Transcript: Endurance, Resilience, and the Defense Science Report

    MITZI WERTHEIM:  I’m Mitzi Wertheim and I’m sort of the shepherd of this organization.  And I want to apologize for the cramped space, but we were originally scheduled for last night, eight months ago, and the only night we could get was tonight if we wanted to hear Amory.  So this is what we’re confronted with.  If there are any empty seats around you that you know there is no one coming to occupy them, raise a hand.  Okay, we’ve got – come on guys.  Come on in and let’s – well, wait.  There’s one over here.  Dan’s going there.  That’s mine.  (Laughter.)  Any more?  Anybody else sort of struggling?  Oh, they’ve got a seat back here, a seat over there.  All right.  I’m going to stop worrying about this.  We’re waiting for Amory actually.  I let him go to the head.  (Chuckles.)  I think we needed to do that.  Oversharing, well, that’s all right.  We live in an open world.  (Chuckles.) 

I’m going to turn this over to Steve.  He’s our moderator.  He does our introductions.  He is a psychologist from the Coast Guard and this is – our whole program is really interagency, interdepartment.  We’re building an entire network, everything from agriculture to the VA.  And then a lot of other things were added onto this by the deputy secretary of Defense.  But we really are trying to build a community about learning and sharing about energy.  So I want to welcome you all for coming.

STEVE WEHRENBERG:  Thank you, Mitzi.  Did you apologize for the venue, by the way?

MS. WERTHEIM:  I did.

MR. WEHRENBERG:  Oh, thank you, good.  At least I don’t have to worry about that part, so I appreciate that.  If you just turn around real quick and look out there, we were tempted to have everybody stand and maybe do the national anthem – (laughter) – and, you know, Pledge of Allegiance or something.  But it’s just a beautiful view and well-worth seeing if you haven’t seen it so far.

Well, good evening and welcome to this evening’s energy conversation.  We’re probably up to about 23 or four now, something like that.  I happened to be perusing our ancient materials – ancient being 2006, of course – today, and discovered a – thank you.  Don’t touch the box there, okay?  Good.  You got an early lead there, Amory.  We’re good.

Anyways, I took a look at a defense journal article that mentioned the high hopes that sprung out of our very first session here in I think March of 2006.  And certainly we’ve seen a couple of hundred folks every month ever since and it’s been just wonderful.  I appreciate you all being here.  Sorry you’re so crowded in.  Here we are.

Anyways, I’m Steve Wehrenberg with the Coast Guard.  I’m also a board member of the Energy Consensus, which is a group aimed at doing exactly what we’re doing here: educating decisionmakers and those who influence them in the challenges and opportunities that we face in energy and the environment.  I will be your moderator this evening.  A couple of quick administrative announcements: one – cell phones, stun please.  The only thing better would be if it, say, went off and it was “Wild Thing” or something like that because then we’d all get a good chuckle out of that.  I’m sure you wouldn’t want it to happen that way.  As you can see, we’ve got a couple of mike stands here.  As we normally do, we’ll have plenty of time for questions after Amory speaks.  The mike stands make it a self-queuing operation so you can just sort of queue up and ask your question when time –

MS. WERTHEIM:  I think they’re going to pass the mike.

MR. WEHRENBERG:  Are we going to pass mikes?  Oh, we’re going to –

MR.    :  That way there doesn’t need to be a stampede towards two corners of the room.

MR. WEHRENBERG:  Well, it’s a good point.  In this venue, that’s probably a good idea only now I’ll have to stand up and moderate the passing of the mike.  That’s the only thing worries me about that.  And somebody will hit me and – you know how that works.

At any rate, if you would be so kind, if you do choose to ask a question, to state your name and your affiliation.  If you don’t, Mitzi will remind you, as she always does.  I will remind everybody that our next session is April 28th.  That will be Lester Brown, the author of “Plan B 3.0,” most recent published.  And just a secret between us, you can download it on the web.  Yeah. 

Our speaker this evening is Dr. Amory Lovins, chairman and chief scientist of the Rocky Mountain Institute.  I believe, Amory, you’re our first returning speaker, which means that one of us must be doing something right, either him or us, one or the other.  I could probably spend a good hour summarizing Amory’s accomplishments and contributions, but I think you’d probably rather hear him speak than me, so I won’t bother to do that.  You have a short biography, I guess, on the invitation that went out for this.  And since all of you got invitations, I know you have the biography.  If you do want some more information about Amory and the Rocky Mountain Institute, I encourage you to visit www.rmi.org – free plug, Amory.  No problem. 

As a member of the Defense Science Board, he has up close and personal insights into that report and will speak this evening on two relatively new strategic directors, I think: endurance and resilience, which are both something that we should be concerned about.  There will be plenty of time for questions at the conclusion of the presentation.  Please welcome Dr. Amory Lovins.

(Applause.)

AMORY LOVINS:  Well, thank you very much and thank you all for taking time out of very crowded schedules to join this conversation.  I am not, by the way, a member of the Defense Science Board.  I was on two of its taskforces on energy strategy including the one that just reported 13 Feb.  And I’m delighted to be back to say a bit more about more fight with less fuel at lower cost for a safer world.

Some of you in the room can see the screens.  Some cannot, but you all have beautifully produced handouts.  I hasten to add that they include many hidden slides that I will not inflict upon you, so I don’t have that many.  And I bring you apologies in advance if required from Bill Gates for some bugs in this PowerPoint software – (laughter) – which may require me to reformat some slides on the fly because he thinks he knows better than I do what font sizes I want and he keeps changing them whenever I save the file.  (Laughter.)

There was a Logistics Management Institute review of winning the oil end game – about which more in a moment – three years ago suggesting that aggressively improving military energy efficiency would potentially do more to solve the most pressing long-term challenges facing both the department and our national security than any other single investment area.  I think that’s true and I hope you will too by the time we get through.

I want first just to give you an update because some of you were at my talk about, oh, five quarters ago or thereabouts.

MS. WERTHEIM:  In ’05.

MR. LOVINS:  Oh, ’05?  Okay, quite a ways –

MS. WERTHEIM:  No, ’06. 

MR. LOVINS:  In ’06, okay.  Some of you heard me say a bit before about a study that Andy Marshall and Jay Cohen, who is with us tonight, have generously co-sponsored at the time that looked at a very – in a very transparent peer-reviewed way nobody is arguing with at the U.S. oil problem.  It was written for business and military leaders and written around competitive-strategy business cases for the car, truck, plane, oil, and military sectors.  You can get it all free at oilendgame.com and it’s a detailed roadmap for getting the U.S. completely off oil by the 2040s led by business for profit and applicable to any other country I can think of. 

The transition could look something like this, that rather than heading up the red curves as officially forecast – sorry if they’re not red in your handout – but the ones that head toward the northeast corner – oil use at the top, oil imports below – rather than doing that, we could turn down those curves along the green lines through end-use efficiency, redoubling it.  We’ve already more than doubled it since ’75.  We can redouble it at an average cost of $12 a saved barrel.  And then we could go down even more steeply by replacing the other half of the oil with a mixture of safe natural gas and advanced biofuel – cellulosic ethanol, not corn ethanol – and maybe some other stuff.  And the average cost of that is about 18 bucks a barrel.  So the average cost of getting altogether off oil is about 15 bucks a barrel, which is about a seventh of the current price.

We’ve done this sort of thing before.  The last time we paid attention and did even better, more steep reductions, was 1977 to ’85.  And in those eight years, the economy grew 27 percent, oil use fell 17 percent, oil imports fell by half, imports from the Persian Gulf fell 87 percent and would have been gone in one more year if we had kept that up.  And indeed OPEC’s exports were cut in half and it broke their pricing power for a decade because we customers, especially in America, the Saudi Arabia of nega-barrels, had more pricing power than the supply cartel.  That is, we could save oil faster that OPEC could conveniently sell less oil.  That’s all the more true today with our much better technology.  So we could rerun that old play all over again.

But we have a much wide range of choices now.  Suppose that we invested $180 billion once, half of it to retool the car, truck, and plane industries, half of it to build a modern biofuels industry.  And suppose that we were so successful that we crashed the oil price by a factor four back to what was the official 2025 forecast when we did the study a few years ago, namely, 26 bucks a barrel.  Against $26 oil, that $180 billion investment would give a gross return of $155 billion a year, a net return of $70 billion a year, assuming all externalities are worth zero.  As a free byproduct, we’d cut the carbon emissions by a quarter, we’d get a million new jobs, three-quarters of them in rural and small-town America, and we would get to save a million jobs now at risk, chiefly in automaking where we have to decide whether we want to continue importing efficient cars to save oil or to make efficient cars and import neither the oil nor the cars – somehow that sounds smarter. 

    And the business case is so compelling that we actually discovered we don’t need – in order to do this – any new fuel taxes, subsidies, mandates, federal laws, or anything else that either party doesn’t like or could mess up.  So it’s not necessary to go to the sausage factory across the river for anything on this.

Now, the technical key, as you might expect, is in transport because that’s where 70 percent of the oil goes and the other 33 percent, the buildings and industry, there are very big cheap oil savings as well.  But I want to focus here on how to triple the efficiency of cars, trucks, and planes at respective U.S. paybacks of two years, one year, and four or five years with a common formula making them very lightweight or slippery and moving through the air or along the road and with advanced propulsion.

    Also, often with better performance – like this sporty, diesel hybrid can do 155 miles an hour and 94 miles a gallon, although, not at the same instant.  (Laughter.)  And the analytic surprise for many is I think we finally showed beyond doubt that the ultra lighting that doubles the efficiency of these carbon fiber concept cars would, in mass production, actually not cost extra because the costlier materials are paid for by simpler automaking and seven-fold (sp) smaller power train. 

And the physics is quite straightforward.  Everyday your car uses about 100 times its weight in ancient plants.  Where does that energy go?  Well, seven-eights of it never gets to the wheels.  It’s lost first in the engine, idling, driveline, and accessories.  Of the one-eight that does reach the wheels, half of it either heats the tires and rotor or heats the air you’re pushing aside and only the last 6 percent actually accelerates the car and heats the brakes when you stop. 

    However, only a 20th of the mass you’re accelerating is you, 19, 20th is the heavy steel car, therefore, only 5 percent of 6 percent of 0.3 percent of the fuel energy moves the driver – not very gratifying.  However, the good news is that three-quarters of the energy it takes to move your car is caused by its weight and every unit of energy you save at the wheel saves another seven units that you don’t need to waste getting it to the wheels.  So there is enormous leverage in making the car a radically lighter weight, whether you do it through light metals, ultra-light steels, or advance polymer composites.

    Using the latter, carbon fiber reinforced composites, our team actually worked with a couple of European Tier Ones and back in 2000, did a complete virtual design for a midsized suburban assault vehicle, weighing less than half normal but safer than the steel one twice its weight even if they hit each other.  Quite brisk performance in getting 114 miles a gallon on hydrogen or 67 on gasoline; that version would have an extra sticker price of two and half thousand bucks, which is under a two-year payback in the U.S. or a year abroad and it’s radically simpler to make.  You notice that the 14 parts and the body are suspended from rings like an airframe to make it really light, strong, and stiff, rather than being built up from a tub, which is our legacy of the horse and buggy days in the car business. 

Each of these 14 parts can be lifted, except maybe the bottom one, with one hand and no hoist.  In fact, the biggest one here on the side I can briefly lift with one finger.  And then each one is made with one low-pressure die set, rather than having 10 or 20 times more parts and a steel body, each with an average of four progressive steel-stamping die sets.  So you save about 99 percent on tooling costs.  Then the parts snap together precisely for bonding so you don’t need the jig’s robots and welders at the body shop, and if you like color in the mold, you don’t need the paint shop, so the two hardest and costly parts of making the car went away along with at least two-fifths of the capital compared with the leanest plant in the country.  So that’s a good game changer.

    And I many have shown you last time my carbon cap, 1916 or so, Italian style.  This is molded in less than a minute by a process that has now entered volume production in the aerospace industry that one of our spinoffs developed and – (tone) – plastics have changed since The Graduate.  (Laughter.)  But this is two-thirds carbon fiber, one-third thermal plastic and you can actually whale on this with an eight-pound maul and nothing happens.  It just bounces off.  This is – this particular piece is tougher than titanium, and in U.S. terms, it’s like finding a Saudi Arabia under Detroit because if you make cars and light trucks out of it that’s how much oil you save, basically, half the weight of the vehicle and half the fuel use go away. It gets safer because this stuff can absorb 12 times as much crash energy per pound as steel but the car costs the same to make.  The ultra lighting is free. 

