Select Committee on Environmental Audit Written Evidence

Memorandum submitted by Amory Lovins

  I have the honour to submit herewith some materials that I hope may help the Committee's inquiry. Unfortunately, word of your work reached me only very recently whilst I was in Sweden, and a heavy travel and writing schedule have made it impossible for me to prepare a special paper for the Committee before today's deadline. However, I should do my best to respond to any further questions from the Committee, and if desired, could testify either by Internet videoconference or, during my mid-March 2006 visit to the UK, in person if your inquiry were still underway at that time.


  Physicist Amory Lovins is cofounder and Chief Executive of Rocky Mountain Institute (, a 23-year-old independent entrepreneurial public charity, and Chairman of its engineering spinoff Fiberforge, Inc. ( Published in 29 books and hundreds of papers, his work has been recognized by the "Alternative Nobel", Onassis, Nissan, Shingo, and Mitchell Prizes, a MacArthur Fellowship, the Happold Medal of the UK construction industry, nine honourary doctorates, and the Heinz, Lindbergh, World Technology, and Time "Hero for the Planet" Awards. He lived in the UK 1967-1981 and was a Junior Research Fellow of Merton College, Oxford (MA Oxon by Spec Resoln). His most recent books are an Economist 2002 book of the year—Small Is Profitable: The Hidden Economic Benefits of Making Electrical Resources the Right Size (—and the Pentagon-cosponsored Winning the Oil Endgame ( His three decades' global consultancy for industry and governments (including USDOE and USDoD) spans all energy sectors and about fifty countries, including extensive work in the nuclear and utility industries and invited testimony before nuclear-related proceedings and inquiries in many countries. Three of his books and dozens of professional papers focus on nuclear issues, of which he has been an independent student since the 1960s, when his physics research won national awards from G.E., Westinghouse, American Nuclear Society, and the Chairman of the US Atomic Energy Commission.

  My organisation is also briefly described in slide 30 of the CEC attachment [not printed].

  My most apposite recent writing for this inquiry is the invited testimony I gave five days ago to the California Energy Commission's hearing on nuclear power policy, slightly updated and with a few extra background slides added at the end for those who wish to dig deeper [not printed]. A PowerPoint (for Mac OS X) file is attached, and a hard copy will go out to you by airmail post tomorrow, together with a hard copy of this note and its attachments [not printed].

  Please forgive the attached PPT file's occasional use of US (originally British) units, such as MCF (thousand cubic standard feet) for natural gas; one MCF has a heat content of approximately one GJ. For general background on climate strategy—on which my first professional paper was in 1968—please see my attached September 2005 Scientific American article, "More Profit from Less Carbon." Its bibliography shows a URL with extensive further citations [not printed].

  Perhaps a prefatory comment is in order. There is a certain sense of deja vu in this inquiry. I recall many years ago submitting testimony to a Select Committee of the House of Commons—I think together with Walt Patterson—predicting that any orders placed for PWRs would prove painfully costly and that their overall economics would disappoint. Over the past several decades I have repeatedly said the same about reprocessing, which has indeed turned out, as expected, to raise the cost of once-through LWR fuel cycles by roughly 4-5-fold and to complicate waste management. The British taxpayer has already twice bailed out the national nuclear enterprise at great expense. I should have thought that by now the basic lessons of this industry's economics and credibility would have been learnt—that everyone would understand that the way forward for energy policy is to take market economics seriously, stand back, let the winners win and the losers lose, design an orderly terminal phase for the nuclear adventure, and avoid further embarrassment. But it seems that the proponents have no shame and have, like an earlier ancien re«gime, learnt nothing and forgotten nothing. So evidently some further reminders are needed about economic fundamentals, where the case today is immensely stronger than ever in the past.

