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Energy Lessons Learned and To be Learned

1. Total US energy use is now slightly below the level suggested in my 1976 "soft energy path" graph, widely criticized at the time as wildly optimistic. Renewable energy growth was delayed a decade by federal hostility, but is starting to gain momentum. A "third wave" of energy efficiency may be starting, reversing the 1986-96 period of stagnation. If we learn its lessons, this success can be greatly expanded, and extended to other resources.

2. Environmental problems from using energy are unnecessary . It's cheaper not to have them. Meeting and surpassing the Kyoto targets will be not costly but profitable-saving fuel costs less than buying fuel. Climate politics will therefore shift from price, pain, penury, bearing burdens, and sharing sacrifices toward profit, enterprise, initiative, innovation, and competitive advantage. This shift will make consensus straightforward; no matter how the climate science turns out or who goes first, protecting climate boosts practitioners' bottom lines.

3. New design techniques can often make big energy savings cost less to achieve than small savings. "Tunneling through the cost barrier" has been empirically and convincingly demonstrated in many technical systems, but such new design is absent from all energy models because they're based not on engineering practice but on economic theory.

4. Energy efficiency and distributed power generation will increasingly be bought for reasons other than saving energy commodity costs . Energy efficiency and power generation will be bought, respectively, for qualitatively superior services and distributed benefits.

5. Ability to respond to price is more important than price itself . Price matters, but its policy importance has been much overrated. High energy prices are neither necessary nor sufficient for very efficient energy use.

6. Restructuring the electricity industry will yield surprisingly small benefits unless retail distributors are rewarded for cutting customers' bills rather than for selling more energy . Restructuring matters, but mainly benefits big users ("big dogs eat first") and confuses small ones. Regardless of restructuring, utilities can't compete without helping customers wring more work from each kilowatt-hour. That's the only important way to yield better service and lower bills.

7. Big, fast energy savings can yield after-tax returns over 100 percent per year even at or below today's low US energy prices . After saving $150-200 billion worth of US energy use per year in the past twenty-five years, we're still wasting upwards of $300 billion a year. End-use efficiency is a rapidly expanding resource, because learning outpaces doing. Its returns to scale don't diminish but rather expand.

8. For many smart companies, capturing these savings is gaining momentum for competitive reasons, but is inhibited by sixty to eighty specific kinds of market failures, some at the level of the firm and some in public policy. Proven techniques can turn each of these market failures into a lucrative business opportunity .

9. American firms that are starting to discover this are increasingly behaving as if the Kyoto Protocol had already been ratified by the US Senate. The more firms so behave, the more likely and less necessary ratification becomes. US leadership on climate protection has largely passed from the public to the private sector , simply because efficiency costs less than fuel. By 2000, carbon-reduction market-makers will have discredited climate skeptics' theoretical economic models by discovering empirical prices 10-100 times below their predictions.

10. Specific efforts to cure market failures in buying energy efficiency should top the public-policy climate agenda . Most countries ignore them, wrongly assuming they need only proper pricing and fuller commodity competition. Countries making this error will fall further behind those that take market economics seriously rather than literally.

11. R&D will yield important advances. But optimal application of old, even Victorian, technologies would probably suffice to meet the Kyoto goals at a profit. Technological R&D must be supplemented by improved design education, retreading of in-practice design professionals, and greater attention to energy anthropology (the emerging science of why people use energy the way they do).

12. A market-driven transformation already irreversibly underway will rapidly bring new light vehicles , including full-sized American ones, above eighty and often to 100-200 mpg. Early models, including fuel-cell cars, will start to enter the market around 2000, with major market shares shifted by 2005-10. Automakers that fail to make the transition to ultralight, ultra-low-drag, hybrid-electric vehicles will risk disappearing. Over the next few decades, such HypercarsTM and their kin will save an OPEC's worth of oil. Complementary policies to maximize competition between ways to get around and not needing to get around-for example, eliminating sprawl by not mandating and subsidizing it-can also yield better and fairer access with much less driving.

13. Twelve powerful forces are driving a rapid transition to distributed electric generation, where the power plant shifts from remote, gigantic stations to your roof, basement, backyard, and driveway. The central power plant is already obsolete and, like much bulk electric transmission, will become uneconomic to run and difficult to sell. Such plants are unlikely to survive in any significant numbers by 2030. Unpleasant vulnerabilities built into the architecture of brittle, highly centralized systems (e.g. Y2K problems) could greatly accelerate this trend.

14. Many of the distributed resources will be renewable as their costs inexorably drop and their quality and convenience improve. Even if the renewable transition took a couple of centuries, it could be bridged by abundant and nearly ubiquitous natural gas. Its use won't harm the climate if its CO2 is separated out at the wellhead and reinjected into the reservoir. This is generally profitable because it yields three income streams: sale of H2 as a premium fuel, enhanced recovery of CH4, and trading sequestered carbon under Kyoto Protocol rules.

15. A smooth transitional path to a climatically benign hydrogen economy has already been devised , appears profitable starting now, doesn't need major infrastructure investments, and is already being adopted by large and capable energy and automotive firms. Much of the energy-carrier role projected for electricity will use hydrogen and fuel cells.

16. So diverse and robust are the existing and emerging competitors that oil will probably become uncompetitive even at low prices before it becomes unavailable even at high prices. The most intelligent oil majors already understand they're in the coal-and-oil endgame ; the only internal dilemma is whether to say so.

17. The possibility of wholly new energy sources consistent with the laws of physics-but going beyond the special-case physics we ordinarily observe-cannot be excluded. However, such sources are unlikely to be free, and may prove uncompetitive with existing sources, let alone with efficient use.

18. These developments in the North fit beautifully with leapfrog development strategies for the East and South, and could free capital for other development needs. The spiritually underdeveloped North will discover the futility and vanity of trying to meet nonmaterial needs by material means . Energy and resource efficiency don't correct excessive population or consumption-they just buy time and earn money needed to address such fundamental problems.

19. The most fundamental and important innovations will come from biological design models in every aspect of our lives, notably redesigning production and commerce, reshaping control, and taking our goals and worldviews not from Bacon and Descartes but from Darwin and Thoreau, Leopold and Lewis Thomas, Kevin Kelly and Janine Benyus. Energy is but one of a myriad of fields that the biological paradigm will transform.

20. In short, past energy surprises pale in comparison with those now certain to occur . However, this neo-cornucopian vision, though basically market-driven, has vital roles also for public policy too, albeit with nontraditional emphases: the cornucopia is the manual model, and one must actually turn the crank!