Amory Lovins on Why Energy Efficiency is the Key

In an interview with Yale Environment 360, Amory Lovins, co-founder and chairman of Rocky Mountain Institute, says that world’s biggest untapped energy source is efficiency. And retooling for energy efficiency will require “barrier-busting” at many levels. And government, Lovins says, “should steer, not row.”

The world’s biggest untapped energy source, according to energy expert Amory Lovins, is efficiency. But don’t call it “conservation.”

In an interview conducted by science writer Carole Bass for Yale Environment 360, Lovins, the co-founder and chairman of Rocky Mountain Institute, says that word connotes “privation, discomfort and curtailment.” By contrast, “efficiency” means “doing more and better with less energy and money, but with more brains and technology,” he says.

The longtime renewable energy advocate and author says retooling for energy efficiency will require “barrier-busting” at many levels. And government, Lovins says, “should steer, not row.”

Yale Environment 360: You have called energy efficiency “the largest, cheapest, safest, cleanest, fastest way to provide energy services.” How do you quantify that claim? For example, how large, how cheap, how fast?

Amory Lovins: Oh, for example, in the United States we could save at least half the oil and gas and three-quarters of the electricity we use, and that efficiency investment would cost only about an eighth [of] what we’re now paying for those forms of energy.

e360: How fast could we do that?

Lovins: To get completely off oil — half from the supply side and half by redoubling the efficiency of using oil — would take ’til the 2040s, if we did it about a third slower than we saved oil from 1977 to ’85, when we were last paying attention. Saving half the gas could be a good deal faster, probably about 20 years. And saving three-quarters of the electricity would take several decades, because we would need both to build new things in a much smarter way and to retrofit existing buildings and factories — bearing in mind that about 70 percent of our electricity goes to buildings and 30 percent to factories.

Now, there are ways to speed this up, like mass retrofits. The most important way to speed it up would be to reward utilities for cutting our bills, not selling us more energy. That reform is adopted in a handful of states but pending in about another two dozen. And there’s a lot of barrier-busting needed at all levels of government as well as firms and households.

By barrier-busting, I mean enabling people to respond to the price signals they see, and use energy in a way that saves money, by turning into a business opportunity each of the 60 or 80 well-known obstacles or market failures in buying efficiency. [You’ll find the taxonomy of those on pages 11 to 20 of our 1997 paper Climate: Making Sense and Making Money, which is in the climate publications library of] And another important way to make retrofits much cheaper is to coordinate them with retrofits and renovations you’re doing anyway for other reasons. We published an example where that coordination would enable you to save three-quarters of the electricity used by a typical 20-odd-year-old glass office tower at a slightly lower cost than the regular 20-year renovation you have to do anyway, that saves nothing.

e360: Now, you mentioned that barrier-busting is needed at all levels of government. It seems as though your work focuses very much on the private sector.

Lovins: Well, barrier-busting is needed in the public and private sectors, and in fact many of the biggest obstacles are at the level of the firm. For example, a company or an individual hiring an architect or an engineer would do well to pay that designer for — or, pay those designers for what they saved, not for what they spend, which is the traditional method of compensation. Or, there’s the well-known split incentive. Why should I fix up the building if the landlord owns it, and why should the landlord fix it if I pay the bills? You need to drop in a lease rider to share equitably the costs and benefits of the retrofit.

e360: You do focus mainly on the business side, is that right?

Lovins: Yeah. We work in all sectors, but most of our work is with the private sector, because we actually want to get things done.

e360: How far can the private sector take us, and at what point do we need to bring the general public along as well?

Lovins: I think government should steer, not row. The rowing, the heavy work, will and should be done by the private sector in its co-evolution with civil society. The government should get the rules right. And I think the broad framework that makes the most sense for energy policy would be to let all ways to save or produce energy compete fairly, at honest prices, no matter which kind they are, what technology they use, how big they are, where they are, or who owns them. And let’s see who’s not in favor of that. I would predict that those not in favor will include all the incumbents, who are quite happy with the present arrangements they paid a lot of money for.

e360: What are the top three things the federal government needs to do right now to get the rules right?

