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Amory Lovins, our speaker tonight is a consultant experimental physicist educated at Harvard and Oxford. He has received an Oxford MA, nine honorary doctorates, a MacArthur Fellowship, the Heinz, Lindbergh Right Livelihood, World Technology and Time Hero for the Planet awards, the Happold Medal and the Nissan, Shingo, Mitchell, and Onassis Prizes. His work focuses on transforming the hydrocarbon, automobile, real estate, electricity, water, semi-conductor and several other sectors towards advanced resource productivity. He has briefed 18 heads of state, held several visiting academic chairs, authored or co-authored 29 books and 100s of papers and consulted for scores of industries and governments world-wide. The Wall Street journal named Dr. Lovins, one of 39 people world-wide "Most likely to change the course of business in the 90s." Newsweek has praised him as "One of the western world's most influential energy thinkers." Car magazine ranked him the 22nd most powerful person in the global automotive industry. And I saw this today, the New Yorker called him environmentalism's most optimistic Guru. I call him a great mentor, wonderful colleague and dear friend. And it's my great pleasure to introduce Amory Lovins. Well thank you Dan. After that introduction I can't wait to hear what I am going to say. But I would like to talk about how to win the oil endgame and while we are at it to solve the climate and non- proliferation problems, all through the profit motive and led by the private sector. In the spirit of Raymond William's remark that to be truly radical is to make hope possible not despair convincing. The thesis I'll the thesis I will outline tonight is set out in a book published in 2004 and prepared partly for the office of the Secretary of Defense's independent peer reviewed and unargued with and written for business and military leaders not for politicians, they can hear about it in due course from their constituents. You can get the whole thing free at oilendgame.com. And it has an arrestingly simple thesis that by the 2040s US can be completely of oil with a much stronger economy and the journey beyond oil will be lead by business for profit. The transition has a rather familiar look to it because we have been there before. Where we could go from here is rather than oil use and imports always heading towards the upper right corner of the graph, we could turn those curves downwards by redoubling the efficiency of using oil at an average cost of $12 per saved barrel. And we could turn those curves down even more steeply by replacing the other half of the oil with a mixture of saved natural gas and advanced bio fuel at an average cost of 18 bucks a barrel. So the average cost of getting off oil is the average of 12 and 18 or about $15 a barrel which is a quarter of what we have been paying lately. And this clearly makes sense and makes money even if all the externalities, the hidden security climate and other cost of getting to use oil are worth zero a conservatively low estimate. But we have done things like this before. In fact oil use and imports fell even more steeply. The last time we paid attention which was from 1977 to '85. In those eight years GDP grew 27 percent while oil use fell 17 percent. Oil, imports fell by half, imports from the Persian Gulf fell 87 percent and would have been gone in one more year if we'd kept that up. In fact, oil use and imports fell so much around the world that it cut Opex exports in half and broke their pricing power for a decade. We customers, especially in America, the Saudi Arabia of nega barrels turned out to have more market power than the oil supply cartel, we could save oil faster than they could conveniently sell less oil. That remains all the more true today with much more powerful technologies. Well, that was then, this is now, you are here. It's good we had that practice because we could rerun that old play all over again a lot better. But imagine that between now and 2025, we invested a $180 billion which is what we spend on oil imports less than every month. If you if you spread it over a ten year investment period, 18 18 billion year. And suppose we invested that $180 billion half in retooling the car, truck and plane industries and half in building a modern bio-fuel industry. And suppose that this had such a dramatic effect in softening the oil markets, that oil were then priced at 26 bucks a barrel, which was the official forecast in January 2004. In that case that $180 billion investment would against that low oil price be saving us $70 billion a year net. As a free byproduct, we would cut our carbon emissions by quarter and we'd get a million new jobs; three quarters of them in rural and small town America and we get to save a million jobs now at risk mainly in auto making. Where we have to decide whether we want to keep importing efficient cars to displace oil or whether to make efficient cars and import neither the oil nor the cars. Now the business case for making that shift in investment is so compelling that we found it could be implemented in the United States without new energy taxes, subsidies, mandates or Federal laws. There are some public policy innovations that would be useful but they could all be done at a state level or administratively. So there is nothing there that either party doesn't like or could mess up. Technologically, the core of the transition of oil is of course transportations that uses 70 percent of the oil. There are of course big cheap oil savings to be had in the other 30 percent in buildings and industry often with reduced capital cost. But let me focus here mainly on transportation, because it it turns out that we can triple the efficiency of cars, trucks and planes with respect to the paybacks at our present fuel prices of roughly two years, one year and four or five years. By a common technological strategy making the vehicles lighter weight, more slippery and moving through the air along the road and giving them advanced propulsion. Often this will also improve