by Amory Lovins
In mid-2005, Rocky Mountain Institute launched a three-year effort to implement the ideas in our book, Winning the Oil Endgame – our detailed 2004 roadmap for getting the U.S completely off oil by the 2040s, without needing new taxes, subsidies, mandates, or federal laws. We felt this $3.6-million effort could be led by business for profit, because saving or displacing oil would cost only $15 per barrel (in 2000 dollars)-far below oil’s price.
It might seem foolish to expect to shift such gigantic sectors as oil and cars. But by taking markets seriously, we saw leverage in "institutional acupuncture": find meridians and points where the business logic is congested and not flowing properly, then stick needles into carefully chosen sites to get it flowing.
Some farsighted donors and foundations backed this ambitious experiment. Two and a half years later, it has exceeded expectations. Of the six sectors that must change to set the United States firmly on the journey beyond oil, I believe at least three, perhaps four, have already passed the "tipping point" beyond which the major efforts still required will become ever easier.
The hardest and slowest sector is cars. But building on 17 years of patient effort, our acupuncture is now driving big and accelerating shifts. The tsunami of "creative destruction" we foresaw in 2004 is now breaking over the industry and changing the managers or their minds, whichever comes first.
Our book urged Detroit to emulate Boeing’s breakthrough competitive strategy, based on an efficiency leapfrog integrating ultra-light materials, advanced manufacturing, and whole system design. Matching our playbook, in September 2006 Ford hired Alan Mulally, head of Boeing Commercial Airplanes, as its new CEO. I now work with Ford’s leadership team as a charter member of Chairman Bill Ford’s Transformation Advisory Council.
In October 2007, Toyota showcased the industry’s best-yet Hypercar®-class concept car- the 1/X (pronounced "one-Xth") at the Tokyo Motor Show. Many concept cars never get to market. But a day earlier, Nikkei reported that Toray, the world’s biggest carbon-fiber maker, plans a $333 million factory in Nagoya to mass-produce carbon-fiber body panels and other auto parts for Toyota, Nissan, and others. Together, these two announcements signal strategic intent.
During 1987-2006, the average light-duty vehicle sold in the U.S. got 29% heavier; cars alone got 17% heavier and 12% denser; but only 30% of the fleet’s weight gain (and none in recent years) was caused by bigger cars or by shifts to SUVs, vans, and pickups. Instead, the obesity came from materials and design.
Yet in recent months, strategy has begun to go lean: integrative lightweight design has emerged as an important trend. In November 2007, Ford led by announcing a 250-750-pound weight cut in all cars starting in Model Year 2012 (as soon as production can shift) to capture unexpectedly big design synergies (Mazda had already been quietly lightweighting.) Two months later, Nissan announced a 15% average weight cut by 2015, and China announced an auto lightweighting alliance aiming to cut 660 pounds out of the average car by 2010. Lightweighting is finally emerging as the hottest strategic trend in the industry.
Unlike traditional improvements, lightweighting can improve fuel economy, performance and crashworthiness. But this seemingly obvious solution had lacked two key ingredients. First, light materials looked costly. This barrier is rapidly falling due to manufacturing advances, both with familiar light metals and with newfangled carbon-fiber composites (led by RMI’s spinoff Fiberforge, whose high-speed manufacturing technology recently entered industrial service).
Second, most automakers still count costs per part or per pound, yet customers care only about cost per car. Since 1991, we’ve shown how costlier parts or pounds can make cars cheaper to build. In 2000, our Hypercar ® spinoff (later renamed Fiberforge®) and its Tier One industry partners designed a 67-mpg uncompromised midsized SUV that proved how cheaper tooling, simpler assembly, and smaller powertrain could offset costlier materials.
Winning the Oil Endgame then showed how eliminating 53% of that car’s weight would be essentially free: the 3.6×-more-efficient SUV would be priced just $2,511 higher (2000 $) – a two-year U.S. payback – and would cost more because it’s hybrid-electric, not because it’s ultralight.
"Feebates" will further speed and reward the transition – a private Feebate Forum RMI led in June 2007 is stimulating strong industry interest.
In January 2008, RMI joined with powerful industry partners to spin off our third venture, Bright AutomotiveTM, focused on PHEV technology development. To push this further, we’re developing the "Smart Garage"-an intelligent interface between electric traction vehicles, buildings, and electric grid. Plug-in hybrids’ distributed battery storage, or fuel-cell cars’ distributed fuel-cell generators, could become important, even dominant, elements of electrical supply, initially for peak loads and later for wider needs-realizing the "vehicle-to-grid" concept I invented in 1991.
Now let’s connect the automotive dots. Drive your Prius-class car properly (not the way Consumer Reports says to) and you double a typical non-hybrid sedan’s miles per gallon. Make it ultralight and slippery and you can redouble its efficiency. Now fuel it with cellulosic E85 fuel (85% ethanol, 15% gasoline) and cut its oil use per mile by another fourfold, to ~1/16th of the current level. Make it a plug-in hybrid and cut oil use by at least half again, to ~3% of the original. Optionally, a hydrogen fuel cell – competitive in such an efficient vehicle – could replace both the engine and its E85 fuel.
This menu doesn’t yet count diesel engines, which are more efficient than normal Otto engines and have half the European market today. In 2004, we weren’t sure diesels could meet future fine-particulate air standards, so we didn’t include them. But in 2007, a small Colorado firm demonstrated a radically new digitally controlled engine that promises above-diesel efficiency, cleanly burning any fuel on the fly, yet with lower cost, size, and weight.
