It is a slow and beautiful drive up to Snowmass, Colorado. Cars drive at 20 miles per hour, due to icy roads. External temperature is -25°C, and everything looks pale white, like in the tale of the Snow Queen, by Hans Christian Andersen.
Given the landscape seems impossible that someone can grow bananas indoor, in a elegant north American mansion. But impossible is something that does not exist for mr Amory Lovins, president of the famed Rocky Mountain Institute, leading american institute for business innovation.
The house, which Mr. Lovins dubbed the “Banana Farm,” used one-tenth the energy of a typical US house of its size. “It is passive solar, superinsulated, and semi-underground – built back into the hill near the north lot line, then bermed over the north wall for aesthetic and microclimatic reasons” explain Lovins. The mansion, that dates back to 1984 (upgrades have been done over time) is the telltale of mr. Lovins effort to show the world that doing radical green business is the way to go, save the planet, live better and make money.
In this house, Amory wrote Reinventing Fire, a book that has transformed hundreds of multimillion dollars companies across America, and many billionaires, CEO and CFO has travelled these roads to pay him a visit and be inspired. We sit in his warm studio.
What did you want to achieve with Reinventing Fire?
“Reinventing Fire is a rigorous scenario-analysis business book, showing how the US can run a 2,6 times bigger economy in 2050 than 2010, using no oil, no coal, no nuclear and a third natural gas; tripling efficiency and quintupling renewables. An economy 5 trillion dollar cheaper than BAU; with 82-86% lower carbon emission, requiring no new invention and no act of Congress, because the policy changes needed to be done can be done at the administrative or subnational level. We wanted to show that it can be done.”
Are the US on that trajectory?
“In fact the US are approximately on that trajectory and renewables have expanded faster and gotten cheaper than we expected. Thus, it almost seems that in the book we have been conservative!”
In the book you talk about many sectors of the global economy. Can you specify which sectors have developed in a sustainable fashion the most and the fastest?
“Electricity for sure. We got the number for 2015: wind and photovoltaic alone had hit almost 121 Gigawatts and all renewable – except big hydro – have got 329 billions US$ of global investment. From an electrical capacity perspective, half of the world’s market has been taken over by renewable energy. As 2013 efficiency, renewable and co-generation, were worth over 630 bln dollars of investment. Large forces are at work.”
Which sector hasn’t transitioned as hoped in your book?
“Well, you can analyze different criteria. But I think we did quite a good job in each of the four sectors the book analyze, transport, building, industry and electricity. Industry was the hardest to make generalization about because it is so heterogeneous, so we have been very conservative in our assumption. We have, however, underestimated the potential considerably. In the building sector we overestimated the gas demand and underestimated the co-generation (counting it only in industry) and we did not count solar heating.”
Now you are working on Reinventing Fire China. What are the challenges for the Red Dragon?
“Several years ago, we assembled a consortium with the National Development and Reform Commission, energy analysts, with the NDRC-funded NGO Energy Foundation China and the China Energy Group – Lawrence Berkeley National Laboratory. Together we have spent 2,5 years with 50-odd people, figuring out what’s the most efficiency and renewables China could practically end profitably deploy by 2050, with a coherent strategy. Meanwhile, at the end of 2014, the Chinese leaders called for a ‘revolution’ in production and consumption of energy. We wrote the road map for that revolution. To be honest, we has already filed ¾ of the roadmap when they contacted us. Timing was good. We have included the result in the 13th Five-year Plan that will be presented in march 2016 to the National People’s Congress.
“What we found was a surprise: by 2050, China has the potential to increase energy productivity sevenfold and carbon productivity twelvefold, while reducing coal burning by 4/5 and carbon emission 2/5 below 2010 levels, with a sevenfold-bigger economy and save about 3,7 trillion dollars at present value. Chinese leaders has warmly received this. It’s important to emphasize that this is a scenario emerging from China’s data and models, not a foreign-imposed model.”
Is a new book on the horizon?
“Publishing is due end of March.”
“Now we are considering India, with its breakthrough energy strategy. We are working in 65 countries; the opportunities are in many places. We try to bring high level of economic and technical rigor and interconnection between sectors. For example if we increase the quality of Chinese cement and steel, making them uniform, you can cut cement and steel production for same structural services. Consequently you save transportation energy to move stuff around. And you limit use of steel and cement for the transport sector that carry these materials!”
A trickle down effect.
“This model show how important can be. We have a unique approach on efficiency, thank to our 40-years long experience on efficiency. We have learned to figure out how to make large, intensive, energy savings, that cost less than small low-savings intervention, only if we use integrated design. We have shown what we can do retrofitting over a thousands building and 40-odd billion dollars of industrial re-design, rethinking various land and sea vehicles. This building is an example: we carried out a deep intervention, but we were able to save 99% of heating energy, optimizing the building as a whole system. We also saved 11,000 dollar (this were the 80s), having no heating system: we used those saving to produce a water heating system that can further save 99% of water-heating and cut water-usage by half, with a payback in 10 months. And this was possible with the 80s technologies. Today we can do much better. We are retrofitting with newer technologies to see how much better they are. Now seems that the electric appliances use less energy than the old monitoring system we use to measure their performance! And now the revolution is everywhere. In Holland Energy Strong figured out of to industrialize mass retrofit of social housing and now are scaling enough to make buildings net zero, financing building entirely from energy saving.”