their performance for example, a diesel hybrid roadster made out of carbon fiber as a concept car by Opal got a hundred and actually it's a 150 miles an hour and 94 millions a gallon, although not simultaneously. And the surprise to many is that the ultra lighting, that doubles the efficiency of carbon fiber concept cars in production would be free because the costlier material as I will explain is offset by simpler auto-making in a smaller propulsion system. All these efficiency technologies are continued continuing to get more powerful and cheaper faster than we use them up. So efficiency unlike oil is an ever bigger and cheaper resource. But to realize that we have to challenge an assumption still common among people to make cars or car policy that if you want to make cars efficient, you have to make them squinchy, sluggish, unsafe, ugly or expensive and you wouldn't really want to buy one, and then we only got to argue about whether we use cafÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â© standards or gasoline taxes to induce you to buy such a compromised vehicle anyway. Well there is another way to encourage technological change. How many of you still buy vinyl phonograph records rather than digital media? There maybe a few antiquarians in the house but I dare say for most of us market expectations have been redefined by this new product. Similarly, we tend not to buy cathode ray tube televisions anymore, but rather flat screens. You could de exactly the same thing for cars, if you make them very efficient as a byproduct of breakthrough engineering integration, then you'd want to buy such a car because it's better, not because it's efficient. That does an end run around the policy grid lock and it gives the automakers a much more robust business model because then they only need to worry about whether they can out-compete other car makers and not about random variables. They can't control like oil price and public policy. So to figure out how to do this we just need to think about where a car's gasoline energy goes bearing in mind that your car everyday uses about a 100 times it's weight in ancient plants, very inefficiently converted to gasoline. Where does that go? Well about seven eighths of that fuel energy never gets to the wheels. It's lost first in the engine idling, driveline and accessories. Of the one eighth that does get to the wheels half of that either heats the tires on road or heats the air that the car pushes aside. And only the last six percent actually accelerates the car and then heats the brakes when you stop. But only five percent of what you are accelerating is you, the other 95 percent is the car. Therefore only five percent of six percent or 0.3 percent of the fuel energy ends up moving the driver. After, a 120, years of devoted engineering effort this is not very gratifying. However, there is a happy ending to this story. If we realize that three quarters of what it takes to move your car, three quarters of that tractive load is caused by the car's weight. And every unit of energy you can save at the wheels, saves an additional seven units of energy you don't need to waste getting it to the wheels. So there is enormous leverage in making the car radically lighter weight. This used to mean just like metals like aluminum which work there on the whole more expensive I drive an aluminum hybrid. Now there are some new ultra light steels. And the strongest and lightest solution is carbon fiber composites which is what Mercedes makes the SLR McLaren Supercar out of. One of these happen to get T-boned by a golf which was totaled and all that happened is it popped off a side panel on the McLaren so they will pop it back on and fix the scratch later. But if you were to look under the hood of the McLaren you would find at the front corners a pair of woven carbon fiber crush cones weighing a total of 15 pounds, 0.4 percent as much as the car. And yet able to absorb it's entire crash energy hitting a wall at 65 miles an hour because these materials can absorb six or even 12 times as much energy per pound in a crash as steel can. And they can do so more smoothly so you can use the crush length or stroke up to twice as effectively. So with such light but strong materials you can make cars that are big which is comfortable and protective without also making them heavy which is hostile and inefficient. Therefore you can save oil and lives and indeed money all at the same time. Henry Ford you know, taught us you don't need weight for strength and of course if you did need weight for strength your bicycle helmet would probably be made out of steel rather than carbon fiber. Of course if you if you look at race car experience, these are Formula One like champ cars for example notice what happens when one of these things hits the wall at 180 miles an hour. Remember there is a person in there. Now this doesn't look terribly promising but And the best news is that Catherine Legg has walked out at the medical center. Under your own power how are you feeling? A bit shaken but I am okay. As you can see, oh I am sorry. All my bits are intact so it's good goes to show how strong my cars are Where where do you have some some injuries? Oh I just banged by knee, the car upside down, you bang your legs on the, bulk head on the steering column and stuff, so just a bit of bruising which well it won't look too attractive in my dress at the Atlantic banquet tonight, but I don't think we will have any trouble marketing the safety of such cars with such testimonials especially when you realize the materials I am talking about are actually twice as energy absorbing as what her car was made out of and are a lot tougher in fact tougher than titanium in some cases. The big problem is cost we use these materials in military and aerospace as well as in sporting goods and race cars. But in military and aerospace we have a about 1000 times lower volume and higher cost than you need for cars. But I started to get encouraged that that gap might be bridged when I met a young engineer at the Lockheed Martin skunkworks who in the