Reinventing Fire (Part Two) (2011)

While the energy efficiency measures detailed in part one of the review are admirable and necessary, the shift that is about to occur in electricity production and distribution is potentially even more important and thus, I think, deserving of its own review.  Though dramatically increased energy efficiency in buildings and industry is predicted to keep overall electricity demand flat or declining for the next few decades, even as we electrify vehicles, the distribution of ubiquitous, clean and renewable energy would be nothing short of a technological and geopolitical revolution that could negate the need for energy efficiency measures.

History

In order to understand why today’s inefficient, insecure and environmentally degrading system is holding us back, it’s important to understand its roots.  Modern electricity production is a 120-year-old story, driven by the complex interplay between the laws of physics, the principles of prudent engineering, the evolution of technology and shifting economics and regulation.

It began with a legendary debate between two of the fathers of the electricity industry, Thomas Edison and George Westinghouse.  In the 1890s, they disagreed on the best method for transmitting electricity – direct current (DC) or alternating current (AC).  Eventually Westinghouse prevailed, laying the foundation for the centralised architecture that dominates the AC electricity system today.  Following this, many cities sought lower prices and a high quality of service by granting non-exclusive franchises to competitors in the same region.  However, as companies invested and competed to serve the same customers, this competition often led to the duplication of plants and wires, which had high fixed costs.

Consequently, due to the nature of these investments and decreasing cost of production per kWh produced, electricity was declared a “natural monopoly” where regulation should play the role that competition fills in the free market: “control of entry, price fixing, prescription of quality, and conditions of service”.  As a result, the question became not whether but only how to regulate the electricity sector.  Legalised monopolies “eliminated investors’ fears that utilities would lose market leadership” and reduced competition for capital and the cost of needed funds.

Fast-forward to the current day, where legalised monopolies still prevail, day-to-day demand is first met by using generators with the lowest operating costs.  These generators are commonly called “baseload” plants because they are used to meet the lowest expected level of continuous aggregate demand.  Traditionally, baseload plants have been coal and nuclear plants, which are costly to build but cost only a few cents per kilowatt-hour to run, and which operate more efficiently at a constant high output.  When demand rises moderately – so-called shoulder demand – operators tap higher-operating-cost generators.  When demand peaks, operators may need to use the costliest-to-run generators, typically combustion turbines.  These generators are flexible, able to start up quickly and to ramp electricity production up and down rapidly to meet fluctuating demands.  This is why we see a constant fluctuation in electricity supply and prices.

To date, this has culminated in a regulatory structure that rewards building a large asset base and selling more electricity.

Problems

At first glance, using large, centralised sources of electricity and rewarding producers and distributors for selling more can appear to be unproblematic.  However, Lovins and his team rightly illuminate three key problems with this model that greatly affect its long-term sustainability: carbon emissions, in-built inefficiency and a lack of competition (not to mention fuel security and the exacerbation of geopolitical tensions).

At present, I don’t feel much needs to be said about carbon emissions.  It has been well documented that the unnecessary long-term use of fossil-based fuels presents risks to the global environment too grave to ignore.  It suffices to say that according to the RMI, on our current path, expected growth would drive up the electricity sector’s carbon emissions 38% by 2050, to levels nearly 600% above Kyoto protocol reduction targets.

The current centralised, fossil-fuelled electricity system also promulgates a series of storage and transmission loss inefficiencies.  Electricity is the only important “energy carrier” that cannot yet be easily and cheaply stockpiled or stored.  Therefore, electricity must be produced and used at the same instant; it is the ultimate perishable commodity.  Lovins makes the point that two-thirds primary fuel is discarded as waste heat or used internally before the electricity leaves the power plant.  

Furthermore, each hour a 1 GW coal-fired plant burns 500 tons of coal and uses 25 million gallons of cooling water.  Consequently, large centralised power generators use swathes of other precious resources and consistently decrease in effectiveness the further they are situated from the consumer.

Regarding lack of competition, it should be noted that the vast majority of electricity sectors in the world remain largely regulated industries in which protected public utilities dominate the market.  While capitalist economies the world over hail competition as the driving force of innovation, the electricity sector has succeeded in convincing the public that this is a vital service which cannot be privatised despite bloated profit margins and chronic under-funding in new technologies.  In such an environment, incremental progress trumps innovation, avoiding risk is the watchword, and protecting the status quo has become the norm.

