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Defossilizing Fuels - An Excerpt from Reinventing Fire

Defossilizing Fuels - An Excerpt from Reinventing Fire

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Whether you care most about profits and jobs, national security, health, or environmental stewardship, Reinventing Fire charts a pragmatic course toward a clean energy economy that makes sense and makes money. With clarity and mastery, Lovins and RMI reveal the astounding opportunities for enterprise to create the new energy era.
Whether you care most about profits and jobs, national security, health, or environmental stewardship, Reinventing Fire charts a pragmatic course toward a clean energy economy that makes sense and makes money. With clarity and mastery, Lovins and RMI reveal the astounding opportunities for enterprise to create the new energy era.

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Published by: Chelsea Green Publishing on Feb 01, 2012
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forewords by
MARVIN ODUM, president, shell oil company
JOHN W. ROWE, chairman and ceo, exelon corporation

“ Reinventing Fire is a towering work, a page-turning
tour de force of compelling wisdom that deserves a
permanent place on the desk—nay, in the mind—of
whoever holds the chair in the Oval Offce.”
— ROBERT C. MCFARLANE, national security advisor
to President Reagan; cofounder and cochair of the
United States Energy Security Council
“ A brilliant, thorough, innovative plan for a complete
and proftable restructuring over the next four decades
of how we use and supply energy for transport,
electricity, buildings, and industry.”
— R. JAMES WOOLSEY, venture partner, Lux Capital;
former director of the U.S. Central Intelligence
Agency; chairman, Foundation for Defense of
“ Lovins and his colleagues blaze a trail toward an
energy future that is cleaner, cheaper, and safer. A
‘must read’ book for business leaders, policymakers,
environmentalists, academics, and anyone else who
cares about our planet’s future and our nation’s
— DAN ESTY, director, Center for Business and the
Envi ronment at Yale University, and author of
Green to Gold
“ If you wanted to bring America happiness and
prosperity, and address unemployment, government
gridlock, and climate change, and create meaning in
a world rife with contradictory views and ideologies,
you can do one thing: read Reinventing Fire . . . and
then see to it that it is read by every decision maker
in the land. This is a stunning work of enormous
— PAUL HAWKEN, author of Blessed Unrest; coauthor
of Natural Capitalism
“ America’s business leaders have long waited for a
practical vision of how innovation and entrepreneurship
can drive the shift from fossil fuels to effciency and
renewables. Now, in Reinventing Fire, that proft-led
path is here, clear, and compelling.”
—GERALD D. HINES, founder and chairman, Hines
“ A must-read ‘new baseline’ analysis for innovators and
policy makers.”
— BILL JOY, partner, Kleiner Perkins Caufeld &
Byers; cofounder, Sun Microsystems
PO Box 428
White River Junction, VT 05001
ISBN 9781603583718
“A wise, detailed, and comprehensive blueprint“ —President Bill Clinton
$34.95 USD
created our wealth, and enriched the lives
of billions. Yet their rising costs to our secu-
rity, economy, health, and environment now
outweigh their benefts. Moreover, that long-
awaited energy tipping point—where alter-
natives work better than oil and coal and
compete purely on cost—is no longer decades
in the future. It is here and now. And it is the
fulcrum of economic transformation.
A global clean-energy race has emerged
with astounding speed. The ability to operate
without fossil fuels will defne winners and
losers in business—and among nations.
Now, in Reinventing Fire, Amory Lovins
and Rocky Mountain Institute offer a new
vision to revitalize business models, end-
run Washington gridlock, and win the clean-
energy race—not forced by public policy but
led by business for enduring proft. Ground-
ed in thirty years’ practical experience, this
ground-breaking, peer-reviewed analysis inte-
grates market-based solutions across transpor-
tation, buildings, industry, and electricity. It
maps pathways and competitive strategies for
a 158%-bigger 2050 U.S. economy that needs
no oil, no coal, no nuclear energy, one-third
less natural gas, and no new inventions.
This transition would cost $5 trillion less
than business-as-usual—without counting
fossil fuels’ huge hidden costs. It requires no
new federal taxes, subsidies, mandates, or
laws. The policy innovations needed to unlock
and speed it need no Act of Congress.
Whether you care most about profts and
jobs, national security, health, or environ-
mental stewardship, Reinventing Fire charts a
pragmatic course that makes sense and makes
money. With clarity and mastery, Lovins and
RMI reveal the astounding opportunities for
enterprise to create the new energy era.
AMORY LOVINS is a leading expert on energy
and its links with economy, security, develop-
ment, and environment. He has advised heads
of state, major frms, the U.S. energy and defense
departments, and governments worldwide. He
received the “Alternative Nobel,” Zayed, Blue
Planet, Volvo, Onassis, Nissan, Shingo, and
Mitchell Prizes, MacArthur and Ashoka Fellow-
ships, eleven honorary doctorates, and the
Heinz, Lindbergh, Time Hero for the Planet,
National Design, and World Technology Awards.
An honorary architect, Swedish engineering aca-
demician, and former Oxford don, he has taught
at nine universities. Among his thirty previous
books are Small Is Proftable, Winning the Oil End-
game, and the coauthored business classic Natural
Capitalism. Lovins was named one of Time’s 100
most infuential people in the world and Foreign
