States taking the lead on alternative energy ideas


It's heartening that President Bush and others in Washington are talking about energy independence and "addiction" to oil and are starting to recognize the value of innovation and advanced energy technology. At last, it seems we're all on board with this important idea.

There are indeed opportunities to replace gasoline with ethanol from plants, electricity stored in batteries, and potentially hydrogen. A growing share of our electricity is being generated with modern wind turbines, such as those in northern and eastern Colorado, at costs competitive with power from fossil-fuel-fired plants. This is half of the energy innovation story.

The other half, the mother lode of energy, is efficiency. It is cheaper, cleaner and far more secure to drill for efficiency in Detroit than to drill for oil in the Arctic. The same applies to electricity and heating fuel for our houses, offices and factories.

While Washington is talking, states have taken the lead in innovation and efficiency technologies. Some 20 states now have "portfolio standards" that require utilities to increase their use of wind and other renewable sources. A 2002 California law that limits light vehicles' carbon dioxide emissions, and thus improves fuel economy, has since been endorsed by 10 other states.

Even if the federal government succeeds in barring states from regulating carbon dioxide, there are other approaches. States can use revenue-neutral "feebates" to shift customer choice within each vehicle-size class by combining fees on purchases of inefficient vehicles with rebates on purchases of efficient vehicles. Washington will catch up eventually.

California and New York offer incentives for utilities to help customers improve efficiency in buildings. Vermont has a dedicated efficiency utility, which saves electricity faster and cheaper than power utilities produce it. Hawaii, with the greatest dependence on oil and the highest oil prices, has introduced portfolio standards for renewable electricity and fuels, backed by incentives for ethanol produced on local farms. Republican governors in these states adopted energy efficiency and oil independence as economic priorities.

Colorado has joined the wind- power boom, and growth should continue under the renewable portfolio standard created by the 2004 passage of Amendment 37. However, we are hardly a leader in energy efficiency. Xcel Energy is rejuvenating electricity-efficiency programs, but the governor in the past vetoed bipartisan legislation for appliance efficiency standards and natural gas utility-efficiency programs.

The inefficiency of our oil use is especially critical today, as oil's volatile price erodes our prosperity, its vulnerabilities undermine our security, and its emissions destabilize the climate. A major independent study released in 2004 by Rocky Mountain Institute, co-sponsored by the Pentagon, shows how the United States can both revitalize its economy and eliminate its dependence on oil over the next few decades.

We found that the tools for curing oil dependence can also revitalize manufacturing. Americans can either replace foreign oil with efficient foreign cars, or leapfrog to super-efficient domestic cars and thus reduce imports of oil and cars. Such innovation and revitalization could save billions of dollars per year, some of which would otherwise finance our enemies, and preserve more than a million jobs in auto manufacturing and related industries.

One key to making cars, trucks, planes and other vehicles more efficient is to make them from lighter but stronger materials, such as advanced steels, aluminum and carbon composites. Contrary to conventional wisdom, lightweight vehicles can be safer than today's steel vehicles. Formula One car bodies are made of carbon, not steel. Likewise, aircraft can benefit from advanced materials. Boeing aims to beat Airbus' "superjumbo" A380 with its fuel-frugal 787, based on advanced technology such as carbon composite materials.

Putting lighter, safer and more efficient vehicles on the road makes the fuel source less important and offers far more flexibility for energy users. Efficiency is the one resource that can shift the oil supply-and-demand balance enough to decrease prices, as it did in the 1980s. Efficient vehicles require smaller, cheaper and lighter power systems. This makes the vehicle even more efficient, compounding the weight benefit.

Downsized motors make it practical to use electricity, stored in batteries, in designs resembling today's hybrid motors - with the added ability to plug into the electric grid. Efficient vehicles also bring the day closer when hydrogen fuel cells become practical.

Energy efficiency is key, but there are also solutions involving fuels - ethanol from plants, for example. Using advanced technology to make ethanol from crop wastes and woody crops like switchgrass and poplar, we could boost today's corn-based ethanol industry. This industry could shift fuel reliance from the Mideast to the Midwest. Such a shift would create thousands of rural jobs, double farm incomes, and revitalize the rural Midwest.

Our energy future is choice, not fate. Oil dependence can be eliminated with proven and cost-effective technologies that create wealth, enhance choice and strengthen security. This transition could be achieved as far in the future as the 1973 oil embargo is in the past. When we last paid attention to oil, in 1977-85, we cut its use 17 percent while GDP grew 27 percent. In eight years, oil imports fell 50 percent, and imports from the Persian Gulf by 87 percent. That exercise of market power - from the demand side - broke OPEC's ability to set world oil prices for a decade and helped fuel inflation-free growth through the 1990s. Today we can rerun that play, and do it even better.

The difference between 1973 and 2006 is that we now know a lot more about what works. Market- based policy incentives, led by the states with federal support where needed, can spur the innovation and technology to revolutionize energy efficiency, green fuels and clean electricity. American business can lead the nation and the world into the post-petroleum era, foster a vibrant economy, and bolster lasting security. If we don't, expect Asian competitors to overtake us in another technological race.

For more information, see "Winning the Oil Endgame," at www.oilendgame.com.

Joel N. Swisher is managing director of the Rocky Mountain Institute.


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