The frugal cornucopian

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Sep 4th 2008
From The Economist print edition

Amory Lovins began making the case for resource efficiency decades ago, long before it became fashionable. Now things are going his way


Illustration by Andy PottsIF ANYBODY should be on top of the world today, it is Amory Lovins. That is not just because the energy visionary makes his home on a mountain in Old Snowmass, Colorado. Rather, it is because today’s interrelated energy and climate difficulties have at last made the world see the importance of resource efficiency, energy innovation and holistic design—principles that he has been advocating for nearly four decades.

For much of that time, Mr Lovins, who heads the Rocky Mountain Institute (RMI), a natural-resources consultancy, has been a lonely voice in the wilderness. As far back as the early 1970s, he sounded his first alarm about the potential damage that climate change might bring, but he was ignored. In a paper in Foreign Affairs in 1976, at the height of the energy crises and neuroses of that decade, he argued that what the world needed most was not new energy supplies but more efficiency. He was ruthlessly attacked by the energy industry and the political establishment, and his proposal for an alternative “soft path” out of the energy crisis was dismissed. Energy and economic growth always grew in lockstep, went the conventional argument, and to think otherwise was dangerously naive.

But history has proved him right. Thanks to a combination of high prices and public policies aimed at encouraging efficiency and conservation, America’s energy use did decouple from economic output in the wake of the oil shocks of the 1970s. Crucially, this happened without impoverishing the country, proving his once-controversial thesis that growth and greenery can indeed go hand in hand. That experience, along with the recent global energy-price shock, has made it respectable for business and political leaders to talk about energy efficiency.

Mr Lovins should be pleased, but his satisfaction at having been proved right is tempered by lingering unease that there are echoes of the 1980s in today’s debate. The main problem with the approach to energy in the 1970s, he argues, was that the issue was defined as a supply shortage. “The question they asked was how to get more energy, at any price, instead of asking: ‘How should we use energy, why are we using it so wastefully, and what do people really use energy for?’” he says.

That question points to one of his main contributions to the energy debate. He insists that the goal of public policy should be to ensure adequate and affordable supplies not of energy per se but of “energy services”—as he loves to put it, the cold beer and hot showers made possible by energy. By redefining the problem that way, rather than merely subsidising more power plants or oil drilling, public policy can be made technology neutral, and consumer needs can be satisfied by demand-side measures if they prove cheaper than drilling or digging for new supply.

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He is also growing concerned because he sees parallels, in today’s energy debate, with the failed supply-side arguments made three decades ago. Just as President George Bush has done recently, Ronald Reagan subsidised the search for costly domestic oil and gas on dubious national-security grounds. Mr Lovins argues that that policy was undermined by the “quiet gusher” of energy efficiency that came to market during that same period. The high energy prices of the 1970s gave way to an oil-price collapse in the mid-1980s that wiped out many of those investments in marginal oilfields—and bankrupted expensive forays into alternative energy. This happened, says Mr Lovins, because “efficiency is a fast resource, and it grabbed the pie first. By the time new supply came in, it was too late and it just ended up crashing the market.”

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Echoes of the 1980s
And that is what could now happen globally, he reckons, pointing to the American example. He observes that a similar combination of high prices and supportive public policies (at the state level this time, given the federal government’s hostility under Mr Bush to all things green) has once again set off a quiet surge in efficiency. He calculates that during the decade to 2005, over three-quarters of the increase in energy services enjoyed by Americans was due not to new supply but to efficiency gains. At the same time, Congress has been lavishing subsidies on oil, gas and nuclear power. The 2005 Energy Policy Act, which John McCain called the “Leave no lobbyist behind” bill, handed out over $80 billion of such supply-side lard.

The odds of a fiasco are increased, he reckons, by the likelihood of a crash in oil prices: “the fundamentals do not support anything like these prices for long.” He thinks the Saudis can live comfortably with oil as low as $40 a barrel, and he does not seem persuaded by the chorus of despair arguing that the world has hit “peak oil” and will soon start to run out of it. In some ways the peak-oil debate is beside the point, in his view. Regardless of which camp is right, he argues that society should be doing the same things anyway to wean itself off petroleum altogether. And done properly, he suggests in his recent book “Winning the Oil Endgame”, such a transition to a safer and cleaner energy world could even be done profitably, thanks to the creation of entirely new, innovative green industries.

That assertion highlights an apparent contradiction in Mr Lovins’s argument, and points to several other criticisms that have been made about his work. If the oil price does indeed come tumbling down, surely the world’s newfound love for energy efficiency will vanish? A related critique is that Mr Lovins, in his eagerness to show that “negawatts” (as he likes to call energy savings) can be cheaper and more profitable than megawatts, downplays the challenges involved in moving off such entrenched, well-financed and functioning incumbents as petroleum and coal. He also stands accused of using blizzards of charts and statistics, some biased and others just downright impenetrable, to sell his arguments.

