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Episode 27: Amory Lovins

On this episode, Jon Powers sits down with Amory Lovins, co-founder, Chief Scientist, and Chairman Emeritus of the Rocky Mountain Institute (RMI). This conversation covers topics from the start of Amory’s career, the founding of RMI and what’s currently happening internationally in India and China.

Amory is a leading innovator on energy and environmental issues. Time has named him one of the world’s 100 most influential people. His current work explores how to make the integrative design the new normal. RMI is an independent, non-partisan, non-profit organization that engages businesses, communities, and institutions, as well as entrepreneurs to accelerate the adoption of market-based solutions to help shift from fossil fuels to renewables.

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Transcript

Jon Powers:

Welcome to “Experts Only Podcast” sponsored by CleanCapital. Learn more on cleancapital.com. I’m your host Jon Powers. Each week we explore the intersection of energy, innovation, and finance with leaders across the industry. Thank you so much for joining us.

Jon Powers:

Welcome back to “Experts Only Podcast” where we explore the intersection of energy, innovation and finance. My name is Jon Powers. I’m your co-host and one of the co-founders of CleanCapital that sponsors this podcast. Check out cleancapital.com and learn more about our new billion dollar partnership with CarVal Investors. Today, we are interviewing Amory Lovins, who’s the co-founder and chief scientist, as well as the chairman of Emeritus of Rocky Mountain Institute. Amory is one of the leading figures and really a godfather in the space for many of us who are focused on things like distributed generation.

Jon Powers:

If you don’t know Rocky Mountain Institute, RMI is an independent nonpartisan nonprofit organization that engages businesses, communities and institutions, as well as entrepreneurs to accelerate the adoption of market-based solutions to help us shift from fossil fuels to energy efficiency and renewables. He’s also an energy advisor to firms and governments worldwide. He’s authored 31 books, more than 600 papers. I’ve quoted many of those papers or referenced them in my own work.

Jon Powers:

He’s an integrative designer of super efficient buildings, factories, and vehicles. He’s received extensive recognition for his work, including the MacArthur and Ashoka Fellowships and 12 honorary doctorates. Time, even named Amory one of the world’s most influential people, 100 most influential people and foreign policy, one of the top 100 global thinkers. I’m really looking forward to this conversation today. We’re going to cover a variety of issues from how he got interested in the space, started RMI, what’s happening internationally, and the work in Indian China today.

Jon Powers:

I’ll warn you, this is a little bit longer episode to our normal episodes, but it really is a fascinating conversation. We thank you so much for joining us on today’s “Experts Only Podcast.” You’ve had quite a prolific career in energy and you’re widely considered as one of the leading innovators in the space. Time has named you one of the world’s 100 most influential folks, you’re seen as a global thinker, but if you step back before you got into working on energy and environmental issues, what drove you into the space? What was your motivation to get started when you started writing even back in the 60s?

Amory Lovins:

Well, in the 60s, it was already obvious that the world was headed for serious problems among other things, the tangle of issues from population resources, environment, economy development and security. As I was writing my first professional paper on climate change in 1968, that’s now 50 years ago, it became ever clearer that energy was a master key for unlocking many of those puzzles or at least offering better ways to think about them. That has turned out to be exactly the fruitful approach that I made my life’s work and, and it’s worked well so far.

Jon Powers:

Yes, absolutely. You’ve seen such phenomenal transformations over that time. We’re obviously seeing such a great surge right now in renewables, but the technology is not new. Jimmy Carter put solar panels on the White House 40 years ago.

Amory Lovins:

They all stand there, they’re still alive and well providing hot water to the dining hall cafeteria at Unity College in Maine.

Jon Powers:

Really?

Amory Lovins:

Yes.

Amory Lovins:

They were rescued from a GSA warehouse where the Reagan administration had stowed them and not allowed them to say it was there, but Unity College got curious about where they were and tracked them down. The guy said, “Oh, I’m so glad you called. We can’t give these things away because they’re government property.” Unity guy said, “Oh, but can you give it to a nonprofit?” Yes. “Why can’t you get the truck here?