    Now, there’s be considerable progress – let me just pass this around the room; just make sure I get it back, please – considerable progress also in design and the most exciting thing, lately, is a concept car that Toyota showed last October called the 1/X because it’s one half the fuel use of a Prius with the same interior volume and one-third of the weight, and that includes 20 kilos to make it – of extra batteries to make it a plug-in hybrid, without which it would be 400 kilos, exactly what I said in ’91 to much mirth from the industries,  you can imagine, a four-seat carbon car should weight.  And the packaging is terrific.  It’s really spacious because the little half liter flex-fuel engine actually tucks under the rear seat – amazing packaging. 

    Now, you might think this is just a brag, which most concept cars are but it looked more serious because the previous day Toray, the world’s biggest maker of carbon fiber had an announced a $.3 billion dollar plant in Nagaya to mass produce carbon fiber car parts for Toyota, Nissan, and others.  So that makes it clearly a signal of strategic intent, not just something for amusement.  And that also happened to come with what is now the hottest strategic trend in the industry; namely lightweighting. 

Ford announced the following month a 250- to 750-pound weight reduction on every platform, okay, starting model 2012 to capture unexpectedly big synergies.  The following month Nissan announced an average 15-percent weight cut by 2015, and a few weeks after that, China announced a lightweighting alliance of its auto industry targeting a 300 kilo average saving by 2010. 

So this is now off and running and, of course, the market will sort out which materials when.  There are perfectly valid light metal solutions.  I happen to think the composite ones have more strategic advantages, but it’s more of the physics and the thinking I’m getting at here.  And this is not just about materials; it’s about integrative design to maximize the snowballing of weight savings and to make a lot of parts go away.

    Now, if you follow that logic all the way through, all of the uses of oil, here’s how the moving parts fit together and I won’t trouble you here with the supply side.  The government had forecast that we would need 28 million barrels a day of petroleum products in 2025. Of that, we could by then have eliminated almost $8- through $12-a- barrel efficiency with another seven still being captured as we turn over the rest of the vehicle fleets.  So we need 20 net at which we could almost six from biofuels, biolubricants, biomaterials, almost two from no-brainer substitutions of saved natural gas.  We can save half the gas in the country at about an eighth of its price.  In fact, most of the savings have negative costs.

    We were forecast to get almost eight million barrels a day from domestic sources already allowed and we’d need five from some place else, which sure beats 20.  Well, where could that come from?  Maybe we should buy more efficiency, it’s so cheap and getting cheaper all the time or maybe we wait a little longer and capture the other half of it that’s still in the works at 2025.  Or we could, of course, continue to import oil from Canada and Mexico or long before this, the WTO will have made our illegal 100 percent tariff on Brazilian ethanol go away so we could buy that. 

Oh, by the way, I haven’t yet accounted for two-thirds of the saved natural gas, and that two-thirds could directly substitute for this five million barrels a day balance, or if we did the most profitable thing with the saved gas, we’d make it into hydrogen, which is so much more efficiently usable that it could also displace all the domestic oil.  We could even be a net exporter for a while if we wanted. 

And I haven’t counted some important other options.  For example, just wind power in the Dakotas could make 50 million tons a year of hydrogen cost effectively by then, and that’s enough to run at these levels of efficiency every highway vehicle in the country and it would be practical if you designed them that way. 

Now, I want to give you a couple of slides on how we’re doing with implementation.  The most interesting story for the defense industrial base, I think, is in aerospace.  And it’s about a breakthrough competitive strategy based on a leapfrogging platform efficiency, based on a very forward-leading approach to advance materials manufacturing, design integration, and better engines. 

We tend to forget that a decade ago Boeing was in as in deep trouble as Detroit is now, and they got their cost back under control with a bunch of wrenching changes, including Toyota production system.  But there wasn’t anything very exciting in the pipeline after the triple seven.  There was the sonic cruiser but that soon died of oil prices and Airbus was starting to pull ahead.  So some observers were even starting to doubt Boeing’s staying power. 

Boeing’s bold repost (?) was the – what turned into the 787 Dreamliner, an airplane that saves a fifth of the fuel but has the same price.  It’s half carbon fiber composites by mass, up from 9 percent in the triple seven, has many advantages for both the customer and the manufacturer, and it has had the fastest order take-off of any plane in history.  It sold out well into 2016.  And now they’re rolling out those – that suite of advances to every plane they make before Airbus can steer itself out of the ditch. 

And basically, this strategy flipped the airframe sector in three years.  Now, of course, there are teething troubles in supply chain but I think this will still turn out to be one of the great all-around – all-time turn around stories in business schools.

Now, with that in mind, my outfit is busy implementing the oil end game through what we call institutional acupuncture; that is, we figure out where the business logic is congested and not flowing properly and we find the right sites to stick needles into.  And we need to change what’s happening in six sectors.  Of those, I would say at least three are past the tipping point already, starting, obviously, with aviation and continuing with heavy trucks, where based on our analysis, Wal-Mart is demanding doubled-efficiency trucks from its suppliers and those will be rolled in to the fleet by 2015.  They’re already – by the end of this year will be about done with the first 25-percent saving, which turned out to be free.  And we’re using that demand pull to get those trucks in the market quickly so everybody can buy them and then we’ll go tripled-efficiency trucks.  So we’re working also to speed the supplier’s innovation and expand the buyer’s consortium.

And I would say that DOD has emerged already as the federal leader in getting the nation off oil.  It may not feel like that from the inside, but the progress I see, as a novice in military affairs, is really quite striking, and I’m grateful to those of you here who are leading it. 

There is a lot happening in fuels.  You will see many stealth-mode companies start to emerge this year into the daylight with very interesting products.  Finance put $117 billion dollars of new capital, worldwide, into the clean energy space last year, and we always knew the toughest sector and the slowest to start to flip would be light vehicles but that’s starting to change.  We recommended in winning the oil-end game that Detroit should do what Boeing had done, which had been announced some months before we wrote the book. 

Well, a couple outside directors of Ford Motor Company read that, thought it was a good idea, and went out and recruited the head of Boeing commercial airplanes to run Ford and they got him eventually.  So Alan Mullally is in Dearborn with transformational intent and from my involvement there, I’m quite excited with what’s happening. 

The UAW and the dealers are keen for this kind of innovation to save the industry, and as this tsunami of what Schumpeter called “Creative Destruction” sweeps over Detroit, it’s opening minds to previously unthinkable change.  I mean, who would have thought a few years ago that two of the big three would now be run by non-car guys? 

Meanwhile, there is leapfrog pressure from elsewhere, like the Nano from Tata in India, the first real clean-sheet design for decades in that industry.  We ran two transformational projects last summer; either one could flip the industry.  They both turned up trumps.  One’s with a major automaker, another was with Tier Ones and turned into a spinoff in January and the competition at a level not seen since the ’20s is really changing the managers or their minds, whichever comes first.  So I’m very pleased with how this is going.

By the way, to continue it, I need another $3 million dollars for another two years.  That’s roughly what the country spends on foreign oil every second. 

What does this mean in the big picture?  Well, if you look at the industry’s view – BP in this case – of the supply curve of global oil, you can see we’ve already taken up about a trillion barrels, and OPEC Middle East claims to have about that much more, which is about as much as the World Energy Organization – excuse me, excuse me – outlook.  Yeah, the IEA forecast says the world would to 2030, but if you don’t want to buy it all from them, then you get into other stuff that rapidly gets expensive and nasty.  And the prices shown here are the economic price in a perfect free market, then you add to that whatever monopoly rent OPEC would extract.  That’s most to the treasure transfer going on. 

Now, you notice this doesn’t include end-use efficiency or advanced biofuels; in fact, any biofuels or saved natural gas substitution.  So if you conservatively scale those to the world and spliced them in, everything shifts three trillion barrels to the right.  And since what you displaced thereby is not just hydrocarbons but the most carbon-intensive kinds toward the upper-right here, you would end up with a cumulative avoided carbon emission of over a trillion tons, along with a saving of tens of trillions of dollars, plus OPEC rent.  That’s just tens of trillions of dollars in a perfect free market with competitive oil price.

So if you noticed that I haven’t mentioned peak oil, nobody can know who’s right about peak oil because 94 percent are still at the reserves or held by governments, which don’t know or won’t honestly tell what they’ve got.  But it doesn’t matter who’s right about it because we should do exactly the same things anyway for other reasons, like saving money or improving our security or helping climate, whatever appeals to you.  I don’t need one more reason to be worried about oil, thank you very much, and I don’t need an indeterminate one; the others are quite definite.

Now, I think the department can be the key catalyst, technically and in other forms of leadership, in getting the country off oil in much the way that Jim Woolsey talks about the history of salt – you know, that countries used to go to war over salt before we had refrigeration.  But now it’s just a commodity and you sprinkle a little on your food from time to time but you don’t think about where it comes from.  Oil can be made that irrelevant by 2050.  And again, DOD should do all of this anyway, just for its own mission success but I think it would be really good for a safer world to do it more broadly.

The obligatory pie charts show you that the department, a few years ago, was using under 2 percent of the nation’s oil.  There are still some to come numbers in here.  Amazingly, it’s still hard to find out just what consumers spent on oil three years ago.  And it’s mostly – it’s about two-thirds jet fuel that went into the department and about three-quarters of it is for Mike Imani’s (ph) airplanes, and the Air Force, of course, is the biggest user and then we break out where that goes; mostly heavy.  And then, the Navy is the next biggest user, mostly for ship and naval aviation, and the Army has a small piece but notice that this doesn’t count Air Force and Navy fuel that’s transporting Army material.  Nobody knows what that lift use is. 

In principle, it’s available but you can’t actually get hold of it.  And we also don’t know how much is used by contractors to whom various functions have been outsourced.  So maybe the total Defense-related use is over 2 percent.  We don’t really know but it somewhere around there and we do know that the Army use is about a third combat; two-thirds logistics; and we were just able, in Defense Science Board Task Force, to find out that at a wartime optempo (sp), which is 3.6 times the peacetime oil consumption.  You know what’s the biggest use of oil by the Army? 

AUDIENCE:  (Off mike.)

MR. LOVINS:  Generators.  Bingo.  Thirty-four percent generators; 30 percent combat aircraft; 16 percent combat vehicles; 16 percent tactical vehicles; 5 percent non-tactical.  More on the gen sets later. 

And the apparent fuel costs that various people quote maybe $13 billion fiscal year ’06, a lot more now, is a modest fraction of the true fuel cost when you have to pay for getting it where it’s bound.  The added delivery cost is fairly small for the Navy but very significant for the Air Force delivering in midair and for forward fuel for the Army and Marine Corps. 

Now, the whole requirements and acquisitions process, as we found in a Defense Science Board Task Force in ’01, grossly undervalues fuel efficiency because it basically assumes that logistics is free and logistics is invulnerable.  This is a very, very bad approximation.  We have whole divisions of folks hauling oil around and more divisions trying to guard them, weakening combat effectiveness, making big hassles with force protection, and it doesn’t always work, and thus, compromising our recruit and retain goals.  But if we had several-fold more fuel efficient platforms using the oil, we’d get some really big warfighting logistics and budget benefits and could unlock multi-divisional level transformational kinds of realignment and at least tens of billions of dollars a year in savings.  It’s a force multiplier because you can turn fuel guarders into trigger pullers, which is what they signed up for in the first place, and the biggest win is to catalyze big leaps in civilian technology that can get the country off oil so you don’t need to fight over oil. 

Now, I want to give, unofficially – I cannot in any way represent the department or Defense Science Board – just my personal views as a citizen of some of the things we learned in the new report that you’ll find at the DSB website – the report of the Energy Strategy Task Force chaired by former Sec. Def. Schlesinger and General Carnes (sp) and called “More Fight, Less Fuel.”  So it’s a terrific report.  I hope you all have read it or will read it soon and I want to emphasize a few things that, had I been writing it, might have come out with a little greater stress than are in it, but they’re there and so I’ll just tell the same story in a little different way, perhaps. 