His enthusiasm for market forces makes Mr Lovins a most unlikely eco-warrior.Mr Lovins rejects such charges, but some doubts linger. Though the energy guru likes to talk about revolutions and rapid change, history shows that the energy industry is exceedingly slow-moving. Its vast and long-lived capital stock gives incumbent firms big incentives to defend legacy assets and resist innovations. And the car and oil industries have unusually strong influence over public policy—a factor Mr Lovins may have underestimated. Indeed, asked about the politics of energy, he refers to his early childhood in America’s capital by quipping that “I fled Washington at an early age.”

And even some of his admirers admit there is some truth in the charge that he marshals obscure and interminable charts and statistics to baffle and browbeat his audiences into intellectual submission. One respected energy expert has said that Mr Lovins is “about 60% pure genius and about 40% snake-oil salesman.” Another pundit puts it this way: “When Amory makes a prediction, don’t stand close and scrutinise the small print. Take a step back and see his broader vision, and you will find that he usually points the way forward as no one else can.”

Fine, but what about the specific criticism that any coming oil-price crash will completely undermine all efforts at forging a clean-energy revolution? That, after all, is what happened after the oil-price crash in the 1980s. Over a decade of low and stable oil prices pushed energy efficiency off the policy agenda, gas guzzlers and sport-utility vehicles proliferated and the average fuel-economy of new cars sold in America fell to a 20-year low. Mr Lovins thinks that will not happen again, thanks to two forces reshaping energy that even a price crash would not wipe out: the need to deal with climate change and the energy-security concerns of a post-September 11th 2001 world.

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Adam Smith meets Rachel Carson
Furthermore, Mr Lovins thinks there other ways in which today’s energy shock differs from the earlier shocks. One big difference between the Eighties and the Noughties, he says, is that “capital markets are a lot less gullible today.” Another important difference is the rate of technological innovation. He is excited to see around 100 entrants from all over the world vying for the Automotive X Prize (a $10m scheme designed to reward the developers of clean, super-efficient cars), and counts nearly a dozen car firms working on radical designs today.

Mr Lovins is convinced that the “intensity and diversity of innovation attempts today is much greater than in the 1980s.” One reason is that technology, be it in nanotech, batteries or computing, has improved. Another is that research itself is much more productive, in his view, thanks to the rise of open, networked and global approaches to innovation.

He sees one more reason for optimism about today’s innovation boom. Unlike the last clean-tech wave, which was largely funded by government money doled out to politically connected groups, this wave is a largely “invisible” trend funded chiefly by private money coming from venture capitalists, angel investors and private-equity funds. That, he reckons, makes for more discerning investments and increases the odds of success.

Unlike many environmentalists, Mr Lovins has always had a respect for market forces and entrepreneurship. Markets are good at weeding out trendy but impractical technologies, for one thing. And he designed RMI to be not only a think-tank but a “do tank” that puts theory into practice. To do so, he has taken various of his ideas and formed start-up companies that have then been spun out of RMI.

Among these are Hypercar (which came up with a new design for a light, efficient car), Fiberforge (an offshoot of Hypercar which sells carbon-fibre parts to automotive suppliers) and Bright Automotive (which is developing technologies for plug-in hybrid cars, and is expected to be floated within a year). It has been nearly two decades coming, but the world’s car industry is now embracing plug-ins, fuel cells, electric cars and lightweight bodies.

It is not just his enthusiasm for market forces that makes Mr Lovins, a man whose green credentials are impeccable, a most unlikely eco-warrior. He does not mind taking an infinitely long shower, he explains, if he uses renewable energy to heat his shower and recycles his waste water. Though it is fashionable to proclaim that sport-utility vehicles (SUVs) are the work of the devil, he made a point of designing his initial Hypercar as an SUV to show that the proper target for green ire was bad design, an inefficient engine and dirty fuel—not the SUV per se. He even rankles when he is called an environmentalist, insisting that he prefers “elegant frugality to wearing a hair shirt.”

Surely it is frustrating to be ignored or pilloried for years, only to have his accusers co-opt his ideas? Mr Lovins smiles. “Yes, my ideas do sometimes have a slow burn of a decade or two before they catch on,” he admits.

Though he is now 60, Mr Lovins shows no signs of slowing down. The Sage of Snowmass is still busy coming up with big new ideas, though if history is any guide, they will take a while to catch on. Watch this space—for ten to 20 years.