McKinsey & Co: Energy Efficiency is Like Free Money

Reflection
We're leaving money on the table by not improving energy efficiency (image by pfala, CC 2.5 licensed)

Would you spend $520 to save $1,200? That’s the choice McKinsey & Co is offering to the U.S. about energy efficiency. In their new report on energy efficiency, released last week, McKinsey shows how the U.S. can reduce its non-transportation energy use by 23%, eliminate the emissions of 1.1 billion tons of greenhouse gases annually, and save $1,200 billion, for a cost of about $520 billion.

They do recognize that achieving these results requires some new thinking on our parts:

Such energy savings will be possible, however, only if the United States can overcome significant sets of barriers. These barriers are widespread and persistent, and will require an integrated set of solutions to overcome them – including information and education, incentives and financing, codes and standards, and deployment resources well beyond current levels.

The report not only provides the conclusions, but also the steps we can take to address barriers and achieve the desired results. They suggest an overarching strategy, including the key point that “energy efficiency is an important energy resource to help meet future energy needs…” and the need for an integrated portfolio of different approaches to unlock the full potential of energy efficiency.

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Structural Problems In The Economy, and How Britain Can Go Renewable

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Roundup Time! (image by williac, CC 2.0 licensed)

Some more roundup links. These pages have been hanging around in my browser for weeks, waiting for me to blog about them. As with the links I posted earlier this week, I consider these “go to” articles and sites – continuously interesting and relevant.

Let me if you have a chance to read any of these pages or sites. I’d love to hear what you think.

Deutsche Bank Confirms Green Energy Creates Jobs and Economic Growth

home with free electricity
Available: Home with free electric (photo by Kainet, CC 2.0 Sharealike license)

From MIT’s Technology Review comes this column from Kevin Bullis, about a recent report from Deutsche Bank on the economic benefits of investing in new energy projects:

It argues that it’s possible to address challenges related to climate change, energy security, and the financial crisis at the same time by investing in four specific areas: energy-efficient buildings, electric power grids, renewable power, and public transportation. The report cites figures that suggest investing in these areas creates more jobs than investing in conventional energy sources because much of the old energy infrastructure is already in place. It says that “a $100 billion investment in energy and efficiency would result in 2 million new jobs, whereas a similar investment in old energy [such as coal or natural gas] would only create around 540,000 jobs.”

Of course, Obama has already pledged to do something along these lines, and the blogosphere (including me, here) has chimed in as well. But the imprimatur of Deutsche Bank adds some gravitas to the proposal.

If you want to read the report yourself, it’s here.

Amory Lovins Named A World’s Best Leader By U.S. News

Amory Lovins
Amory Lovins

Amory Lovins is one of my true heros, and I’m thrilled to hear that U.S New has named him one of World’s Best Leaders in their report this week. Lovins has inspired multitudes (and this blog) with his vision of “getting off oil at a profit” and “drilling for negabarrels under Detroit.” The Rocky Mountain Institute, a “think and do” tank that he founded 26 years ago, takes this vision and makes it happen for Fortune 1000 companies, the military, and governments around the world (including Portola Valley, just up the street from me, where he spoke a few weeks ago).

Lovins argues that, contrary to the common belief, efficiency is much cheaper than energy use. Especially when pursued with a technique he calls “integrative design,’ doing efficiency right results in lower energy use, lower costs in the first place, and better productivity. The last point is critical – efficiency improves not only the bottom line by reducing costs, it also improves the top line by increasing productivity and profits.

So why aren’t we pursuing energy efficency faster, if it has so many benefits? Many companies are doing so, getting benefits that go directly to their bottom line and give them a competitive advantage, like Dupont. And Intel. And Wal-Mart.

In 2006, for example, RMI partnered with Wal-Mart to boost the fuel efficiency of the retailer’s truck fleet. “When Wal-Mart came to us,” he says, “we had a lot of internal discussion, because they have big issues,” notably the company’s history of labor problems. “But we decided if we worked only with perfect companies, we wouldn’t get anything done.” The collaboration has proved fruitful. Wal-Mart is now working to retrofit its 6,800 trucks with designs developed by RMI that should allow its fleet to go from getting 6 miles a gallon to between 16 and 18 miles a gallon by 2015, saving about $500 million annually.