Before moving to discuss renewable energy, I want to address what many view as half-way houses for the electricity industry: nuclear and carbon capture sequestration (CCS). 

Many advocate such a switch, however Lovins produces a cogent argument that nuclear is just not economically viable.  In the three years following August 2005, when nuclear power enjoyed the strongest political and policy support, and most robust capital markets in history, none of its 34 proposed U.S. projects was able to raise any private financing despite federal subsidies rivalling or exceeding their construction cost.  The market verdict is similar in other countries.  Of the 64 nuclear power projects that were under construction globally in 2012, all were in centrally planned power systems, mainly run by authorities with no private funding.

This is mainly due to the popular notion that no other source of the energy is so prone to catastrophic failures that cause massive financial losses.  In the wake of the Fukushima disaster in Japan in 2011, Tokyo Electric Power Company posted a $14 billion loss.  At present, a fifth of the world’s reactors are based in significant seismic zones. 

Fundamentally, though, nuclear power had been overtaken in the marketplace long before Fukushima, just as its U.S. orders had collapsed from poor economics a year before Three Mile Island.  Its costs and risks are simply unattractive to investors.  In time I genuinely hope this can change as the potential of nuclear energy dwarfs that of any other energy source (and that is just talking about nuclear fission; if we ever crack nuclear fusion it would be hard to charge money for electricity it would so abundantly available), however, at present it is not a viable candidate when compared to the more mature, safe and investor-friendly renewable energies I will discuss.

Like nuclear power, CCS could be used to eliminate carbon emissions but also faces challenges from its high costs and uncertain performance, which limit its access to capital.  Issues regarding how to store the captured carbon emissions with appropriate safeguards and liability protection mean it is unlikely to be cost-effective enough to keep coal-fired power plants economically competitive in the short or medium term.  Furthermore, moving towards nuclear and/or CCS does nothing to address the critical issues of fuel security, financial stability, and above all competition.

Opportunity for decentralised renewable electricity

In energy production and consumption the electricity system is facing a convergence – some would say a perfect storm – of changes including technology development, reliability and national-security concerns (prolonged electricity blackouts are just as economically serious as oil interruptions), and environmental issues that together create some of the largest opportunities for innovation and investment seen since the industry got its start over a century ago.  And the market is already reacting.  Half of the world’s total 2008-2010 additions of generating capacity were renewable. 

Renewable markets are now immense, global and dominated by developing countries, and will become increasingly so.  Through 2035, official projections say China and India will together add nearly twice as much new capacity as the U.S. and Europe combined, continuing to drive renewable markets.  China is now the world leader in five renewable energies and is aiming for them all.

As discussed in part one of the review, the way we consume energy is about to become radically more efficient.  Information technology providers are quickly infiltrating the electricity business with products that greatly enhance the level of information supplied to customers, utilities and even energy-using devices (I refer back to the Buildings section in part one of the review).  Passive consumption of electricity is on the brink of a radical shift.  Advances in smart-grid technologies that combine IT with the electricity grid are enabling bidirectional control, distributed intelligence, two-way communication, ubiquitous real-time price information, and demand response.

Regulatory solutions

Beyond the economic and technical challenges facing the industry, regulatory and institutional shifts must occur that quite clearly challenge a lot of powerful vested interests.  Electric utilities’ business models and regulatory structures will need to be reformed to level the playing field between investments in supply- and demand-side solutions, and between non-renewable and renewable, and centralised and distributed, options.

Regulators need to share benefits and costs equitably between customers and shareholders and to hold utilities to standards of investment and operation that are far more ambitious.  Achieving a transition to a largely renewable and distributed future will require transparent, fair, and non-discriminatory rules that ensure the safety and reliability of the grid while minimising barriers to entry.  These rules critically affect project economics and, in turn, scope of competition.

At a national level, a first important step would be the widespread adoption of policies that reward utilities for efficiency rather than the bulk amount of electricity sold (here I echo the points made in the discussion of “decoupling” policy in part one of the review).  At a local level, liberalisation of the rules affecting small-scale distributed resources (for example the permitting and inspection procedures for home rooftop solar systems) would open investment in a diverse array of new electricity markets and increase competition.

Furthermore, rewarding utilities for cutting bills, not selling more energy, aligns their interests with customers’ interests and society’s larger goals.

There may even be a whole new business model: acting much like the internet service provider, the utility could be the open source for myriad power generators and other companies, allowing these providers to get their electricity and services, like demand response, to customers on the utility’s new supergrid.