Jon Powers:

That’s amazing. One of my fondest memories of working in the White House was getting the panels put back on the top and actually getting to go up and see them up there. It was an amazing long overdue accomplishment.

Amory Lovins:

Yes, well, we co-ed the greening of the White House for president Clinton and a lot of good things have been underway ever since.

Jon Powers:

Absolutely. In that career, you’ve seen a lot of transformation. What’s excited you, what’s scared you, how do you see where we are today versus writing your first paper on climate change 50 years ago, 1968?

Amory Lovins:

Well, in those days, renewables were hardly even a gleam in the eye. Although the Paley Commission under the Truman administration, I believe had recommended emphasis on renewables. Thomas Edison, foresaw, they would be a big deal, but they were considered so unrealistic that when my ’76 foreign affairs paper reframing the energy problem referred to solar, it didn’t mean photovoltaic it meant solar thermal.

Jon Powers:

Interesting.

Amory Lovins:

Energy efficiency in ’76 was considered probably impractical or unnecessary because after all we live in a market economy, so we must already be using energy with perfect efficiency. It is quite amazing what people said in those days that if energy use grew slower than GDP, we’d be back to caves and candles. They really said that stuff. Therefore, just making the case that one could ring more work out of the energy and consider other kinds of supply, other scales of supply and not all electric supply necessarily, but matched to the quality needed for the job that was all heresy.

Amory Lovins:

Well, as it turns out, the rate of improvement of energy efficiency has tracked very closely to what that article suggested. Renewables however, were held back 20 odd years by a series of policy choices and are only now doing what they should have been doing back then. If you go to rmi.org and look up Solutions Journal last summer, you’ll find a paper, a 40-year retrospective on that article about what worked, what didn’t and why, and what we learned or should have learned from it. But broadly speaking, we’re now getting over twice the work from each unit of energy that we did in the mid 70s.

Amory Lovins:

An eighth of the world’s electricity is now from modern renewables, those other than big hydro and that’s creeping up one odd percentage point a year. Those sources last year had 61% of the global market for new electric capacities and growing fast. They’re heading for whether they got over twice as much investment as all fossil fuel generation heading for three quarters of the total over the not many years. Now it’s clear that we’re headed for peak oil and probably peak gas on the demand side and the coal is already right around here.

Jon Powers:

Great. I think we’re witnessing today. Let me ask you, I’m going to get into the market forces and what’s happening in the space but for doing that, you are the co-founder of an amazingly influential organization, the Rocky Mountain Institute, I think folks don’t know RMI. They need to check it out. It’s a group that as I first got into this space, I started getting interested in clean energy when I was deployed to Iraq as part of the Army’s first armor division in 2003, 2004, came home and had no idea the context.

Jon Powers:

I just understood the idea around energy security and began to study and reading actually a lot of your work at RMI, influenced my next step in my career, which led me back to the Pentagon and working at these issues across the army. I was the Army’s first special advisor on energy,

Amory Lovins:

For heavens’ sake.

Jon Powers:

Yes, it was a fascinating world.

Amory Lovins:

I spent the last 20 or 30 years helping shape military energy policy around efficiency, renewables, and resilience that’s going very well.

Jon Powers:

I think people that don’t know the space don’t recognize that the army manages three times the square footers of Walmart and because of the policies that many like yourself are advocating for. They’re doing really innovative stuff on renewables, on energy efficiency, on AVs, even in the headwinds that sometimes they face.

Amory Lovins:

Indeed, all the army services are the national leaders within our government on efficiency, renewables.

Jon Powers:

Absolutely. Stepping back, what drove you to start RMI? What was the original mission and how has it changed over time?

Amory Lovins:

Well, it was clear in ’82 when my then wife Hunter and I were starting up RMI that the conventional assumptions about politics and political evolution were not going to hold and that there was a great need for an independent voice, which we thought would be a handful of people. We now have about 200. That could fit all the moving parts together, that could do serious thought leadership practice and integration of a clean, prosperous, secure, low carbon energy future. The premises we set it up on, have proved valid.