Policy’s 100 top global thinkers. He is cofounder,
chairman, and chief scientist of Rocky Mountain
entrepreneurial, nonproft think-and-do tank
that drives the effcient and restorative use of
resources. It has three decades’ practical experi-
ence implementing innovative solutions with
private-sector partners in transportation, build-
ings, industry, and electricity.
COVER DESIGN BY Maureen Forys, Happenstance Type-O-Rama
from browndogstudios/iStockphoto.com; Chemc/iStockphoto.
com; samoyloff/iStockphoto.com; sodafsh/iStockphoto.com.
AUTHOR PHOTOGRAPH © 2007 By Judy Hill Lovins
“ My friend Amory Lovins knows that the most important question of the 21st
century is the ‘how’ question—how we turn good ideas into working solutions.
Reinventing Fire is a wise, detailed, and comprehensive blueprint for gathering the
best existing technologies for energy use and putting them to work right now to
create jobs, end our dependence on climate-changing fossil fuels, and unleash the
enormous economic potential of the coming energy revolution.”
—President Bill Clinton
ReinventingFireCoverJacketFinalPS.indd 1 8/30/11 11:23 AM
Think about how much our world has changed in just the past two hundred years.
We can fly around the globe in less than two days, buy Chilean grapes at a local
supermarket, enjoy similar amenities whether we choose to work in skyscrapers or in
rural cabins, build mammoth machines and tiny chips, and use a handheld device to
connect instantaneously with people in virtually every distant corner of the planet.
All these advances have sprung from humankind’s restless imagination and ingenu-
ity—and from one crucial enabler: fossil fuels.
Before the fossil-fuel era, people could only
harvest energy on the spot. They pumped water
with windmills, plowed fields with draft animals,
cooked with wood, and explored the seas with the
wind in their sails. None of these sources could
provide portable energy on demand. But coal and
oil and natural gas were different. They store in
concentrated form immense amounts of ancient
sunlight accumulated over vast areas and geologi-
cal periods. Tapping into these deposits of plants
and animals that grew tens or hundreds of millions
of years ago allows us to grab and use amounts
of energy unimaginable to our ancestors. It’s like
being able to live a life of wealth by withdraw-
ing vast sums of money from a gargantuan bank
account that took eons to accumulate.
Fueled by those ancient deposits, ordinary
people in industrialized countries now use up to
100 times more energy than their predecessors did
before the burgeoning use of coal in the 1700s, the
birth of commercial oil in 1859, and the gas pipe-
lines of the early 1920s. Each of us, in effect, has
been able to harness the energy equivalent of sev-
eral hundred human workers, not to mention the
hundreds of horses under the hoods of our cars.
The effect has been profound. Fossil fuels
made possible James Watt’s steam engine and
the Industrial Revolution, the growth of cities,
the Internet Age—indeed modern civilization.
Between 1800 and 2000, “total worldwide energy
use grew by 80–90-fold, the most revolutionary
process in human history since domestication” of
plants and animals, writes Georgetown Univer-
sity historian John R. McNeill.
Adopting fossil
fuels, he adds, was “one of the three or four most
crucial ‘choices’ in the history of our species, and
more than anything else has shaped the tumultu-
ous relationship between human society and the
ecosystems on which it depends.” The modern age
represents such a break from past planetary his-
tory that many scientists say we now live in a new
human-driven “Anthropocene Era.”
But now it’s time for another historic break
from the past. In this next revolution, we need to
stop using fossil fuels. This book will show how
to eliminate oil and coal completely by 2050, with
less risk and less cost to society than business-as-
usual. Natural gas use can be moderated and ulti-
mately phased out too.
Why would we want to take such a drastic
step? Why give up on gasoline stations, coal-fired
power plants, and the other fossil-fueled founts of
energy that have made our lives so much easier
and wealthier than our great-grandparents’ or even
our grandparents’? Why not just keep pumping up
the oil, drilling the gas, mining the coal—in all, the
RFc01.indd 2 8/28/11 3:43 PM
four-odd cubic miles a year of that magic carbon-
iferous stuff that keeps the global economy hum-
ming? Why go to the trouble of Reinventing Fire?
The short answer: to create wealth (trillions
of dollars’ worth, as we’ll see in the following
chapters), manage risk, capture opportunity and
choice, and expand innovation and jobs. But the
broader business and social reasons for farsight-
edly achieving displacement before depletion are
compelling. Beyond opportunities for profit, they
include correcting structural weaknesses in our
economy and threats to our health and our way of
life. Indeed, the list of reasons to wean ourselves
from fossil fuels is long and strong. Let’s start with
basic economics.
The U.S. has built its economy on cheap oil and
coal. At late 2010 prices, gasoline was cheaper
per gallon than milk, orange juice, and domestic
bottled water. This low price is a tribute to the oil
industry’s remarkable skill, not just in its complex
operations and technologies but also in the politics
of keeping subsidies high and fuel taxes low. In
2006, federal subsidies to oil and gas, mostly oil,
totaled about $39 billion,
shifting several dollars
a barrel (abbreviated “bbl”) from pump prices to
income taxes and budget deficits financed by bor-
rowing abroad. Subsidies to oil-using systems are
even bigger, estimated in 1998 at $111 billion a year
for autos alone, equivalent to $16/bbl.