Lovins: Well, I won’t include the utility reform I referred to earlier, which is technically called decoupling and shared savings, because that’s done by state utility commissions. However, the federal government could certainly encourage that, as it has encouraged many other previous utility reforms, without preempting state authority. And if that happened, that would be the most single powerful lever in getting utilities excited and engaged in efficiency, rather than averse or at least indifferent to it because it hurts their profits.

Second, to get efficient cars on the road quickly, the federal government should incubate at a state and regional level and then take nationwide a system of size-neutral and revenue-neutral “fee-bates”. A fee-bate is a combination of a fee and a rebate. When you go to the dealer to buy a vehicle of the size you want, there are more and less efficient models on offer. Under a fee-bate system, the less efficient ones would pay a corresponding fee, that would then be used to pay a rebate on the more efficient ones. This widens the price spread between more and less efficient models, enough so that you will pay attention to lifecycle fuel savings, not just the first year or two. It’s a more powerful method than either fuel taxes or efficiency standards. Unlike standards, it rewards continuous innovation and improvement, and it makes more profit for the automakers. That’s because, in order to move their vehicles from the fee zone to the rebate zone, they add technology content that tends to have a higher profit margin than the rest of the vehicle.

The third important thing I’d suggest is to de-subsidize the entire energy sector systematically. We should be paying energy costs through our energy bills, not through our tax bills. Right now, there’s over a century of encrusted and assiduously lobbied-for and defended subsidies to almost every kind of energy. They’re very lopsided. They favor supply over efficiency and big over small, nonrenewable over renewable, nuclear over everything. And they cause enormous distortions in private investment and consumption decisions. This is, of course, consistent with the policy framework I suggested a moment ago, in which all technologies should compete on merit, not by lobbying power.

e360: How important are (the recent) elections in moving in the direction you’re talking about?

Lovins: Well, we’ll see. And I should emphasize, RMI is completely apolitical and nonpartisan. The candidates had quite different energy platforms. Voters have chosen one, and if that’s what they get, I think it would be constructive. Remember, though, that many of the big energy choices are not made in Washington, although that matters. For example, most gas and electric utilities are regulated very largely at the state level.

e360: What would be the first concrete thing that President Obama and/or the new Congress ought to do here?

Lovins: It’s not for me to say what their political priorities should be. I’ve given you at least a quick sketch of the big three things. Actually, if you look at, you’ll find our detailed, Pentagon-co-sponsored study of four years ago, Winning the Oil Endgame. And that explains exactly how to save half the oil and gas at average costs of roughly 12 bucks a barrel and under a dollar per million BTU. And you’ll find in there a slate of innovative policy measures, going well beyond fee-bates, to support rather than distort the business logic that makes it very profitable to get completely off oil, led by business, at an average cost of $15 a barrel.

Similarly, if you look at our economist book six years ago, Small is Profitable — that’s — you’ll find a pretty complete agenda for reforming the electricity system to let big and small technologies compete fairly, with huge advantage to the public.

e360: Can you give us a couple of real-life success stories that you’ve experienced in the private sector?

Lovins: A well-known one, with Texas Instruments, was their new chip-fab — that is, a microchip-making plant — in Richardson, Texas. It was built in Texas, not China, because, together, we were able to cut out 30 percent, or $230 million, of capital costs, while saving a lot of energy and money. Our next fab design after that, by the way, will save about two-thirds of the energy and half the capital costs. Our latest data center design saves about 80 percent of the energy and 15 to 50 percent of the capital cost, depending on whether they buy anyway the chillers they will no longer need.

Or, we had a recent design for a mine that will use no fossil fuel and no electricity; it runs on gravity. We’re working on a refinery that will probably need no natural gas, no electricity and no outside water, but cost less and work better.

