THE INVISIBLE ENERGY BONANZA
Creating Wealth Out of Nothing
By Amory Lovins, Cofounder, Chief Scientist, and Chairman Emeritus of Rocky Mountain Institute
Three guesses: is this article about a new, cheaper renewable technology? a cheaper, safer nuclear fission or fusion technology? A new technology to extract more fossil fuel at lower cost?
None of the above. It’s about neither energy supply nor new technology. It’s about a more important but far less familiar story: how smarter design can better apply existing technologies to create radical energy efficiency at far lower cost. That game-changing linkup creates a potential new competitor to all forms of energy supply. Every year, it could save the world many trillions of dollars’ worth of fossil fuels more than it costs. Indeed, some savings are better than free: they can actually make buildings, vehicles, and factories cheaper to construct.
ENERGY EFFICIENCY: BIG IMPACT, LITTLE ATTENTION
Conventional ways to save energy are actually the world’s largest energy “source” today. Millions of small improvements over the past few decades — insulation, weather-stripping, better motors and engines, recovering waste heat, more-frugal chemical reactions, all the myriad fruits of careful engineering — add up to efficiency gains that now provide more global energy services than oil or any other fuel. Of the vast energy savings so far in producing each dollar of GDP, roughly two-thirds came from smarter technologies, one-third from shifts in the composition of economic output and in human behavior.
Exhibit 1 shows how since 1975, the United States got about 30 times (or from more-efficient technologies alone, roughly 20 times)
as much energy from savings as from doubling renewable output. US and global energy savings are now reducing energy intensity three times as fast (or efficiency technologies alone roughly twice as fast) as the stunning growth in renewables — which nonetheless get nearly all the headlines. Why? Renewables are conspicuous and easily understood. Efficiency is far bigger but gets no respect. Try this simple thought experiment:
If someone had discovered yesterday that the world has several times more oil than had been thought, and at a cost several times lower, it would be in today’s front-page headlines, steeply trending on social media, and all over the evening news. The new oil’s owners would suddenly be richer and more powerful, their competitors less so. And, awash in more oil for longer, the world would face more energy disruption, conflict, corruption, pollution, and climate change.
While nobody has discovered such an oil bonanza overnight, a trend I’ve been nurturing for decades reached an important milestone on September 18, 2018, when my scientific article “How Big Is the Energy Efficiency Resource?” assembled powerful evidence for a previously unnoticed phenomenon. The paper, published by Environmental Research Letters, documented a severalfold increase in the size and affordability of a global energy resource with three gratifying properties: it’s already bigger than oil, even before it gets severalfold bigger still; it’s cheaply available to everyone everywhere; and its widespread use could profitably decrease conflict, corruption, pollution, and climate change. It’s also more fun for the engineers.
BETTER DESIGN PROVIDES A REAL AND HUGE VALUE
This new energy resource went virtually unreported because it’s neither a fuel to be burned nor a gadget to be sold, but simply a better way of designing everything that uses energy — buildings, vehicles, factories, appliances, equipment — to do more and better work using less energy, less money, and more brains. This bonanza is invisible because, unlike barrels of oil or lumps of coal, energy itself is invisible, and the energy we don’t even need or use seems to verge on imaginary. But its value is real and huge: the International Energy Agency says that saved energy cut global costs by $2.2 trillion in 2016 alone, including $1.1 trillion in China and $0.5 trillion in the United States. That global saving was worth twice the GDP of Australia — yet it’s just scratching the surface of the savings that are now available, that are worth buying, and that have recently been greatly enlarged.
“Millions of small improvements over the past few decades — all the myriad fruits of careful engineering — add up to efficiency gains that now provide more global energy services than oil or any other fuel.”
Even if we can’t see energy itself, can’t we see the devices that save it? Not easily. You can see an oil refinery, but not the better catalysts and heat-recovery systems inside. You can see solar panels on rooftops, but not the thermal insulation beneath them that keeps people warmer in winter and cooler in summer. You can see wind turbines, but not the advanced materials that make their blades longer, stronger, and more efficient, nor the electronics and software that make them more productive and valuable. You can see a car, but not its lighter materials, sleek underside to cut air resistance, and better propulsion systems. You may look closely enough to spot new LED lights, but you might not notice if better lighting design has made them more visually effective, or if controls dim or extinguish them whenever daylight suffices. Wherever you look, you won’t see energy efficiency — yet it is the foundation of our prosperity and security.
Many people think of energy efficiency as static, as if whether you have an energy-efficient house were a binary question like whether your house has a garage. But in fact, efficiency’s untapped potential is highly dynamic. That’s not just because technologies improve, but also because we’re learning better ways to choose and use them. The best new and old office buildings lately doubled their energy efficiency in five years, not because their technologies got twice as good, but because designers combined and applied those technologies twice as effectively.
THE MORE YOU BUY, THE CHEAPER IT GETS
“How Big Is the Energy Efficiency Resource?” is a rigorous compilation of empirical evidence drawn from across all sectors of the economy. It shows that the scope for technological energy savings has long been underestimated, and that its cost has been overestimated by at least two- or threefold, often more. Moreover, exploiting this invisible bonanza can often yield the same increasing returns that drive renewable energy’s stunning pace: the more you buy, the cheaper it gets, so you buy more, so it gets cheaper. Just as almost nobody expected the cost of solar and wind to nose-dive, speeding adoption so their cost drops further, almost nobody has realized that the cost of modern energy efficiency can do the same thing. This second shoe to drop in the efficiency-and-renewables revolution is the best news in many years for climate, health, prosperity, and national security.
