But between 1984 and 2000 the U.S. went from consuming 2,400 billion kilowatt-hours in 1984 to 4,000 billion kilowatt-hours in 2000, noted energy journalist Robert Bryce. Lovins complained to Bryce that Business Week misquoted him.
Below is the full interview from the article.
The Lovinses detailed their latest thinking in an interview with editors of BUSINESS WEEK: A sample follows.
Q. How would you define the electric utility crisis?
A. (Amory) Very few utilities understand what business they are in for the long term. Many still think that they're in the business of selling kiIowatt hours of electricity and that they have to compete with, say, natural gas. Like it or not, they're actually competing in an energy service marketplace in which people are seeking -- and increasingly finding -- the cheapest way to do each desired task. Electricity has to compete not just with fuels but with weather-stripping -- a very tough competitor.
The abandonment of over $15 billion worth of nuclear plants so far, and about $40 billion to come, is only the beginning of a longer-term problem. There are $100 billion or $200 billion worth of uncompetitive coal and nuclear plants in operation. Technologies to wring more work out of electricity have been emerging with dizzying speed. Full use of the best devices now on the market -- most of which did not exist last year -- would roughly quadruple the long-run efficiency of using electricity in this country at a cost under 2 cents a kwh, in today's dollars. That is less than the operating cost of coal or nuclear plants.
In other words, something like 80% or 90% of the electricity now sold is uncompetitive with electricity-saving technologies. Even if you've just finished building a new reactor, it would be cheaper to write it off than to operate it.
Q. For 2 cents a kwh or less, enough efficiency is available to reduce consumption of electricity by three-quarters?
A. (Amory) Five years ago, the best analyses showed that you could double electricity end-use efficiency at 5 cents a kwh in 1979 dollars. [But] technical progress has been such that we are now seeing twice the potential savings we did then, at about one-third the real cost. And we see no sign that the flood of new electricity-saving devices is slackening.
Q. What are the main improvements?
A. (Amory) We have much better tech- nologies for controlling, sizing, and coupling motors, especially large industrial motors. Since motors use about 64% of our electricity, this would more than displace every reactor in the country.
There have been dramatic developments in lighting. [New] Norelco light bulbs, for example, quadruple the efficiency of what fits into an incandescent lamp socket, improve the quality of light, and multiply the lifetime of the bulb tenfold or so. If I [use] an 18-watt light bulb [to replace] a 75-watt bulb, the 57 "negawatts" of unused electricity are in effect dispatched back to the utility to sell to somebody else. That device and its cousins render obsolete about $35 billion worth of power plants.
Q. Given iohat Market penetration?
A. (Amory) You wouldn't quite get complete penetration, because [these bulbs] do not start well at or below freezing. But indoors you could expect 90%.
(Hunter) Whether utilities get involved in implementing [this] will affect how fast it comes in. Traditionally, [they have said] demand is going to be so much, therefore, we'll build to meet it. We're saying this bulb can radically affect demand, and you ought to be giving them away, financing people's purchase of them, because that's cheaper than any new kind of power plant.
Q. You're suggesting that utilities should shape their market?
A. (Amory) Let me take an example of why a utility should encourage this. The best U.S.-made refrigerator in mass production is about one-third more efficient than the average. The best American prototype [is better by] a factor of 100. However, you don't know whether people are going to be buying 15- or 1,500-kwh-per-year refrigerators unless you can influence that decision. If you take a worst-case approach, you'll end up building so much capacity you'll go broke.
(Hunter) The smartest utility managmight be true is in areas such as the upfront money for [customers] to buy whatever refrigerator meets our standard. And we will then know how much we have to maintain on our system.'
(Amory) The reason is not simply that the kwh's are cheaper to save than to generate. It's that you avoid the range of uncertainties in future demand. [This is] the best utility strategy now.
Q. Couldn't marketing surplus power be a correct strategy in some cases? A. (Amory) It may where it is cheaper to generate power than to save it. But we haven't yet found [such] a case.