mid 90s had led the design of an advanced tactical fighter airframe that was 95 percent carbon, one third lighter but two thirds cheaper. Because of it's design from scratch on a clean sheet to be made optimally out of carbon not metal. Of course it was so weird he couldn't find a military customer for it. So one bounce later I was able to hire him to do the same thing for the cars which we did. And what we ended up with is your basic uncompromised midsized suburban assault vehicle. An SUV that can handle five adults in comfort up to 69 cubic feet of cargo, haul half ton up 44 percent grade. It weighs less than half as much as the equivalent steel version but is safer even if they hit each other. The hydrogen fuel cell version would get a 114 miles a gallon and the gasoline hybrid version would get 67 miles a gallon and do zero to 60 in 7.1 seconds. Its extra sticker prize would be two and half thousand bucks because it's hybrid. Not because its ultra light, that part is free as I will explain next. So that would be less than a two year payback and it's completely uncompromised. Now the manufacturing is the really fun part. The body is really like an airframe, it's suspended from rings rather than built up from a tub which is our hug-in, our horse and buggy legacy and other than the floor pan each of these parts can be lifted with one hand and no hoist. Each is made with one low pressure die set and the steel body instead of 14 parts you would have 10 or 20 times that many parts each with an average of four progressive steel stamping die-sets. So you just saved about 99 percent of the tooling cost and these composite parts are then designed to snap precisely together for bonding, kind of like assembling a kid's toy so you don't need the jigs, robots, and welders to assemble the body. So you get rid of the body shop and if you want you lay color in the mould to get rid of the paint shop, those are the two hardest and costliest parts of making the car. So altogether your capital intensity will drop at least two fifths below the leanest in the industry which is a very disruptive technology and it's it's quite a tough material. Tom Friedman did a film called addicted to oil for the Discovery Channel. And first he tried lifting up the most highly loaded and complex body part which is the whole side of the car We could see this on the road in five to six years These are the materials I can't lift this. Sure you could. It's not steel it's carbon fiber. Well that was strong I am not that strong. I have actually lifted that part with one finger for a little while and then Tom tried to do some damage to this part. They can look just like these other parts. You say these things are tough right. Oh yeah very tough. So he bangs on it with a hammer. Just plastic you want to try jumping on it. Sure jumping out And he bounces off Somebody get a bigger hammer. And he grabs a sledge hammer. That doesn't do any damage either. These this is really amazing stuff. You can tell plastics have changed since the graduate we can pass this around if I get back. Don't worry if it drops. It's quite indestructible. So you get the idea about what can be done with efficiency we have done a similar analysis through the whole transport sector as well as buildings and industries. Now there is also the supply side. the other half of the oil solution, instead of using ever more natural gas and bringing in most of it as liquefied natural gas from the same exporters we know and love, we can instead save way more gas than that in fact half of all of our gas at about an eighth of it's current price. And the biggest part of the gas saving is actually from saving electricity because especially peak electricity is made in simple cycle gas turbines so inefficient that if you save one percent of the electricity in the country including peak hours you thereby save two percent of all the natural gas consumption and cut the price of gas by three or four percent. That's an amazing leverage. And the other part of the supply solution is in advanced bio fuels I did not mean by that corn ethanol which are a rather small and costly and heavily subsidized resource. And soon they start interfering with other crop uses. Rather I am talking about making ethanol or other products out of woody weedy stuff like switch grass, poplar elephant grass, forestry wastes. And you can make almost 4 million barrels a day of that stuff with twice the yield of corn ethanol, less investment and up to eight times in energy yield and without actually using any crop land. And you'd still have some feed stocks left over to replace petrochemicals. The sector is starting to mature. Brazil is already getting over a quarter of its gasoline energy from sugarcane ethanol and is now with that an offshore has replaced all oil imports. And they had to prime the pump with subsidies initially but then got that back fifty times over and the ethanol is now completely de-subsidized competes beautifully, they would love to sell it to us. But we put on an illegal 100 percent tariff to protect our cotton farmers so they got ship to Asia instead. Sweden has a nice strategy for getting off oil based on forest waste. Europe is a much bigger producer of bio-diesel than we are as part of the strategy to shift farmers from temporary subsidies to durable revenues. So all the moving parts fit together, instead of needing 28 million barrels a day of petroleum products in 2025, we could get almost to eight of that by then in another seven still in the works as we complete the turnover of the vehicle fee from $12 a barrel efficiency. We could get almost six from bio-fuels and the like, almost two from no brainier substitutions of safe natural gas that makes sense at any price, almost eight form domestic oil production, that's still going on by then from areas already allowed. And we need five from somewhere else. Where could that be? Well, efficiency is so cheap. Maybe we should buy more of it or wait a little longer and get the rest of it. Or we could continue importing oil and gas say oil in this case from say, Canada and