Interview with Amory Lovins: Building a sustainable energy future

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The biggest threat to upsetting the amazing pristine landscape and aspirations for a sustainable path in Patagonia, particularly on the Chilean side of the Andes, are an array of development projects aimed at converting this region’s natural resources into electricity.  In Aysen, HidroAysen’s big plans to build five large-scale dams on the Baker and Pascua rivers are well-known, but there are also a plethora of other dam schemes slated for southern Chile. Off the coast of Magallanes, on Riesco Island, a massive coal mining project called “Mina Invierno” is already underway to help support a rapid expansion of coal-fired thermal power plants in Chile’s north (and global warming). Chile’s government urges that more energy supply is needed to continue to fuel economic growth in the decades ahead, but are their facts, figures and energy strategy correct, wise and forward-looking?
Nobody is better to answer that question than Amory Lovins, probably the preeminent energy thinker in the world today. The chairman and chief scientist of the Colorado-based think tank Rocky Mountain Institute has a jaw-dropping resume: Oxford don; a former professor at nine universities; author of more than 30 books; advisor to a long list of heads of state, governments and major corporations around the world; winner of numerous awards including the “Alternative Nobel” and a MacArthur genius award; and named one of the 100 most influential people in the world by Time Magazine. 
Lovins’ most recent book is Reinventing Fire: Bold Business Solutions for the New Energy Era. Says former US President Bill Clinton on the jacket of the book: “Amory Lovins knows that the most important question of the twenty-first century is the "how" question-how we turn good ideas into working solutions. Reinventing Fire is a wise, detailed, and comprehensive blueprint for gathering the best existing technologies for energy use and putting them to work right now to create jobs, end our dependence on climate-changing fossil fuels, and unleash the enormous economic potential of the coming energy revolution."
Recently, Lovins visited Chile for the first time to speak at several conferences and meetings. He was also here to spend some quality time exploring northern Patagonia. Patagon Journal executive editor Jimmy Langman caught up with him during his trip and here are excerpts from their conversation about the future of renewable energy and Chile’s energy sector.
Langman: What’s your opinion of Chile’s energy sector?
Lovins: I've worked in fifty-odd countries, and never seen a situation quite like this. Chile restructured its electricity sector for competitive generation a few decades ago and today has extraordinarily expensive electricity that is very profitable for its producers. Chile has extremely concentrated ownership and control with very little regulation in its energy sector -- it is nearly an unregulated oligopoly.  The big three generators not only control most of the market, they indirectly control much of the distribution. And it does not appear that the system is operating in an independent and impartial way, and the concentration of ownership clearly deters market entry and innovation.
Another reason for higher energy prices in Chile is the way prices move up steeply to bring supply and demand into balance in drought years which recur periodically and are likely to worsen with climate change. Indeed, hydropower is likely to become generally less available with climate change and more volatile. To try to protect against drought, Chile relies on buying more fossil fuel capacity, which means much of the time you have expensive coal capacity sitting idle, as well as oil and gas fire capacity, and when there is a drought you have to make up for it by burning very expensive fuels like LNG and diesel. So, the roughly doubled capacity for use largely in drought years further increases prices that are already inflated by the limited competition. Further, the whole system is set up to encourage the sale of more electricity. This increases the provider's profit, conversely if the customers get more efficient, then the provider's profit suffers, so the providers cannot be enthusiastic about doing what’s in the national interest: using electricity more efficently.
What is Chile’s potential to meet its energy needs through renewables?
Renewable sources are already competitive in Chile. Indeed, Chile has the most impressive renewable energy resources in terms of quality and diversity of any country I know. Even more than Japan. Much more than the United States. And it's tapping only a tiny fraction of the amount and range of renewables now cost-effective throughout the country indefinitely. The price of solar cells, for example, has fallen by 70 percent in the past four years and its still falling rapidly.  There are two evolutions going on in electricity worldwide, one in using it several times more efficiently and the other in changing how we make it. Orders for giant plants, whether thermal or hydro, are dwindling because they have too much cost and too much financial risk to attract investors.
Renewables are also generally less centralized, right?
One of the inherent advantages of decentralized renewables is that they generally don't require long transmission lines. The energy is not all in the same form, at the same time and in the same place, but in a very desirable diversity. That also greatly increases national energy security by eliminating the serious risks inherent in long transmission lines, such as earthquakes, solar storms, volcanic eruptions, disgruntled landowners, terrorists -- risks so serious that in the United States the military is getting off the commercial grid because its too vulnerable. Then there is a reliability gain of distributed resources because in countries that avoid outright supply shortages like the U.S., 99 percent of the power failures actually start in the grid. So if you bypass the grid and the power comes from your roof or your neighborhood or right down the road, there's much less that can go wrong.
The diversity of renewable sources in a well-arranged portfolio also means that they don't all see the same weather at the same time because they're in different places, and weather that's bad for one kind is good for another. If you then forecast it, we end up with supply more reliable than now and at very competitive cost even with 80 or 100 percent renewable diversity. This has been well analyzed in both Europe and North America. Already for example, four states in Germany in 2010 are 43 to 52 percent wind-powered; Denmark has 36 percent renewable electricity, 26 percent of that from wind; and Portugal has gone from 17 to 45 percent renewable electricity in just five years. Germany has been adding 8 gigawatts of solar power per year and added 2.13 gigawatts of solar power just in the month of June 2011, yet Germany has less than half as much sun as Chile and lower electricity prices. 
Has the energy market also been distorted by the enormous subsidies given to Chilean energy companies from the privatization of water rights?
Yes, when there was still a national electric company, one of the last acts of the Pinochet military regime was to give it for free enormous amounts of water rights which could be sat on as a speculation without having to be used and which in practice are disbursed in a way that takes priority over agricultural or any other water rights. And when the industry was privatized, those rights passed on the same terms to the successor for-profit companies, which therefore enjoy a huge windfall at the expense of the national interest and of any competitors. But the global energy outlook as I have described will now make these water resources increasingly risky to exploit. The five hydroelectric dams proposed by HidroAysén can not come online until at least 2020. And I would guess even a longer wait is ahead for the transmission line. And by then, the takeover of the world's markets by very cheap non-conventional renewables and efficiency will be overwhelming.  Read the rest of this article in the magazine, subscribe to Patagon Journal

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