But this seemingly cheap fuel has been a
dangerous illusion. The low price covers just a
fraction of the total costs society actually pays to
mine and burn fossil fuels. When all those costs
are included, the true price soars to well above
the cost of renewable alternatives. The surprise,
though, is that, as we’ll see, practically all energy
efficiency initiatives and many renewables are
already cost-competitive even without counting
those hidden costs—and indeed our analysis val-
ues them all at zero, a conservatively low estimate.
Switching from fossil fuels is often justified today
just on head-to-head price competition, and renew-
ables are widening that gap. But switching also
avoids the hidden costs, and they are large.
Consider that the low U.S. price of gasoline,
about half to one-third what’s normal in other
industrialized countries, has helped to create a
pervasive pattern of inefficient vehicles and settle-
ment patterns that maximize driving, causing a
massive treasure transfer from America to oil-
exporting nations. Of America’s $0.9 trillion
bill in 2008, $388 billion went abroad. Some of this
money paid for state-sponsored violence, weapons
of mass destruction, and terrorism. This wealth
transfer also worsens U.S. trade deficits, weakens
the dollar, and boosts oil prices even higher as
sellers try to protect their purchasing power. It’s
equivalent to a roughly 2% tax on the whole econ-
omy, without the revenues.
Since 1975, America’s
oil imports have sucked well over $3 trillion of
cash out of other expenditures and investments.
Much of it has never returned. Dr. David Greene of
Oak Ridge National Laboratory graphs this wealth
transfer and its costs, including the economic
damage (called “dislocation losses”) from oil price
shocks, in figure 1-2.
The economics are worsened by the pricing
power of the Organization of Petroleum Exporting
Countries (OPEC). The OPEC cartel can charge
above-free-market prices so long as America’s
oil addiction helps keep markets tight. In 2000,
Greene calculated that over the past three decades
this had probably cost Americans more than a
year’s worth of GDP and depressed total cumula-
tive real GDP by about 10%.
Price shocks alone have cut the GDP growth
rate by about half a percentage point. High oil
prices have preceded every recession since 1973

and put mobility industries (such as automakers,
RFc01.indd 3 8/28/11 3:43 PM
trucking companies, airlines, and tourism) at spe-
cial risk. At least until the past decade, the effects
of oil shocks were amplified because the inflation
they helped trigger typically caused the Federal
Reserve to raise interest rates, choking off eco-
nomic expansion.
Oil-price volatility would still rattle the U.S.
economy even if all oil were domestic, because
oil prices would still be set in the world market.
And derivatives markets tell us what that volatil-
ity is worth—what you’d have to pay a trader to
bear your price risk. For example, price volatility
over the next five years was recently expected
to cost $40 a barrel for crude oil and $124 a bar-
rel ($2.95 a gallon) for gasoline. These costs of
volatility respectively add 40% and 47% to those
commodities’ spot prices five years out
more over the much longer period appropriate for
big energy investments. Thus 2010 U.S. gasoline
consumption alone bore a hidden volatility cost
(over just five years) of $0.41 trillion, or well over
a half-trillion dollars for total oil consumption.

That microeconomic cost is borne directly by oil
users as a business risk and appears to be mainly
additional to the macroeconomic costs shown in
figure 1-2.
In total, U.S. oil dependence’s economic cost
just in 2008 was on the order of a trillion dollars
beyond the cost of the oil itself. The only escape is to
stop using oil.
loss of potential GDP dislocation losses wealth transfer
Costs of oil dependence to the U.S. economy, 1970–2008
1970 1975 1980 1985 1990 1995 2000 2005 2008