  Here, then, are the key arguments in my 16 August 2005 CEC testimony:

  1.  Nuclear power worldwide has already been eclipsed by its supposedly small and slow decentralised rivals (renewables other than big hydro, and CHP). Slides 3-4, [not printed] documented by a spreadsheet and a methodological memorandum posted at, compare nuclear power with its no- or low-carbon decentralised competitors: renewables including hydropower only up to 10 MWe, and fossil-fueled CHP, respectively—the latter typically reducing CO2 emissions by approx. 30-80% depending on before-and-after fuels and design details. These data, not previously assembled, show that the decentralised generators overtook nuclear power in worldwide installed capacity in 2002 and in annual electricity output in 2005. (Dr Eric Martinot at Tsinghua University in Beijing is to publish his own detailed comparison next month, with very similar results.) The remarkably faster absolute growth of the decentralised options, in MWe added, is shown in slide 4 [not printed] by year and by technology. Five years from now, the respective industries project that nuclear power's net capacity addition will total only 1/177th as much as the decentralised competitors'. Whilst this will doubtless not prove to be exactly the right number, its direction is clear, and its implications for nuclear advocates are devastating. Those who contend that only nuclear power is big and fast enough to cope with climate change, or that the non-nuclear ways to reduce carbon emissions have excessive "dry hole" risks of nondeployment, have apparently overlooked this actual market behaviour showing exactly the opposite. (Of course, as Schneider and Froggatt show—please see slides 5 and 31-33—nuclear power is about to begin a long but inexorable global decline due simply to the aging of existing plants.)

  2.  Demand-side installations may well be even bigger and faster than these winning decentralised supply-side competitors, but are not being properly measured globally nor, in most cases, nationally. For lack of data, slides 3-4 omit demand-side competitors (end-use efficiency and electric load management or demand [Not printed] response). These are probably saving more GWp and TWh/y than the decentralised supply-side resources are adding, but as they are not well tracked statistically (they formerly were in the US but not for the past decade or so), I couldn't properly graph their progress. Nonetheless, as a rough indication, the US Energy Information Administration's Annual Energy Review 2004 shows that in 2003 alone, utilities' demand-side programmes—which are far from the only and may not even be the main cause of saving electricity and shifting peak loads—saved 23 GWp and 50 TWh/y in the US, which is one-fourth of the world electricity market. This approaches the 28 GW added by the decentralised supply-side resources in 2003 worldwide, vs 0.6 GW of nuclear net additions.

  Remarkably, nobody is keeping track, worldwide or in almost any country, of how much electricity is being saved at what cost. Thus both policymakers and investors are "flying blind", to their peril. Exactly such invisibility of demand-side achievements created the mid-1980s US fiasco of overinvestment in supply, glutted demand, crashed prices, and bankrupt suppliers. The current US administration seems determined to see this very bad film all over again: since 1996, US electric intensity and primary energy intensity of GDP have respectively declined at rates averaging 1.5 and 2.3% per annum—2-3x faster than in the previous decade—recently causing investors to lose nearly all their money in nearly 200 GW of combined-cycle plants built to meet nonexistent demand. Yet during 1996-2004 inclusive, some 78% of the increase in US energy services has been "fueled" by reduced energy intensity rather than by increases in physical energy supply. Since official statistics focus only on the other 22%—the recognised supply side—this means policymakers and investors are seeing less than one-fourth of reality. I hope your Committee will strongly encourage Government to correct this informational imbalance.

  3.  Both electric end-use efficiency and decentralised generation cost much less than new nuclear plants per delivered (retail) kWh. This comparison, using nominal but conservative values based on wide US market experience, is presented in slide 7 [not printed] and in the animation of slides 8-21. Supplementary slide 34 [not printed] amplifies some illustrative US demand-side costs. Note the decline in programme costs in both California and the Pacific Northwest in recent years when efficiency efforts (interrupted by restructuring) have been revived—much as on previous occasions—and the very low costs of most savings in the commercial and industrial sectors, vs all-sector programmes whose average costs are raised by heavy investments in lagging and draughtproofing houses and flats.

  4.  The cost of all these non-nuclear competitors is relentlessly declining. Please see slides 21-22 [not printed]. Clark Gellings of the Electric Power Research Institute told me last month that he agrees the electric "efficiency resource" is getting cheaper and bigger because better technologies, their lower costs in volume production (often in Asia), and more streamlined delivery are together more than offsetting the depletion of efficiency opportunities. Moreover, my consulting team's practise has demonstrated in very diverse industrial sectors and building types that integrative design—optimising whole systems for multiple benefits rather than isolated components for single benefits—typically makes very large energy savings cost less than small or no savings. (Natural Capitalism,, gives many earlier examples.) That is, rediscovering good Victorian whole-system design can generally make investments to energy efficiency yield expanding rather than diminishing returns. This is why slide 20 [not printed] shows that the $0.01/kWh typical cost of saving electricity in the business sector can decrease to negative values in properly designed new installations across all sectors.