I think there is a clear and present danger to our energy security, nationally and in theater, but it’s not oil.  It’s electrical vulnerabilities.  They’re blocking stabilization in Iraq.  They’re becoming acute in Afghanistan.  They could take down the whole country, let alone the department’s operational capability.  Now there is a gathering storm over reliable and affordable oil supply for the world, for the nation, but not specifically for the department, which has purchasing priority under the Defense Production Act, if needed, and will always be able to get the mobility fuel it needs.

So the department doesn’t specifically have an oil problem of supply.  It has a different problem; that of the very great burdens imposed by using oil so inefficiently and weakening combat effectiveness.  But that can be turned around, boosting combat effectiveness and fuel efficiency, and I think we’ll find that the cost of doing that ranges from small to lower than now by exploiting two new strategic vectors, which I’ll call endurance and resilience, turning these energy risks into revolutionary gains in security and warfighting capability.  That’s the big picture.

Now, the major energy threats to mission execution for the department and to the national economy start and almost end with takedown of the electric grid on any scale and for very long periods.  I don’t mean weeks or months.  It can be much longer than that.  It could be permanent.  And then there’s the more obvious risk of taking down vital oil infrastructure, like two-thirds of Saudi oil passes through one processing plant and two terminals.  The processing plant has been attacked once; the larger of the terminals has been attacked twice.  There were at least two other major roundups of bad guys, recently, allegedly with their eye on the same sorts of targets.  I don’t know how long we’ll go on being lucky – and there are many other choke points that you’re well aware of.

And then there’s the energy inefficiency of the military systems, making warfighting less effective, making it much more vulnerable, creating big logistical burdens, and the price is paid in both dollars and blood.  And these are all self-inflicted wounds.  We create them by our own policy, and they’re unnecessary and they’re uneconomic.  So I’ll talk about how to fix that. 

We know in military affairs that new threats require new strategy.  It’s competition that drives strategy and then that changes the capabilities you need and the technologies you need, and we now have a very different kind of adversary –asymmetrical and everything that goes with that.

So we need to an unprecedented degree, dwell or persistence, agility, mobility, maneuver, range, reliability, autonomy – things that we kind of paid lip service to before,  and we need to those things cheaply so that small units in large numbers, but not very large total, can cover large areas for a long time.  That’s a big challenge.  And yet, we have these half-century old heavy legacy forces dragging this fat-fuel logistics tail around behind them – an attractive nuisance for insurgence, a serious vulnerability, a big cause of casualties, and huge financial burdens. 

And I think to turn those threats into advantages takes two strategic vectors that have so far have been missing from the conversation but they are mentioned in the new DSB report.  It says the task force concluded DOD’s energy problems are sufficiently critical to add two new strategic vectors:  endurance and resilience.  Here’s how I defined them.  Endurance turns radically improved energy efficiency and autonomous energy supply into a many-fold increase in range and dwell.  With all of that implies for affordable dominance in the kinds of operations we increasingly will have and in more traditional operations, it just enhances over match.  Resilience means efficiently used, diverse dispersed, renewable supplies with such architecture – which I’ll get into later – that major failures, whether deliberate or accidental, become practically impossible, whereas right now they’re inevitable by design. 

It seems to me these two vectors compliment but they’re just as important as the four vectors that have already led the revolution in military affairs; namely speed, stealth, precision, and networking.  But we need those two more because without them the exploitation of the electric and fuel vulnerabilities already critical in theater could soon come to a theater near you.  But with those vectors, I think we’re headed toward more effective warfighting and a safer world with less need for warfighting, and generally it’s going to work better and cost less.

Now, electricity – dwell on that for a moment – is needed to run everything else.  If you don’t have it, you don’t have much oil or gas either.  It’s very capital intensive.  More than anything else we do, very long lead times, very unforgiving technologically, and the central plants and especially the grid are vulnerable to pretty simple attacks because they require exact synchrony continuously over enormous areas.  There’s only three grids in the United States.  This needs long power lines, which can suffer from boll weevils or insulator disease if you got a 30-ought-6 (?).  They rely absolutely on COMS that are pretty easy to crack into.  They rely on vulnerable transformers that are not made in this country.  There are very small stocks of them and very long lead times to get them and, of course, we see these kinds of vulnerabilities regularly exploited in theater.

Some months ago, seven of the big lines in Iraq had been down to 400 KVs.  I was told this evening that four is a more number but four out of nine means not much gets delivered, and the bad guys keep taking the lines down faster than we can put them back up.  We’ve had three runs now and maybe we’re starting a fourth on trying to get White House approval to rebuild the system in a decentralized, invulnerable way.  The previous three had been vetoed even though the third one was supported by the Iraqi Power Minister.  And the chronic lack of electricity is undercutting everything that our forces are trying to do in reconstruction and stability, and there are some real experts on this subject in the room and we may get into that later.  We’re starting to see similar tactics in Afghanistan.  They’re probably still reversible but they’re ramping up. 

And yet, there is enormous progress in distributed electric systems – a little more on that later.  The ones that we’ve rejected for use in theater are actually winning in the global marketplace.  Now, DOD is the world’s top buyer of renewable energy and yet it’s at least 98 – more like 99 percent reliant on the electric grid here and abroad and therefore, the DSB Task Force put a lot of emphasis, rightly, on making our bases’ power supplies and those around them resilient and mainly renewable.  There’s 584 bases in CONUS of which about 90 percent turned out to have good supply options on site or near site, mostly renewable, and they could also, of course, improve their efficiency considerably so that you’d have not only the lights on the base, if the grid went down, but also in the surrounding communities where base personnel tend to live. 

This would be a very good nucleus – a bunch of them around the country – for keeping basic services going and nucleating restart of the black grid.  So I think the energy independence and resilience of DOD bases and electric supply is not just important to the country, it’s vital to counter the takedown threat that is real and urgent,  and it’s even a bigger problem abroad in many ways and it’s worth more abroad because avoidable delivered costs are higher outside CONUS.  But I don’t feel that our government outside the department or even within the department is yet moving nearly quickly enough on this issue. 

Oil.  In World War II, we had heavy SEAL forces; they floated to victory on a sea of oil.  Six-sevenths of the oil that defeated the axis powers came from Texas.  Our warfighting, today, uses 16 times more oil per warfighter than it did then and Texas is now a net importer of oil.  That’s a pretty simple story.  So the department is the world’s biggest buyer of oil – 90-odd-percent of the government’s oil use goes through DOD – and yet, its use isn’t all that big.  It’s 0.4 percent of the world oil market.  It’s less than 2 percent of the U.S.  You could run the whole department on the output of two big offshore platforms in the Gulf of Mexico or on less than a fourth of the typical output of California and Alaska.

However, essentially all DOD mobility is oil-fueled, mostly in CONUS and mostly jet fuel.  In fact, if DOD were an airline, it would be the number one or two airline in the country.  And again, the problem for DOD with oil is not can we get the oil, but all the problems that come with wasting the oil.  And it’s not just budgetary problems, we have inefficient platforms, and the true cost of delivering the huge amounts of oil they require is a lot higher than the apparent price.  Now, OSD is analyzing this fully burdened (?) cost of oil delivered to platform in theater in wartime and is starting to apply it in some pilot projects.  And over years, just signaling a higher value for saved fuel, I think, will elicit much more efficient use and I wanted to get into that in a bit. 

But the total cost in blood and degraded combat capability is much higher than the dollar cost, and just bear in mind that in recent months, about 80 convoys, mainly hauling fuel, have been in continuous orbit between Kuwait and Iraq destinations, and about half of the casualties the U.S. is taking in theater are associated with convoys and convoy protection.  So many of our casualties – approaching half – are an oil related problem. 

So try this picture:  here’s a tent in a hot, sandy place, pretty dark colors, got a little fly over it but the walls are exposed, and sitting in front of it is a box with a very inefficient five-ton air conditioner.  It uses on the order of a gallon per hour to run the gen set, which is at the other end of a long, glossy cable. 

Okay, here’s a beautifully decorated truck hauling 68 barrels of oil.  That can cool 120 of these tents for 24 hours.  Here’s a whole bunch of these trucks in a three-mile long convoy.  If you were special ops, wouldn’t just love to see that; just kill the truck at each end, pick off the rest at leisure?  So a lot of this stuff happens.  These photos are not all of the same place. 

So a third of the Army’s wartime fuels, we’ve said, runs gen sets, and in a typical forward-operating base that the Army recently looked at, 95 percent of the gen set electricity was doing this kind of stuff:  air conditioning tents and shoes, space cooling by cooling outer space.  What’s wrong with this picture?  So we’re getting people blown up in fuel convoys to run gen sets to do that. 

Well, you could actually make boxes that look like this and cold comes out but they don’t use any electricity.  Let’s get on with that.  Colonel Nolan, who is here with us, said we can up gun or down truck; the best way to defeat an IED is don’t be there.  And the task we’re trying to do here can be done with no oil, no gen sets, no convoys, no problem.  So you turn your tail into trigger pullers, you multiple your force that way, you grow stronger by eating your tail, and ultimately we breed a manx force with no tail, like a manx cat. 

You know, Clausowitz (ph) had three conditions for a success in war and our adversaries have been attacking mainly the third one, the will of the people, but they’re figuring out that the second one, military capacity, is pretty fragile, too.  And Colonel Nolan says we’re in crisis now and if we don’t fix it, we’ll be in catastrophe in five years.  By the way, now that stability OPS has equal priority with combat OPS, the endurance strategic vector is at least as vital for stability as for combat OPS because they need even more persistence, dispersion, and affordability than combat OPS.  There are some interesting overlays in Iraq suggesting that areas with reliable electricity have substantially lower violence and are less attractive for insurgents to get engaged with and take over. 

Now, the DOD views on energy, as I wander around the building, are pretty straightforward and they’re starting to change, thanks to many of you.  But here are things I hear along:  we exist for effectiveness, not efficiency; performance always trumps fuel costs. 

Well, rightly so, you need performance, and whatever we get in efficiency is going to come from the civilian marketplace.  We don’t need to pay attention to it with minor exceptions:  we don’t have rewards for energy efficiency, we don’t have penalties for inefficiency, we don’t know much about how we use energy and that’s okay because we don’t do energy.  We buy it.  It’s just something we pay for.  It’s not an investment issue.  It’s infrastructure.  It’s not important to requirements, to the whole JACID (sp) process because fuel logistics is invisible, free, and vulnerable.  You can ignore the burden when we decide on what we’re going to buy that uses the fuel, and existing key performance parameters implicitly include everything you’d want to do with energy so we don’t need another one for energy.  Does that sound familiar?  Okay.

So the endurance vector has to change that and rearrange the metal furniture, redesigning the energy flows in the military quite radically to support these new strategic and operational and tactical requirements so that we can affordably dominant the kinds of conflicts we’re starting to have without much, if any, fuel logistics.  And there’s a whole bunch of great technologies for doing that that, properly combined, can often eliminate and reverse trade offs between KPPs.  We often talk about the trade space and just adding energy into that without noticing that an energy efficient platform will typically do everything better and cheaper.  It’s a way, not of conflicting, but of potentiating all our other performance goals. 

We have found this in our own practice in civilian vehicles – land, sea, and air – in 29 industrial sectors, in every kind of building you can think of.  We haven’t yet found any exceptions, and in the more than 100 briefs that we took in the platform panel in DSB, we heard no exceptions to the notion that energy efficiency is synergistic with other performance goals.  And we came to the conclusion in our own work – and it’s fairly consistent with what I learned with DSB this time – that platform efficiency can be at least tripled, probably quadrupled with the same or generally better warfighting capabilities and I would say with comparable or probably lower cost for the platform, let alone for the system.

Where do you look for winners?  Well, if you want to save the most fuel, you go to Mike’s aircraft because they use three-quarters of the oil and that’s so much that if you save 35 percent of the fuel in aircraft that would equal the total fuel used by all our land and maritime and all our facilities.  However, 35 percent is a low estimate of what we could do because three-fifths of the heavy-fixed wing inventory, which uses three-fifths of Air Force’s aviation fuel, is based on 50- or 60-year-old designs and practically all the vertical fleet is 30- to 50-year-old technology – amazingly antiquated stuff – and it’s clear that the heavy-fixed wing fleet can cut its fuel use in half, and in vertical lift, there’s technology I’ll mention that saves a factor five or six. 