FIG. 1-2. Estimated direct costs of oil dependence to the United States, 1970–2008
RFc01.indd 4 8/28/11 3:43 PM
Looming even larger are added national-security
costs. Our petrodollars, notes former CIA direc-
tor R. James Woolsey, have effectively funded
both sides of recent U.S. wars. The United States
has diverse interests at stake in the Middle East,
of course, but surely it wouldn’t have sent a half-
million troops to Kuwait in 1991 if Kuwait just
grew broccoli. And as Alan Greenspan said in
2007, the Iraq War “is largely about oil.” That war
has already cost more than 4,400 U.S. lives, plus
one to several trillion borrowed dollars.
The costs mount even without war. In the 1990s,
the U.S. paid two to three times as much to maintain
forces poised to intervene in the Persian Gulf as it
paid to buy oil from the Persian Gulf.
In 2000, if oil
imports from the Gulf had been charged with those
costs, they’d have been priced $77/bbl higher, or 2.7
times that year’s price of Saudi crude.
Those costs
count only the Gulf-focused Central Command,
yet every Combatant Command has oil-protection
duties, whether fighting tanker-hijacking pirates
off Somalia, instability in Latin America, or mili-
tants blowing up pipelines in Faroffistan. In 2010, a
Prince ton study
pegged the cost of U.S. forces just
in the Persian Gulf in just one year (2007) at half a
trillion dollars, or about three-fourths of the nation’s
total military expenditures.
That’s similar to the
peak expenditure rate for the Cold War. It is also
about ten times what the U.S. typically pays for all
the oil it imports from the Persian Gulf.
So the economic costs of oil dependence, plus
U.S. military expenditures for Persian Gulf forces
(and minus the cost of the oil itself), total roughly
$1.5 trillion a year, or 12% of GDP—far more than
our total energy bill. This hidden surcharge, paid
not at the pump but through business risks, taxes,
and deficits, exceeds the per-gallon U.S. price of
gasoline. It also rivals or exceeds the gasoline
The United States still has both coal and natural gas in rela-
tive abundance, but no longer oil: U.S. oil output is back
down to pre-1950 levels. With 4.5% of the world’s popu-
lation, the U.S. produces about 23% of world GDP, and it
uses 22% of world oil but supplies only 11% and owns just
2%, so we can’t drill our way out of depletion. Indeed, after
one and a half centuries of skilled and nearly ubiquitous
drilling, U.S. oil resources are now so depleted that a new
domestic barrel consistently costs more than an imported
barrel. This leaves only three ways for a market economy
to avert rising import dependence:
u Protectionism distorts oil prices by taxing foreign oil or
subsidizing domestic oil (the latter also retards effi-
cient use and substitution). This violates free-market
and free-trade principles, sacrifices competitiveness
and economic efficiency, and illogically supposes
that the solution to domestic depletion is to deplete
faster—a policy that conservationist and retired Army
major David R. Brower called “Strength Through
u Trade simply buys oil unsentimentally from the lowest
bidder, as the U.S. did for 49% of its 2010 use and as
most other countries do—both those good at earning
money to buy oil, like Germany and Japan, and the
rest, like most developing countries. Trade can be eco-
nomically efficient and is generally a sound concept;
it underpins the global economy on which the U.S.
depends. But when a resource is vulnerable or unreli-
able, trade makes everyone share shortages and price
spikes as well as surpluses. Trade also creates depen-
dent relationships and imposes political and diplo-
matic constraints that a superpower may find onerous.
u Substitution replaces oil with more efficient use or
alternative supplies whenever they’re cheaper. These
domestic substitutes offer the advantages of protec-
tionism without its drawbacks, and the advantages
of trade without its vulnerabilities. Since substitution
is cheaper and less risky than buying oil in the world
market, it’s the focus of chapter 2’s exploration of how
to achieve mobility without oil.
RFc01.indd 5 8/28/11 3:43 PM
taxes that most industrial countries’ citizens pay
to their national treasuries, while Americans pay
their version mostly to oil suppliers (Canada,
Mexico, OPEC, and others), military contractors,
and foreign lenders.
Meanwhile, the whole oil supply chain is
astonishingly vulnerable. For example, failing
to foil just one of the steady stream of terrorist
plots against key Saudi oil facilities could crash
the global economy. Two-thirds of Saudi oil flows
through one processing plant and two terminals,
both already repeatedly attacked. Yet oil choke-
points are spread around the world, including in
the United States. A Pentagon study found that
a handful of people in one evening could cut off
three-fourths of the oil and gas supplies to the
eastern U.S. without even leaving Louisiana.

Drilling for more oil at home (see The Nature of
the U.S. Oil Problem sidebar) could simply shift
oil insecurity from well-known instabilities and
chokepoints abroad
to equally brittle domestic
infrastructure, such as what Woolsey called the
“frighteningly insecure” Trans-Alaska Pipeline.
Want even more reasons? Dependence on oil
gives disproportionate power to exporters like
Iran. It hurts America’s reputation around the
world (since many foreign-policy issues look like
they’re just about oil, eroding U.S. moral author-
ity). It hinders the spread of democracy: 67% of oil
reserves are in “unfree” nations, 25% “partly free,”
and only 7% “free,” as rated by Freedom House.

With few exceptions—above all Canada, which
supplied 37% of U.S. oil imports in 2010—coun-
tries that depend heavily on oil revenue tend to
have more corruption,
autocratic governments,
repression, inequity, and excessive militarization.
The Economist in 2005 called this “the oil curse.”