Amory Lovins:

One of those is to remain rigorously apolitical and non-partisan, we work with everybody. We are practitioners, not theorists. We do solutions, not problems. We do transformation, not incrementalism. We say exactly what we think. That’s turned out to be a useful approach. I think Rocky Mountain Institute has earned some respect and been able to do good work because of those core values. We now are active as much abroad as at home, helped with the transformation of Chinese energy policy.

Amory Lovins:

We’re now playing a similar role with innovative mobility strategy for India and doing everything from rural electrification in Africa and the transition for Caribbean island nations, from diesel to renewables efficiency, all the way to efficient aviation and marine shipping. Our core activities have long been with equal depth in all the energy using sectors, making buildings, mobility, industry, and electricity, radically efficient, and the renewable supply, diverse, distributed, dynamic, and resilient.

Jon Powers:

I think being here in Washington, D.C., there are no lack of think tanks, where folks publish academic policy positions and will often write…

Amory Lovins:

We don’t do that.

Jon Powers:

Exactly. I think that’s.

Amory Lovins:

We’re “think and do tank”. The important word and, and I would add a scale tank as well. We go make stuff big. We don’t just suggest it.

Jon Powers:

Yes. What I find interesting with RMI is that in the startup world, I meet people who talk about incubators. You can look at so many things that have spun out of RMI, whether it be black or energy and other really amazing initiatives that started off being incubated within the walls there and now are making tremendous transformational change as they’ve moved out. It’s something that you don’t see come out of the Think Tanks. I love their “Do tank” phrase.

Amory Lovins:

Well, the important word is “and”, and “think and do.” I think there’s a Chinese proverb to the effect that thinking without doing as a daydream doing without thinking, I bear. We are also an archetype of the entrepreneurial non-profit in the earlier years, we earned 40 to 70% of our revenue from programmatic enterprise that supports our charitable mission, but does it using business tools and methods.

Amory Lovins:

We’ve had something like six or eight for-profits spinoffs about four nonprofits spin-offs one or two spin ins and more of that going on all the time, because we’re now figuring out how to animate more of these market affiliates that will carry out our mission for fun and profit, and then feed some revenue back to the nonprofit mothership. We also, from the beginning have been active in policy. Policy is important. Policy matters.

Amory Lovins:

You got to get the rules right, but most of our effort has from the beginning focused on transformation that is business led and market-driven. That turned out to be a good call because that’s where most of the action is and it didn’t seem to us to make sense, to go into for a largely owned by incumbent industries and try to argue against what they’re good at and what they’re comfortable doing, but rather to enlist both incumbents and insertions in a creative tension with each other to do new things that would be of advantage to them.

Jon Powers:

Right. It seems with… It’s interesting that touching because the idea of what really trying to continuously transform that the goalposts keep moving. In a very positive way, if you think about it over the course of when you started in 1982. There’s been such acceleration the last 10 years or so in the energy space, post the Paris pull out of this administration, you had corporate giants stepping forward saying, no, we’re still in because this makes economic sense.

Jon Powers:

We’ve got entire offices around how to purchase energy now for Google and for apple and for eBay and Walmart. You all have really helped see that and set, but the goalpost for RMI keep moving. How do you all from a leadership perspective, try to look out and figure out where you should be playing next?

Amory Lovins:

How to skate, where the puck’s going to be?

Jon Powers:

Yes, exactly.

Amory Lovins:

Well by really being blessed with extraordinary people. We seem to have some gravitational attraction to pull in more of them that we can deal with actually, but the inflow of talent has been most gratifying. That’s what’s really been the foundation of our success so far. Also of course, having people with real field experience and strong connections and insight in the industries that we’re trying to change because we’re trying to move a tens of trillions of dollars economic activity on a budget of about 40 million.

Amory Lovins:

We need really strong leverage to do that, and that comes from being able to present recent and compelling business cases. One of the challenges we face is there are so many shiny objects attracting us in the insurgence space that we mustn’t forget to devote some serious effort to helping incumbents to change so that at least, the highly adaptive ones can be hived off from the herd and we won’t be fighting all of them. Some will be helping lead the way with their remarkable skills.