These companies, and many more, are enjoying an “unfair advantage” due to their pursuit of efficiency. But for many companies, there are mixed up incentives, such as between commercial landlords and their tenants. The landlord has to pay for the efficiency, but the tenant reaps the benefits – their interests are not aligned, and so “business is usual.” In his books and talks, Lovins provides techniques, guidelines, and policy suggestions to help align these incentives.

For more on Lovins, I can recommend his books, Winning The Oil Endgame and Climate: Making Sense and Making Money (both available free for download) and Natural Capitalism, written with Hunter Lovins and Paul Hawken.

You can hear Lovins in numerous talks and interviews available as podcasts, including this outstanding series of five talks at Stanford University in 2007. Download those to your iPod or mp3 player and prepare to be amazed by the possibilities.

Congratulations Amory!

Amory Lovins On Declining Gas Prices

There's a lot of energy to be saved in all sectors
There is lots of opportunity to reduce energy intensity throughout the U.S. economy

In “a few policies to hedge against crashing oil prices,” the latest post on the Rocky Mountain Institute‘s “Environmental Lovin’s” blog, Amory Lovins himself provides some suggestions on how to keep making progress on energy independence despite the recent dip in oil prices. Of course, efficiency is the star of the show:

We now have techniques to save half our oil and gas, and three-quarters of our electricity, at about an eighth of their price. Energy efficiency remains one of the highest-return and lowest-risk investments in the entire economy.

The basic argument is that no matter how low oil prices go, efficiency remains more cost effective than almost any other investment. His specific suggestions, such as “fee-bates” to encourage purchasing more efficient cars, rewarding utilities for cutting energy use (as we do in California), and implementing policies that get older less efficient cars off the road faster, are covered in much more detail in RMI’s two books Winning The Oil Endgame and Climate: Making Sense and Making Money (both free for download).

Efficiency investments pay for themselves twice over – saving money on energy usage, while reaping numerous benefits as side effects – improved productivity in businesses, faster learning in schools, better sales in shops. As Lovins concludes:

Conscientiously pursued, this … approach would solve the oil, climate, and proliferation problems at a profit, over a few decades, totaling trillions of dollars.

There have been calls already for President-elect Obama to bring Lovins into the cabinet to help drive us to energy independence. He won’t do it (he wants to remain independent), but hopefully Obama and his team will at least take the advice – it will definitely pay off for all of us – and help us out of the recession to boot.

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Study: Make Money and Create Jobs By Greening California’s Economy

Boutiques along Fillmore Street in Pacific Heights
Fillmore Street in San Francisco; Image via Wikipedia

The San Francisco Chronicle reports on the conclusions of a study just completed by the California State Air Resources Board that “going green” will be extremely beneficial to the state’s economy.

Under the California Global Warming Solutions Act of 2006, the state must impose a limit on the amount of pollutants companies emit and expand renewable energy. These changes, along with others, would result in 100,000 new jobs, boost the state economy by $27 billion and increase personal income by $14 billion, the study said.

It’s traditional to believe that becoming green – reducing energy usage, switching to renewable energy, and curbing greenhouse gas emissions – is costly and a net drag on economies. But studies like this one, as well as many others (see the Rocky Mountain Institute website for many more examples), show again that the future is going to be both green and profitable.

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Top Green Energy Stories For August 2008

Top Fivewoodleywonderworks
Top Five Stories

August was a great month for energy storage breakthroughs! In addition, a big talking head talks big, and a business-of-green-energy announcement make my list of top stories.

1. Hydrogen from water
2. Fuel cell breakthrough #1: cheap catalyst
3. Fuel cell breakthrough #2: better cathode
4. Al Gore’s call to action: The U.S. should “produce all electricity from carbon-free sources by 2018.” (Actually from late July, but my blog didn’t start until August!)
5. Green energy investment up 60% YoY in 2007, on target for 60% YoY growth in 2008

Moore’s Law depended (and still depends) on a constant flow of breakthrough technologies, processes, scale, and designs. You can’t necessarily predict how Moore’s Law will continue to hold two years from now, or five years from now, but you can be confident that through some combination of technologies, processes, and designs, the price/performance of IT will continue to decline at an exponential rate.