Quite a few oil-endowed countries are unstable:
Algeria, Chechnya,
Indonesia, Iraq, Nigeria,
Sudan, and Yemen all harbor Islamic extremists.
And don’t forget the environmental and health
costs of oil spills.
Oil isn’t the only fossil fuel with large hidden
costs. Coal fires the power stations that generate
45% of U.S. and 41% of world electricity. Burn-
ing coal emits sulfur and nitrogen oxides (caus-
ing acid rain), particulates, mercury, and other
toxic metals. Coal ash from power plants pollutes
streams. Mining coal injures and kills workers
and inverts landscapes. Such hidden costs of U.S.
coal-fired electricity total $180 to $530 billion per
year. Properly charging that on our electric bills,
rather than to our health and our kids, would
double or triple the price of coal-fired electricity.

Up to half those hidden costs come from con-
ventional air pollution—more than the National
Academy of Sciences’ estimate of coal’s climate
cost. And as we’ll learn in chapter 5, the trans-
portation and burning of coal is not an entirely
secure system, and the grid that transmits its elec-
tricity across the country is alarmingly vulnerable
to physical attack, cyberattack, and solar storms.
But coal’s gravest threat to national security may
emerge from those power plants’ smokestacks.
Burning coal and oil each emit about two-fifths
of U.S. and global fossil carbon,
incurring the
risks of climate change. Military leaders worry
that climate change’s possible droughts, floods,
famines, disease spread, geopolitical shifts, mass
migrations, and other likely effects could trig-
ger and amplify serious instability, conflict, and
humanitarian-relief missions. Defense Secretary
Robert Gates, Chairman Mike Mullen of the Joint
Chiefs of Staff, and other military leaders therefore
include climate change among the Pentagon’s core
security concerns.
In January 2011, Admiral Mul-
len commented at the front of Joint Force Quarterly,
his magazine for military commanders:
Near the polar cap, waterways are opening that
we could not have imagined a few years ago,
rewriting the geopolitical map of the world.
Rising sea levels could lead to mass migrations
RFc01.indd 6 8/28/11 3:43 PM
similar to what we have seen in Pakistan’s recent
flooding. Climate shifts could drastically reduce
the arable land [available that is] needed to feed a
burgeoning population as we have seen in parts
of Africa. As glaciers melt and shrink at a faster
rate, crucial water supplies may diminish fur-
ther in parts of Asia. This impending scarcity of
resources compounded by an influx of refugees if
coastal lands disappear not only could produce a
humanitarian crisis, but also could generate con-
ditions that could lead to failed states and make
populations more vulnerable to radicalization.
These troubling challenges highlight the systemic
implications—and multiple-order effects—
inherent in energy security and climate change.
Besides, we’ll have to stop burning oil and
coal—and ultimately even cleaner natural gas
at some point—because we can’t withdraw from
nature’s vast deposits forever. Humanity has
already withdrawn about one-third of the original
fossil-fuel bank balance, and those once-in-a-
civilization withdrawals are accelerating: half their
total has occurred just since 1985.
While there’s a raging debate over whether
we’ve reached or passed the peak of oil production
(fig. 1-3), there’s no doubt that the cost of finding
and lifting new oil is rising, despite ever-better
technologies, as those huge reserves dwindle.
And whatever its pace, depletion will concentrate
oil ownership, raise tensions, boost prices, and
You are here
year CE
1000 2000






1800 1900 2000 2100 2200
Fossil fuels: global production, 1800–2200
natural gas
(primarily oil)
FIG. 1-3. This graph plots the actual global output of the three major classes of hydrocarbons through 2009, then proj-
ects the remaining amounts of each believed likely to be recovered if there are no aboveground constraints.
The historic
data are accurate but the smoothed illustrative projections are quite approximate, reflecting leading resource experts’
knowledge in early 2011 but subject to many uncertainties. The projections include unconventional resources such as
shale gas, heavy oil, tar sands, and shale oil, but not methane hydrates, potential Arctic and Antarctic resources, or
Alaskan North Slope and central Siberian coal.
RFc01.indd 7 8/28/11 3:43 PM
increase price volatility. If you believe oil produc-
tion has peaked or is about to, getting off oil is a
practical and profitable way to reduce those risks;
if not, it’s negative-premium insurance, prudently
hedging your bets while cutting you costs.
Figure 1-3 also shows how coal depletion, long
assumed to be centuries off, may arrive unexpect-
edly soon. Coal resources had long been assessed
with little or no attention to their exploitation cost.
Recent reassessments of coal’s economic geology
are more sobering, suggesting that “peak coal”
will occur within decades even in such coal-rich
countries as the U.S. and China. Physical deple-
tion could take much longer, but the cheap coal is
going fast.
Obviously, weaning ourselves from fossil fuels
isn’t easy. Every American president since Richard
Nixon has vowed to break the country’s addiction
to imported oil, yet U.S. oil-import dependence
hit 60% in 2005 before falling back to 49% in 2010.
U.S. coal use also rose from 15 quadrillion BTU in
1980 to nearly 21 quadrillion in 2010. Its mining is
deeply embedded in some regions’ way of life, and
a huge fleet of power stations burns it.
Though most trends are in the wrong direction,
encouraging examples prove that reducing or elim-
inating fossil-fuel use is possible. For instance, the
U.S. and others responded to the oil price shocks
of the 1970s with a spate of efficiency gains that
halved OPEC’s sales in just eight years and “broke
its pricing power for a decade,” Greene found.