Successful development of this concept could quickly bring internal combustion engines to and beyond fuel cells’ efficiency range-itself a moving target-revolutionizing both vehicular propulsion and stationary micro-power systems.
Alternatively, MIT researchers have shown how a tiny, timely squirt of ethanol into the engine can suppress knock even at tripled compression ratio, permitting half-size, same-torque engines about about one-fourth higher efficiency. That could stretch today’s modest ethanol supplies to cover the whole fleet.
Aviation, Trucking & the Military
Meanwhile, the first three sectors to have reached the tipping point are continuing to accelerate their transformations. Let’s start with aviation, the fastest-growing oil user. In 2004, Boeing got outsold by Airbus, but launched a bold riposte: the 20% more- efficient, same-price, greatly simplified, easier-to-build-and-run, 50%-carbon-composite-by-mass airplane called the 7E7, later renamed the 787 Dreamliner.
As we expected, it proved wildly successful. By late February 2008, Boeing had sold 885 of these airplanes and 430 options, the fastest order takeoff of any jetliner in history. Production is sold out well into 2017. Boeing now plans to add similar innovations to every airplane it makes before Airbus can catch up. Boeing will also presumably apply its momentum and cashflow to aggressively develop even more efficient designs to consolidate its competitive advantage.
So far, Boeing’s strategy looks like one of the great turnaround stories in business history: it took only two years to move Boeing from trouble to triumph. RMI is discussing with airframe makers some ways to accelerate such progress within a profitable competitive and climate strategy. And in February, Sir Richard Branson’s Virgin Atlantic Airways successfully tested a novel non-food-crop-based A380.
Winning the Oil Endgame showed how to triple the efficiency of heavy (Class 8, 18-wheel) trucks through an integrated suite of improvements, mainly in aerodynamics and tires, with a juicy internal rate of return around 60%. On discovering that major truck buyers didn’t know this was possible, we began facilitating conversations between one such firm and its suppliers. They soon discovered that the first 25% fuel saving was free.
The buyer said, "Free isn’t good enough: I want to invest for a return. What can you do for me?" Dramatic and lucrative opportunities quickly emerged. In October 2005, the firm announced its new truck purchases would soon become 25% more efficient (it now expects near-completion by late 2008), and that it would double its fleet efficiency by 2015. The firm is Wal-Mart, the world’s largest company. It will save billions of dollars’ and Wal- Mart’s immense "demand pull" will bring doubled-efficiency trucks into the marketplace. In the U.S. alone, that’ll save 6% of total oil use!
Now RMI is working to enroll more buyers, speed suppliers’ innovations, and demonstrate tripled-efficiency designs, which Wal-Mart’s CEO has acknowledged as a realistic goal.
Having analyzed and advocated for military energy efficiency for two decades and served as an independent member of two U.S. Defense Science Board task forces advising the Secretary of Defense on this issue, I’ve long urged military leaders to start valuing saved fuel at its delivered value.
Tying down whole divisions hauling fuel and guarding convoys diverts and degrades combat capability. About half of all U.S. theater are related to convoys, which mainly haul inefficiently used fuel. The "fully burdened" cost is many times the $13-billion cost of undelivered military fuel in FY2006.
Winning the Oil Endgame recommended a practical long-term plan for tripling the average fuel efficiency of military platforms and installations. Today that estimate looks realistic, perhaps even conservative. The resulting DoD R&D emphasis on light-and-strong materials, advanced propulsion, etc. will help to transform the civilian car, truck, and plane industries toward tripled fuel efficiency, much as past military R&D led to the Internet, the Global Positioning System, and the jet-engine and microchip industries. The Pentagon is thus emerging within the U.S. Government as the leader in getting the nation off oil.
In February 2008, the Defense Science Board panel released a report. Its Appendix E revealed an important policy created in April 2007 by the Under Secretary of Defense: "Effective immediately, it is DoD policy to include the fully burdened cost of delivered energy in trade-off analyses conducted for all tactical systems with end items that create a demand for energy and to improve the energy efficiency of those systems, consistent with mission requirements and cost effectiveness." A pilot project is now refining and field-testing this policy.
Another new directive, approved by the Joint Staff in 2006, will selectively apply to new weapons systems an Energy Efficiency Key Performance Parameter-a core metric that drives requirements-writing and acquisition. In May 2008 I hope to start helping the Defense Acquisition University, which trains all DoD purchasers, to apply these vital concepts. And as soon as we can find funding, I intend to expand RMI’s efforts to help the civilian and uniformed leadership to embed energy efficiency irreversibly in the Services’ cultures and processes.
From cellulosic ethanol to butanol to algal oils, a portfolio of exciting new biofuel options is moving from lab to market, including breakthroughs not yet announced. RMI recently helped the National Renewable Energy Laboratory redesign a cellulosic ethanol plant to save half its steam, three-fifths of its electricity, and a third of its capital cost, and other emerging advances can cut costs even more drastically.
At RMI, we’re experiencing a rush of pre-nostalgia just thinking about the richer, fairer, safer world beyond oil.
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Amory Lovins is Chairman and Chief Scientist of the Rocky Mountain Institute.
Adapted from RMI Solutions, a SustainableBusiness.com Content Partner
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