(Hunter) The only place where it might be true is in areas such as the Pacific Northwest, where you have old, embedded cheap hydropower -- and if you won't have to build an additional plant. . . .
Q. Let's go back to your 2 cents per kwh figure. Based on that, you say it would be cheaper not to start up a virtually complete nuclear power plant.
A. (Amory) It is certainly true for new nuclear plants and most existing ones. Nuclear operating costs are rapidly approaching coal costs, mainly because of higher operation, maintenance, and repair costs than had been foreseen.
Q. How do those costs break down?
A. (Amory) Let's take Wolf Creek, a reactor under construction mainly by Kansas City Power & Light and Kansas Gas & Electric. As of the end of September, 1983, the plant had cost $1.78 billion. If finished on time with no surprises, it would cost at least another $900 million. But it's less than half finshed on a life-cycle cost basis.
If the plant were not finished, ratepayers would save, in rounded numbers, 3 cents per kwh in capital costs -- the $900 million not yet spent as of last September. They would also save at least 0.6 cents for not having to fuel the plant, 0.8 cents for not having to operate and maintain it, 0.6 cents for not having to decommission it and manage its radioactive waste materials, 0.4 cents for not having to repair and replace major components, and about 0.3 cents for not paying for electricity lost on the grid between the plant and its final users.
Q. Are these numbers typical?
A. (Amory) If anything, they're low. But we're also saying that if a utility properly structures its financial participation to get efficiency improvements to its customers, it can improve its cash flow so much that it can gradually make itself financially whole and even restore to investors the sunk cost of the abandoned plants without raising rates. In fact, the bills would probably go down.
Indeed, if you count not just electricity use but all energy use, the net national savings available from a least-cost energy strategy by [2000] is several trillion of today's dollars. That is more than enough to pay off the national debt.
Q. Let's take another specific. What should Long Island Lighting Co. do?
A. (Hunter) Lilco should stop any expenditure on Shoreham and write it off.
Q. There goes Lilco's stock.
A. (Amory) Lilco's stock has been so heavily discounted there's not much left. If stopping Shoreham were part of a well-thought-out program to meet customer needs in a way that would not cause rate shock, if you could pay off the sunk cost to the investors over a period of years from the stream of savings from using electricity more efficiently, nobody would lose.
There are ways to handle utility investment in alternatives which improve cash flow enormously [with] no capital burden on customers. It would take about five or 10 years to restore a deep- ly troubled utility to financial health if it gets into short-lead-time, relatively lowcapital-cost, and modular, high-velocity-cash-flow investments. [If utilities] invest in insulating your roof rather than building a power plant to heat your house, they'll need to put in only a tenth as many dollars per watt of comfort, and they'll get those dollars back in three to four years, not 30 to 40. They can reduce their need for capital to meet your need for comfort by up to a hundredfold.
Q. Electricity consumption is up something like 8% so far this year. Does that shake you at all?
A. (Amory) We would expect in the short term that a recovery would stimulate electricity demand to recover toward its previous levels. However, we see electricity demand ratcheting downward over the medium and long term.
The long-term prospects for selling more electricity are dismal. Imagine being in a business where most of your costs are fixed and 80% of your product is uncompetitive, and yet marginal supply of the kind you're used to buying is much more expensive than historic supply. If demand is as sensitive to price as we now suspect, raising utility rates will probably reduce long-run revenue.
Q. How do you account for the utilities that are doing well financially?
A. (Amory) They've had a lot of rate relief. Many are [finishing] construction programs or have none. By stopping that cash hemorrhage, they can show a healthy cash flow. [But] that doesn't say anything about the long-term prospects of keeping their product competitive.
Q. At some point, though, won't utilities need to replace retiring base-load power plants?
A. (Amory) Only in the sense that the big hydro dams eventually silt up and have to be replaced. Far from there not being enough renewable sources to run an advanced industrial society, we will find there are too many. There won't be enough demand to support them all.
(Hunter) All the nifty solar technologies and everybody's favorite widget may compete with nuclear plants -- but can they compete with those light bulbs?
