Nearly 90 percent of the world’s economy is fueled every year by digging up and burning about 4 cubic miles of the rotted remains of primeval swamp goo. With extraordinary skill, the world’s most powerful industries have turned that oil, gas and coal into affordable and convenient fuels and electricity that have created wealth, helped build modern civilization and enriched the lives of billions.
Yet today the rising costs and risks of these fossil fuels are undercutting the security and prosperity they have enabled. Each day the United States spends about $2 billion buying oil and loses another $4 billion indirectly to the macroeconomic costs of oil dependence, the microeconomic costs of oil price volatility and the cost of keeping military forces ready for intervention in the Persian Gulf.
In all, the United States spends one-sixth of its gross domestic product on oil, not counting any damage to foreign policy, global stability, public health and the environment. The hidden costs are also massive for coal and are significant for natural gas, too. Even if oil and coal prices were not high, volatile and rising, risks such as fuel insecurity and dependence, pollution-caused illnesses, energy-driven conflicts over water and food, climate change and geopolitical tensions would make oil and coal unattractive.
Weaning the United States from those fossil fuels would require two big shifts: in oil and electricity. These are distinct—nearly half of electricity is made from coal, and almost none is made from oil—but power plants and oil burning each account for over two-fifths of the carbon that is emitted by fossil-fuel use. In the United States three-fourths of electricity powers buildings, three-fourths of oil fuels transportation and the remaining oil and electricity run factories. So saving oil and electricity is chiefly about making buildings, vehicles and factories far more efficient—no small task.
But epochal energy shifts have happened before. In 1850 most U.S. homes used whale-oil lamps, and whaling was the country’s fifth-biggest industry. But as whale populations dwindled, the price of whale oil rose, so between 1850 and 1859, coal-derived synthetic fuels grabbed more than five-sixths of the lighting market. In 1859 Edwin Drake struck oil, and kerosene, thanks to generous tax breaks, soon took over. Whalers, astounded that they had run out of customers before they ran out of whales, begged for federal subsidies on national security grounds, but Thomas Edison’s 1879 invention of electric lighting snuffed out their industry. Whales had been accidentally saved by technological innovators and profit-maximizing capitalists.
As the world shuddered from the 1973 oil shock, the economist Phil Gramm predicted that just as with whale oil, innovators would innovate, capitalists would invest, markets would clear and substitutes for petroleum would ultimately emerge. He was right. By 2010 the United States was using 60 percent less oil to make $1 of GDP than it had in 1975. Now the other shoe is dropping: since its use in the United States peaked in 2005, coal has lost one-fourth of its share of the U.S. electric services market to renewable energy, natural gas and efficient use. After just a few centuries, the anomalous era of oil and coal is gradually starting to come to an end. In its place the era of everlasting energy is dawning.
Underlying this shift in supply is the inexorable shrinkage in the energy needed to create $1 of GDP. In 1976 I heretically suggested in [the pages of “Foreign Affairs”] that this “energy intensity” could fall by two-thirds by 2025. By 2010 it had fallen by half, driven by no central plan or visionary intent but only by the perennial quest for profit, security and health. Still-newer methods, without further inventions, could reduce U.S. energy intensity by another two-thirds over the next four decades, with huge economic benefits. In fact, as “Reinventing Fire,” the new book from my organization, Rock Mountain Institute (RMI), details, a U.S. economy that has grown by 158 percent by 2050 could need no oil, no coal, no nuclear energy and one-third less natural gas—and cost $5 trillion less than business as usual, ignoring all hidden costs. Today’s fossil carbon emissions could also fall by more than four-fifths without even putting a price on them.
This transformation requires pursuing three agenda. First, radical automotive efficiency can make electric propulsion affordable; heavy vehicles, too, can save most of their fuel; and all vehicles can be used more productively. Second, new designs can make buildings and factories several times as efficient as they are now. Third, modernizing the electric system to make it diverse, distributed and renewable can also make it clean, reliable and secure. These ambitious shifts may seem quixotic, but sometimes tough problems are best solved by enlarging their boundaries, as General Dwight Eisenhower reputedly advised.
Thus, it is easier to solve the problems of all four energy-using sectors—transportation, buildings, industry and electricity—together than separately. For example, electric vehicles could recharge from or supply power to the electricity grid at times that compensate for variations in the output from wind and solar power. Synergies likewise arise from integrating innovations in technology, policy, design and strategy, not just the first one or two.
This transition will require no technological miracles or social engineering—only the systematic application of many available, straightforward techniques. It could be led by business for profit and sped up by revenue-neutral policies enacted by U.S. states or federal agencies, and it would need from Congress no new taxes, subsidies, mandates or laws. The United States’ most effective institutions—the private sector, civil society and the military—could bypass its least effective institutions. At last Americans could make energy do their work without working their undoing.
Mobility without Oil
The United States burns one-fourth of the world’s oil, half in automobiles (which comprise cars and light trucks). Two-thirds of cars’ fuel use is caused by their weight, yet for the past quarter-century, U.S. cars have gained weight twice as fast as their drivers. Now, lighter metals and synthetic materials are reversing automotive obesity. Ultralight, ultrastrong carbon-fiber composites can trigger dramatic weight savings, improve safety and offset the carbon fiber’s higher cost with simpler automaking (needing four-fifths less capital) and smaller powertrains. In 2011 lightweighting became the auto industry’s hottest trend. Ford’s strategy rests on it, and the United States could lead it. So far, however, Germany has taken the lead: Volkswagen, BMW and Audo all plan to be mass-producing carbon-fiber electric cars by 2013.