Commercial solutions

If you’re sold on the reasons for changing, and the regulatory environment that would encourage such a change, I’d like to outline in more detail some of the outstanding commercial projects that Reinventing Fire advocates.

But even if you’re not sold, it is important to realise you are swimming against the tide.  If you’re one of the nation’s largest emitters, it doesn’t matter whether you believe human activity is changing the earth’s climate; it matters only whether you think your emissions might be restricted or taxed.  Very few nations around the world are not embracing a long-term strategy towards taxing carbon emissions more heavily.  That’s why we’re seeing the world’s largest oil and natural gas producers investing in large renewable portfolios; in order to at least hedge bets.

It just so happens they’re also great investments too. While renewable technologies generally have had higher capital costs than fossil-fuelled power plants, their fuel is free, their energy price is locked in for decades, and their capital costs are falling.  However, these investments generally come in two different varieties with very different investment profiles: distributed and large-scale renewables.

-         Distributed solutions:

“Distributed” usually means dispersed geographically and connected to the distribution system rather than the transmission system, so the resources are nearer customers, saving grid costs and reducing losses and failures.  But “distributed” resources are also often modular – made in small, similar chunks that can be linked together.

Consequently, distributed resources avoid the losses of delivering power.  Also, distributed resources’ combination of short lead time and small unit size reduces financial risk by building capacity in increments more closely matched to changing customer demand, easily ramping investment up or down as new demand information unfolds.  This more interactive, informed, rapidly evolving electricity system is not centrally planned from the top down.  

Lovins details a number of distributed projects that outline how new energy solutions are moving away from the public sector:

o   Chicago’s 108-story Willis Tower is now exploring the possibility of becoming the nation’s largest vertical solar farm;

o   A superefficient, affordable housing development in Sacramento, CA, will use a first-of-a-kind private, commercial microgrid to manage and distribute intelligently the generation and storage of solar power among 34 single-family homes.  The project, known as 2500 R Street, aims to achieve net-zero efficiency levels, with each home generating as much clean energy as it uses;

o   The global distributed-generation market grew 91% in 2010 to $60 billion.  In the past decade, micropower has more than swapped with nuclear power their respective shares of global electricity production, and in 2008 micropower provided roughly 90% of the world’s additions of electricity generation.

o   Seattle-based start-up Clarian Power even offers a novel solar panel system completely bypassing the normal connections to the utility’s grid.  You simply plug a cord from the PV solar system and its accompanying “SmartBox” into any wall outlet in your house, and its microinverters let electricity from the solar panels flow to all household lights and appliances, using only existing wiring.  Some of these firms are remarkably innovative.  SolarCity, SunRun, Sungevity, SunPower and a growing collection of other competitors offer rooftop PV panels for zero money down – eliminating the sticker shock that frequently deters customers.

           -          Large-scale renewable solutions:

Long have large-scale renewable projects been the fantasy of clean energy advocates, however, fervour for their investment is diminishing after years of political stagnation.  While multi-GW-scale PV farms are already planned in the Chinese deserts and have been proposed in North Africa, and California, these are necessarily centrally-planned projects.  These projects should continue to be encouraged due to their incredible potential to provide ubiquitous clean energy, however, they share few of the advantages that make distributed power so commercially appealing.  Firstly, they suffer similar transmission losses to traditional power plants.  The enormous proposed solar park in the Sahara would lose almost half its produced energy in transmission when delivering to Europe.  Secondly, the cost and financial risk is far too large to allow agile investment; these are large, long-term bets that don’t appeal to the majority of investors and consequently require major public backing.

Nonetheless, large-scale renewables should be developed in order to replace current baseload coal facilities.  The more agile and scalable distributed sources should be developed in order to meet shoulder demand and to spur innovation and investment.

Risks

Reinventing Fire is not oblivious to the risks inherent in such a transition and the RMI team deliver a healthy dose of reality by presenting opportunity and challenge in equal measure. 

Firstly, harnessing distributed, renewable power sources would require siting and building 116 million MW-miles of new high-voltage transmission lines, costing an estimated $166 billion before 2050 (and that’s just the book’s U.S. estimate).  

Furthermore, a system dominated by renewables has security and reliability risks.  More inputs and greater dependence on IT and smart-grid technology will increase cybersecurity threats to the system.  Any electricity scenario dependant on the frail aerial arteries of the transmission grid – without the ability isolate demand centres from grid disturbances – carries a national security risk.