  5.  Conventional comparison between new central stations—nuclear, coal, or gas—thus miss the point. All three of these centralised options are grossly uncompetitive with demand-side and decentralised supply-side investments. Hence the bleak economic prospects for nuclear power summarised in slide 6. Counting the 207 "distributed benefits" (slide 37) documented in Small Is Profitable would typically give decentralised investments a further order-of-magnitude cost advantage not counted here.

  Please note also slide 42's empirical data suggesting that currently popular declining-cost assumptions [not printed] merit caution: US coal and nuclear plants through -1980 experienced not a learning curve but a "forgetting curve"—a neoclassical supply curve of increasing real cost with increasing installations. The main underlying reason for this appears to be that the more plants are built, the more likely it is something will go wrong amongst them and that one will be close enough for you to notice, so you are more likely to exert pressure on the political and regulatory system to make each new plant cleaner or safer. Cleanliness can be both directly perceived and much improved at modest cost that is reasonably bounded. However, risks from nuclear plants are not so directly testable by the senses, often depend on differing personal judgments of probabilities, and can drive investment in greater safety or security without any obvious upper bound. One implication is that inherently benign technologies are more likely to win wide acceptance. Another is that decentralised technologies, by allocating their costs and benefits to the same people (not to different people at opposite ends of the wires or at different times), automatically internalise their perceived impacts and thus are unlikely to elicit open-ended regulatory intervention.

  6.  The decentralised competitors, both demand- and supply-side, offer a considerably larger resource base, especially in diversified portfolios, than nuclear power can. Please see slide 23 [not printed]. The -2-4x range of potential efficiency gain for the US comes respectively from Clark Gellings' analysis at EPRI (in 1990 for the 2000 base, including 9-15% of spontaneous savings then expected) and from a far more detailed RMI long-term analysis documented in more than 2,500 dense technical pages documented to more than 5,500 sourcenotes (the Competitek/E Source library, Both sets of results were summarized in Dr Gellings's and my joint article in the September 1990 Scientific American (enclosed with the postal version); our differences were mainly methodological not substantive, as noted in my 1991 Ann. Rev. En. Envt. survey article. Please see also my 2004 Encyclopaedia of Energy article "Energy efficiency: taxonomic overview", a copy of which is attached as 383—402.PDF [not printed]

  My background paper currently in editing, "Energy Policy for National Insecurity", will more fully document the well-established arguments that neither the intermittence nor the land-use of certain renewables need be of serious concern at large scale, given thoughtful siting and proper system engineering. This paper will soon be posted at Meanwhile you will find many helpful references up to spring 2002 in Small Is Profitable, op. cit. supra. Indeed, it has been known since IIASA's - 1977 analyses that land-use for nuclear, coal, and [relatively inefficient] solar fuel cycles is broadly similar per TWe-y of output.

  Please see also slide 38 [not printed], which shows that whilst conventional projections show very large increases in renewable energy supply are possible (and would be necessary if one did not make least-cost investments on the demand side, which none of the projections shown takes seriously), these plausible renewable expansions far surpass both the current scale and the declining officially forecast future scale of the nuclear enterprise [not printed]

  7.  Neither of the main arguments for nuclear power—displacing oil and mitigating climate change—can withstand serious scrutiny. Please see slide 24. [not printed]

  As to oil: for a very detailed Pentagon-cosponsored synthesis of how to eliminate US oil dependence over the next few decades, led by business for profit, please see Winning the Oil Endgame, free (with its supporting analyses) at Its Executive Summary is attached hereto. As a free byproduct of the profitable oil savings, US CO2 emissions projected for 2025 would drop by 26%. I have not performed a comparably detailed analysis for the UK, but am confident that despite many differences of detail, a broadly similar potential would be found there.