What about transportation? What will we see over the next years?
“In mobility, there is a ongoing revolution that we summarized as ‘transition from PIGS to SEALS.’ Pigs are Personal Internal-combustion-engine Gasoline Steel-dominated vehicles. SEALS are Shared Electrified Autonomous Lightweight Service vehicles. This can profoundly change transportation infrastructure: driving more total kilometer per vehicles, with fewer global kilometers in all vehicles, with a fraction of the cost of today’s personal mobility, with less emissions. You don’t need much infrastructure for this change.”
RMI often advocate for de-centralized production. Why is so?
“In buildings we are used to have our building connect to few remote centralized, large scales, infrastructure, paid over decades, connected with pipes and wires. This is for six reasons: electricity, cooking fuel, water, sanitation, waste management and telecommunication. It turns out for each of those six service needs there is a solution that require nor pipes nor wires. Everything can be done on site. This would be a huge change. To get it right we have to ask ourselves: what is the right size, what are the economies of scale. Adelaide was planning a large sewage treatment plant. And someone asked: what fraction of the total system treated goes to the treatment plant? Only 10-15%, the rest goes into the collection system, which had severe dis-economy of scale. The larger the plan, the bigger the radius of the area, the more complex are the pipe system. So they looked at the whole cost and they fund that the optimal cost was at the villager/neighborhoods scale. This is true in many areas of infrastructures. Gigantism leads to big costs and vulnerabilities, is an artifact of not looking at economies of scale for the whole system.”
Transition always require finance. What is your sense of the financial support to “reinventing the fire”?
“We need four kinds of innovation: tech, design, policy and, last, new business and finance model. This is as important as to creating deeply disruptive tech innovation. From green bonds to new finance tool, new business is growing rapidly, investor are becoming more distant from of the old way of doing things, and decapitalizing the fossil fuel industry. The job of capital market is not only to help capital flow to best risk-adjusted returns, but also to keenly sniff out disruption biz. The pace of transformation is set by insurgents not by incumbents’ legacy business and assets. Capital can easily switch direction.”
Can the Paris Agreement be a game changer?
“It is an extremely helpful psychological and political signal. We should be ambitious and keep warming below 2 °C. Ambition will grow when most states will realize that going green is not likely to be costly but profitable. Renewable are getting cheaper then fossil.”
I always ask a personal definition of “circular economy”. What is yours?
“We never used the term, but we introduced the concept in a book, in 1999, with Paul Hawken, Natural Capitalism. In that book we define natural capitalism as a way of doing business as if nature and people were properly valued. Not as internalization of external costs. We assumed: let’s act as Nature would be ‘highly’ valuable. How we’d do business? Before the First Industrial Revolution, in England there weren’t enough weavers to make cloth to satisfy population’s needs. But if you have said in 1750 ‘we will make weavers 100 times more productive,’ none would have understood how that could be possible. Than the revolution came and spread across every sector and the middle class was able to obtain affordable mass goods. The basis of that revolution was realizing that the shortage of human resources (in this case weavers) was limiting the ability to exploit seemingly boundless nature resources. Today we have the opposite pattern of scarcity: abundant people and scarce nature. So we have to use 100 times more productively topsoil, water, energy, everything we borrow from the planet. Therefore the first principle is radical resources productivity.
“The second principle of natural capitalism is producing things the way nature does, with closed loops, no waste and no toxicity. The third shift in natural capitalism is a solutions’ economy business-model, rewarding both customers and providers for doing more and better, with less for longer – typically this takes the form of leasing the desired service rather than buying things. The forth principle is to reinvest some of the resulting savings back into the capital shortage stuff, such as nature.”
Capitalism is classically the productive use of and reinvestment of capital.
“The question is: what is capital? Industrial capitalism covers only money and goods and ignore – I’d say liquidate – the two more precious kinds: human and nature capital. Natural capitalism uses and reinvests all four forms of capitals. So you make more money, do more good and have more fun.”
Choose five innovative technologies or disruptive process.
“The wise thing to do is not to pick specific technologies. The smart thing to do is choose the race you want to bet on, rather than the horse.”
So, which races?
“In industry, I would bet on natural capitalist principles, biomimetic design and addictive manufacturing; in mobility, I am betting on SEALS and ultra-light material (when you take out 2/3 of weight on a car, you need 3 times fewer energy from costly batteries); in the energy sector the future is efficient distributed renewables; in buildings net-zero and net-positive for new and retrofit. Clearly not everyone will have 61 banana crops as I have here in Snowmass, high in the Rockies, when temperature outsides is -40 °C.”
Rocky Mountain Institute, www.rmi.org