THE BLOG
11/09/2011 03:37 pm ET Updated Jan 09, 2012

Energy Efficiency: The New "First Fuel"

The long-awaited first flight by the Dreamliner -- Boeing's new 787 -- demonstrated not only the most advanced jet liner in the sky. It also carried aloft a powerful idea -- the critical role of energy efficiency in carrying us to a better energy future.

The 787 is 20 percent more fuel efficient than the jet liners it will replace. While it may be called the Dreamliner, the focus on efficiency was anything but a dream. It was the result of hard reality -- airlines' battle for survival midst high oil prices.

The decision to go for efficiency in the Dreamliner was resulted from a democratic vote that resembled an Iowa presidential caucus. In the early stages of the design process, Boeing invited representatives of 59 airlines to Seattle to take part in an election.

There were just two candidates: A new jet that would go 20 percent faster versus a new jet 20 percent more fuel efficient. All in favor of more speed were to walk to one side of the room; all in favor of 20 percent more fuel efficiency, to the other side. It was a rout -- 59 to zero in favor of efficiency.

The airlines were voting their pocketbooks. Jet fuel costs can be as much as 35 of total operating costs for an airline, more than is spent on labor. Jeffery Smisek, the CEO of United Airlines, summed it up when I talked him while writing The Quest. "Increasing efficiency in the use of jet fuel is incredibly important to us," he said. "Volatility of price kills us."

Energy efficiency, sometimes called "conservation", is also known as the "fifth fuel". For decades, its significance was underestimated and its role debated, sometimes dismissively so.

But today, energy efficiency has moved from contention to consensus. Environmental groups and energy companies agree that it should be at the top of the agenda of what needs to be done. Indeed, efficiency could well be called the "first fuel"; for, overall, it has had the single biggest impact of any source in the energy mix. The United States is twice as energy efficient today as it was in the 1970s. Think of it this way: Were it not for these efficiency gains, the United States would be using twice as much energy as it does now. In terms of oil, the gains are even greater. The U.S. economy is two-and-a-half times what it was in 1973. Yet oil consumption is only ten percent higher than it was in 1973.

As important as efficiency is in the United States and other developed countries, it is even more urgent in the fast-growing emerging markets. This is particularly clear in China, which already uses more total energy than the United States and where energy demand is rapidly increasing. Such growing energy use puts a burden on the economy and adds further to the high levels of air pollution.

In response, Beijing has put energy efficiency at the top of its energy agenda. Chinese mayors, who whose responsibility includes GDP growth and job creation in their cities, are now also graded on how they do in terms of increasing energy efficiency.

The basic challenge to energy efficiency is the same around the world. Energy efficiency is not one big thing. It is embodied in everything -- buildings that operate more cleverly, cars that get more miles to the gallon, factories that put in new technologies and reduce energy use in manufacturing goods -- and, yes, planes, that get better mileage in the skies.

But how to step up energy efficiency? There is no single answer. Price certainly counts. In response to high jet fuel costs, airlines have been doing everything they could to reduce fuel use -- from changing descent paths to getting rid of magazine carts and even magazines in order to reduce weight. Industrial firms, for which energy costs are a big item, are similarly motivated. Rising gasoline prices have changed the minds of consumers and auto companies alike.

Regulations reinforce efficiency. The latest fuel efficiency standards will carry new vehicles from today's 30 miles per gallon to 54 miles per gallon by 2025. This requires new designs and new technologies and weight reduction. In the building sector, new construction codes promote more efficient designs. But the impact in the that sector takes time, both for know-how to spread throughout the industry and because the stock of buildings turns over so slowly.

Energy efficiency needs its own distinctive system of support. "While other fuels need 'hard' infrastructure like pipe and transmission lines," said Kateri Callahan, president of the Alliance to Save Energy, energy efficiency requires its own infrastructure of "public policy support, education and awareness and innovative financing tools."

There is one other element that is critical -- how people think. Dow Chemical reduced its energy use per unit of output by 25 percent over a decade. Andrew Liveris, Dow's CEO, ascribes a critical role to the way in which efficiency has become "part of our DNA". Japan's success as a global role model in energy efficiency is rooted in a deep-seated cultural value of "mottainai", which translates as "too precious to waste".

The fact that efficiency is so diverse stands as one of the biggest obstacles of all. One evening I was talking with the European Union's energy commissioner, the top energy person in Europe. He was in Washington for a renewable energy conference. But he wanted to talk about the enormous impact of energy efficiency. He then turned to what he said is its greatest drawback.

"There is no red ribbon to cut," he said. By that, he meant there is no singular moment, no photo op, no opening ceremony with smiling politicians and business leaders and environmentalists, no obvious celebration.

And I thought he was right, or at least I did until the Dreamliner took off, on its first flight, from Tokyo to Hong Kong. Right there, I suddenly realized, was a red ribbon -- a 270-ton red ribbon when fully loaded with passengers. And that is a very big red ribbon.

Daniel Yergin is the author of The Quest: Energy, Security, and the Remaking of the Modern World. For more information, go to www.danielyergin.com