  As to climate: of special importance to your inquiry is the opportunity-cost argument in slide 24's second main bullet [not printed]. If, for example, saving electricity cost one-third as much per delivered kWh as a new nuclear plant (the actual ratio would generally be much larger than threefold), then every £ spent on a new nuclear plant could have bought three times as much carbon displacement if invested in efficiency instead. The net result of choosing the costly nuclear investment will thus be to keep on burning two unnecessary units of coal for each unit displaced by nuclear power—thus making climate change worse than had the least-cost option been bought instead. The more concerned we are about climate change, the greater rigour we need in applying such a marginal cost-benefit calculus to our investments, so that we are confident of winning the most carbon displacement, soonest, per £ invested. On grounds of both cost-effectiveness and speed, nuclear power falls near the bottom of the list of investment priorities. Thus as soon as one realises that the available, practical, and empirically more successful portfolio includes efficiency, CHP, and renewables as well as central coal or gas stations, the supposed case for substituting nuclear for coal power falls to the ground. (Obviously a low- rather than no-carbon resource—CHP rather than renewables or efficiency—requires the reduced but nonzero carbon emissions to be taken into account, but the decision outcome will be the same: nuclear loses on carbon displaced per £ or per year.)

  8.  All options have their difficulties with implementation at scale, and hence a nonzero "dry-hole" risk that they will not actually get built or will not operate timely and durably. But these risks are empirically greater for nuclear power than for a proper portfolio of its no- and low-carbon competitors on the demand and supply sides. Please see slides 25 and slides 35-36, and review slides 3-4, for compelling illustrations from actual market behaviour [not printed].

  9.  In view of these findings, further private investments in nuclear power are unlikely, and further public investments in it are counterproductive: they would actually reduce and retard CO2 reductions by diverting money, time, and talent away from the biggest and fastest solutions. Slide 39 summarises why the just-approved major increase in US nuclear subsidies, though an extraordinary distortion of markets, is unlikely to overcome the fundamental economic disadvantages shown in slides 8-20. That is a good thing because of the unpleasant implications and discouragingly small benefits of large-scale nuclear expansion (slides 40) [notprinted] and the leverage of market-driven nuclear phaseout for discouraging further proliferation of nuclear bombs (slide 41). (The proliferation analysis is set out in detail in my 1979 out-of-print book Energy/War: Breaking the Nuclear Link, summarised in the Summer 1980 issue of Foreign Affairs, "Nuclear Power and Nuclear Bombs", and technically supported by my Nature review article of 28 February 1980.)

  Having worked in the UK for more than three decades, I am well acquainted with the many differences of detail between my largely US-based analysis for the California Energy Commission and UK conditions. However, I believe that for the purposes of your inquiry, these differences are far less important than the similarities, and that all the same conclusions, mutatis mutandis, would remain valid for the UK.

  My team at RMI is currently completing a far more detailed examination of the US gas and electricity sectors than the already very suggestive one in Winning the Oil Endgame, which showed, for example, how to save half of U.S. natural-gas use—half of it directly, the rest by electrical demand-side management displacing gas-fired power generation—at an average cost below $1/GJ. I would not be surprised if the UK had a comparable or even a larger potential for saving natural gas, and would urge this as a focus for concerted and modern analysis across all sectors.

  The potential for saving UK electricity is among the largest in the industrialised world, yet will remain largely uncaptured so long as Parliament continues to give energy suppliers and customers contrary incentives. Ever since Parliament set and the Regulator, at the start of the restructing era, first implemented the formula for forming the retail prices of electricity and gas (the Government of the day having rejected an amendment in the Lords seeking to prevent the problem), distributors have effectively been rewarded for selling more energy and penalised for cutting customers' bills. This and other factors nearly destroyed the fledgling efficiency industry. Dr Stephen Littlechild was unable to mend this perverse incentive within the constraints of the legislation. May I suggest that doing so is probably the biggest single leverage point in UK energy policy and merits Parliament's prompt attention? The basic goal should be first to decouple revenues from sales volumes—so that distributors are no longer rewarded for selling more energy nor penalised for selling less—and then to let distributors keep, as extra profit, part of whatever they save the customers, so that both parties have fully aligned incentives. This has already been done in some other jurisdictions, with a very salutary effect on both parties' behaviour. The independent and not-for-profit Regulatory Assistance Project,, stands ready to help the UK authorities to design and implement this vital reform. This alone would go a long way to profitably meeting UK climate-protection goals.

22 September 2005

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