Ultralight, aerodynamic autos make electric propulsion affordable because they need fewer costly batteries or fuel cells. Rather than wringing pennies from old steel-stamping and engine technologies, automakers could exploit mutually reinforcing advances in carbon fiber, its structural manufacturing and electric propulsion—a transition as game changing as the shift from typewriters to computers. BMW, whose chief executive has said, “We do not intend to be a typewriter-maker,” has confirmed that its planned 2013 electric car will pay for its carbon fiber by needing fewer batteries.
Electric autos are already far cheaper to fuel than gasoline autos, and they could also cost about the same to buy within a few decades. Until then, “feebates”—rebates for more efficient new autos, paid for by equivalent fees on inefficient ones—could prevent sticker shock. In just two years France, with the biggest of Europe’s five feebate programs, saw its new autos get more efficient three times as fast as before. Well-designed U.S. feebates, which could be enacted at the state level, need not cost the government a penny. They could expand customers’ choices and boost automakers’ and dealers’ profit margins.
Autos could also be used more productively. If the government employed new methods to charge drivers for road infrastructure by the mile, its insolvent Highway Trust Fund would not need to rely on taxing dwindling gallons of fuel. Information technologies could smooth traffic flow, enhance public transit and promote vehicle-and ridesharing. Better-designed layouts of communities could increase affordability, livability and developers’’ profits. Together, these proven innovations could get Americans to their destinations with half the driving (or less) and $0.4 trillion less cost.
RMI’s analysis found that by 2050 the United States could deliver far greater mobility by making vehicles efficient, productive and oil-free. Autos powered by any mix of electricity, hydrogen fuel cells and advanced biofuels could get the equivalent of 125 to 240 miles per gallon of gas and save trillions of dollars. By 2050 “drilling under
Detroit” could profitably displace nearly 15 million barrels of oil per day—1.5 times as much as Saudi Arabia’s current daily output.
Heavy vehicles present similar opportunities. From 2005 to 2010 Walmart saved 60 percent of its heavy-truck fleet’s fuel through smarter designs and changes in driver behavior and logistics. Aeronautical engineers are designing airplanes that will be three to give times as efficient as today’s. Superefficient trucks and airplanes could use advanced biofuels or hydrogen, or trucks could burn natural gas, but no vehicles would need oil. Advanced biofuels, two-thirds made from waste, would require no cropland, protecting soil and the environment. The U.S. military’s ongoing advances in efficiency will speed all these innovations in the civilian sector, which uses over 50 times as much oil, just as military research and development created the Internet, GPS and the microchip and jet-engine industries.
U.S. gasoline demand peaked in 2007; the oil use of the countries of the Organization for Economic Cooperation and Development peaked in 2005. With China and India pursuing efficient and electric vehicles, Deutsche Bank forecast in 2009 that world oil use could begin to decline after 2016. In fact, the world is nearing “peak oil”—not in supply but in demand. Oil is simply becoming uncompetitive even at low prices before it becomes unavailable even at high prices.
Saving Electricity
The next big shift is to raise electricity productivity faster than the economy grows—starting with the United States’ 120 million buildings. Even though U.S. buildings are projected to provide 70 percent more total floor space in 2050, they could use far less energy. Investing an extra $0.5 trillion on existing or emerging energy-efficient technologies and better-integrated designs could save building owners $1.9 trillion by tripling or quadrupling energy productivity. These straightforward improvements range from installing insulation, weather-stripping and caulking to using more efficient equipment and controls, adopting better lighting design and simply making new buildings the right shape and facing them in the right direction.
An even more powerful innovation, called “integrative design,” can often save far more energy still, yet at lower cost. Integrative design optimizes a whole building, factory, vehicle or device for multiple benefits, not isolated components for single benefits. For example, in 2010 the Empire State Building remanufactured its 6,514 windows onsite into “superwindows,” which pass light but block heat. Requiring a third less air conditioning on hot days saved $17 million of the project’s capital cost immediately, partly funding this and other improvements. In just three years energy savings about 40 percent will repay the owners’ total energy-saving investment.
Integrative design’s expanding returns are even more impressive when built in from scratch. From tropical to subarctic climates, new passively heated and cooled buildings can replace furnaces and air conditioners with superinsulation, heat recovery and design that exploits the local climate. European companies have built 32,000 such structures at roughly normal capital cost and cost-effectively retrofitted similar performance into Swedish apartments constructed in the 1950s and into century-old Viennese apartments. The business case would be even stronger if it included the valuable indirect benefits of these more comfortable, pleasant and healthful buildings: higher office labor productivity and retail sales, faster learning in classrooms, faster healing in hospitals and higher real estate values everywhere.
Integrative design can also help double industrial energy productivity, saving $0.5 trillion. Pumps, for example, are the world’s biggest user of electric motors. Pumps, motors and controls can improve, but first replacing long, thin, crooked pipes with short, fat, straight ones often avoids 80–90 percent of the usual friction, saving 10 times as much coal back at the power plant. When RMI and its industrial partners recently redesigned existing factories valued at more than $30 billion, our designs cut predicted energy use by about 30–60 percent with payback times of a few years. In new facilities our designs were expected to save around 40–90 percent of energy use while usually reducing capital costs. This is not rocket science—just elegantly frugal whole-system thinking.
Adopting energy-saving innovations as quickly nationwide as some U.S. states do today will require patiently fixing perverse incentives, sharing benefits between landlords and tenants, allocating capital wisely and designing thoughtfully—not just copying the old drawings (“infectious repetitis”). None of this barrier busting is easy, but the rewards are great. Since the Dow Chemical Company embraced efficiency innovation in the 1990s, its $1 billion investment has returned $19 billion. Savings and returns, far from petering out, often kept rising as the engineers learned new tricks faster than they exhausted old ones.
Part two of this essay will be published in our November 2012 issue.