Another challenge is the potential for public resistance.  PG&E, one of the U.S.’s leaders in smart-grid deployment, has experienced considerable customer backlash, largely based on (misguided) concerns about the health effects of electromagnetic radiation from smart metres.

Some households and small-business operators simply may not be interested in a more active, technology-intensive system, or they may not want what some see as “big brother” technology in their homes.

Financial capital is an obvious bottleneck.  Investment will fail to flow in the direction of renewable projects so long as state subsidies continue to prop up the oil industry (artificially deflating their price and distorting the market).  While immediate withdrawal would punish those on low income with more costly energy bills, plans need to be agreed to sunset all state support of non-renewable sources over the next decade.

Perhaps most crucially, the perception that the green economy is the pet project of the privileged seriously undermines the message and distorts the value proposition of making such a transition.  Without a long-term, focused government that can deliver the necessary regulatory structures and the social and environmental reasons for doing so, the ability of a green economy to reinvigorate national infrastructure to create a more open and legitimately competitive society will never be realised.  That starts with us; that starts with political pressure.

Conclusion

The challenges outlined above make clear that this is not a plan without risk.  However, Reinventing Fire has delivered the most comprehensive and ambitious plan for a green economy that I have ever read.  Six main criteria should gauge success in the new electricity sector: affordability, technical feasibility, security, reliability, environmental responsibility and public health, and public acceptability.  Reinventing Fire’s plan works on all above the criteria.

By focusing on the four sectors of transportation, buildings, industry and electricity, a complex and daunting problem now appears to have a clear solution.  By reframing the environmental agenda as a commercial opportunity, entrenched political positions are dissolving and emotion is being replaced by common values and pragmatism.

Rapid innovation, combined with society’s need to reduce fossil-fuel use, has created a golden opportunity to reinvent the electricity system – to the great advantage of clever and agile businesses and nations.  As Thomas Edison exclaimed to Henry Ford in 1931: “We are like tenant farmers chopping down the fence around our house for fuel when we should be using Nature’s inexhaustible sources of energy – sun, wind and tide…I’d put my money on the sun and solar energy.  What a source of power!  I hope we don’t have to wait until coal and oil run out before we tackle that.”

Score: 95/100

Reinventing Fire (Part One) (2011)

Sixteen years ago Amory Lovins and his team at the Rocky Mountain Institute (RMI) wrote Natural Capitalism.  For me, the book was an inspiring investigation into how the environmental movement could be married to the capitalist agenda.  While the great majority of environmental books at the time spent their energy attempting to scare readers into believing the threat of climate change (lest we forget how powerful environmental sceptics were), here was a philosophy that argued for working within the current model; using the competitive markets and intelligent regulation to propel clean energy and to deploy ubiquitous energy efficiency.  Fast-forward to 2011 and Reinventing Fire, I am pleased to say, finishes what the first book started.  By focusing our efforts on four main sectors: transportation, buildings, industry and electricity, Lovins and his team has delivered a near-complete blueprint for increasing prosperity and reducing carbon emissions while simultaneously reducing energy insecurity, expanding choices and harnessing innovation.

Due to the sheer volume of ideas contained within the Reinventing Fire plan, I’ve chosen to break this review into two parts: part one will cover transportation, buildings and industry while part two will cover electricity.

Transportation

[DISCLAIMER: the statistics referred to in this book, and subsequently by me, usually relate to the U.S.  The book is unashamedly aimed at a U.S. audience, however, the lessons are applicable to any open market.]

The first sector ripe for transition is the transportation sector.  The mass adoption of the cars, trucks, trains and airplanes has led to levels of independence that were unimaginable 100 years ago.  But the practice of using combustion engines and heavy materials has seriously polluted the atmosphere and is becoming increasingly uncompetitive.  Lovins argues that the key innovation needed within the sector will be radical efficiency via a shift to ultralight but ultrastrong auto-bodies, made of advanced materials.

The key enablers of these new generation vehicles will be: (1) integrative, whole-system design optimised for (2) ultralight materials, particularly advanced composites (primarily carbon-fibre).  Adding (3) an electrified powertrain creates incredibly efficient vehicles that are much less fuel-intensive.

