Amory Lovins: How to Face Today's Greatest Energy Challenges

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If politicians think in sound bites and intellectuals think in sentences, Amory Lovins thinks in white papers. His speech is studded with pregnant pauses -- you can almost hear the whirs and clicks as an enormous mass of statistics, analyses, and aphorisms is trimmed and edited into a manageable length. I've talked to experts who struggle to substantiate their answers. Lovins struggles to leave things out.

No one has done more to change the world of energy, both its intellectual underpinnings and its real-world practice, than Lovins. Beginning with a seminal Foreign Affairs article in 1976 -- "Energy Strategy: The Road Not Taken?" which introduced the "soft path" to energy -- Lovins shifted the focus from bigger to smarter, from more to more-with-less. He's consulted with businesses, governments, and militaries on how to achieve organizational goals using less energy and less money. His books and articles are legion; the latest is Winning the Oil Endgame, a "roadmap to getting the U.S. completely, attractively, and profitably off oil."

This year marks the 25th anniversary of the Rocky Mountain Institute, the "think and do tank" Lovins founded. The occasion will be celebrated in early August at an event attended by, among others, Bill Clinton and New York Times columnist Thomas Friedman.

I gave Lovins a call to check in on some of today's greatest energy challenges, from biofuels to Iraq to a backwards-looking Congress.

DR: After all you've done to shift the energy debate, why do supply-side questions still dominate the discussion in Congress?

AL: Congress is a creature of constituencies, and the money and power of the constituencies are almost all on the supply side. There is not a powerful and organized constituency for efficient use, and there's a very strong political (but not economic) constituency against distributed power, particularly renewables. So I would not pay too much attention to what Congress is doing. I'm not saying it doesn't matter, but ultimately economic fundamentals govern what will happen -- things that don't make sense, that don't make money, cannot attract investment capital.

We see this now in the electricity business. A sixth of the world's electricity and a third of the world's new electricity comes from micropower* -- that is, combined heat and power (also called cogeneration) and distributed renewables. Micropower provides anywhere from a sixth to over half of all electricity in most of the industrial countries. This is not a minor activity anymore; it's well over $100 billion a year in assets. And it's essentially all private risk capital.

So in 2005, micropower added 11 times as much capacity and four times as much output as nuclear worldwide, and not a single new nuclear project on the planet is funded by private risk capital. What does this tell you? I think it tells you that nuclear, and indeed other central power stations, have associated costs and financial risks that make them unattractive to private investors. Even when our government approved new subsidies on top of the old ones in August 2005 -- roughly equal to the entire capital costs of the next-gen nuclear plants -- Standard & Poor's reaction in two reports was that it wouldn't materially improve the builders' credit ratings, because the risks private capital markets are concerned about are still there.

So I think even such a massive intervention will give you about the same effect as defibrillating a corpse -- it will jump but it will not revive.

DR: Does the same critique apply to liquid coal?

AL: Yes. I was delighted when both the Chinese State Council and the U.S. Senate about a week apart canceled [liquid coal] programs.