(Amory) The long-run supply curve for electricity is as flat as the Kansas horizon. We will never get, we suspect, to a high enough price to justify building centralized thermal power plants again. That era is over. The efficiency improvements are there to be bought. It is up to the utilities to choose participation rather than obsolescence.
Readers as puzzled as I am about why you would post today an interview I did with Business Week 27 years ago (with my then wife L. Hunter Lovins, who was CEO of my organization) may be less puzzled when they read the full interview at the bottom. Although the interview was a pastiche -- the magazine's unverified selection and compilation of snippets from a much longer interview whose transcript nobody has -- it's still coherent enough to help your readers understand that you've systematically misrepresented what I said and taken your quotations out of context.
You assert: "Readers can see that Lovins repeatedly claims energy demand will decline." I said no such thing. Specifically:
1) The interview was all about electricity, not energy in general.
2) Your first quotation that "...we see electricity demand ratcheting downward over the medium and long term" was indeed misquoted, and your source Robert Bryce knew it, but in his pervasively counterfactual nine-page article that you link, he chose to misrepresent what happened. What I'm confident I actually sald to Business Week, and confirmed in writing to Bryce in 2007 before he published his misrepresentation, was "electricity demand growth ratcheting downward...," but the magazine dropped the word "growth". I've been pointing this out ever since, but those who want to ignore the correction continue to do so. Now you know better.
3) Your second quotation is correct: "We will never get, we suspect, to a high enough [electricity] price to justify building centralized thermal power plants again. That era is over." In context, as the full published interview shows, this meant that new power plants can't compete in cost with more-efficient use of electricity. That was right in 1984 and is even more right today. Yet you allege, following Bryce, that this statement is refuted by 1984–2000 growth in electricity demand. It's not: those two facts are logically unrelated. Rather, the new power plants (mostly ordered before 1984) simply provided more electricity that could have been saved at a lower cost. In fact, electricity demand growth did slow pretty much as I'd expected, from 3.74%/y in 1984-89 to 1.55%/y in 2002-07. Hundreds of new power plants were cancelled, and the rest should have been, because investing in efficient end-use would have been cheaper. Utilities and customers that made that switch benefitted. That others didn't, and continued to use more electricity than is economically justified, is no surprise. That's why the opportunity to save far more electricity and money still exists.
4) Quick reality check: U.S. electricity consumption in 2009, the latest data available from USDOE, was only 0.13% above 2004's even though real GDP was 5.9% higher, because electricity used per dollar of real GDP fell at an average rate of 1.5%/y . Seeing the accelerating decline in electric intensity, many utilities are now starting to realize that long-run (next few decades) demand may be approximately flat or declining. Just the new building codes coming into force in about half the states this year and next could roughly flatten long-run demand, since buildings use ~71% of U.S. electricity and the rest, in industry, is trending down. Business Week's misquotation -- demand itself, not its growth rate, ratcheting down -- is now actually becoming a possibility for the coming decades, especially if we start taking efficiency seriously and using electricity in a way that saves money. After all, when the U.S. last paid attention to oil, in 1977-85, real GDP grew 27% while oil use fell 17%. There's nothing magical about electricity that prevents similar behavior, and the economic benefits would be even larger.
5) The other quotation you adduce to support your assertion that I "repeatedly claim...energy demand will decline" was also correct: "The long-run supply curve for electricity is as flat as the Kansas horizon." But it has nothing to do with the meaning you try to put on it -- a forecast of declining electricity demand. It's not a demand forecast at all, because a supply curve relates additional supply to its extra cost, not consumption to time. "Supply curve" is a bedrock concept in economics, and I'd hate to think you didn't know what it means -- or hoped your readers wouldn't.
Your press release today characterizes me as an "anti-nuclear activist." Readers who want to know what I actually do can find my organization's work at www.rmi.org and my background at www.rmi.org/rmi/Amory+B.+Lovins.
Posted by: Amory B. Lovins at February 17, 2011 5:44 PM