By using integrative design Lovins utilises one of the key concepts of his first book, Natural Capitalism.  When the energy intensity of a process is dealt with as far upstream as possible, then gains are compounded as they flow back downstream, and ever smaller parts are required at each juncture.  Consequently, “a lighter auto needs less power, so its powertrain can be smaller and simpler.  That makes the auto even lighter, so in the next design go-round, the engine can be made yet smaller and lighter.  The weight savings multiply with each component, from brakes to suspension parts, and with each turn around the design cycle.  Parts and systems can even disappear entirely: put an electric motor in each wheel, for instance, and suddenly there’s no need for a transmission, clutch, driveshaft, axles, universal joints, or differentials.  Their disappearance in turn triggers still more weight savings.  Lightness multiplies.”

Electric motors are lighter, smaller, cheaper, quieter, cleaner, more rugged and reliable, and severalfold more efficient than modern fuel engines, while still enabling sizzling acceleration.  Furthermore, electric drive can automatically recover for storage and reuse (accelerating the auto) up to 70% of the energy otherwise wasted as heat by the brakes.  When your vehicle can save, and even sell, excess energy the payback period, in comparison to traditional vehicles, becomes very short.

Using advanced carbon fibre technology, composites with greater tensile and impact strength than steel can be affordably produced for all vehicle types, cutting the weight by up to 70%. There is a perception that safety requires weight but Lovins presents studies proving that it is size – due to having more crush space to absorb impacts – not weight that is the primary indicator of a vehicle’s safety.  Consequently, Lovins makes a marked departure from traditional environmental transportation ideology wherein the cars of the future are tiny cars like the Gwiz or the Tata Nano.  Should advanced composites continue their progress in reducing body weight, large vehicles like SUVs and planes need not be the target of environmental derision.

So far, first movers regarding the pursuit of the compound benefits of lightweighting plus electrification include: Audi, BMW, Volkswagen and Toyota.  No U.S. automakers appear on that list for two reasons: first, U.S. auto efficiency standards and offerings still lag behind most first world economies; secondly, historically cheap gasoline (due to low fuel taxes and large public subsidies) make the U.S. the only auto-making country where inefficient cars can still be affordably fuelled (petroleum is one-half to one-third the price in comparison to most other countries).  Start-ups like Tesla and rapidly emerging Asian competitors can and will adopt the latest manufacturing technology in order to gain competitive advantage.

This is one the first instances in which we can see how the market would gain from more ambitious regulations.  At present, global fuel efficiency standards lag technology in a major way.  By 2016, most countries will have set policies regarding vehicle fuel efficiency at roughly 30 mpg and have agreed and 54.5 mpg for 2025.  Yet attractive 125-240 mpg autos can be achieved within a decade.  Countries who set ambitious fuel efficiency targets, while admittedly suffering short-term pain, will capture the global transportation market in the long run.

Another tool the RMI team advocate using to speed the transition to ultralight and efficient vehicles is something they’ve termed, “feebates”.  Feebates make efficient autos cheaper to buy and inefficient autos costlier.  The idea is that if you buy a fuel hog you’d pay an up-front fee, right on the sticker price, which climbs as its fuel economy declines.  But choose a fuel sipper instead and you’d get a rebate funded by others’ fees: the more efficient the auto, the bigger the rebate.  In this way choices are not limited, but the market and our aspiration to reduce carbon emissions work hand-in-hand.  Personally, I think it’s a brilliant idea that encourages movement along the innovation curve without increasing public sector spending.  However, it does not take much imagination to consider the political difficulties of passing such a law given that, in the short term, fuel-intensive industries (such as logistics and agriculture) would have to shoulder a large burden.

Further ideas that permeate the chapter are that: (1) sharing transportation can radically reduce fuel-intensity and (2) creating more self-sufficient communities reduces the need for transportation.  Lovins makes the analogy that “buying a car to get mobility is like buying a three-star restaurant to get a good meal” and comments that “most people believe that the alternative to autos is better transit – in truth, it’s better neighbourhoods.” 

When the book was written in 2011, the online sharing economy was only just getting started, but in 2015 we can already see the incredible efficiency gains promoted by businesses such as Uber, AirBnB, Zipcar and countless cycle hire programmes throughout cities worldwide (led by Europe).  As the migration of people to major metropolitan areas continues throughout the world, the quality of public transportation will take on increased importance.  Generally public transportation requires great investment, but the book highlights spades of smart thinking, such as the “surface subway” system pioneered in Curitiba, Brazil, providing subway-like rapid bus systems that provide mass efficient transport and reduce congestion at a tenth of the cost of even surface light rail (rapid bus/surface subway systems are now found in more than 80 cities, chiefly in South America, but now headed for Los Angeles).

