After all you’ve done to shift the energy debate, why do supply-side questions still dominate the discussion in Congress?
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 fifth of the world’s electricity and a quarter 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.
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Does the same critique apply to liquid coal? Yes. I was delighted when both the Chinese State Council and the U.S. Senate about a week apart canceled [liquid coal] programs. But I’m sure you’re aware that the political push behind liquid coal is still very much pushing. Of course, including some people who should know better. It has fundamental problems in economics, carbon, and water, and bearing in mind that we can get the country completely off oil at an average cost of $15 a barrel, something in the $50s to $70s range doesn’t look viable. Those who invest in it, publicly or privately, will lose their shirts, and deservedly so. I think a good way to smoke out corporate socialists in free-marketeers’ clothing is to ask whether they agree that all ways to save or produce energy should be allowed to compete fairly at honest prices, regardless of which kind they are, what technology they use, where they are, how big they are, or who owns them. I can tell you who won’t be in favor of it: the incumbent monopolists, monopsonists, and oligarchs who don’t like competition and new market entrants. But whether they like it or not, competition happens. It’s particularly keen on the demand side.
Will Big Coal fall on its face? It’s already clearly happening in the global marketplace — although the U.S. lags a bit, having rather outmoded energy institutions and rules. Worldwide, less than half of new electrical services are coming from new central power plants. Over half are coming from micropower and negawatts, and that gap is rapidly widening. The revolution already happened — sorry if you missed it. How might your notion of "brittle power" apply, not to developed countries but to countries that are developing in conditions in which resilience is at a premium? Iraq is the obvious example. Some of us have made three attempts at [bringing decentralized power to Iraq] and there’s a fourth now under discussion. The first three attempts, the third of which was backed by the Iraqi power minister, were vetoed by the U.S. political authorities on the grounds that they’d already given big contracts to Bechtel, Halliburton, et. al to rebuild the old centralized system, which of course the bad guys are knocking down faster than it can be put back up. How could Iraq have played out differently? If you build an efficient, diverse, dispersed, renewable electricity system, major failures — whether by accident or malice — become impossible by design rather than inevitable by design, an attractive nuisance for terrorists and insurgents. There’s a pretty good correlation between neighborhoods with better electrical supply and those that are inhospitable to insurgents. This is well known in military circles. There’s still probably just time to do this in Afghanistan.Meanwhile, about a third of our army’s wartime fuel use is for generator sets, and nearly all of that electricity is used to air-condition tents in the desert, known as "space cooling by cooling outer space." We recently had a two-star Marine general commanding in western Iraq begging for efficiency and renewables to untether him from fuel convoys, so he could carry out his more important missions. This is a very teachable moment for the military. The costs, risks, and distractions of fuel convoys and power supplies in theater have focused a great deal of senior military attention on the need for not dragging around this fat fuel-logistics tail — therefore for making military equipment and operations several-fold more energy efficient.
I’ve been suggesting that approach for many years. Besides its direct benefits for the military mission, it will drive technological refinements that then help transform the civilian car, truck, and plane industries. That has huge leverage, because the civilian economy uses 60-odd times more oil than the Pentagon does, even though the Pentagon is the world’s biggest single buyer of oil (and of renewable energy). Military energy efficiency is technologically a key to leading the country off oil, so nobody needs to fight over oil and we can have "negamissions" in the Gulf. Mission unnecessary. The military leadership really likes that idea.
Do you think that individual changes in behavior can or will have substantial effect on the energy situation? Yes, of course. People will vote with their wallets as well as their ballots, in a way that will affect the political system and even more the private sector, which is quite good at selling what you want and not selling what you don’t buy. The interplay between business and civil society is even more important than between business and government, and that is where I want to continue to focus most of my effort. I admire those who try to reform public policy, but I don’t spend much time doing that myself. In a tripolar world of business, civil society, and government, why would you want to focus on the least effective of that triad? Reports out recently cast doubt on the environmental advantages of biofuels. Have you ever reconsidered your support for them? You’re treating biofuels as generic and I don’t think that’s appropriate. There are much smarter and much dumber approaches to biofuels, and biofuels do not need to have the problems you refer to. But even cellulosic ethanol has come under criticism lately. Not from anyone knowledgeable that I’m aware of. Unless of course you need such large quantities of it, because you have such inefficient vehicles, that you start getting in land-use trouble. We suggest that U.S. mobility fuels could be provided without displacing any food crops. You could do it just with switchgrass and the like on conservation reserve land. Being a perennial, which can even be grown in polyculture, switchgrass and its relatives would hold the soil better because they’re much deeper rooted than the shallow-rooted annuals with which that erosion-prone land is often planted. And of course the perennials don’t need any cultivation or other inputs.
Just a few weeks ago my colleagues and I led the redesign of a cellulosic ethanol plant — we were able to cut out very large fractions of its energy and capital need by designing it differently. There are other process innovations we’re aware of that would achieve similar results. I would not write off biofuels at all.
Now, your broader point: Should it not be part of an integrated spectrum of efforts? Yes, of course. We can triple the efficiency of our cars and light trucks without compromised performance and with better safety, and we could also, if we want to get really conservative, stop subsidizing and mandating sprawl so we’d have less of it.
The automotive revolution alone has a number of steps you could do in whatever order you’d like. In round numbers, if you take a really good hybrid and drive it properly, — not the way Consumer Reports says to — you roughly double its efficiency. If you make it ultra-light and ultra-low-drag, you roughly redouble its efficiency. Now you’re using a quarter the oil per mile you were before. If you then run it on, say, properly grown cellulosic E85, you quadruple its oil efficiency per mile again — you’re using a 16th the oil per mile that you started with. If you make it a good plug-in hybrid and have a good economic model to pay for the batteries — some of those are starting to emerge — then you at least double efficiency again. Now you’re down to about 3 percent the oil per mile you started with. And of course there are also renewable-electricity battery-electric cars. There are some sensible and profitable ways to do hydrogen, to displace the last bit of oil or biofuel, and there are other options like algal oils that are becoming very interesting. It’s a rather rich menu, and you don’t need all of it to get largely or completely off oil and make money on the deal.
Do you think private transportation will remain dominant for the foreseeable future or will there eventually be a shift to public transportation — high-speed rail, etc.? We can do a lot better in that regard, with policy and technical innovation, and there are many countries that already do. But with the settlement patterns we have in the United States, it’s difficult to make a large shift in a short time in that regard. It’s much easier to make the cars, trucks, and planes three times more efficient, and that has respective paybacks of two years, one year, and four or five years with present technology. In your work, to what extent do you think about quality of life, or happiness, as opposed to providing the material goods we now consume more efficiently? A lot. It isn’t our main analytic focus, but of course every thoughtful citizen has to ask about the purposes of the economic process. As Donella Meadows reminded us, it is silly and futile to try to meet nonmaterial needs by material means. If we’re not careful in what we do, and how we decide, and in who decides, we can end up with outer wealth and inner poverty. Thanks again, and congratulations on 25 years.