RMI's Approach to Energy

The inefficient use of energy causes many economic and security problems, and most environmental ones. Simply using energy in a way that saves money would avoid most of these problems. RMI therefore works to speed the free-market adoption of a "Soft Energy Path" — a profitable blending of efficient energy use with safe, sustainable sources to provide the same or better services while saving money, abating pollution and climate change, reducing the threat of nuclear proliferation, and increasing global security.

Over the years, we've assembled the following intellectual tools to achieve this:

In a 1976 Foreign Affairs article, Amory Lovins, now the Institute's Chairman and Chief Scientist, asked: "What are the jobs for which we need energy, how much and what kinds of energy do we need for each task, and what is the cheapest way to supply that energy?" People don't actually want kilowatt-hours of electricity or barrels of oil, but rather the "end-use services" they provide — lighting, heating, refrigeration, mobility, and so on. Thus it's the price of obtaining those services, not of the energy that drives them, that should matter. This "end-use/least-cost" approach is basic to RMI's thinking about using all kinds of resources more productively.

Thinking little about their customers' end-use demands, electric utilities historically believed their business was simply to sell electrons. They created giant, centralized systems that relied on multi-billion-dollar power plants that took years to build, thinking they had no choice but to keep up with demand for electrons. Some still think this, but most now realize that it's usually cheaper to help their customers save electricity than try to sell them more of it—because selling more means having to build more expensive, economically risky power plants. "Demand-side management," a practice that Amory Lovins helped pioneer and RMI has consistently promoted, recognizes the fundamental equivalence of savings and supply. The cost of saving electricity — or saving any sort of energy, or any sort of resource — should be weighed alongside the cost of producing more of it. Saving energy is usually cheaper, and not only that, it also reduces pollution and many other problems. As Gary Zarker of Seattle City Light says: "There's no cheaper, cleaner power than power you don't have to produce."

There's an old joke about an economist who was walking down the street and saw a $20 bill on the pavement. He didn't pick it up because he assumed it didn't exist; if it did, he reasoned, someone would have already picked it up. Many good ideas are slow to catch on because people assume that if it worked somebody would have done it already. That's why RMI devotes much of its efforts to documenting the best and most profitable energy-efficient technologies, industrial and architectural designs, and business practices: if they exist, they must be possible.

In today's complex world, designers and decision-makers too often define problems singly, without due attention to their causes or connections, and devise narrow "solutions" that merely shift the problem or create new ones in its place. For example, the usual response to an oil shortage is to encourage more domestic production (a "drain America first" strategy that will soon backfire) or to increase the flow of imports (which entails massive defense expenditures, and risk, to keep Gulf supply lines open). "Systems thinking" means considering the bigger picture to find solutions that avoid such unintended consequences and instead produce cascading benefits — as, for example, when more efficient vehicle designs not only make more oil unnecessary but also reduce pollution, protect the climate, save money, and strengthen the economy.

Efficiency is usually viewed as a process of diminishing returns: the more you do, the less attractive the payback. But RMI has demonstrated in a number of fields—buildings, vehicles, industrial systems — that it's possible, using highly integrative design, to achieve very large efficiency gains even more cheaply than small ones. This results from the conscientious application of various non-standard techniques — for more on tunneling through the cost barrier, see the newsletter story mentioned below.

For least-cost solutions to win out, the market must offer a level playing field. Most of RMI's activities are aimed at accomplishing this: urging policy-makers to desubsidize energy prices and remove barriers to energy efficiency; devising mechanisms for market trading in saved energy and for rewarding engineers and designers for saving energy; and improving market function by educating utilities and businesses about profitable energy-saving opportunities.

RMI has been a driving force in showing how regulations can provide energy utilities with profit incentives to invest in efficiency. This has included extensive writing and testimony on decoupling profits from electricity sales so that utilities aren't punished for helping their customers save energy; and ensuring that electric-industry restructuring encourages competition and maintains public goods such as efficiency, renewables, and research and development.

Centralized electricity systems with giant power plants are becoming obsolete. In their place are emerging "distributed resources" — smaller, decentralized electricity supply sources (including efficiency) that are cheaper, cleaner, less risky, more flexible, and quicker to deploy. RMI is at the forefront of quantifying the benefits of this approach to enable utilities and other energy providers to justify changing their strategies.