Now if you want the greatest gains in combat effectiveness from energy efficiency, then you go for fuel-efficient ground forces, whether land platforms, vertical-lift platforms, land warriors, or forward-operating bases.  And we were actually briefed that downstream savings; that is, near the Army’s spear tip, save an additional 1.4 liters in logistics fuel for every liter of delivered fuel.  I still want to dig into that number and see if it’s right and I’m sure it’s complicated, but there’s some number like and this one looks pretty plausible.  And we need to look carefully at non-combatant platforms at the spear tip therefore. 

We found in the first DSB panel in ’01 and we found it again in this one in ’08; that in a typical Army armored unit, today, the fifth biggest battlefield fuel user is the Abrams tank; the 10th biggest is the Apache helicopter; the other eight are non-combatant vehicles:  field kitchens, water heaters.  By the way, some of them haul fuel.  We haven’t come a very long way since the Civil War when a lot of what the mule teams were hauling around was their own feed.  (Laughter.)  You remember the – (inaudible) – remark about you should always forage off your enemies logistics?  Because then you get it delivered.  He’s got to deliver it twice.  (Laughter.)  Yeah.

If you want the most saving in delivery costs and therefore the most realignable support assets, then you’ll for savings in aerially-refueled aircraft and in forward-deployed ground forces.  It’s another criteria.  By the way, in this study, in DSB, we took a platform to be any device that directly or indirectly consumes fuel or electricity in the battle space.  It can be a land warrior using batteries.  It can be a tent using air conditioning.  It doesn’t have to be something that flies, swims, or rolls.  And the biggest gains are going to come from the kind of thing I talked about in the civilian car example, radical, as well as the sum of many incremental concepts and technologies, strongly emphasizing lightweighting, drag-on-board energy burden, and then making those savings compound, especially reduced weight. 

I’m still astonished that the Joint Strike Fighter has a lower advanced composite mass fraction than a Dreamliner does, especially since what it inspired us to get into the carbon-fiber SUV was Dave Taggart at the Skunks Works leading a project that later helped drive DARPA’s Composites Affordability Project.  He led little team at the Skunk Works that developed an advanced tactical fighter airframe one-third lighter than its 72 percent metal predecessor but two-thirds cheaper at T100 because it was clean sheet design to be made optimally out of carbon, not metal 

The technologies have to be not just stuck together, but highly integrated.  This is a level of system integration that I know the civilian industries, even aerospace, are not accustomed to.  I mean, the airframe makers are just starting to figure out what they call super integration, which means things like, gee, why don’t we use this structural member as a duct instead of having a separate duct?  But there are much higher levels of integration than that, and we should jettison from the start our entrenched assumptions about diminishing returns.  The last 30-aught-billion dollars worth of stuff my team has designed has gotten expanding, not diminishing returns to investments in energy efficiency.  If you go to rmi.org/Stanford, you’ll find my lectures on how to do that.

We can’t be incremental and we shouldn’t assume tradeoff.  These are unsound assumptions and they will not give us what we want. 

Here’s my favorite slide.  It’s a petting zoo I cooked up showing some of the things that were briefed to us – and these are all publicly usable images – and for each one I’ve described what it is and what it does in operations and what it does in fuel use.  So here’s a blended-wing body, quiet aircraft with about doubled range in payload – this is sitting in a wing tunnel – and you can cut your sorties by a factor of five or ten; that includes the refueling it doesn’t need because you have longer legs, and it cuts the total fuel use by about five to nine in the heavy-fixed wing or about two to four for the whole force structure in the Air Force.

But there are some examples like this one, with a 97-percent fuel saving and a factor of two cost-saving that I found particularly impressive because this sensor craft would replace three different kinds of aircraft and can loiter for 50 hours, so your sorties go down factor 18. 

Next generation engines doubling your loiter, 25 to 40-percent fuel saving, less maintenance, probably cheaper. 

Here’s a really revolutionary one.  Imagine a 300-knot rotary-wing aircraft that can jump very far inland.  What would normally take three helicopter relays, you can do in one hop without all the refueling bases along the way, and then you’re vertically inserted for mounted maneuver, and you’re saving a factor of five or six on the fuel, while tripling speed five or six-fold on range.  You get the idea that we could do things with that that we just can’t imagine now.  Just re-engining an Abrams with a modern diesel should at least double the range and cut the fuel three or four-fold, and there are some other diesels coming at us that could be very much better than that. 

Here’s a much more protective, but also more lethal and extremely IED-resistant Humvee replacement that is stable at high speed or any speed, even in pretty abrupt maneuvers because it was designed a NASCAR guy.  He won 30-odd NASCAR and F-1 championships.  Clean sheet design with a third of the weight, about a fifth of the fuel, about an eighth the acceleration time.  As I recall, for the Army to penetrate, it took something like 43 or 4500 (FPS 50 CAL ?).  It darn near blew up the gun.  And there’s hardly anything in the later versions, which are not shown here.  This is a very early version.  There’s hardly anything for a blast wave to grab onto. It’s got cockroach architecture.  This was Jay Cohen’s baby, by the way.  Thank you, Jay. 

Compare that with an up-armored Humvee that went down with the armor from about 10 to four miles a gallon and will typically have at least one blowout per mission,  and a lot of people get killed in rollovers and running off the road because just the armor overloads the steering and suspension of brakes.  It’s not designed for that, and a guy I know who is a chief test-driver at GM will simply not get in such a vehicle because he thinks it’s so unsafe to drive.

    We did a study for SECNAV. Danzig years ago showing how to save close to half of the hotel load aboard a typical surface combatant, Princeton, CG-59, with very good economies.  Well, that would save, if executed, about a sixth of the Navy’s non-aviation fuel.  And I hope we’ll get to do that with NAVSEA.  I’ll already given you the cooling the tent story. 

There are extraordinary advances in electromechanical actuators, in advanced composite structures, in advanced propulsors.  Just for fun, this is a bio-mimetic propulsor that’s even better than conventional ones.  It works on a wholly different flow regime – flammeter (ph) vortex flow.

    We hear about folks parachuting in with huge loads of batteries in special ops and breaking their legs when they land.  And they have PCs that draw tens of watts.  Well, the one child per laptop – (laughter) – no, one laptop per child, sorry, project: 2.5 watts, peak maybe 1.5 a lot of the time; 150, 200 bucks; runs on solar with a backup crank.  Why aren’t all of our portable electronics as efficient as that or as efficient as Sony battery portables we buy at the store? 

    Zero net-energy buildings have been done from minus 47 to plus 115 Fahrenheit with same or lower capital cost.  Here’s a supercomputer: ultrareliable with no cooling sitting in a hot, high-altitude hallway at Los Alamos and it has a three- or four-fold lower lifecycle cost, no cooling required.  In our practice, we just designed both a chip fab (ph) and a data center requiring no chillers.  They’re a lot cheaper and they work better.

    You start to get the idea of why, as a technologist, I was so excited when we took these 100-odd briefs on these kinds of technologies and checked into them and they looked like they work.  And it strongly reinforced the conclusion I had come to in “Winning the Oil Endgame” before hearing all of that that about two-thirds of the service’s fuel need could be eliminated over several decades and, again, with no compromise and considerable gains in war-fighting capability and with lower cost. 

    Everything we heard was consistent with that, although the DSB taskforce did not draw a quantitative total conclusion.  I wish it had.  And this does not count, by the way, saving an avoided interservice fuel because you’re lifting less fuel and perhaps lighter platforms.  And that’s a very considerable amount when you remember all of the lift and platform use that was half of Mike’s Air Force consumption.  The data, by the way, behind this total are weak, but I would defend that they are conservative.

    So I want to take just a few minutes on what’s fully burdened fuel cost because if that’s going to drive this change, we need to think about what it is; it’s the whole system, end to end, lifecycle cost of getting a gallon to the platform in theater in wartime as to both op-tempo and site.  Platforms are designed to win wars.  We don’t intend that they will see only peace.  And I emphasize that because some people believe that we should base fully burden of fuel cost on a partly or wholly peacetime op-tempo.

    Of course, every KPP is based on combat performance.  I think the logic is exactly the same for something to do with energy.  And we’re really interested here in all of the cost that we could ultimately avoid if you never again have to deliver that gallon.  We may choose to cash in this cash metric by realignment for more effective force structure.  But, for the moment, we’re using dollars because that’s the common currency.  And there was a preliminary look in PA & E (ph) a year and half ago that found that the delivered fuel bill was about four times more than the direct fuel cost.  That’s good to know.  And I thought at the time that was very conservative and it’s turning out that way.  But how can we refine the cost as it’s now underway in OSD?

    I want to emphasize 11 methodological traps that I’ve noticed so far in this kind of work.  One is to use peacetime op tempo in whole or in part.  Of course, we don’t know what the op tempo is going to be.  Maybe we’re in a long war.  Average conditions are a way to estimate average fuel savings.  They’re not a criterion for optimizing fuel savings for use in weapons systems.  You know, if utility is built to meet average load, not peak load, the lights wouldn’t stay on.  Of course, we also need to bear in mind rapid depreciation.  All of this reset does not fit with a 20-year depreciation that’s sometimes assumed. 

    And you’ll find in the DSB report just out, the taskforce does not support PA&E’s guidance that fully burdened cost of fuel should general assume peacetime op tempo because, as the report says, “fully burdened cost of fuel is a wartime capability planning factor, not a peacetime cost estimate.”  I hope that is clear to everybody.  We’re not trying to figure out how much money we’ll probably save over the next 20 years; we’re trying to define, to define the criteria that drive the design and fielding of an effective platform to win wars with. 

Another common mistake is to emit wartime force protection and logistics.  We don’t have safe rear areas anymore.  DOD already test the IPT to find fuel costs including logistics and force protection, to ask questions like, how many escorts and IEDs and casualties could we avoid if we had several full fewer fuel convoys?  Well, the Army has a sustain-the-mission project that’s done some impressive work.  And they estimated last year that supplying a striker brigade with a 450-mile roundtrip from Kuwait to Iraq would cost about 25 bucks a gallon.  But in that scenario – and their model lets you plug in whatever scenario you want – 65 percent of that cost was for air cover – helicopters are expensive – and 12 percent was for ground protection.

So that’s over three-quarters of the cost is for protecting the convoy.  So leaving that out is a really material omission.  And they came up with costs for that mission that were four to 12 times the direct fuel cost.  If the roundtrip lengthens to 950 miles then they go over 44 bucks a gallon, or 20 times the desi (ph) fuel price.  You see why we’re interested in figuring out these numbers?  That can drive a whole lot of efficiency innovation.

Another methodological trap would be to count only the specifically dedicated petroleum, emollient, oil, and lubricants resources, not those that are shared or multipurpose.  And that’s a good way to leave out most protection and support assets if you want to, but it’s not valid.  Another fallacy would be to count only short-run not long-run marginal costs rather than looking over a time horizon that’s long enough to realign slow assets. 

There’s another fallacy I’ve run across, which is using a weighted average for the Air Force of aerial and ground refueling costs.  Again, it’s like peacetime versus wartime OPTEMPO.  It’s a good way to estimate average dollar savings, but it will grossly undervalue combat efficiency and you won’t buy efficient-enough planes.  And you’ll buy a whole lot more tankers than you should.

The early PNE estimate, which I’m sure will be refined further, is that about 9 percent of the Air Force gallons cost 42 bucks delivered and 91 percent cost 2.79.  Now, do you design your long-range bombers for a $6.36 weighted average?  No.  (Chuckles.)  I think not.  If this is a weapons system, you design it for wartime conditions with as much aerial refueling as you need in really difficult profiles. 

Now, of course, battle scenarios are very diverse so it’s easy to claim that wartime conditions are unassessable, but we’re pretty good at making assumptions; we’ll just make them explicit and emphasize representative conditions in theater like the ones we actually encounter.  I don’t mean really pathological cases like deep multi-helicopter relays that run 600 or 1000 bucks a gallon, but we should assess those because they do happen.  And we should pick a worse than average base case.  The goal is not to win the average battle.  We most need fuel efficiency in the exceptional cases where we need stretch performance to win and that’s what we’re designing for.

