published in Business
Week Online in March 2006
This version was too long to meet their publication standards, but
due to the complexity (and controversial nature) of the subject,
the longer version is reproduced below:
Whether I talk
to fellow venture capitalists, speak to Washington officials, or
merely overhear conversations at the supermarket, it's clear we
have reached one of those rare moments of broad societal accord.
We all agree the U.S. has become overly dependent on fossil fuels-
particularly foreign energy. We all want to do something substantive
to eliminate that dependency. It's a consensus- at least in terms
of recognition of the problem- transcending party affiliation, occupation,
income level or age.
that consensus has been accompanied by a virtual absence of leadership-
particularly from Washington. In this January's State of the Union
address, our "addiction" to foreign oil was belatedly
acknowledged; a national goal of displacing 15% of Middle-eastern oil imports1 by 2025 was proposed; and vague "new technologies" were
trotted out as the solution.
But talk about
snatching defeat from the jaws of victory! On the one, rare occasion
while the entire country stands united towards a common goal, Washington
can't even imagine a real plan, let alone inspire the public to
individual action. Our country isnt addicted to foreign
oil in particular- were addicted to energy in general2-
and the Presidents plan only substitutes one drug for another.
A decision avoided.
An opportunity squandered.
It doesn't have
to be this way. I believe a careful look at the underlying numbers,
followed by simple appropriate actions, could lead us to:
- Twice the
real energy savings in half time targeted by President
Bush- that is, a 30% reduction in total energy use by 2015.
- A virtual
absence of economic and societal pain.
could achieve these goals by utilization of currently available
technologies, with no need to engage in expensive searches for supposed
energy-policy "silver bullets" like hydrogen power. The
result would be more efficient use of the energy we already have
at hand--and automatically emitting less CO2 into the atmosphere.
the clearest, most easily traversed path to energy independence.
Not conservation -- not production-- not alternative fuels.
Don't get me
wrong- I'm in favor of conservation and doemstic energy production and a greater reliance on
renewables. But time is of the essence, and none of these
three choices are straightforward. Realistically, insufficient numbers
of people will choose conservation by turning down thermostats to
65 in winter or buying compact cars. Nor will domestic energy producers
be able to extract what isn't there. Despite the smoke and mirrors
thrown up by vested interests, the world is truly running out of
oil. Chasing more production is a poor use of limited economic resources-
especially with a ballooning deficit to pay down and deferred social
programs to fund. Alternative fuels will eventually become an economic
reality, but we need action now.
is different. Think back thirty years, to the first energy crisis.
Out of that "panic" arose the federal government's EnergyStar
program, which set energy efficiency standards and made them visible
to producers and consumers alike, with those ubiquitous yellow stickers
on major appliances. And then let the free market sort out solutions.
Today, refrigerators consume five times less power, are more reliable
and emit no greenhouse gases. Have the policies that created refrigeration
efficiencies left major controversy in their wake? No. Economic
pain? No. It happened so quietly and beneath the surface that we
are scarcely aware anything happened at all.
These are the
kind of policies we require throughout the economy. But first we
need a clear picture of the challenge, and then encourage only those
efficiency savings which pay for themselves.
And the first
step is to follow the numbers
- In the U.S.
40% of energy is consumed by transportation, 30% for industries,
and 30% on buildings.
- The average
U.S. resident consumes 1,000 gallons of gasoline every year.
- To produce
1,000 gallons of ethanol energy from switch grass requires about
one acre of land, and about 150 gallons of energy to run the farm
and refinery. Thus, to produce the 120 billion gallons of gasoline
we consume annually requires at least 120 million acres of land-
- more than 25% of the 450 million acres the U.S. currently has
under cultivation. Add to that the enormous infrastructure costs
in trucking and refining capacity and you have a proposal that
is only modestly plausible for the U.S.-and even less so for the
rest of the world, which lacks this country's breadbasket agricultural
lands. Moreover, other countries would likely place a higher priority
on feeding their population rather than transportation. They would
note that the same acre of land could instead feed 20 people.
- Corn nets
only 200 gallons of ethanol/acre, and thus requires more than
600 million acres.
automobiles consume 20%- 40% less energy for the same mileage
than gasoline. Unlike hydrogen power- which is an awkward and
inefficient automotive fuel system- this mature technology requires
no sacrifice of performance.
- More than
25% of all electricity is used for lighting.
- We could
eliminate 90% of all electricity used for lighting, by switching
to smart LEDs which are already 8 times more efficient than incandescent
lighting and, over the long-term, less costly.
- Leaving computers
and TVs on "standby" wastes another 7% of all electricity.
Typical microwave ovens consume more energy in standby mode than
they use in cooking.
changes that make better use of "daylighting" and solar
heat gain could save an additional 15% of all building energy
homes save at least 30% more energy than traditional "stick"-built
homes- because of tighter construction and better attention to
details-and at no extra cost.
From just these numbers alone it is obvious opportunities for greater
energy efficiency abound throughout the economy. Just phasing in
LED lighting and diesel engines would, by themselves, achieve my
proposed energy goals.
change, we need a combination of public and private initiatives,
which I call measure, motivate and mandate:
- Tag all energy
consuming devices with an estimated yearly energy cost, and provide
suggestions on how that cost could be reduced.
- Install energy
meters on every new home, and any renovation greater than $10,000
- showing how much electricity, hot water, etc., is being used
in terms of dollars. You can't save what you can't see.
energy cost-sharing programs for those projects that save both
energy and increase productivity (see BW essay on Phantom
Productivity ). For example, help offset the cost of improved
diesel catalytic converters in exchange for their vastly improved
fuel economy. Or, offset the added cost of a power meter on an
outlet strip, which would motivate people to turn off computers
- Develop energy
teaching modules, and make them part of the no-child-left behind
program. Energy literacy is an essential skill for all citizens.
- Grant National
Medals of Freedom to the greatest contributors to energy independence.
- Set standards
on all new buildings and renovations above $25,000 to improve
energy efficiency by 5% compared to benchmarks, with the benchmarks
rising over time. Any excess above 5% could be traded as a credit
in other projects.
- Raise CAFE
targets by 30% over the next ten years. With diesel or hybrid
power, this bold reduction is easily within reach, and cost effective
over the life of the car. And if you want, you can still drive
We need Washington
to lead- but cannot wait to follow. As individuals, everyone can
become more energy savvy. Buy a more efficient car and water heater.
Install LED lights. Build your new home with south facing windows.
Advocate for energy-sensitive, local zoning codes. And demand leadership.
The price of deciding not to decide is too high a price to pay.
is a general partner at Morgenthaler Ventures and is based in Princeton,
NJ. The firm is an investor in a number of energy companies and might
benefit if the recommendations above were adopted.
(1) The President's
original statement was a 75% reduction in Middle East energy imports
by 2025. But the Middle East is the source of only 20% of our oil
imports. So his proposed import reduction is 0.75x20%=15%. Imported
oil makes up 60% of all oil consumed, and oil is 40% of all domestic
energy consumption. If the intent was to actually SAVE this much
energy, the President's plan at best saves 0.15x0.6x0.4=3.6% of
all energy over the next 19 years.
(2) Energy use
GDP has gone down by almost half over the last 30 years- and
that's mostly due to a shift from manufacturing to services, as
well as remarkable efficiency improvements such as the refrigerator
example above. Unfortunately, our energy use per person has been
flat for the same 30 years. Its like eating less ice cream,
but more candy...
Useful links. Note each site has slightly different ways
of calculating sector energy use, so care is required when comparing