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Energy by the Sip
The next big piece of a global-warming-control plan involves learning to be more efficient with the fossil fuels we continue to burn. America has long been astoundingly wasteful about energy use, but for years, that mattered little because power and fuel were so cheap. "Until recently, using more energy was a way to get more productive," says Kevin Surace, CEO of Serious Materials, a green building company. "That doesn't change until energy costs go substantially up."
Surace has a point. There are a lot of reasons Western Europe and Japan are so far ahead of the U.S. on energy efficiency, but one is that their higher energy costs simply forced their hand. With oil now well over $100 per bbl., that crisis moment may have arrived for the U.S. too. The answer is an "efficiency surge," a crash improvement that can help offset the steady increase in energy prices and so buy time for the development of carbon-free alternatives. "We need to create breathing room," says Rick Duke, director of NRDC's Center for Market Innovation. "But an unguided market won't take care of that alone."
A coherent plan could. Recent research from the McKinsey Global Institute (MGI) shows that we could slash the projected growth in the world's energy demand by at least half by 2020 just by taking advantage of existing opportunities to cut waste. Think of simple, costless changes like turning off the lights in offices at night—that's "money on the table," in the words of efficiency guru Amory Lovins of the Rocky Mountain Institute. MGI says annual industry-wide investments of $170 billion per year in efficiency improvements like green buildings and higher-mileage cars could yield an additional $900 billion per year in savings by 2020. More important, the emissions cuts resulting from better efficiency could deliver up to half the carbon reductions needed to keep warming at no more than 2 degrees Celcius hotter than the present—considered to be an upper safe level. "There's so much water pouring out of the bottom of the bucket that it's insane to put more water into it," says Adam Grosser, a partner with Foundation Capital, which has invested heavily in energy-efficiency companies.
Some of that hole-plugging has already begun. Last year's federal energy bill raised corporate average fuel economy (cafe) standards for the first time in three decades, to 35 m.p.g. for cars by 2020. That's not world-beating compared with Europe's average of 40 m.p.g., but it's a good start. Efficiency standards could be put in place for household appliances and lighting as well. Japan's smart Top Runner program takes the best model in the marketplace and sets its performance as the industry requirement. Similar rules could be applied to architecture. Since nearly half of U.S. greenhouse-gas emissions channel through buildings, there's a sizable opportunity for savings if we mandate green design rather than simply depend on architects and builders to adopt it voluntarily. And if utilities were able to institute variable pricing—charging customers more for power during periods of peak demand and less during off periods—you'd see enormous efficiency improvements.
California—again the leader—has implemented a pilot program for just such a variable-pricing plan. It uses what are known as smart meters, which provide real-time information about customer energy use and make billing more precise and savings more predictable. Since the project began, energy demand has fallen 13%, giving a taste of the wider savings that could be captured with a more comprehensive, permanent plan. Other efficiency programs have managed to keep per capita energy use in California—already the lowest in the country—essentially flat for the past three decades, even as energy use per person in the U.S. overall jumped 50%. California's pleasant clime plays a role, but efficiency still matters. Darbee of PG&E estimates that the state's green policies have eliminated the need for 24 power plants over the past 30 years—a process called "demand destruction," or cutting carbon before it's even born.
Invent, Invent, Invent
Even an epic surge in efficiency, though, won't by itself solve our energy woes, because demand in the booming developing world will outpace the best productivity measures. Hence the need for the final and most difficult step in the blueprint: the creation of a new energy system, one that doesn't depend on carbon. There's a chasm between where we are and where we need to be—and our current strategy for bridging it is murky at best. "What we need to do over the next 10 to 20 years is redesign our relationship with nature and energy," says Nicholas Parker, chairman of the Cleantech Group, a green research organization.
No problem, right? But the good news is that there are already thousands of very smart people working on alternative energy in what Daniel Yergin, chairman of the Cambridge Energy Research Associates, calls "the great bubbling." Venture-capital funding in the clean-tech sector hit $5.18 billion in 2007, up 44% from the year before. And no surprise, the biggest bubbling is happening in California, specifically Silicon Valley, where a combination of the state's progressive environmental measures, unmatched scientific talent and entrepreneurial culture is giving birth to dozens of start-ups.
Among the new companies is Amyris Biotechnologies in the Bay Area, where Jack Newman and his team are developing ways to genetically modify bacteria to make better biofuels, sidestepping the food-vs.-energy debate that has long dogged the field. With nearly $100 million in venture backing, Amyris is trying to engineer yeast or bacteria that can metabolize biofuel feedstocks like wood chips and dramatically increase the amount of biofuel that can be extracted from them. "There are staggering things that technology can do," says Newman. "But we need to make this happen in as short a time as possible."