It’s easy to look for your lost keys under a distant lamppost because the light’s brighter there, but it ain’t where you lost them.  And, yeah, it’s hard to get good wartime data, but do your best.  Don’t let the perfect be the enemy of the good.  It’s better to be approximately right than precisely wrong.  Don’t seek spurious precision.  And don’t ignore higher-order effects like trucks hauling fuel for trucks.  Remember, if it does take an extra 1.4 liters of logistics fuel to deliver a liter to the end user, that’s a big multiplier.  We heard from a field radar operator who said a fuel truck’s late; I’m sitting up in my truck idling the engine to charge my batteries.  Not trivial. 

Oh, we’ve seen some studies of fully-burdened fuel cost that forgot to multiply the fielded personnel and equipment by the rotational multiplier to get the first structure.  That’s a several-fold error right there.  And the biggest mistake I think everybody is making so far is to count accounting cost, not the opportunity cost to the warfighter.  All of the assets diverted to protect fuel convoys are foregone combat capability because logistics enables your forces, but it subtracts from their net capability.  This is why General Maddis (ph) is said to have called for unleashing us from the tether of fuel.  It’s why General Zilmer (ph) made this urgent request that got priority-one certification from command for renewable and self-sustainable energy solutions in al Anbar.  He wanted to go kill bad guys and he couldn’t because he was tied down protecting fuel. 

So this leads to a point that really startled me when it came up in the platform panel; what the JCID system calls capability, the whole building calls capability, as near as I can tell, is the theoretical performance of the tooth at a platform or a system level without counting the tail that you need to produce the capability.  Of course, tail takes various kinds of resources that detract from tooth.  So to get net capability constrained by sustainment, you have to take the gross capability of the tooth and multiply it times what I called an “effectiveness factor,” the ratio of effect to effort.  So effectiveness factor could be expressed as tooth divided by the sum of tooth and tail or, since you actually have a budget in which tooth takes away resources – or tail takes away resources and you’re left with tooth – you could express “effectiveness factor” as resources minus tail over resources, which means that effectiveness factor will range from zero, if you have an infinite tail, to unity, if you have a zero tail.  Now, as long as your tail is not zero, your net capability is always going to be less than your gross capability. 

But I think the department quite consistently seems to confuse these metrics and misallocate resources accordingly.  If you buy more tooth that comes with more tail and you don’t pay attention to the tail, you may be less capable than you started with.  Can you think of cases like that?  (Chuckles.)  But if you dramatically trim the tail, just the mathematics tells you you’re going to create revolutionary gains in net capability as well as freeing up the tail assets for realignment.  It seems to me this point, which was in the report, but it went by pretty fast, deserves a lot more emphasis.  And I would hope that the acquisition people here among others would think very hard about it. 

We need a really broad assessment of fully-burdened fuel cost, not a narrow one.  To make it simple would be easy, attractive, but there’s some real complexity there and we need to make it as transparent as we can and not just leave out things we don’t want to get into because they’re difficult.  This is not just about counting 20-year depreciation and some maintenance costs for fuel trucks because behind each truck and driver is force protection.  And they all need a support pyramid and a rotational multiplier.  And all of these things get diverted from the combat mission, leading to a major opportunity cost.

So I actually one day told the story of this is the gallon that Jack pumped.  This is the truck that Stephanie drove to carry the gallon that Jack pumped.  And it kind of goes on from there until you to get to: this is the cook who fed the barber who cut the hair of the intel officer who briefed the platoon that guarded the road that Stephanie drove to carry the gallon that Jack pumped. 

And there’s more to it, but, obviously, you know, after a while, you get into a conversion series, but you have to count roughly the long-run avoidable cost not just of dedicated folks hauling oil including contractors and folks stolen from other services and non-POL staff doing POL duties and their immediate assets, but everything needed to support them worldwide, lifecycle, recruitment through burial and survivors benefits.  You know, planning tools contain this information.  We ought to use it.  We ought to count every activity that over decades doesn’t need to occur if you don’t need to deliver the gallon because, otherwise, we’re going to continue to undervalue and under-buy fuel efficiency, will weaken our warfighters, squander our resources, waster our lives and treasure.  And the mental model I brought to this work was let our last thought in battle never be that we wish we’d saved more fuel.

There are widely divergent estimates of what the Army’s delivered fuel cost is.  We’ve heard numbers anywhere from a few dollars or even $1 to hundreds of dollars a gallon.  They may all be true in certain circumstances.  You know, if you’re delivering to a base in the U.S. in peacetime, a buck used to be the right number, sort of.  It’s way more than that now.  And I did a little checklist just to show you the progress that we’re starting to make.  And any of you that are working this issue and don’t know Chris DiPettro in OSD, you should.  And he and some very bright colleagues are working this with some outside help as well.

We used to count just desi fuel costs, which is now about $3.00 a gallon.  When we took the Army briefs and Defense Science Board taskforce in ’01, we were told $15 in CONUS and peacetime, up to hundreds of dollars if far into – you know – toward the forward edge of the battle area.  And weren’t counting CO2 costs; we were counting sort of trucks to deliver to a forward operating base.  And that’s end of the platform and some people directly engaged in that.  And it wasn’t clear we were counting anything else, but we might have counted some of it.  PANE did a preliminary estimate – and we’ve not gone considerably further than that – that started to count a few more things maybe.

But here’s what you should count in fully burdened delivered cost, and I’ll just leave you to hang out with that right-hand column in your handout.  And there are some inconsistencies in past data that have not been reconciled but need to be.  But a new policy framework is emerging that really makes these numbers matter.

Undersecretary’s memo, 10 April ’07, effective immediately, it is DOD policy to include the fully burdened cost of delivered energy in tradeoff 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.  And the vice chair of the Joint Chiefs endorsed selectively applying an energy efficiency KPP as appropriate, reversing a partial non-concurrance that we’d had on the ’01 report on exactly that point.

So I think the lesson in this for the primes for the whole defense industrial base is that you can expect to see the department valuing saved fuel far more highly.  You will be hearing stronger and stronger signals about what that’s worth, how to do it, and it will be a key to your competitive advantage to get better than your rivals at delivering very, very efficient platforms.  This means top-level leadership to – (inaudible) – energize the department, build it into doctrine and reward structures and culture; doing the accounting right, making war gaming play fuel, and not assume that logistics is free and invulnerable; requiring, rewarding, embedding whole system design so the tradeoffs turn into synergies.  That means basic reforms in how we design and teach it and reward it, and leading the nation off oil so we needn’t fight over oil.  I think we’d all like to have neg emissions in the Persian Gulf, mission unnecessary.  And I think we can.

And there are some supporting actions we need of retrofitting the legacy force with the framework to do that properly and realigning to capture the fuel logistics benefits all the way upstream.

Now, diversifying fuels is the one that puzzles me a little bit because if the problem is supply-chain interruptions, you should stockpile end-use fuel of the form you will need near where you will do that.  Desi is very good at that.  If the problem is long-term unavailability or unaffordability of oil, it’s not clear why this should affect DOD with its purchasing priority and being a tiny part of a global competitive market for a fungible commodity.  We know that what is often proposed for this, coal to liquids, is very expensive and the biggest, cheapest, fastest military fuel reserve is civilian efficiency.  Just the work we did with Wal-Mart on the double-efficiency trucks, once everybody is able to buy those, that will save 6 percent of U.S. oil.  That’s about three times what the department uses for everything.

Now, there are things DOD can do to speed cellulosic ethanol, like a DARPA flyoff, to speed algo oils, maybe hydrogen.  And there’s a lot to be done in facilities, building desing (?) and retrofit, the sort of thing my colleague Bill Browning has been helping with.  You know, we helped overhaul how NAFAC (sp) designed buildings in ’95 but then they slipped a bit.  These are things that around for 100 years.  And we’re building huge amounts of them.  We’re now procuring over 200,000 military housing units that last I heard were going to be less efficient than normal civilian standards.  But making them an order of magnitude better than civilian standards could actually reduce their construction cost and make on-site renewable supply very cost-effective.

I’m almost at my end here.  Beware of the usual distractions.  There are agendas around.  Coal to liquids has its enthusiasts in the Air Force and th Navy.  You will note that it was strongly unrecommended both by our Defense – (inaudible) – taskforce and by Jason’s report for, I think, very good reasons.  Capital, water – you can’t get the billions needed invested in the private sector without very pricey, very long-term large purchase contracts that would be clearly imprudent.  Costs go up even more with carbon capture, which is now, I believe, legally required.  Or at least, you have to be carbon neutral against regular oil for such projects.  And it would divert investment from faster oil efficiency.

If Mike Imani (sp) has got a budget, I want to see it going into blended wing body and that optimal-speed tilt rotor and other breakthrough aviation efficiency techniques that give the revolutionary gains in war fighting and save the fuel and save money rather than spending way over the odds for a fuel substitute I don’t really need.  In fact, the Jason’s remark was, if you want to get more military fuel, go invest in those 10 mile-a-gallon postal service delivery vans.  Good advice.

There’s also a recent push for small nuclear plants on military bases.  This was considered and not recommended by our Defense Science Board taskforce for very good reasons of both cost and resilience, not to mention some other special challenges and they need full backup.  So why are we doing this?  There’s no business I can think of that would dream of investing in either of these technologies and I can’t think of any good reason for DOD to invest in them either.

Big picture though is that some science and technology investment can have enormous implications, like finding that Saudi Arabia under Detroit, because as military S&T turns to things like ultra-light materials, advanced manufacturing in engines, that then drives innovation in the civilian car, truck, and plane industries.  So we get better war fighting, but we don’t need as much of it because we’re not fighting over oil.  Oil becomes like salt, not interesting anymore.  And we end up with a stronger economy, cheaper oil, more balanced trade development, diplomacy, and a safer world.  I can’t think of a greater contribution to the national security mission.

Just a few words about the last strategic vector: resilience.  Remember the blackout in ’96?  Notice the large dark area down here with about 4 million unhappy campers; 98 or 99 percent of outages in the U.S. are caused by the grid.  Remember this one in the Northeast in ’03, 71 gigawatts lost in nine seconds, 50 million people?  What’s interesting is, look at the lights that stayed on.  Those were islands of distributed generation or backup generators or local systems that were able to isolate from the collapsing grid and keep going in balance with their loads.  All of our systems should be designed that way.

Sure, we need some modest transmission modernization, but building more and bigger transmission lines and power lines, which is the main thrust of federal policy, means more and bigger blackouts.  It’s exactly like the mathematics of suppressing forest fires.  When one gets away from you, you have an unprecedented conflagration.  Our grid model shows this very clearly.  I hope Commissioner Wellinghoff at FERC here will do something about this.

The basic problem we’ve got in the grid is that the architecture is very over-centralized, over-concentrated with critical vulnerabilities.  We laid this out in what is still the definitive unclass report for DOD on this subject back in ’81.  It’s only gotten worse since then.  And there are three simpler, faster, cheaper solutions that are quite ample: end-use efficiency, demand response, distributed generation designed for islanding.  These are not yet allowed to compete fairly with transmission.  I hope they will be because big-generating units that are far from the load are not equivalent to small ones near the load.  They ought to get credit for the reliability value of avoiding the grid where most of the problems occur.

By the way, back in ’81, I wrote this rather disturbing thought.  Are we there yet?  A few lessons from military history:  Every few days in the ‘80s, as I was writing that book in the early ‘80s, significant attacks on centralized energy systems were occurring, not counting a few places like El Salvador where they were happening every few hours.  Goering and Sper said after World War II that we could have shortened the war by two years by bombing the Nazi’s electricity system, which was very centralized.  Well, we sort of tried that in Japan, and it didn’t work because 78 percent of their electricity in World War II came from small hydro, so it sustained 0.3 percent of the bombing damage. 

Attacks on energy systems are, of course, part of our standard tactics now; same for the Russians.  There are some countries, including China, that favor energy decentralization for security.  We don’t.  But we understand pretty well what are the engineering conditions of resilient design.  These are in chapter 13 of “Brittle Power.”  And they are exactly the attributes of the so-called micro-power that is now taking over the grid.