These examples are among a much larger list, totaling over $30 billion worth of facilities in 29 sectors, that we’ve recently redesigned for radical energy efficiency with our private-sector partners. And in the retrofit projects we typically save 30 to 60 percent of the energy with two- or three-year paybacks. But in the new facilities we save more — typically 40 to 90 percent — and the capital cost almost always goes down. That’s because we use integrated design to get expanding, not diminishing returns. That is, we make very large energy savings cost less than small or savings. If you want to know how, please go to

e360: What is the importance of language choice in trying to spread these ideas and their adoption?

Lovins: It’s extremely important. For example, many, if not most, Americans think of the term “energy conservation” as connoting privation, discomfort and curtailment, that is, doing less, worse or without. So if what we mean is, as in my case, doing more and better with less energy and money, but with more brains and technology, then we should call it energy efficiency or raising energy productivity. Those terms are unambiguous. Similarly, if you are proposing to examine someone’s house or factory to look for energy saving opportunities, I’d suggest do not call it an energy audit, which makes people think of the IRS, perhaps an energy survey would be more interesting.

e360: What about coinages like fee-bates and negawatts?

Lovins: I think they’re in fairly common usage by now, especially “negawatts”, which was a typo I spotted in a Colorado PUC document several decades ago and spread around, or the economists’ term “micro-power” to embrace both co-generation and distributive renewables is a very useful term. But for people not in the energy business they are jargony, so instead of negawatts, we can say just “saved electricity.”

e360: So the term negawatts actually came to you by spotting a typo?

Lovins: Yes, they meant to type megawatts, but it came out negawatts, and I said: What a nice term! Let’s use it!

e360: Do you find that people respond to that? You used the word jargony, for me it sounds gimmicky.

Lovins: Well, tastes differ.

e360: How do you find people respond to it?

Lovins: Generally, very well. I talked to a wide range of audiences and for some it is not appropriate. You have to speak to people’s concerns in their language.

e360: How do we get people to focus on these issues right now, given everything else that’s going on in the country and the world?

Lovins: By speaking to their concerns in their language. If they are concerned about national security, energy efficiency is probably the best way to get it. If they are concerned about education, they may like to know that students learn 20 odd percent faster in well day-lit classrooms and efficient schools have money left to hire teachers and buy books. If they are concerned about climate protection, they may like to know that energy efficiency can provide it not at a cost but at a profit. There are arguments here for essentially every constituency and political view. I think it is important to get the result, not to get it for the reason you want. That is, the core truth of today’s energy dilemma is that whether you care about security, climate or prosperity, you should do exactly the same things about energy. There is no trade-off or compromise required. Any one or more of those motives would lead to the same actions, and for that matter the same is true, if you care about peak oil and other depletion issues.

e360: Living in Colorado, I assume, you need to drive, is that right? What do you drive?

Lovins: I drive a 2001 Honda Insight aluminum hybrid that is rated at 64 miles a gallon. I am driving in a lot of snow and slush and mostly in snow tires, and it gets 61-point-something.

e360: How does that get that mileage?

Lovins: Well, it weighs only 1889 pounds. It happens to be a two-seater because that’s all I need. And it has a very efficient, slightly-under-one-liter engine with an electric hybrid, boosted by a 10-kilowatt motor on the upper shaft, and it’s got also a very good aerodynamics and tires. It is rated (mileage) the highest in the market, although they pulled it off the market some months ago, because it sold poorly, not because it isn’t a great car, but because the two-seat segment in extremely small. But they are going to replace it under the same name with a four- or five-seat hybrid. They have a habit of producing the most efficient cars on the market in any given time. And, of course, they are in a race with Toyota and everybody else to do that. More importantly, though, I don’t commute by car, because my trip to work is 10 meters across the jungle in the middle of my passive solar banana farm.

e360: And how long has that been your situation?

Lovins: Oh, let’s see. We moved in in January 1984, after a year and a half of construction. So that would be 24 years, now almost 25. I’ve saved a lot of commuting by now. The car has, I think, 3,000 miles a year, most of which is driving to and from the airport. Then I took a lot of video conferencing, rather than flying. Just move the electrons and leave the heavy nuclei at home.