I published the findings in the peer-reviewed journal Environmental Research Letters rather than a mainstream publication, and the mainstream still hasn’t picked up on its full import. It’s the most important stage-setter for energy in 2019 and the years to come.
The ability to save more energy at lower cost is most obvious in buildings. In the early 1980s, my own house (where we just harvested our 75th passive-solar banana crop high in the Rockies despite outdoor temperatures that used to dip below –40 ̊) showed how superinsulation and superwindows add less construction cost than they subtract by eliminating the heating system, so net construction cost falls slightly (and fuel cost vanishes). The key to a cheap-to-construct building turned out to be costly windows, insulating as well as 16 or even 22 sheets of glass — and from optimizing the whole building as a system, not each part singly.
The Financial Times reports 1.8 million square meters of such passive buildings were certified in Europe during 2011–2018 (two-thirds of the German ones from fixing up old buildings). Experienced European practitioners have cut the extra construction cost to about zero, plus or minus a few percent. In fact, extensive European data marshalled by the Intergovernmental Panel on Climate Change’s Fifth Assessment Report proved that in diverse buildings — big and small, new and old, hot- and cold-climate — energy savings around 80 to 90+ percent needn’t cost materially more than small or no savings.
So buildings, which use two-fifths of America’s energy and nearly three-fourths of its electricity, don’t follow the freshman-economics theory that saving more energy must cost more (diminishing returns). Neither do other energy-using systems. My Environmental Research Letters article shows that similarly big and cheap savings are also proven and available in vehicles, factories, and equipment, spanning all sectors and nearly all uses.
How? Not by adding more or fancier equipment, but by using less and simpler equipment — by taking stuff out and optimizing system sizing and design. Fatter pipes with less friction make pumps and motors five- to tenfold smaller, more than paying up-front for the fatter pipes.
“This second shoe to drop in the efficiency-and-renewables revolution is the best news in many years for climate, health, prosperity, and national security.”
Lighter, more streamlined cars need smaller engines, and if electric, they save costly batteries, partly paying (or, in my carbon-fiber car, entirely paying) for the lightweighting. Redesigning energy-using devices as whole systems, not as a pile of isolated parts, can offset efficiency’s costs not just with avoided energy costs over time but also with lower capital costs up-front. Integrative design thus creates a new normal: bigger savings at lower capital costs. That’s called increasing returns. It makes traditional economic models blow up. It deeply disrupts energy markets.
MARKETS ARE MISSING OUT
News of this design-driven energy-efficiency revolution hasn’t been fully digested by the markets. Energy suppliers, though, will discover it the hard way as customers get radically more efficient, energy sales and revenues dwindle, forecasts and business models collapse, and these unforeseen outcomes seem mysterious. Business innovators preferring foresight to mystery can simply read “How Big Is the Energy Efficiency Resource?,” which is available for free.
“Market actors who first master and scale such integrative design will win. Those who ignore its power will lose. Competition between megawatts and negawatts will work inexorably, whether we foresee it or not.”
If my 1976 Foreign Affairs paper “Energy Strategy: The Road Not Taken?” reframing the whole energy problem (later independently assessed as the only accurate foresight into energy demand in 2000) was a Richter 8 earthquake that knocked things down, my 2018 Environmental Research Letters paper feels like a Richter 7 that shakes things up. Four decades’ experience confirms that energy efficiency is the least visible but most potent driver of supply/demand balance. Now the unheralded news is that energy-saving technologies can become far more powerful and affordable when combined using whole-system design. As Aristotle taught, the whole is more than the sum of the parts: well-integrated efficiency technologies can save far more energy, at far lower cost, together than separately.
Thus integrative design that optimally chooses, combines, times, and sequences an artful bundle of efficiency technologies can greatly speed and enlarge their savings of energy and money. Market actors who first master and scale such integrative design will win. Those who ignore its power will lose. Competition between megawatts and negawatts will work inexorably, whether we foresee it or not. Integrative design can be a formidable competitor to supply growth — and an asymmetrical one, because once designers master and refine integrative techniques, they’re not likely to forget them and return to old dis-integrated design methods. And the pervasively emerging mashup of energy with ubiquitous sensors and information technology, enabling device-to-device transactions secured by block chain, makes integrative design even more versatile and effective.
As an energy observer and author with a half-century track record, I feel obliged to warn when important news is spreading slowly at investors’ peril, creating systemic risk of vaporizing vast energy supply investments and asset valuations by overlooking new demand-side competitors. Energy investors need to pay attention before painful history repeats itself. Integrative design makes the already large overhang of unbought energy efficiency much bigger than we thought — and such simple design ideas can spread at the speed not of infrastructure but of Twitter.
Supply-side investments traditionally seemed low-risk: regulators often set prices while energy users’ efficiency rose at a modest and measured pace, typically slower than economic growth. But today’s customers are figuring out how to buy less energy, use it far more productively, and even make their own. Now this bypassing of traditional suppliers will accelerate. The solid bedrock of durable energy sales by incumbent vendors is starting to crack and shift. Queasiness is appropriate. Alertness is essential. Reallocation is wise. Energy efficiency is transforming itself and the entire energy sector. Demand will be just as dynamic as supply, and the future will belong to the superefficient.
This article is updated and adapted from first publication by Forbes on January 21, 2019, at https://www.forbes.com/sites/amorylovins/2019/01/21/the-invisible-energy-bonanza/.
A four-minute video abstract narrated by Amory shows simple practical examples. It is posted at the same site as his scientific paper, both freely downloadable: https://iopscience.iop.org/article/10.1088/1748-9326/aad965