Just a quick plug here for something that those of you in the defense community, I think, need to know about.  After World War II, the department set up the Dahlgren mission assurance division to assess vulnerabilities of the department and the industrial base.  And there is decades of great analysis there, mostly in a GIS.  Now, some very disturbing vulnerabilities that are described in a classified appendix to our new DSB report were recently discovered.  Secretary Schlessinger and Jim Woolsey who cochaired the policy panel with Gueta Mezzetti are very seized with this issue.

And Dr. Schlesinger, Mr. Woolsey made it a priority to brief Steve Hadley and Secretary Bodman personally on this issue, which is called Aurora.  And its extent and implications, the things we need to do about it urgently can only be understood as the tas force learned by exposure to classified briefs from Dahlgren and the Idaho National Engineering lab about what’s been going on lately in electric grid vulnerability.  And I would strongly encourage those of you professionally engaged with these issues with DOD to contact Gueta, 202-256-6716 to arrange to take the classified briefs.

This is very – right here, very important stuff, because if we don’t deal with this very quickly, we could be showing a whole lot more solidarity with Iraq than we had intended to.  We could be in the seventh century more or less permanently.  So do pay attention to this.

Resilient electric supplies are DOD policy already, but hasn’t been implemented.  And we said it hadn’t been implemented except in a few showcase projects.  And you get the most bounce per buck from efficiency because it replaces the most vulnerable supplies quickly and cheaply.  And then, it makes failures happen slower and makes them more graceful and fixable.  It buys time to improvise substitutes.  It stretches the job they can do.

Now, we found back in the late ‘80s, looking at about 1,000 technologies in my shop for saving electricity very heavily analyzed, documented, that you could save about three quarters of U.S. electricity at an average cost that in today’s dollars is just one cent a kilowatt hour, cheaper than running a thermal plant.  There were similar findings in Europe.  The utilities think tank found a somewhat smaller but still very big and very cheap potential.  And the savings keep getting bigger and cheaper faster than we use them up.  It’s like the low-hanging fruit is mushing up around the ankles.  It’s spilling in over the tops of our waiters.  The innovation tree keeps pelting our head with more fruit.

Well, there’s a similar innovation on the supply side.  This is extraordinary stuff that we’ve gathered from all the industrial databases.  These two graphs show in the upper graph, the electricity supplied in the world, and in the lower graph, the capacity installed for what The Economist magazine calls micropower.  The larger part, in tan, is cogeneration, combined heat and power, in industry or buildings.  It’s mostly gas-fired.  It saves most of the money and most of the carbon.  The colored wedges below that are distributed renewables, all renewables except big hyrdro.

In 2006, micropower turns out to have added six times as much electricity and the 30 to 41 times as much capacity as nuclear added.  That’s the black line running across here.  For comparison, you can see it’s practically flat.  So micropower, very quietly, is mow making a sixth of the world’s electricity, a third of the world’s new electricity, and from a sixth to over half of all electricity in a dozen industrial countries.

Negawatts – saved electricity – are comparable or bigger, not as well measured.  And together with micropower, negawatts – those two – probably have over half the world market, and central plants less than half the world market for new electrical services.  This revolution already happened.  Sorry if you missed it.

Why is micropower winning, because it’s cheaper and has lower financial risks, so it is financed by private capital.  Here are the graphs of annual installations of capacity in the world – nuclear in orange and then let’s see, this is geothermal, biomass, and small hydro.  The next line up is wind.  The next one is decentralized, non-biomass cogeneration, and the total of all of them is this heavy black line.  And then, if you add in stand-by and peaking decentralized onside units, which can often be dispatched, then you get the purple line.  And you can see, these are enormous numbers, like 40 to 60 gigawatts a year and rising fast, the world’s top source of new electricity.

So just for comparison, in 2006 worldwide, nuclear added less capacity than photovoltaics added, a tenth what wind power added.  Retirements were even bigger.  But then, they ended up with a little net nuclear gain, 1.4 gigawatts in the world because of upgradings.  Meanwhile, micropower, the same year, added 43 and 60 gigawatts depending on whether you count the standby peak units.  And micropower pulled ahead for the first time in electricity output.  Distributed renewables in 2006 got $56 billion of risk capital, private risk capital.  Nuclear has always got zero.

China has ambitious nuclear goals.  By the end of 2006, China had seven times as much distributed renewal capacity installed as nuclear capacity and they were growing it seven times faster.  Last year, nuclear added less world capacity than China or Spain or the U.S. added wind power.  I don’t know what part of this story anybody who takes markets seriously doesn’t get, but it’s a pretty clear story.

And we have some papers coming out shortly on comparative costs of nuclear, coal, combined-cycle gas, wind, farmed wind, various kinds of co-gen end-use efficiency.  Basically the stuff the market favors is what’s cheapest.  And the stuff the market is moving away from is what has higher costs and higher risks.  But if you turn that graph around backwards and then you correct for the modest carbon emission of two of the forms of co-gen, you can draw a graph of how much carbon you displace per dollars spent on electrical services from new stuff delivered to your meter.

And you find, as you might expect, that if something is cheaper you get more of it per dollar.  And you actually get anywhere from about 1-1/2 to 11 times as much carbon displacement per dollar if you buy micropower in negawatts than if you buy nuclear.  Of course, there’s always a risk you get what you wanted to; you’ll get a dry hole.  But there was an interesting example in California where in three years by letting things compete fairly, the utilities barter were firmly offered negawatts and distributed capacity – mostly renewable – adding up to 143 percent of their peak load.  They had to stop the bidding.  If they had gone on one more year they would have had to shut down every fossil nuclear unit in the state as superfluous which, you know, in hindsight might not have been such a bad idea.  And that was with 25-year-old technology. We can do a lot better now.  And these are also extremely large resources. 

The real surprise in that is that the variability in sun and wind is not turning out to be a significant problem even when used in large quantities because the backup they need to keep the power reliable collectively is less than the back up we’ve all ready paid for and installed to cope with the intermittence of large thermal plants because they fail unpredictably, often for long periods in billion-watt chunks.  And many diverse, dispersed distributed renewables don’t do that. 

So really what’s happening here is kind of like the revolution in computing.  If you were to tell me lots of people do computing; we need to build more mainframe computer centers, I’d say, where have you been lately?  We have network PCs. 

Or if I told you many people make phone calls; we’d better go build some more big switching exchanges with relays and copper wires, you’d say, no, no we do that with distributed packet switching.  And yet this mentality has not yet penetrated the electric business, at least its establishment.  So we don’t yet quite see that a billion-watt – a thousand megawatt, million kilowatt unit is not the same as a thousand-one megawatt units or a million-one kilowatt units.  They’ll all send out the same electrons, but even if they’re all equally reliable the many small units are more reliable because they don’t all fail at once.  And those close to the customers bypass the grid where almost all of the failures occur. 

And by the way, it’s not only, let’s say, wind farms that can go dark for an extended period.  The average nuclear plant in this country shuts down for refueling and maintenance for 37 days every 17 months.  But many units can fail simultaneously without warning and unlike renewables. 

So here’s an example of that.  August 2003 we had nine nukes in the northeast running perfectly, many of them in normal operation are highly reliable.  They have about 90 percent capacity factor on average; that’s great.  The industry’s done a good job on that.  So here are these plants running perfectly.  Then the grid goes down so they scram.  They have to for safety.  But then stuff like xenon and sumeriam (sp) build up in the fission products and sponge up the neutrons and it’s hard to get flux-stability.  You can’t restart it fast; it’s just a matter of nuclear physics.  So we had, let’s see, in day two 5 percent output.  And it took two weeks to get them all the way back up.  The average capacity lost in the first week was 59 percent, in the first 12 days 53 percent.  This is an anti-peaker; it’s guaranteed unavailable when you most need it.  The Canadians had an even worse problem. 

I think this is my last real slide.  I want to suggest to you that the biggest threat, the most far reaching and effective threat to our national energy security is our federal energy policy – (laughter) – made not far from here.  It’s perpetuating our oil dependence in many ways.  The Iranian treasury was broke.  We thoughtfully bailed them out.  The Saudi treasury was almost broke, we thoughtfully bailed them out.  Ahmadinejad and Chavez and Putin, these are our creation in a very important sense.  For the first time in our history that I know of we’re funding both sides of the war and losing a lot of moral standing, and warping our foreign policy in the process, making our economy less competitive and more vulnerable.  I don’t think these are good outcomes. 

We strongly favor, in almost every element of our policy, an over-centralized system architecture.  Back in “Brittle Power”, 1981, I wrote that a handful of people could turn off three-quarters of the oil and gas supplies to the eastern states in an evening  without leaving Louisiana.  Sorry if Katrina read that. 

Electricity, it’s the same story, and our blackouts are getting worse.  We’re creating fat new terrorist targets, LNG terminals and so on, often near our cities.  And the centerpiece of our federal energy policy is still to create an all American new Strait of Hormuz on the north slope of Alaska.  Well, thank you, I thought one was enough.  And since the president has correctly identified proliferation of nuclear weapons as the gravest threat to our security, I find it very puzzling that he’s doing everything he can think of – like reprocessing – to make it worse. 

So if these are not the national security outcomes you want, I think, it’s your duty as military professionals to say so. 

What are we waiting for to get all of this stuff done?  We’re the people we’ve been waiting for.  And if anything I’ve said seems to good to be true, please consider Marshall McLuhan’s lovely remark, that only puny secrets need protection; big discoveries are protected by public incredulity.  (Laughter).  It’s your move.  Thank you.

(Applause.)

Thank you for your very prolonged attention.  Let’s see what’s on your minds.  There are mikes where? 

MS.    :   Shelby (sp), your mike is over there, I think.

Q:  Amory, I agree with you on about –

MS.    :  Name, please.

Q:  My name is Rod Adams.  I write Atomic Insights.  And I’m the host of The Atomic Show podcast.  I agree with about 99 percent of what you said.

MR. LOVINS:  Let me guess what the other 1 percent is.  (Laughter.)

Q:  Particularly when you mentioned the small nuclear plants, I learned my nuclear secrets by being on some of the most resilient and long endurance platforms that the U.S. government does produce being a nuclear submarine.  (Laughter).  And we have for more than 50 years known how to build reliable, small, distributed, nuclear power plants that can operate for as long now as 33 years without refueling.  It seems to me to be absurd when you think about the cost of not having electricity that you would avoid those by the basis of cost, particularly if you think about the fact that we have always built them one at a time and never thought about mass production of small nuclear power plants.  I’d like to hear your thoughts on why you think they are so dangerous as to be avoided even in this very stressful market.

MR. LOVINS:  Well, I don’t think I said that.  I didn’t refer to any of their attributes except cost.  And just for reference, if you look at the levelized cost in ’07 dollars of delivered electricity, the MIT study came out around seven cents bus bar (sp) which is around 11 delivered.  The keystone study in mid ’07 – and this is a study where, I believe, nine of the 11 sponsors either sell or buy nuclear plants – said it was considerably higher partly because of the fuel cost, historically very low, is about to go up by a factor roughly two to five depending on your fuel cycle because of past mismanagement of the uranium and enrichment businesses. 

The more recent estimates, both by experienced utilities and by the financial community, are much higher than that, and what I talked about was cost.  To my mind, this is an unnecessary and uneconomic technology that cannot attract capital in the private market, even though it now enjoys, for the next X units, subsidies approaching or exceeding its total cost.  And I think, having taken half a century to learn that, we should accept the market verdict and say there are better ways to do the same thing.  They are more abundant.  They are equally or more reliable.  They’re a lot cheaper.  They’re a lot faster to deploy.  And we see that by the empirical data that worldwide micropower is bigger than nuclear in output.  It passed it in capacity in ’82.  It’s growing tens of times faster.  It has tens of times greater market share.  Do you see a problem with that?

Q:  Yes, I’d like to redress one thing.  The MIT study’s high cost gas case noted gas this year would be $4 per million Btus.  It’s over $10 per million Btus now.  So –

MR. LOVINS:  You’re talking about combined cycle gas which is this part?  Yes, which – and, in fact, we assumed, I believe, 7 or 8 bucks levelized.  That means that you start at 7 or 8 and you go up 5 percent a year real, right?  That leads to extremely high gas prices.  And – but I’m not suggesting combined cycle gas plants.  In my view, all three kinds of central plants are grossly uncompetitive.  And that’s what the market is telling us by what capitalists are actually buying. 

