Markets, ethics, faith, and politics: Amory Lovins discusses our energy future

Amory Lovins is the visionary co-founder and chair of the Rocky Mountain Institute, a Colorado-based "think-and-do" tank that helps businesses, communities, individuals and governments increase profits and competitive advantage through efficiency while building a more just and sustainable world. Lovins was in North Carolina recently to speak at the 2008 Emerging Issues Forum at N.C. State University on the topic of energy innovation as economic success. While in the area, Lovins also dropped by the University of North Carolina at Chapel Hill, where he spoke to Institute for Southern Studies intern Meaghan Jennison's environmental policy class. The discussion -- which ranged from the profit potential of saving energy to the problem with Duke Energy's controversial Save-a-Watt program -- was so interesting that we asked Meaghan to share her notes with Facing South readers.

What is RMI?

The Rocky Mountain Institute was founded 25 years ago and currently runs on a $12 million budget earned by private-sector consultancy to advance our mission of fostering the efficient and restorative use of resources to make the world secure, just, prosperous, and life sustaining. We are currently reviewing our mission to change its wording to align more with what we actually accomplish; we want to eliminate the word "foster" because we are driving transformational change. Our modus operandi is akin to institutional acupuncture-we figure out where the business model isn't "flowing" and we stick in needles, so to speak. We don't lobby or litigate, but we do use large corporations to leverage change-WalMart, Rupert Murdoch, etc. Our biggest work in the last few years has been the book Winning the Oil Endgame (oilendgame.com), which outlines a plan to get the U.S. off oil by the 2040s; out of about 20 major industrial sectors, three or four sectors have already begun implementation.

How did you get to do this work?

I am a recovering physicist. But honestly, I work in a ton of sectors, which leads to a lot of cross-pollinations. In the last few weeks I have been working on the Empire State building, an oil refinery, a car company, and more. I have to say that it's pretty amazing considering I am a dropout of Harvard and Oxford, and so I have all honorary degrees. Ironically, part of what I currently do is lecture on my work at various universities. I recently visited as faculty at the Stanford energy school on how to see expanding, not diminishing, returns in energy efficiency (you can see the lecture on energy history at rmi.org.)

How can we have profitable solutions to the climate and oil problems?

The climate, oil and proliferation problems are artifacts of not using energy in ways to save money. It is much cheaper to save fuel, not buy fuel. Smart companies are reducing their CO2 intensity by 5 to 10 percent per year, which is the smartest money-saving thing they can do. Energy saving is about profits and competitive advantage. It doesn't take a great deal of efficiency changes to solve climate change. If we reduce the total energy intensity of world by about 2 to 3 percent, 2 percent would stabilize carbon dioxide emissions and 3 percent would actually reduce them. And 3 percent is less than what those smart companies are already doing! Besides, developing nations haven't built much infrastructure yet and have a big market for efficiency.

The current breakdown of our emissions sources is simple. Two-fifths of the fossil carbon emissions come from burning oil, two-fifths from power plants, and one-fifth is directly used coal and gas. With oil, we can redouble its use efficiency. We can also use biofuels and renewables. For vehicles, we need to make lighter weight products, which can be done with existing technologies -- aerospace technology at an automotive cost. RMI is currently using WalMart to get double-efficiency heavy trucks on the road. Boeing has developed a one-fifth more efficient, same-price airliner, which has sold out through 2016. Ford is now looking at doing the same thing. All this activity is generating hyper-competition. Even the military is emerging as the federal leader in getting the country off oil, developing triple and more efficiency. In the public sector, we could save about three-quarters of our energy by implementing late '80s daily life energy savings techniques.

Why is there a persistent gap between what the public knows about and the true existing options?

If climate is a problem, you need to buy the most solution per dollar, but this is never mentioned! Why? Lazy editors, lazy journalists, and an undemanding public. We hold the assumption that anything "carbon free" must be good, without looking at the range there and comparing.

Utilities should be encouraged to invest in energy efficiency instead of building new plants. Why are environmental groups opposed to some of this -- for example, Duke Energy's Save-a-Watt program? This program would allow Duke Energy to share the benefits of savings from conservation programs up to 90 percent of their avoided cost. The problem is that many industries lack complete transparency. In Duke's specific case, people are opposed to the 90 percent model -- if Duke can save so much money, why aren't people getting more savings back themselves?

An inherent problem with utilities is that generally companies are rewarded for selling more energy and penalized for selling less. The solution: decoupling and shared savings. That is, make profits indifferent to total sales (if a company sells more than anticipated one year, then the extra revenue goes into an account that is drawn upon in a year when they sell less than anticipated). You also let utilities keep, as profit, a small part of what they saved the customers by increasing efficiency (about 10 percent). You therefore align the utilities' interests with the customers' interests.

You seem to have a very different outlook on our future than Al Gore. Are you not an alarmist? Are you not worried?

Focusing exclusively on the bad things achieves nothing. The country is fairly balanced between hope and fear, and it's worth reflecting on the difference between optimism, pessimism, and hope. Someone said that the optimist proclaims we live in the best of all possible worlds, while the pessimist fears this is true. We need to take the responsibility for creating the future we want. The hopeful person is always working hard to beat the odds, while the optimist just sits back and counts on the fact that the odds will work out in his favor. I don't take either position; for me, the glass is not half empty or half full, but it is 100 percent expandable by improved efficiency.

I hardly ever mention problems in my speeches because people in my audiences already know there are problems. With regards to Al Gore's approach, he has been successful in letting people in a crowded theater know that there is a fire and to move smoothly to the exits but doesn't tell them how to contact the fire department.

Why aren't most engineers following your principles yet?

Cars aren't changing to lightweight advanced composites yet because of cultural hesitation. That is, our obstacles are mainly cultural and not technological or economic. We need to change the paradigm of engineering. RMI is working to change it, and our working principles are on 10xe.com. We need to increase our natural resource productivity. We need to recognize integrative business design as profitable. We need to optimize whole systems for multiple benefits.

Are there other arenas in which we can be working on solutions?

There's exciting stuff to be done everywhere! You need a combination of vision, a business model, culture, structure, marketing, and after-marketing. You need to follow through with whole value change. You can't simply change facilities and infrastructure but need to change underlying values as well.

Increased efficiency can be had anywhere. I can give you the example of when I worked with a cider company. We found that the orchard trimmings that they had been throwing out were actually perfect for growing shiitake mushrooms, which is more profitable than cider itself. We also found that the apple core and seed casings that they had been discarding contain antioxidants, which are also more valuable than the apple itself. That company was able to utilize all of its input elements to expand their business and capitalize on all profit potentials.

What do you have to say about the paradox of when I use energy more efficiently, it costs me less so I'll buy more, thus keeping total energy consumption unchanged? Are energy efficiency efforts futile?

Saving energy encourages more energy consumption? If this were true, the business model would say we should mandate inefficient appliances in order to make more money. The reality is that in the end, saving energy saves energy, period. Improved efficiency can improve welfare. Markets themselves cannot be counted on to encourage efficiency, though. We must include ethics, faith, and politics.