the auto makers would have achieved what they did with the hybrid electric engine without NREL. Enron Wind is a fine company and does great work. But they will say themselves that they couldn't have achieved the kind of progress they have without their cost-shared contract with the lab's National Wind Technology Center.

Q: Last year, NREL's budget was about $200 million, which is pretty small for a national lab. What would you do if you had more money?

A: In preparation for the new Administration, we sat down and talked about what was really needed. Pretty soon, we weren't just talking about NREL budgets, but total investment, which is in the billions of dollars for some of these technologies. Probably the biggest problem that NREL would face if our budget were to be doubled tomorrow would be finding the space to fit people. This is a small lab. But there are technologies that aren't being pursued aggressively enough. For example, storage. Everybody talks about wind, but the wind doesn't always blow. And solar cells don't work at night. We need ways to store the energy.

Q: In terms of the environment, how critical are renewables?

A: Observing Earth from those big windows on the Space Shuttle gives one a complete perspective about the awesome beauty and the fragile nature of our planet. From space you can see the smog that often obscures Los Angeles, Mexico City, and Tokyo. We're all in this together--a world view that is really humbling. In the U.S. today we use a lot of energy to maintain our enviable standard of living and we wrestle with some environmental problems as a result. To me, the scary thing is that there are still about two billion people in the world without electricity, and who want it. Fossil fuels will be an important energy source for a number of years to come. How do we seriously begin putting the unlimited potential of renewable resources to work in our earth's energy mix now so we can enjoy the benefits in the future?

Q: What's the biggest barrier to renewable power?

A: To tell you the truth it's not technical. It's a knowledge barrier, both in the Congress and Administration--and with the public--about what an unbelievable opportunity this is. But that's changing. I thought it was just amazing when BP Amoco PLC redid its public image in one day. They came with advertisements in every major newspaper with a new logo that looks like a green sun and a new tag line, "Beyond Petroleum." That's not "religion." That's business. And they see it. If you look at this as an opportunity--let's jump into it!--it could change the world we live in. It really could.

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