The top five green energy stories of 2008 give an indication that the same types of forces are at play in the green energy world. Numbers 1, 2, and 3 each represent a potential 10x reduction in the cost of the most expensive part of a particular energy flow. For number 4, Gore used the bully pulpit of a Nobel Prize and Oscar (and, oh yeah, he was nearly president) in a most constructive way. And number 5 illustrates that green energy technologies are on a growth rate of doubling about every 18 months.

Did these stories excite you as much as they did me? Were there other green energy stories in August that you feel are more important?

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Why I Am Optimistic

GDP per capita vs. 'Economic Energy Efficiency...Image via Wikipedia

The signs are pointing to a critical convergence that, to be honest, is coming just in time. The world’s will is aligning. Climate change, oil prices, pollution, growth, commuting – these and other factors are forming a message in society’s mind that says “things are not good and they must be fixed.” Businesses and governments, at the same time, are realizing that the changes needed to achieve sustainability are not going to be a drag on the economy but can actually be profitable while being good for society as a whole. Of course, the high and rising price of oil has something to do with this as well.

And technology is improving – finally – to the point that our remaining energy needs, after the 50% reduction in energy intensity possible via efficiency, can be cost-effectively replaced by renewables. Scientific and technical announcements just in the last two weeks – factor of 10 reductions in fuel cell and hydrogen splitting catalyst costs; new materials lighter, stronger, and cheaper than carbon fiber; and new ways to collect sunlight and convert it to electrical, thermal, and chemical energy – will, when available commercially, combine with all the other technologies that continue to stream out of labs and corporations, to drive the prices of sustainable energy down, down, and farther down.

So what we’re seeing at this moment in history is a powerful combination – the will to change with the technical ability to make the change, and the understanding that the change is cost-effective and in many cases profitable.

And that’s why I’m optimistic.

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SD Forum’s Green and Clean Dinner Meeting

The Image via Wikipedia

I attended the SDForum Green and Clean Dinner tonight. The topic was “Where’s the Money?” Five panelists, representing a VC firm, a bank, an angel funding group, a bridge-financing firm, and an entrepreneur who has raised his money independently, discussed the various sources of funding for clean tech companies. i took extensive notes, and will provide more details later, but for now some of the highlights were:

  • Liquidity may be different for clean tech companies than we got used to for high tech companies during the Internet boom
  • Because of the technical risks involved in clean tech, the old venture capital adage of “market first, team second, and product third” often needs to be turned around
  • Especially for power, this is a global market – Europe is at least 15 years ahead of the U.S. in terms of regulations supporting alternative energy and other clean tech
  • There are a lot of entrepreneurs seeking funding – the VC read over 2,400 business plans and funded only 21. The angel investor says one of his biggest problems is “perpetual motion machine” proposals – they have to do a lot of scientific due diligence on the proposals

SDForum’s next Green and Clean event is a breakfast meeting in San Francisco on September 30, focusing on Innovation in Transportation.

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Execs See Profits and Higher Quality Through Green Manufacturing

U.S.Image via Wikipedia

In a recent survey by Eye For Transport, supply chain executives across a range of industries agreed not only that “greening” the manufacturing process was becoming more and more cost effective, but that they expected increased profits and better quality as a result.

A whopping 95% of the 3,000 North American executives polled agree that green manufacturing will continue to expand, citing increased profits (66%) and improved efficiency and product quality (43%) as key drivers.

43% is not even a majority, but it’s a sign the tide of perception is turning that going green is not a tax, but can result in both bottom line and top line benefits to companies.

Other interesting numbers from the survey:

  • 77% of manufacturing executives believe energy prices will rise significantly next year, requiring them to improve energy efficiency
  • 66% believe there are markets for more expensive and greener products in their industries

(Via Sustainable Life Media)

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