(Specifically, during 1977–1985, U.S. GDP grew
27%, oil use fell 17%, oil imports fell 50%, and
oil imports from the Persian Gulf fell 87%.) Simi-
larly, as we’ll see later, coal’s share of electricity
generation plummeted starting in 2009 as utilities
switched to cheaper natural gas, while efficiency
and renewables further eroded its market.
Or consider Denmark. A Danish home built
in 2008 uses half the energy per unit of floor-
space of one built before 1977. The Danish econ-
omy grew by two-thirds during 1980–2009, while
energy consumption returned to its 1980 level
and carbon emissions fell 21%.
All new power
plants, too, are either renewable or generators of
both electricity and useful heat. Of all Danish
electricity, 53% is cogenerated and 30% is renew-
The average Dane releases 52% less carbon
than the average American. Yet Danes have an
excellent quality of life, with the most reliable
electricity in Europe, at some of the lowest pretax
And in 2011, Denmark’s conservative
government announced nearly self-financing,
and over time highly advantageous, plans to
get the country completely off fossil fuels by
2050 by boosting efficiency and switching to
Motivating 21st-century Danes to reverse their
19th-century switch to fossil fuels are the same
forces that are motivating people everywhere. Peo-
ple want their energy services to be secure against
being accidentally or deliberately cut off; afford-
able even in hard times; stably priced; clean and
safe; fair, not unduly disadvantaging others; and
modern, continuously improving through innova-
tion. Many people are realizing that fossil fuels
are no longer the only or the best way to achieve
these goals. Business-as-usual with fossil fuel still
works, but its costs and risk are increasing, and so
are opportunities for change.
Consider autos. A 20-mile round-trip in an
average new two-ton auto to buy a gallon of milk
burns a gallon of gasoline probably costing less
than the milk. The gallon of milk could have come
from a nearby cow that did two hours’ work yes-
terday to eat and digest nine dry pounds of grass.
But the gallon of gasoline—pumped up, refined,
and perhaps hauled halfway around the world—
was formed over eons from a quarter-million
pounds of primeval plants, only a tiny fraction of
RFc01.indd 8 8/28/11 3:43 PM
which formed oil, got geologically trapped, and
ultimately was extracted and processed. Thus
when your auto burns a gallon of gasoline, it’s
consuming over 60 times its own weight in ancient
plants—17 million times more plant weight per
gallon than the cow ate to make the gallon of milk.
Why so much? Not just because copious ancient
pond scum forms little recoverable oil, but also
because the auto’s basic physics make it so inef-
ficient that, as we’ll see in the next chapter, a mere
fraction of a percent of its fuel energy moves the
driver. How long can such autos compete in a
world of scarcer oil?
Looking at the bigger picture, CODA Automo-
tive’s then CEO Kevin Czinger said the backbone
of the U.S. economy used to be locally made cars
fueled with relatively locally produced oil. That
industry sparked America’s great industrial
growth. But now we often drive imported cars
fueled with imported oil, so “every time we buy
a car we’re exporting $15,000 of capital, pay-
ing for it with borrowed money, and running
it on foreign energy sources. We’ve gone from
autos’ being a middle-class-making machine to
a middle-class-destroying machine.”
Of course,
the more we make efficient and competitive cars
at home, the less we’ll need to import both cars
and oil, and the more our dollars and jobs will
stay home.
Competitive strategy similarly demands mov-
ing beyond wastefully used electricity and the
coal burned to make it. Radical efficiency can save
much or most of the electricity used in buildings
and industry. And renewables have already cap-
tured half the global power-plant market,
ening U.S. coal in its last big use. Judicious choices
can speed all these trends, benefiting the economy,
the environment, and our lives.
The tipping point for shifting from fossil fuels
to the new fire has arrived. And the new fire can
work worldwide. It can be scaled up quickly in
many diverse conditions and cultures.
This book explains how business—motivated by
enduring advantage, supported by civil society,
sped by effective policy—can advantageously
achieve the ambitious transition beyond oil and
coal by 2050, and later beyond natural gas too.
New technologies, and new ways of combining
them, can wring severalfold more work from the
same amount of energy. Those efficiency gains
then allow renewable energy sources, equally
enabled by modern information technology, to
be deployed faster. The transition will create new
industries with vast potential for jobs, profits, and
better, cheaper, more robust services.
These new energy futures promise total eco-
nomic costs comparable to or less than those of
the old fossil-fueled approach, with a cost advan-
tage increasing over time. Meanwhile, far more
importantly than any modest cost differences, they
already offer far lower risks to national security,
the economy, the environment, and public health,
and a rapidly expanding range of choices.
Unfortunately, many barriers lurk in the tran-
sition to the new fire, which explain why it’s now
only just beginning. But as we’ll see, clever poli-
cies and business strategies can help surmount
those barriers, and business logic favors getting
in early.
We will explore these themes and ideas in
the four sectors of the economy that burn fossil
fuels—transportation, buildings, industry, and
electricity generation—and see how they inter-
twine into a whole new structure for the energy
system, creating a remarkable range of public and
private benefits. We can best illustrate the possible
paths to the future by looking first at how these
four sectors use fossil fuels, and how the United
States used all forms of energy in 2010 (fig. 1-4).
These energy flows show only how fuels were
burned for energy, and not how they were used
as raw materials to make plastics, chemicals,
RFc01.indd 9 8/28/11 3:43 PM
lubricants, asphalt, fertilizers, and other materi-
als. (When Russian chemist D. I. Mendeleyev
said in 1877 that crude oil was far too precious to
burn, he was right.) The U.S. Energy Information
Administration expects all these combustion uses
to grow, as figure 1-5 shows, under its standard
assumption of existing laws, rules, and (mostly)

