Can the United States stop its use of oil, coal and nuclear completely within the next 40 years? In his new book, "Reinventing Fire: Bold Business Solutions for the New Energy Era," Rocky Mountain Institute Chairman and Chief Scientist Amory Lovins argues that with a shift in thinking from the business community, the U.S. economy could be supported in large part by renewables. During today's OnPoint, Lovins discusses why he believes there is a disconnect between rhetoric in Washington and progress on innovation.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Amory Lovins, chairman and chief scientist at Rocky Mountain Institute and author of the new book, Reinventing Fire: Bold Business Solutions for the New Energy Era. Amory, thanks for coming on the show.
Amory Lovins: Thanks for having me.
Monica Trauzzi: Amory, in this new book you say we'll be able to run a 158 percent bigger U.S. economy in 2050, but needing no oil, no coal, no nuclear, one third less natural gas and no new inventions.
Amory Lovins: And costing $5 trillion less in net present value, assuming all externalities are worth zero, require --
Monica Trauzzi: It's a hugely bold suggestion.
Amory Lovins: And requiring no act of Congress in the transition led by business for profit.
Monica Trauzzi: OK, but the issue is that the energy discussion always seems to be going in circles here in Washington. So, what's wrong with the approach right now? And even in the business community, what's being done wrong and how do they sort of steer themselves on track to get to where you're talking about?
Amory Lovins: Well, within the Beltway you have a lot of partisan debate by people who favor one or another technology. As an independent nonprofit, we are outside that debate. We work in every sector of the industry and we've worked deeply for 30 years in all four sectors that we integrate that use energy, namely transportation, buildings, industry and electricity. Also, the debate in Washington tends to be about what unnatural act is business supposed to commit in the marketplace and they'll all wait for Congress to tell them what it is. But we felt that there was probably a great underused scope for dynamic business leadership and that the most effective institutions in our society, namely private enterprise and its co-evolution with civil society accelerated by military innovation, could end run our least effective institutions. Why wait for Congress? This transition needs to be led from the C suite, not from K street and when we really dug into it, we discovered not only was that possible, but it was highly profitable. It could create durable advantage and win the clean energy race by creating the core industries of the 21st century.
Monica Trauzzi: You consult with a wide variety of industries. When you go and talk to folks in the oil sector, in the electricity sector, do they get it? Does the business community get it?
Amory Lovins: Oh, yes. This book actually has forwards by the president of Shell Oil, Marv Odom, and the chairman of Exelon, the big coal nuclear utility in Chicago, John Rowe. I'm actually a member of the National Petroleum Council and was in one of their meetings yesterday discussing this very work. And it's been quite well received by the energy industries and the others that will have their piece of the $5 trillion, buildings and industry, because remember that three quarters of our oil is used for mobility and, you know, we've worked for 20-odd years helping the automakers get ahead. That's now showing very encouraging signs. And three quarters of our electricity goes to buildings, where there's a 33 percent IRR from tripling or quadrupling energy productivity. The savings are worth four times what they cost, so just buildings have one and a half trillion dollars on the table.
Monica Trauzzi: So the no oil part of your plan is very interesting, because one of the things we constantly here in Washington is we're never going to be without oil. We're always going to need some percentage of oil. So, is that misleading and why is that the rhetoric?
Amory Lovins: The percentage is extraordinarily small. It's for certain lubricants, basically, and oil is worth more as a feedstock than as a fuel. But we won't need oil for mobility. Even with the enormously increased mobility of a 2.6 times bigger economy, we found it was cheaper not to use the oil, but to substitute a lot of efficiency and then a mixture of electricity, hydrogen and, at most, 3 million barrels a day of advanced biofuel. And, if you want, you could use some natural gas in the trucks as well. The key is taking the obesity out of our vehicles. Our autos have gained weight in the last decade twice as fast as we have, but you can take out so much weight and drag that it takes two or three times less energy to run the car. And this triggers three very steep learning curves that strongly reinforce each other. One in carbon fiber itself, another in ways to make it into structures and a third in the electric powertrain that then gets affordable because it's so much smaller. So I brought a Saudi Arabia that our wildcatter's found drilling in the Detroit formation, you can tell from the sound ringing like a bell, this is really strong and stiff and it's tougher than titanium, but it was made seven years ago in less than one minute. And when you scale and mature this process to automotive costs and speed, make all our autos out of this sort of thing, half the weight and half the fuel go away, it gets safer because this absorbs 12 times the crash energy of steel per pound. But it turns out it costs about the same to make the car, because the smaller powertrain and much simpler manufacturing pay for the carbon fiber. So, now three German automakers, in the next two years, are planning mass production of carbon fiber electrified cars. And BMW has confirmed that the carbon fiber is paid for by needing fewer batteries. Then you put those smart cars in communication and electricity exchange with the grid and you've suddenly added to the grid some storage and flexibility resources that make it easier to integrate wind and solar power.
Monica Trauzzi: So then when you consider a proposal like the Keystone XL pipeline, which is currently under State Department review, which would connect Canadian oil sands to the United States and transport fuels down to the U.S., what do you think? You know, if you're talking about no oil in 2050, then why are we pursuing projects like that?
Amory Lovins: Well, I think it's up to the investors whether they think it's a good deal, but they have to realize that there's enormous amounts of oil in places like the Detroit formation and the Seattle formation and so on that are a whole lot cheaper to get at and of course, all-American, nonpolluting and so on, don't run out, compared to their tar sands. Now, I've worked in that industry too and it's very expensive. You might think it's cheap compared to very pricey and volatile oil from the Middle East, but it's not cheap compared to efficiency. And I think that competition is really coming to the fore now as automakers start to realize that by combining those three synergistic learning curves, they can make as big a game changer at least as switching from typewriters to the Internet. And the head of BMW says we do not intend to be a typewriter maker, because he can look across Munich to where Olympia used to be, so that's very real for him. I think this is a good example of the kind of profound shift in competitive advantage that American industry can capture in both efficient supply -- or efficient use and renewable supply if we actually get our act together and stop waiting for Congress. There are some policy innovations needed to unlock and speed this business adoption, you know, to get the $5 trillion prize, but those policies don't require congressional action. They can be done either administratively or at a state level.
Monica Trauzzi: So, we're not too late to the game when it comes to innovation?
Amory Lovins: Not yet. We have exactly enough time starting now.
Monica Trauzzi: But there will need to be some kind of policy to sort of drive the direction of things?
Amory Lovins: I don't think this requires a coherent national energy policy made in Congress. What it requires is for the businesses that own their piece of that $5 trillion to go for it and at the end of each of the sectoral chapters we have a terse outline of who can do what, depending on their appetite for adventure and risk, you know, anything from no-brainers to cutting-edge. It's a big agenda, but it's exactly the kind of thing business is very, very good at. It makes sense, it makes money and, by the way, that's regardless of why you would want to do it. This is a trans-ideological approach, so whether you most care about profits, jobs, and competitive advantage or about national security or about health and environmental stewardship, you ought to do the same things anyway. That's what we lay out here. And if we focus in this way on outcomes, not motives, and do what we agree for whatever reason it ought to be done, then the stuff we don't agree about becomes superfluous.
Monica Trauzzi: All right, we're going to end it there. Thank you for coming on the show, nice to see you.
Amory Lovins: Thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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