Amory Lovins:

We’re working with a number of major energy companies now in various sectors to help them figure out how to apply their skills and assets, do graceful exits from others, activities that aren’t so promising. We’ve also had good fortune with what’s called eLab energy, electricity innovation laboratory, which has now for some years provided a safe place where incumbents and insurgents can meet and create value together rather than just lobbing grenades in public.

Jon Powers:

Interesting. With eLab and going back the, I think insurgents and incumbents concept with all the… I don’t want to really use the word disruption, but the transformation that’s happening around…

Amory Lovins:

Oh, it is very disruptive.

Jon Powers:

It is very disruptive. Around distributed generation we’ve got really just such major players in the private sector now no longer relying on just paying the utility bill, but actually putting really sophisticated purchasing power forward and leveraging their strengths. Seeing Microsoft doing massive solar in places like Virginia, where I live in Virginia, and there’s very little solar to be had as a off-taker. They come in and say, “Hey, we’re going to bring these data centers here if you do X.”

Jon Powers:

I think we’re well aware of Google, but at the same point, you have the utility status quo trying to adjust to this. You have spinoffs like energy impact partners, which is a really interesting venture capital pool they put together to look at new technologies. Does RMI play a role at all of bringing those forces together and finding ways that to find the solutions for both?

Amory Lovins:

Very much so. Our business renewables center members, several hundred firms accounted for upwards of 96% of the corporate renewable energy purchases last year. Through that forum, we’re able to share best practices, do bulk deals for companies that want to buy renewable energy, both to save money and avoid price volatility and to be doing the right thing. Which is good for reputation, recruitment, retention, motivation of their talent, and doing what their customers expect of a responsible company.

Amory Lovins:

There are very strong, direct and indirect business reasons now. It’s not just the renewables are cheaper, although that’s a strong motivation. It’s not that unusual for a creative and a far-sighted CEO to be moved by the spirit at some conference to say, yes, we’re going to go all renewable by the year X and then comes back home and word gets around and the purchasing people say, oh my God, I don’t know how to buy that stuff. I just don’t know how to buy kilowatt hours and MCF of gas help.

Amory Lovins:

Then we hook him up with others who’ve been there, done that and made their first rodeo. There’s a lot of wonderful information sharing going on. We’ve had the good fortune to be in it through creation of the automotive transformation, similar transitions in everything from semiconductors in data centers to older industries and of course the birth and growth of green buildings. A concept Bill Browning invented around the early 90s in our shop and by exploiting indirect benefits of happier, healthier, more productive people in efficient green buildings.

Amory Lovins:

It’s wonderful to see the green and efficient building movement spread around the world and added, it matters of course to energy because buildings use three quarters of U.S. electricity. Only a quarter goes to industry. There’s a lot going on that we’re finding from unexpected interactions between sectors that aren’t even adjacent to each other. For example, the smartphone, the need to miniaturize energy storage. The premia that the phone makers will pay for longer battery life have driven huge technical advances in batteries.

Amory Lovins:

Those then made it affordable to put batteries in cars, giving rise to the likes of Tesla and everybody else practically every automaker has a big lineup of electric cars on or about to enter the market. Some of them are awfully attractive, but then when you make that many batteries, they get cheap for everybody, which means you can start to pair them up with variable renewables, photovoltaics and wind.

Amory Lovins:

Not that you need to do that because there’s about nine other ways to integrate those variable renewables reliably into the grid, but batteries are one way to do it. Of course, when that happens, you start to get further innovation, which in turn can be the end of thermal power stations, because it will shortly be so cheap to make your rooftop solar power even in Virginia 24/7. That is not even clear, there’ll be that much use for the grid anymore. It could get it’s strategist like phone company copper did.

Jon Powers:

How do we continue to bring the utilities forward? There’s no doubt in being here in Virginia, that there’s enough solar, enough sun to create solar and the challenge is a policy fight in Richmond with dominion energy. We literally look across the river and to Washington D.C., it’s one of the hottest markets in the country for solar. How do we continue to educate these utilities that provide them new business models really so that they can figure out how to stay active in this space?