0 20 40 60 80 100
quadrillion BTU/y
U.S. energy consumption, 2010
primary energy
end-use energy
nuclear coal natural gas oil
transportation buildings industry
FIG. 1-4. U.S. energy use in 2010, measured in the U.S. in “quads” or quadrillion BTU (million billion British thermal
units) and in the rest of the world as a 5.5% larger number of EJ (exajoules, or billion billion joules)
0 20 40 60 80 100 120
quadrillion BTU/y
Business-as-usual U.S. energy consumption, 2050
primary energy
end-use energy
oil natural gas biomass coal
transportation buildings industry
FIG. 1-5. RMI’s extrapolation to 2050 from the Energy Information Administration’s 2010 forecast of U.S. energy supply
and use to 2035.
RFc01.indd 10 8/28/11 3:43 PM
Yet trend is not destiny. Our energy future
could be startlingly different. These uses could
shrink and the fuels that drive them shift (fig. 1-6),
while providing exactly the same amenities—
access, comfort, and industrial production, for
instance—and using the same or better vehicles,
buildings, appliances, and other equipment as in
the 2050 base-case forecast.
While our energy economy is complex and
the uses of energy are myriad, we can move away
from fossil fuel by focusing on three simple princi-
ples: reduce use, modulate demand, and optimize
supply. These principles are not new, but they
must be applied holistically, with consistent pas-
sion and relentless patience.
Do more with less. The cheapest, best “source”
of energy is needing less of it in the first place
by converting, delivering, and using it more effi-
ciently. By 2009, wringing more work from each
barrel, ton, therm, or kilowatt-hour had become the
biggest energy source in the U.S. economy. In that
year, it fueled half of all economic activity and pro-
vided 174% more energy services than oil-burning
did. For businesses, this principle, called “raising
energy productivity,” is a veritable gold mine. It
delivers the same or better services every day at
lower cost, while also reducing the risk of energy
price spikes or supply failures. We can then use less
energy but get even more work out of it. Almost
unnoticed, the U.S. economy actually did that in
nine of the past 36 years by raising energy produc-
tivity even faster than GDP grew. The following
chapters show how we could do it every year—both
by wringing more work from our energy and by
using more productively the services it provides.
0 20 40 60 80
quadrillion BTU/y
Reinventing Fire U.S. energy consumption, 2050
primary energy
end-use energy
natural gas
other renewables biomass
coal hydro
buildings industry
FIG. 1-6. The following chapters will show how we can run the same 2050 economy as in figure 1-5, but with half the
delivered energy, with less risk, and for $5 trillion less (in 2010 net present value).
RFc01.indd 11 8/28/11 3:43 PM
Modulate demand. We have been trained to
believe that our economy and our way of life
depend on a ceaseless, constant, ever-growing
and never-ending supply of electricity. That par-
adigm is rooted in 19th- and 20th-century think-
ing, from a time when factories were steeped in
mass production and large central generators
sought “baseload” customers to utilize their
capital every hour of the year. Today, new tech-
nologies, smart controls, and IT-enabled services
empower us to adjust our energy demands to
match more closely and advantageously a wide
range of supply technologies. The upshot for
businesses is that they can use electricity when it
is cheapest and, without disruption or inconve-
nience, reduce their use and costs when electric-
ity is most precious. For commercial building
owners this may mean storing energy in the cool
of the night and releasing it in the heat of the
day. For other customers it may mean charging
an electric vehicle when prices are lowest. Even
aluminum producers have begun to modify
demand in response to price signals—a practice
unheard of a decade ago.
Optimize supply. Once we have dramatically
reduced our demand and learned how to con-
trol and modify it (all without diminishing or
compromising services), we can expand our
choices about how to meet it. The old fire left
few choices, all of which chiefly involved burn-
ing one or another abundant fuel for heat or
electricity. Today and in the near future we can
choose from an ever-expanding array of options
ranging from fuel-switching (coal to gas) to
windpower to solar photovoltaics and someday
fuel cells. These new options give business new
ways to control energy risks, often at ever lower
and more stable costs. The rest of us can become
both consumers and producers of energy—
“prosumers”—as rapid innovation expands our
choices too.
The next four chapters explain how to optimize,
execute, and combine these three principles in all