Let me add, I think there is probably a good case.  There’s certainly a serious, valid, well-demonstrated case for enabled nuclear propulsion in submarines and probably in carriers.  And the reason for that is the strategic and operational requirements override cost or it’s simply a good engineering solution that works because of an extraordinary culture. 

In the civilian nuclear sector, cost is very important.  If you can’t attract private capital and you live in a market economy, you better think about something else to do.  And in general, despite NPO (sp) and other very important and commendable improvements, I fear we don’t have the naval nuclear culture operating everywhere we should.  So I hope you will take that in the respectful spirit in which it’s meant. 

But I think, the situations are very different.  And, you know, Captain Pew (sp) and I – who used to drive nuclear attack subs – had long discussions of this because he was a senior reactor/examiner and we worked together for a year.  Do you have anything to add?  I don’t want to put you on the spot if not.  Okay.

CAPTAIN PEW:  No, I agree with you on the cost.  I don’t think Amory has ever said that nuclear was dangerous or unreliable.  It’s just a question of bang for the buck.  And, you know, there’s limited resources out there for buying power plants.  And whatever you can do to buy clean power plants and offset dirty things like coal is what we have to be doing.  And frankly, that’s what the point is – that the market is showing us we can buy more clean power than we can buy nuclear and we can build it faster.

MR. LOVINS:  Yes, and if climate is the problem, we need the most solution per dollar and the most solution per year.  Very simple opportunity cost argument. 

Q:  Dave Kerner (sp), the Tory (sp) Group.  Continuing on the theme of resource availability, I appreciate most of the negawatt implications.  You’re just drawing down on things and doing better with the energy you’re using.  But there are some things you mention that require infrastructural change.  And infrastructural change requires materials.  And currently there’s a lot of global competition for materials; people looking for the amount of steel they need, the concrete and so on. 

I wonder if you could address that too and the energy that would go into making the infrastructural changes, be it production plants or whatever else is involved in infrastructure changes.

MR. LOVINS:  Yes.  I’ve been looking at this lately for, say, wind power because there was about a 1.2 or 3 cent-a- kilowatt-hour up tick in the average contract price for wind for the ’06 machines compared to the couple years earlier.  A good deal of that turns out to be exchange rate because we import roughly half our wind machines, having given away the technology as we do so many others. 

Most of it is the temporary turbine and part shortage like earbot (ph) shortage because of the explosive growth of the sector.  And that’s something that re-equilibrates over several years.  Some of it is, indeed, materials escalation. 

However, it appears that in modern wind machines of the, say, one or preferably two megawatt class, materials intensity is now lower than for central thermal plants, and that’s roughly what you’d expect.  Interestingly, for our major U.S. wind resources, the haul length from the source to the major load center is a bit shorter for wind than for central thermal plants.  That was a surprise.  That’s something DOE came up with.  John, I don't know if FERC has data like that. 

But yes, I think, at least for the time being we are in a world of quite expensive steel, cement and copper.  This is not a bigger problem for distributed solutions on the generating side than for central ones.  It’s probably a smaller problem.  And it is a much smaller issue on efficiency than for any kind of supply.  Generally, an efficient device uses comparable and often less material than an inefficient device but it’s comparable.  And it’s a lot less marginal investment, if any, of material that you would use on the supply side.  That’s partly why it’s so much cheaper.  Sir. 

Q:  Over here.  My name is Brian Wilson.  I’m with Interstate Waste Technologies.  We’re a developer of gasification process that uses municipal solid waste to convert into clean synthetic fuel.  My – this country’s roughly 280 million tons a year go to landfill.  My question really is has the Rocky Mountain Institute done any work as far as municipal solid waste to energy, specifically with gasification?

MR. LOVINS:  Not significantly.  It’s something we occasionally look at over the years.  I think there’s probably improvements to be had there.  The analogy that comes to mind is we recently did a cellulosic ethanol charrette with EnRel and found together with industry experts that we could cut out about half of the steam used, some 60 percent of the electricity and 30 percent of the cap ex while improving the yield.  And it would be interesting to take the gasification plant and see if we could apply similar design improvements.

Q:  We employ a gasification process that’s been proven to work in Japan as well as in Germany.  There’s – about 42 percent of the gas is hydrogen so there is a lot of synergy there that could happen.  So maybe I’ll give you a call.  Thank you very much for your time.

MR. LOVINS:  Thank you.  Sir.

Q:  I’m Alan Drake (sp) and I’m in town working with the Millennium Institute on what modeling on what a non oil transportation system using exclusively mature technology would look like and what would be involved in the results from implementing such.  And one of the key – there are several keystones to this, but one of them is rail transportation where converting from an 18-wheeler using today’s technology to an electrified railroad such as the Russians are running across Siberia today, you’re trading 17 to 20 Btus of diesel for one Btu of electricity.  And in addition, it provides additional transmission corridors which could add additional redundancy. 

And we’re also looking at other non-oil things.  And the French, quite frankly, are doing it almost all right.  They are putting in rental bicycles all over Paris and they’re putting it in a new French city every couple of months.  They are 26,000 in Paris –10,000 plus 10,006 (?).  They are going to build 1,500 kilometers of new tram lines in the next decade.  And that’s with taking the month of August off and working 37 hours a week –   (laughter) – with roughly one-fifth our population.  And they announced in 2006 the goal of electrifying every meter of the French rail system and burning not one drop of oil.  As well as the TGV system is – phase one is almost complete and they’ve announced phase two.  So they are creating a non-oil transportation system today from soup to nuts, for lack of a better way of putting it.  And we’re modeling what a similar effort in the United States would cost and so forth.

MR. LOVINS:  I’ll be interested in the results and let me give you a card offline so I could ask you to share those interesting numbers. 

We have quite a different rail situation, as you know, but I’m pleased to see a lot of the new investment in it that was profiled in the Wall Street Journal.  And, I think, electrification of rail often does make sense and we ought to do more of it, although I think there are also probably some parts of our rail network where it might not make a good case. 

Q:  CSX currently has a proposal asking for funding.  The Bush Administration asked for corridor congestion relief.  They got 19 proposals for more interstate highways or more lanes on interstate highways –

MR. LOVINS:  Of course.

Q:  – and one from CSX Railway to build 1,200 miles on their existing right-of-way with minor additions, the five feet out of, you know, here – added here and there – of grade separated from D.C. to Miami, three tracks with two tracks from Richmond to Miami, four tracks from Richmond to Washington D.C.  And the two tracks would be doing freight at 60 to 70 miles an hour.  One track would be doing passenger and priority freight – Florida veggies, packages, mail, that sort of thing – at 100 to 110 miles an hour.  This is on the table now before the Department of Transportation awaiting funding.

Q:  Can I ask a question of you?  What’s the price per mile?

Q:  For 1,200 miles they are saying 15 to 25 1billion and depending on just how good you want to make it.  That’s the entire U.S. east coast.

MR. LOVINS:  Yes, I should, perhaps, clarify that in “Winning the Oil Endgame,” aside from a small shift from road to rail on freight we did not assume any modal shifts.  If we had, we would have saved more oil.  But I didn’t want to get people confused about, oh, they’re saving all of that oil by putting us on bicycles or getting us out of our SUVs or whatever.

Q:  Bicycles – I live in New Orleans and with the collapse of public transportation, bicycle modal share has picked up dramatically.

MR. LOVINS:  Yes, well Dave Brower (ph) used to say, all of those who believe in individual mass transit raise your right foot.  (Laughter).  Thank you.  Was there one over here?  Over there.

Q:  Brian Krueg (sp) from Clark Energy Services.  One thing I didn’t see mentioned in the DSB passports report was much mention of energy storage devices and development of technology in that area.  How important do you think it’s going to be develop high capacity cheaper, smaller, energy storage devices, especially to supplement solar and wind renewable production? 

MR. LOVINS:  It’s a complicated question to which I’ll try to give a misleadingly simple answer.  (Laughter).  If we had great electrical storage technologies at low cost, we could do a lot of really great things with them.  And they would potentiate a lot of variable renewables in particular. 

However, we don’t need them in order to have a very attractive negawatt and micropower based, highly resilient, highly cost effective power system.  So I think to that extent storage is rather over rated as somehow a requirement or a sine qua non for getting very far with renewables.  There are, for example, countries – well, let’s see, just to take wind, which is the biggest of the variable renewables, Germany’s now a tenth wind powered.  Denmark is over a fifth wind powered – Schleswig-Holstein about 25 percent.  But there are particular months in north Germany, parts of Spain, parts of Denmark where the wind production is more than the entire load on the grid.  No stability problems.  You don’t need storage to do that.

What you need for a reliable power supply including a lot of variable renewables – namely sun and wind the other variables – the other renewables not being variable – is you need to diversify them in types so that weather that’s bad for one is good for another; diversify them in locations so they’re not well correlated; forecast them –  we call this weather forecasting and we’re pretty good at it; and then integrate them with your existing supply side and demand side resources. 

There are several meta studies recently – an especially a good one in Britain, for example – of over 200 international studies of grid integration of variable renewables, and not one of them found a significant technical problem or cost to getting a reliable supply in the way I’ve described.  And this is empirically going on, of course, all of the time in those wind intensive parts of Europe or in certain other places that are highly solar dependent.

So storage is most important actually not in the grid but for things like computers, cell phones, hearing aid batteries, and there’s of course intense commercial drivers to do well in that.  There are some very important things, however, that you can do with light vehicles if you have cheap, safe, light, reliable long-lived batteries.  That’s really hard.  It’s easier to make a good fuel cell than to make a good battery.  However, there are at least six or eight stealth mode companies that think they’re on to something approaching an order of magnitude better than lithium, some of which are just materials, changes in chemistry or format like the nanotech stuff, nanostructures, and some of which are a little more adventurous.  Outfits like Kleiner Perkins are heavily invested in these and, you know, they’re bright people and probably some of them will work.

If any one of them works, it’s a whole different world in transportation, but I’m not betting on it, again, as like the previously gentlemen on rail, I’m going to with established technology and nice surprises will happen.

Q:  So in terms of islanding military bases, you don’t think that will be necessary?

MR. LOVINS:  There are probably cases where you would do, let’s say, a super conducting loop for glitch handling or where you might do a flow battery.  But I wouldn’t say generally that storage is a vital technology for mission continuity on military bases.  What I would do is a combination of dramatic efficiency gains.  There’s just huge potential for that which we looked at in DSB and micropower.  And the work that, in particular, Pacific Northwest lab has done surveying the renewable and co-gen and other opportunities on and around bases is just very impressive.  Gueta, do you want to say more about that?  Gueta Mezzetti was the co-chair of the policy panel at our DSB task force.

MS. MEZZETTI:  Actually, we funded that work that PNL did, and there’s a database that shows where these resources exist on military lands.  It’s owned by the services. 

As far as islanding goes, the conclusion to island was reached by the taskforce and by the full taskforce after the classified briefings because there are some risks.  Dr. Schlesinger, in particular, dictated to me in that part of the report, you know, “shall partially separate from the grid,” and actually made my language quite stronger. 

So we felt that the risks, once you have the classified briefings, merit looking at islanding for task and defense critical assets because we became to the conclusion that the regulatory structure, the congressional will, the utility need for short team ROI and just the lack of knowledge and will in the system, we weren’t going to get there in time in light of the risks that we’re facing in this country over the long term.

MR. LOVINS:  Or even the short term.

MS. MEZZETTI:  Or even the short term.

MR. LOVINS:  Yes.  And if you’re, let’s say, doing military housing and you’re doing photovoltaic roofs and very efficient houses which is kind of a no-brainer combination, for heavens sake put in a resilient inverter; by which I mean that if the grid goes down, the inverter will, for safety, immediately isolate from the grid.  It will continue to run the load without operation – sorry – without interruption.  And then when the grid comes back the inverter will detect, re-synch and reconnect.  And if you’re in the building you won't know it has happened.

This inverter technology that, you know, Joe Bobiyette (sp) out in the hills of West Virginia developed years ago and others have, it’s been around for about 20 years.  We now have an IEEE standard on how to do resilient interconnection with the grid.  We’re just not using it.  But it ought to be the military standard and, I hope, the civilian standard for every inverter we make.  Sir.