Amory Lovins:

Well, they have several big issues. First of all, they’re traditionally regulated in a way that rewards them for selling you more energy and penalizes them for cutting your bill. There’s a way to fix that called decoupling and shared savings that about 16 states, I believe have done for electricity about 20 for gas, more on the way and Edison Electric Institute, American Gas Association support that reform and more utilities are wanting it because it helps protect their revenues from erosion as efficiency and renewables cut into their own sales.

Amory Lovins:

That then raises an issue that goes back to Thomas Edison. When he set up the electricity business, he did not sell kilowatt hours, he sold light. He would charge you a penny to run a lab for an hour because as an investor, he knew people would come up with much more efficient lamps. When they did, he wanted that to cut his costs of producing the lighting service, not his revenues. He was overruled in 1892 and ever since then, utilities have been selling electrons as a commodity. The more efficiently you use the electrons, the less money they make, They’re cutting their revenues, not their costs.

Amory Lovins:

The whole revenue models upside down, and the same thing is true. The hydrocarbon industries, which cells molecules, when what you want is services like comfort and mobility. That’s a really big issue that very few of the companies have come to grips with yet. Of course, then efficiency in using energy is undergoing the same radical change that renewables have done and the same analytic methods and models that failed to predict the one or failing to foresee the other.

Amory Lovins:

Most people don’t realize that very large, even as much as tenfold energy savings in buildings and factories and vehicles now can cost less than normal inefficiency. The more you invest in efficiency, the more you save but the less it costs. In other words, expanding returns not diminishing returns. That is quite commonly found out through what we call integrative design. That’s hardly on anybody’s radar because it doesn’t fit conventional economic theory any more than the renewable revolution did.

Jon Powers:

Can you talk a little bit… When you say integrated design, are we talking about integrated energy management system?

Amory Lovins:

No. A simple example. I’m a passive solar banana farmer near Aspen, Colorado, where it used to go to minus 47 F on occasion. We’ve had as much as 39 days of continuous cloud in midwinter, but our house doesn’t have a furnace. It’s a passively heated and was forerunner of the passive house movement. But it was slightly cheaper to build that way because the stuff that got rid of the heating system cost less than we saved by not putting in the heating system. I’m talking about upfront construction costs, not subsequent savings.

Amory Lovins:

The office from which I’m talking to you does the same thing, roughly normal construction costs like any modern, passive building, no mechanicals, except air to air heat exchange, no normal heating or cooling equipment, and just provides passive comfort. Ultimately, everything will be built that way, it is now becoming mandatory in California and in some other parts of the world. The integrative design optimizes the building as a whole system for multiple benefits rather than a component like insulation for single benefits. I’m going to pick a simpler example even.

Amory Lovins:

Even if you make the worlds pipes and ducts fat, short and straight, rather than skinny, long, and crooked, you save so much friction and therefore so much pump and fan energy that you would displace roughly half the world’s coal-fired electricity. You’d recover your investment in typically less than a year in retrofit, less than zero in new builds. Yet this is not in anybody’s forecast because it’s not a technology, it’s a design method and those people don’t think of design the way we choose and combine technologies as a scaling vector, but it is.

Amory Lovins:

We’ve shown how to do that in buildings, vehicles, mobility systems, industry in sufficient depth and detail, that it is really hard to argue with, but you then run squarely into economic theory that says the more of anything you buy or do the more it costs increasing marginal costs. If you try to model the opposite, expanding, not diminishing returns, it makes your models blow up and your head surges so you don’t want to think about it. This is now a major kind of confrontation brewing between economic theory and engineering reality.

Jon Powers:

Interesting. A conversation to be had with ASHRAE and USGBC and then some of the stuff?

Amory Lovins:

Yes, there are a lot of people there but they’re not the ones writing the economic forecast. The bad news about climate is that it’s changing faster and less linearly than the conservative model said and the good news is that the same models greatly understated the scope for profitable mitigation. We can get to a two or even one and a half degree trajectory, not at a cost, but at a profit that ought to change the politics.