On the more expensive end of public transportation, the Chinese and Japanese bullet-trains still have the capacity to inspire incredible change if they can realise the tested speeds of over 300 mph (see this recent news report).  Such technology could displace thousands of flights per year with a cheaper and greatly more fuel-efficient alternative.  While working on the technology, based on magnetic levitation, engineers have even invented a way for passengers to enter and leave without the train stopping, via a “connector cabin” that the train drops off at each station while picking up a new one.

However, this is not to say that the transition will be easy.  The mass lightweighting and electrification of the world’s transportation will also require an infrastructure to recharge them (preferably from renewables).  By some estimates, each new electric vehicle will require about 1.1 charging stations – though 80% will be at homes and paid for (costing about $1,500) by the auto buyer.

But the important lesson is that the technology is available and simple regulatory changes can spur investment that leads to enormous fuel-savings and greatly more competitive companies.  The chapter aims to complete the transition by 2050 but takes pains to explain that the nation will still need liquid fuel – lots of it, falling over decades.  Unlike cars and trains, planes and heavy trucks can’t yet be cost-effectively electrified. 

The ambitious goal of using three-fourths less fuel and an entirely oil-free auto fleet by 2050 is necessary and achievable.  Reinventing Fire’s plan to transform vehicles through highly integrative design, electric engines and electric fuelling that draws on renewable sources is considered and visionary.

Buildings

Buildings are energy hogs.  They consume 42% of the US’s energy (more than any other sector) and 72% of its electricity.  Much of that energy is simply wasted.  Buildings primarily use energy in six ways: space heating, water heating, space cooling, lighting, electronics and appliances.

Lovins argues that this is a serious economic opportunity.  According to the RMI team, by 2050 the realisable savings from energy-efficiency in buildings is at least $1.4 trillion in net present value.  Those savings are worth four times the cost of capturing them.  Generally speaking, energy efficiency measures in buildings cost less than half as much as the energy they save within three years.

Such a mass focus on improving the energy efficiency of buildings could “create new business opportunities and strong new industries as companies gear up to install insulation in inner-city homes or to manufacture easy-to-install efficient office lighting systems.  This expanded economic output means that reducing the energy used in our homes, offices, warehouses, theatres, shopping malls, and other structures could revitalise the real-estate sector and help rejuvenate the national economy.  Consider the multiplicative effect of putting all this cash (and added value) back in the hands of businesses and consumers.  In a sector that needs new ideas, energy efficiency in buildings creates exceptional opportunities for growth in jobs, new goods and services, and finance.”

Lovins argues that the biggest opportunities lie in designing new buildings right and retrofitting the existing buildings that waste the most energy.  While I agree with the assessment, unfortunately there are few cookie-cutter or blanket solutions.  Upgrading existing buildings will need to be done one building at a time and every building has a different set of requirements. 

However, the book outlines a spate of emerging technologies that are making our buildings cleaner, more efficient and, frankly, cooler places to be that could soon make the process much more appealing.

One of my favourites, that I can see becoming commonplace within the next decade or two is the smart window.  Smart windows darken in response to a small electric current or heat (see firms like Pleotint and RavenBrick).  Serious Energy’s “AdaptivE” windows will use a printable liquid-crystal coating to vary the amount of incoming heat energy depending on the temperature of the outer pane of glass, while letting in the same amount of visible light.  In warm climates, this will eliminate the trade-off between being well-lit and being cool.

Phase-change materials could soon be found in the outer walls of most buildings.  Phase-change materials absorb heat by melting as the temperature rises.  Used in walls or on roofs, they slow the build-up of heat in a house on a hot day.  The stored heat is then gradually released at night meaning that you reduce the need for air-conditioning during the day and heating at night.

I could go on, but it suffices to say other technologies such as enhanced evaporative cooling, radical insulation, light emitting diodes, Fibonacci series rotors and combined heat and power (CHP) pumps are meaning that we can do much more with less (look these technologies up if you have the time, some of their energy savings are incredible).

Yet, despite the prevalence of these cost-saving technologies, the biggest problem is that the path to making money from energy savings isn’t always considered, monitored or incentivised appropriately.  Few firms track their energy use as a line item for which profit centres are accountable (the utility bill is usually just factored in as a constant in overhead costs).

Landlords have no financial incentive to weatherise homes, since the energy savings would go to their tenants’ pockets, not theirs.  The tenants, in turn, are unlikely to invest money to improve a house they don’t own and may not live in for long.  The same problem stands in the way of upgrades to many commercial buildings, since 45% of them are not owner-occupied.