four energy-using sectors of the economy—trans-
portation, buildings, industry, and electricity
generation. But our story is about more than just
reducing each sector’s fossil fuel use. What’s espe-
cially exciting is how in each sector, those three
principles launch self-reinforcing cycles that bring
more gains in the other sectors. In just one exam-
ple, switching to electric cars to eliminate oil use
could also make the electricity grid more efficient
and resilient, speeding the electricity sector’s path
to replacing fossil fire with renewable energy. Such
leapfrogs are challenging, but with business lead-
ership and policy support, they’re also realistic,
already under way, and strikingly rewarding.
If you think things must always remain as they
are, remember that history tells a different story.
Energy sources have been coming and going for
millennia. Renewable energy technologies such as
wind and solar have become widespread several
times in the past few millennia, only to be dis-
placed by a glut of apparently cheap fuel, which
then dwindled, making room for the renewables
to be rediscovered.
But some sources go away and never come
back, simply because their time has passed. No
matter how dominant their role—even if they
bestride the earth like a colossus—there comes
a time when competitors overtake them. That’s
been happening for both oil and coal. The U.S.
stopped directly using coal for transportation by
1920 and for buildings by 1960. Industrial coal use
has halved in the past 40 years, U.S. coal output
peaked in energy terms in 1998, and coal’s last
big use, for power generation, probably peaked
in 2007. Now the costs of using oil and coal are
climbing, even as the price of renewables drops
inexorably. The curves are already crossing. The
endgames of oil and coal have already begun.
RFc01.indd 12 8/28/11 3:43 PM
When upstart competitors knock off the domi-
nant source of energy, the end can be swift and
cruel for the established industry. Consider how
one type of oil—a versatile, convenient, ubiquitous
oil—was snuffed out way back in the mid-19th
In 1850, most American houses were
lit by whale-oil lamps. Today we think of whal-
ing fleets only when we read Moby Dick or visit a
whaling museum, but in 1850, whaling was Amer-
ica’s fifth-biggest industry. The demand for whale
oil was so great that whales were getting shy and
scarce. But rising whale-oil prices brought compe-
tition, mainly from kerosene and gas, both at that
time synthesized from coal. Entrepreneurs started
selling cheap kits to convert lamps from whale oil
to coal oil, repaying their cost within months.
By 1859, when Drake struck oil in Pennsyl-
vania, creating another source of kerosene, more
than five-sixths of whale oil’s lighting market had
been taken over by these competitors, in less than
a decade. The inattentive whalers were astounded
to find they had run out of customers before
they ran out of whales. The whaling industry
was reduced to begging for federal subsidies on
national-security grounds—and soon American
whaling was history. The remnant whale popula-
tions had been saved by technological innovators
and profit-maximizing capitalists. And within
another few decades, kerosene lighting was his-
tory too, replaced by Edison’s 1879 electric light.
In November 1973, as economies reeled under
the shock of the Arab oil embargo, a Texas A&M
economics professor named Phil Gramm recalled
the whale-oil history in a Wall Street Journal op-ed.
Don’t worry about oil price shocks and shortages,
he said. Markets would clear, innovators would
invent, and oil, like any other commodity, would
in due course be saved or displaced. He was right.
By 2009, America was making a dollar of real
GDP using 60% less oil, 50% less total energy,
63% less directly used natural gas, and 20% less
electricity than in 1975. But this journey toward
using energy in better, cheaper ways has only just
It has happened despite general indifference,
gridlocked national policy, 26 years of stagnant
efficiency standards for automobiles, and 48 states’
rewarding utilities for selling more electricity and
natural gas. Imagine what we can do together
once we pay attention to the trillions of dollars of
savings and potential profits lying on the table.
So with the whale-oil history fresh in our minds,
let’s start with the vital function that uses 71% of
America’s oil—transportation. Right now, oil is
the lifeblood of the most mobile society in the his-
tory of the world. But we can reinvent the fire that
now burns in our internal-combustion engines as
well as in our buildings and factories, eliminat-
ing oil burning by 2050—all while saving about
$5 trillion.
RFc01.indd 13 8/28/11 3:43 PM

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