Jon Powers:

Yeah. I actually would like to do a whole different conversation on that because I think I completely agree with you. It’s the heart of what CleanCapital has been focusing on and we are driving to educate more folks in the investor space. Say, there’s such a great effort around the divest movement for instance, but let’s turn on a dime and say, look, it’s equally as profitably investing into solar or some other spaces it is, and what you’re doing in the real estate space, for instance.

Jon Powers:

I want to ask two final questions. One, looking at the work that you’re doing internationally, we often talk about ideas and innovation we can export in terms of clean energy to China, India but I think there’s so much knowledge that we can import on what they’re doing. Is there anything that you’ve seen that really stands out that we should be trying to replicate here at home?

Amory Lovins:

Yes. Where to start on that one? Brains are evenly distributed, one per person as says the Pincho is remark. Therefore, most of the brains are not in the rich countries. Only half are in the heads of men. Most are in the heads of poor people who are very resourceful and we have a lot to learn if we have the humility to look at what other people are coming up with. China is making extraordinary world-leading progress in both efficiency and renewables. We’re seeing very exciting developments at both a national and a state and city level in India in rethinking personal mobility and making it shared connected and electric, and also fair and accessible to everybody.

Amory Lovins:

Some of the technical and policy innovations there, I think will have a big influence in other countries. That’s why our big report on that with the prime ministers’ strategy shop called NITI is called India Leaps Ahead, because that’s exactly what this could produce. We are also seeing exciting innovations in some of the poorest countries that are leapfrogging over the phases of energy development that countries like ours had to go through that are going straight to very efficient, renewable provision of basic services. That has huge implications for bringing a decent life to all and helping to reduce both injustice and conflict in the world.

Jon Powers:

Absolutely. Again, that could be a whole different podcast and conversation. I actually did my master’s thesis on Chinese energy security, fascinated on what’s happening there versus the five-year plans and how they differ from the way we approach things here but there’s one final question. I sort of ask this to all folks on the podcast. You had such a prolific, an impactful career and if you go back to yourself at a young age, for instance, like coming out of high school and you could sit down and have coffee, what advice would you give?

Amory Lovins:

Well, first of all, don’t take any crap from the educational administrators who want you to study just one thing. Most of the world’s big problems come from trying to do just one thing without understanding how it’s connected to everything else. Jump the fences, walk out of the grass and go learn what you want to, what you think you need and the more disparate your learning is, the more effective you’re likely to be.

Amory Lovins:

Second, for a smart, motivated person like you, there are few, if any disciplines that you cannot learn as much about in six months as most, not all, but most people in the field know. That was true even before the internet. Once you understand that, it’s profoundly liberating because you can take the initiative to go figure out what you need to learn, what you need to do, what you need to, and don’t let anybody keep you down or hold you back.

Jon Powers:

I’ll tell you quick to just put a story behind that. When I was working at the Pentagon and first got interested in the finance piece, we were doing large-scale power purchase agreements. I didn’t understand anything around finance. I don’t have an MBA. I literally went and bought corporate finance for dummies to start to read and understand it. I had the similar role at the White House to set up a clean energy finance working group to get smarter at it and here we go. Now I’m running a FinTech company, but it all works out. We thank you so much for your time, for your commitment to the space and the mission and all the work you’ve done. I really am honored to have you on today.

Amory Lovins:

Well, honor to be here. Thank you very much for all you do.

Jon Powers:

Thank you.

Amory Lovins:

Bye.

Jon Powers:

Well honored to have Amory Lovin’s on today’s episode. We appreciate you taking the time to listen. You can learn more about CleanCapital at cleancapital.com and find more “Experts Only Podcast” and if you have thoughts or ideas, please let us know. I wanted to thank our producers, Emily Connor, and as well as Lauren Glickman and wanted to thank you for listening. I look forward to continuing the conversation.

Jon Powers:

Thanks for listening in today’s conversation. Find more episodes on cleancapital.com, iTunes or wherever you get your podcasts. You like what you hear, be sure to subscribe and leave us a five star review. We look forward to continuing our conversation on energy, innovation and finance with you.