Q:  Yes, I’m Jed Chilling (sp) with the Mining Institute (?), a brief comment and a question.  The comment is the institute has developed a very extensive model that runs scenarios in the U.S. for various energy issues out over 20 years.  We’ve incorporated a couple of the things you’ve talked about and are adding more.  So it would be very useful to see how we can look at the broader impacts of that on the whole economic and social factor.

MR. LOVINS:  It would be interesting if you took our parameters in here and saw how we look in your model.

Q:  We’ll we’ve included some of those all ready.  We’ve tried to integrate the information that’s available and there’s a lot more to incorporate.  It just takes time and information to spread it out.  My question is a little bit different.

You mentioned the carbon fiber building materials for airplanes and for cars and things like that, which was very impressive.  Is there any feasibility – and I’m not a chemist – that carbon from carbon sequestration or other CO2 captures could be converted into that carbon factor to get a double benefit?

MR. LOVINS:  A lot of people are hot on the trail of that, as you can imagine.  But about 96 percent of our carbon fiber, maybe more now, is made of polyacrylnitril which is a white fiber like orlon, which then carbonized in a controlled atmosphere to make half as much black fiber.  And the polyacrylnitril is made of propane.  Now propane is a small molecule.  You can make it out of hydrocarbons.  You can make it out of carbohydrates.  It doesn’t care.  And there are some very interesting projects I just saw in India, for example, that use carbohydrates.  But the amount of material involved is quite small. 

If every car were a hyper-car (?) and you didn’t recycle them, which they are very good at, and you didn’t take credit for their lasting a very long time because the material doesn’t dent, rust or fatigue, then you would increase the carbon fiber production by about 100-fold.  But it’s only a couple of years’ normal growth for the polymer industry as a whole.  You’re just shifting to higher value products.  The total amount of polymer in the vehicle doesn’t change particularly.  It just shifts toward high value structure.  And the – of course, it is enormously better from a net energy point of view to invest your molecules in durable ultra light structures than to burn them to move steel around. 

Just for comparison, the total mass flow in the world of manufacturing advanced composites is roughly the same as for chocolate.  So it’s important but not a very big number. 

Q:  Yes, sir.  My name is Vince Marshall (sp).  I’m the regional energy manager for NAVFAC mid-Atlantic out of Norfolk and my questions concerns renewables.  As DOD personnel, we have various required guidelines that says we have certain percentage of renewables that we have to hit.  And the problem is we don’t have very much money and they’re really pricey.  They’re long-term paybacks.  So my question is – or a potential solution:  heat recovery.  I really like heat recovery especially off AC systems taking the hot gas off of like – (inaudible) – things like that.  And they’re not currently considered renewable if they’re quick paybacks.  They’re not – from what I can tell they’re not considered renewables.

MR. LOVINS:  They’re probably considered efficiency rather than renewable.

Q:  Right.  But we can hit our renewable goals if we can use heat recovery in that manner as a renewable resource.  It comes from the sun, heats the buildings up.  The quick payback is two or three years.

MR. LOVINS:  I see.  So your argument would be that you’re taking solar heat that –

Q:  Well, that’s a stretch, I understand.

MR. LOVINS:  – accidentally got – yes, well, it’s creative. (Laughter).

Q:  Right.  I mean, it’s waste heat that’s going out to the atmosphere right now. 

MR. LOVINS:  Let’s try that one offline.  I don’t – the trouble is I don’t know the legal definitions of whose they are –

Q:  I understand.

MR. LOVINS:  – so I can’t really comment on whether you can successfully evade them that way.

Q:  I was just looking really for an opinion so I could use that to argue when I go back, that’s all.  (Laughter.).

MR. LOVINS:  No, I want to make – that’s what I gathered.  I want to make a different point.  In the Santa Rita jail in Alameda, California they put out several acres of photovoltaics on a bit flat roof.  But first, they made it a white roof rejecting solar heat and had an ASCO come in and fix up the HVAC and the lights and the controls so that the – on the hot days when the solar cells are producing the most juice, the building isn’t using very much.  So they have 0.7 megawatt net to dispatch into the peak at the best price, okay?

Well, by properly integrating their efficiency, their load management and their photovoltaics, they made the photovoltaics cost effective without subsidy.  This is a $9 million project.  The state subsidized it with five to get down to four net.  But if the state hadn’t subsidized it would still pencil because the 25- year present value benefit was 15 million.  In other words, properly combining demand side and even expensive – that is, photovoltaic renewables – can make sense and make money without subsidy.  So when you talk about stuff being really pricey you have to look at the integration of design with the demand side. 

I would also urge you to go to smallisprofitable.org and get our little book.  It was an Economist Book of the Year six years ago called “Small is Profitable:  The Hidden Economic Benefits of Making Electrical Resources the Right Size,” because it shows that 207 – count them – hidden benefits mainly in financial economics and electrical engineering typically increased the economic value of distributed resources, especially renewables, by about an order of magnitude and that will outweigh any investment decision you might otherwise hesitate about. 

For example, we got almost a factor three typical increase in value at a substation level for small fast resources instead of big slow ones because it’s worth that much to reduce the financial risk.  And you get an extra several cents a kilowatt hour value out of renewables just by counting the value of hedging against volatile gas price. 

Q:  Thank you.

MR. LOVINS:  Holmes.  No, who has –

Q:  Right here.

MR. LOVINS:  Sir. 

Q:  Paul Roggi, (sp), army operations staff.  Mostly a comment that I’d like to make – you made a good case about the tooth-to-tail issue over on the ground.  A lot of us have lived that.  Five years ago I was faced with that on a daily basis.

Then you talked about the microgrid and microgeneration capability, and I’d like to kind of reinforce that, having actually fought some of the same battle trying to motivate investment in that. 

The situation we faced in Iraq in stability operations was that a lot of people enjoyed the benefits of power, but only a few people were involved in delivering it.  And so it only took a few people to disrupt that.  And if you were able to create an Internet style distribution grid, and come up with technologies that could locally produce power, then you could encourage ownership and motivate people to protect those resources and to run them.  And for that matter you could contribute to the economic, to the economic growth because people are then making profit on those generating capabilities.  So there’s an additional benefit that you can really –

MR. LOVINS:  It’s an important one.  And I guess, we’re seeing some of those social phenomenon in the kind of back-alley generator phenomena in Baghdad now. 

I – you know, the day after we went into Iraq I got a senior call from the building saying, what should we do about restoring telecoms for everybody?  And I said, well, I think what you should do – just off the top of my head; I’m not a telecoms expert – is to go to your favorite GSM provider and buy a whole bunch of simple handsets and give them to everybody.  And put several GSM towers up that don’t look like towers.  Just put them invisibly in high buildings powered by solar that’s up there so there’s no logistics and you can’t see them, and you keep quiet about where they are.  And give people with their phones two kinds of chargers: one plugs into the cigarette lighter socket in their car; the other one is solar.  Neither of them plugs into the wall.  I think we’d have had a lot better telecoms if we had done that. 

MR.    :  We’ve got time for about two more questions and then we’ve got to close the room. 

MR. LOVINS:  Holmes Hummel, congressional staff. 

Q:  Sure.  Hi.  Holmes Hummel, congressional science fellow.  Amory, welcome back after six years, and what an accomplishment to have worked with the science board to produce a lot of astounding and challenging findings. 

I would like to know what you have as your highest aspiration for us between now and the next six years, and what you think you’d like to contribute to the thinking, to the task force supporting the Defense Science Board looking ahead.

MR. LOVINS:  In this sphere?

Q:  Absolutely.

MR. LOVINS:  I would like all of the recommendations of our new report to be promptly adopted, and I don’t mean cherry-picking them.  They are well thought through as a coherent package and perhaps they can be improved upon.  No doubt they can in some ways.  But I would not like to have to do a third one of these things because it got ignored like the first one while everything got worse.  We can’t – we don’t have time for it to go on getting worse. 

I would like the overarching goal of military energy efficiency guided by the – and resilient supply guided by the two new strategic vectors of endurance and resilience to become so firmly enculturated, built into doctrine, training, reward systems, the whole thing, that they will not go away and do not depend on the leadership of the moment. 

To that end, by the way, since there is good work going on in the building to work these issues, I would like to refill my institute’s vacant post of military principal.  I’m looking for a terrific retired or about to retire 06 plus or minus one preferably from land forces who would like to take on the mission of driving the DSB conclusions and similar ones indelibly into the services and other components that cannot be done just from the building.  And if any of you know the right person, please let me know.  ablovins@rmi.org or see me afterwards.

I would also like the primes to compete over who makes the most efficient platforms and who is best at the high level of design integration that turns that into leap- ahead performance in other respects.  And I expect to be working with some of the primes in this way because I think they’re a very important driver of what gets required and procured. 

And going back a step further, we’re hatching a plot called 10XE – one-zero-X-E – dot-org if you want to look it up – factor 10 engineering which is aimed at the non-violent overthrow of bad engineering.  (Laughter). 

Q:  Why non-violent?

Mr. LOVINS:  I’ve lately redesigned over $30 billion worth of stuff in 29 sectors for super efficiency and reduce cap ex and that wouldn’t have been – what we did wouldn’t have been possible if they had been designed right.  I’m really tired of redesigning stuff that wasn’t designed right.  So it’s time to change fundamentally the teaching and practice of engineering to optimize whole systems for multiple benefits rather than isolated components for single benefits. 

For those that don’t know this remarkable lady, Holmes was the lead teaching assistant on my Stanford course on advanced energy efficiency a year ago – the thing that’s at rmi.org/Stanford. 

And I think this is a high calling because the problems we are all dealing with in military energy strategy and many other walks of life are design problems. They are caused by unmindful design.  And it’s through better design in mindful markets that we’re going to fix them.  Thank you.  Sir.

Q:  Yes, perhaps it would have been better before Holmes but I’m hoping this comes out right.  I have my shelves siroki (sp) – Adam Siegal (sp), energy consensus.  I have my shelves of Amory Levins and Rocky Mountain marked up and otherwise.  Every time I hear you or I read it just makes so much sense.  And I look at the pricing and why hasn’t – but then I leave here and I see how inefficient buildings are built.  I see the McMansions built with building standards from 25 years ago, that bad equipment and otherwise. And can you – it is somewhat an RMI but what are the non fiscal obstacles and how do we get past them do you think?

MR. LOVINS:  Please go to rmi.org/publications/climate and get a 1997 publication called “Climate: Making Sense and Making Money.”  Go to pages 11 through 20 and you will find a prospector’s guide where the left hand column lists 60 or 80 specific obstacles to buying energy efficiency and the right hand column lists the business opportunity each one can be turned into.  That alchemy of stumbling blocks into stepping stones is even more important than getting the prices right.  Correct pricing is important and I’ll never quarrel with it, but if you correct the prices without busting the barriers, not very much happens. 

So it ranges from, say, the way we reward utilities in about 40 states for selling more energy and penalize them for cutting your bill to the way we pay our architects and engineers for what they spend, not what they save; to the split incentives between landlords and tenants; to obsolete building codes.  It’s a long list. 

In, for example, the commercial building sector – since we are in a typically inefficient building – there are about 24 parties in the value chain, each with stunning perfection rewarded for inefficiency and penalized for efficiency.  Any one of those can be a show stopper.  Each one of them is a business opportunity.  Turning them all into business opportunities and not letting any of them be a show stopper requires relentless patience and meticulous attention to detail.  It requires, in short, an act of management will or I would say leadership, which is different, consistently applied.  And until we get highly motivated because our buddies are being blown up in convoys, we may not be willing to put that level of attention into it.  But if we do, I think, the rewards will be beyond measure. 

Q:  Can you repeat the publication?

MR. LOVINS:  “Climate:  Making Sense and Making Money.”  It’s a 1997 pub in the climate section of publications at rmi.org.  You’ll find it – other sections there on energy with a lot of sub sections and on energy security which has our “Brittle Power” book and other such things – a lot of neat material there.  The book as at oilendgame.com and it’s free.  All of our stuff is free.  And is that it?

MR.    :  Amory, thank you.  I can’t thank you enough.  (Applause.)  Please recycle your name tags on the way out, please.  You know, let’s do our part.  It doesn’t take a whole lot.  We’ll see you on the 28th.

(END)

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