Historically, utility regulation has tied revenue to the amount of energy sold and the capital invested to provide it.  Investing more money to build more energy-supplying infrastructure to sell more energy was the golden road to revenues and profits.  Indeed, utilities and their investors tacitly preferred that customers be inefficient, since inefficiency could raise profits. 

Consequently, the most important piece to the buildings’ efficiency jigsaw is the mass adoption of decoupling regulations.  Decoupling breaks the link for electricity providers between earnings and total energy sold.  To sweeten the pot, many regulators should also reward utilities for cutting customers’ bills or beating efficiency goals.  Unfortunately, though, this new business model for utilities is taking hold slowly.  The RMI team present evidence that in more than half of U.S. states, electric and gas utilities are still penalised for cutting your bill and rewarded for selling you more energy.  That’s just as odd as it sounds: it rewards exactly the opposite of what we want, so that’s what we get.

Should decoupling become the new norm, energy efficiency measures would become incredibly profitable and allow some of the following best practices to proliferate.

One brilliant technique advocated by the book is simply to provide more information in order to change behaviour.  For instance, letting people know how their energy consumption compares to their neighbours’ can stir competitive juices and reduce use markedly.

Smart controls can automatically turn down the thermostat when you’re gone, or run your dishwasher or washing machine at a time that’s convenient for you but cuts your cost.  They’d also let an office building start precooling earlier on a hot day, when electricity costs less than in afternoon peak hours.  Such unobtrusive technology can deliver the same or even better services at lower cost with no inconvenience or loss of amenity.

A Danish study, highlighted in the chapter, found that the pumps used to circulate hot water in normal European homes are 5-10 times bigger than needed and 4-8 times less efficient than they should be.  Gradually replacing 120 million household circulating pumps across Europe over a decade would eliminate the need for 8.5 one-billion-watt power plants and achieve one-sixth of Europe’s Kyoto carbon-reduction obligation.

Integrative design, just as in the transportation chapter, is a crucial component to unlocking the energy savings.  Instead of just upgrading, say, conventional lights or heating systems with more efficient equipment, integrative design starts by asking whether there are smarter ways to design the whole building and all its interacting systems together.  Integrative design combines technologies (old and new) in novel ways.  But as before, switching to integrative design isn’t easy.  It requires architects, engineers, contractors and owners to collaborate more effectively.

The resolution here is twofold – first, let businesses, homeowners and government entities seek solutions to reduce their own energy use and develop services and products to help others do the same.  Second, enable those solutions through smart policies that remove persistent barriers, open new opportunities, level the playing field, and align incentives.

Buildings are the future hub of energy storage, energy production and energy markets (as I will illuminate further in part two of the review, focusing on electricity), consequently, it is imperative that we all begin to harness available technology in our homes and offices.

Industry

Innovation within the industrial sector (i.e. manufacturing / the extraction and use of raw materials) is also rooted in the concept of efficiency via integrative design.  However, here Lovins reintroduces the concept of biomimicry (please visit my review of Biomimicry by Janine Benyus for further detail).

In human industry we mine ores, fashion them into products that we use briefly, and then throw away.  We use processes that extort exotic elements from all over the world, many rare and toxic, to drive unnatural chemistries under severe conditions inside costly furnaces and reaction vessels to heat, beat and treat and then discard most of the results as waste.

Calculations indicate that an appalling 1% of the originally extracted materials actually make it into durable goods – and of those, only one-fiftieth gets recycled.  Therefore, only 0.02% of the originally extracted mass flow returns to nature as compost or to industry as a “technical nutrient” for recycling or remanufacturing.  The other 99.98%, much of it toxic, is pure waste.

According to the RMI team, global industry now makes four times the tonnage of major engineering materials – metals, plastics, cement – that it made 50 years ago.  They forecast that that amount is to double again within 40 years.  That’s despite a 26% drop in the amount of materials used per dollar of global GDP between 1980 and 2007. The “take-make-waste juggernaut”, as Lovins terms it, rumbles forward.  It’s hard to find a more wastefully designed system, or a greater business opportunity, on the face of the earth.

In contrast, nature uses almost zero wasteful or aggressive processes in manufacturing materials stronger than steel (spider silk) and storing information more efficiently than a computer chip (DNA).  We know the ability exists and biomimetic scientists work to unlock the potential to achieve the same bounty nature has achieved with this planet’s finite resources.  Importantly though, following Nature’s lead is not only good for the earth; it can also bring crucial competitive advantages to business.

Over the past 40 years, U.S. industry has cut energy intensity in half, scrubbed its stacks to reduce acid rain, greatly reduced poisonous discharges into water, and clamped down on profligate flaring of “waste” gases.  Many of industry’s advances over the past three decades arose directly from the Nixon-era Clean Air Act and Clean Water Act (and the Control of Pollution Act 1974 in the UK).  There is no plateau suggesting that further improvement cannot be achieved over the next 40 years.

Despite the incredible diversity of products, processes, and plants, just two purposes account for more than three-quarters of U.S. industry’s primary energy use.  Within manufacturing facilities, more than two-fifths of primary energy is used to heat things, whether giant vats of steel or tiny dabs of solder on circuit boards.  Another two-fifths turns shafts to drive machines, from the clattering conveyor belts in soft-drink factories to the robotic arms on auto assembly lines.  The rest goes into a myriad of processes and support functions, including smelting, reduction, lighting and space conditioning.

Lovins outlines how we can design out waste in mining and manufacturing, recapture resources now lost in extraction and manufacturing and make products last longer – then recover, reuse, repair, remanufacture and recycle them.  By systematically designing out waste and toxicity, and radically increasing the efficiency of using resources, we can deliver more service per pound of material.

First, Lovins offers the plan to reduce the energy needed to run fundamental processes.  Next, reduce the losses in the systems that distribute energy services within a facility.  Third, improve the efficiency of devices like boilers and motors that turn energy into useful services.  Finally, put energy that’s now wasted into use (heat being the largest waste in almost all industrial processes – the U.S.’s power plants turn fuel into one-third electricity and two-thirds heat – and that heat is typically thrown away, wasting more energy than Japan uses for everything, because there’s no productive use for it nearby, and old U.S. practices encourage or mandate power-only plants despite industry needing enormous amounts of heat energy).

The beauty of these four steps is that they not only achieve virtually every imaginable efficiency gain, but they also feed on each other.  Reduce the amount of steam heat needed for a chemical reaction, for instance, and you’ll also reduce the losses inherent in bringing steam to heat a reaction and be able to use a smaller, cheaper, more efficient boiler.  And if you can recapture some of that heat, the efficiency gains compound even more (again, this is integrative design in action).

In many European countries and increasingly in Japan, manufacturers bear a legal lifetime responsibility for their products and thus have a strong incentive to make them easy to repair, reuse, remanufacture or recycle.

The RMI team estimate that such additive manufacturing, using only what it needs, can create better products with up to 90% less material.

In order to encourage investment and spur innovation within the sector, a few regulatory changes could arguably go a long way.  They include: desubsidising fuel; mandating producer lifecycle responsibility; allowing and encouraging waste-heat recovery and reuse, including all forms of cogeneration; removing distortions that favour virgin over recycled materials; letting businesses expense energy-saving investments against taxable income (just as they now expense wasted energy) rather than having to capitalise them; and properly pricing the commons into which things get thrown away, whether gunk in our water, soot in our lungs or carbon in our air.

Such deliberate, across-the-board stimuli to innovation and adoption have long driven the competitive prowess of countries like Germany and Japan.  Their high energy prices and strict environmental rules honed their efficiency, helped cut their healthcare costs and resource dependence, enhanced their economies’ transparency and choice, and sped their broad adoption of energy efficiency.

Lovins and the RMI team make a compelling argument that biomimicry and integrative design are the two next big design revolutions.  Each is important separately.  Together they will transform industry and remake our world.

Conclusion

While a lot of the efficiency measures detailed in the above chapters are now, in 2015, becoming more commonplace, I want to applaud the book for its comprehensive collation of such innovation. But moreover, the real strength of the text is that it refocuses the environmental agenda in a coherent way.  Over the past decade environmental literature has failed to speak coherently.  The majority of texts pick a distinct issue and deal with it in isolation.  In Reinventing Fire I believe we have the first coherent singular voice, cutting above the noise and delivering a clean, equitable and prosperous vision for the environmental movement that is no longer distracted by notions of taking down big business.  By understanding the key levers of energy efficiency and renewable energy the proper solutions are rewarded and the political positions appear less entrenched. 

In the second half of the review I’ll attempt to describe how the plan can be power by a revolutionised electricity sector.