Mexico or by then WTO would have made illegal tariff on Brazilian ethanol go away, so that will come in. Oh, I haven't yet accounted for two thirds of the saved natural gas. It turns out that's enough to directly substitute for that last five million barrels a day of oil. Or if we used at the most profitable way which is to turn it into hydrogen which you could use a lot more efficiently, that would also displace the domestic oil. We could even be a net exporter of oil for a while if we wanted. And I am not even counting other options, for example, there is available windy land in the Dakotas that could cost effectively by then make enough hydrogen to run at these levels of vehicle efficiency, every highway vehicle in the county. So lot's of options. Nice big menu. And there are five ways government could help this happen faster by supporting rather than to distorting the business logic. The most effective way I know to get efficient vehicles on the road - light vehicles would be the fee-bate. That's a cross between a fee and a rebate. Here is how it works. You go to the dealer to buy a car or light truck of the size you want. You notice there are different models for different efficiencies. The less efficient ones pay a corresponding fee, the more efficient ones earn a corresponding rebate and the fee is paid for the rebates. So within each size category we broaden the price spread in such a way that you will look at all fourteen years worth of life cycle fuel saving, not just the first couple of years, and you'll make a choice that's sufficient for society. And you are being encouraged to buy more efficient car of the size you want rather than a different size than you want. Auto makers are also starting to warm to this idea as they realize that as they shift their production towards more efficient models, because they want to earn rebates instead of having their buyers pay a fee, the kinds of value they will add more and more to the vehicles to achieve that efficiency are actually more profitable than the rest of the cars. So their margins go up. We have also figured out some creative financial engineering to enable low income Americans to get into very efficient, reliable new cars that they can afford to run. This is a big deal for social equity. If for example, African-American and White households had the same car ownership that would cut the employment disparity roughly in half. And it turns out that we can do this very cheaply and couple it with premature scrappage of clunkers to clean out the air faster. The net result is Detroit gets a shot at a million car a year market they didn't have before because these aren't credit worthy customers, they could never buy a new car before, so they kind of like that idea. Governments at all levels buy lots of fleet vehicles. Let's buy the most efficient ones. Let's use a golden carrot method to aggregate demand for more efficient vehicles and deliver that market research information to the makers so that they feel less risk in making that stuff. And just announced what we call the platinum carrot, the automotive EX prize, which like the price for the first private space flight gets the competitive juices flowing among entrepreneurs. Now in the case of heavy trucks it turned out what was missing was information. When my MBAs brought in the spreadsheets showing the triple efficiency 18 wheelers would have a 60 percent internal rate of return which is really juicy. I couldn't figure out why the competitive truck industry hadn't done this already and thus maybe they didn't realize they could do it. So just to test that hypothesis, I called up the heads of some large companies we deal with, that each buy about one percent of the national truck league. And said did you know you could triple your truck efficiency? They said no. The truck maker said we could save maybe a 10th and it would cost a lot. How do you do that? So I told them and the answer we got back was on the lines of well let's build one and test it and if it does what you say we'll tell the truck makers that's what we want. That has to be the right answer of course, so. We started facilitating conversations between one such company and its suppliers. They soon figured out the first 25 percent saving is free. And then the buyer said free is not good enough. I want to invest for a return. What can you do for me, now they are arguing about will they get 16 or 18 or what miles per gallon instead of the present 6 and half. Well the company is Wal-Mart so every mile per gallon is worth 42 million bucks a year straight to their bottom-line. So they are going to make billions on the deal they are highly motivated. In the case of airlines, if you decide philosophically you want to help the bankrupt Legacy Airlines dig their way at least half way out of their cost hole, a good way to do it would be federal loan guarantees offset by equity warrant so there is no net cost to treasury. Specifically for buying efficient new planes on condition that for every new ones they buy we are going to scrap an old one that's parked in the desert so it will never fly again because if it did, it would waste more oil and block the adoption and development of more efficient new planes. So the old inefficient ones are worth more dead than alive, we are going to take that back and shoot them. Boeing likes that idea. It turns out there is a wonderful ally in all this efficiency stuff and that is the military, which has very compelling reasons for tripling or better the efficiency of hits platforms in order to trim it's very fat cumbersome expensive and vulnerable fuel logistics tail that it drags around. And in order to do that, military science and technology is going to be pushing things like ultra light materials and advanced manufacturing and so on which will in turn help to transform the civilian car truck and plane industries to lead the nation off oil, so nobody needs to fight over the oil and then we have neg emissions in the Gulf Mission unnecessary and the war fighters really like that idea. There are some methods already agreed by the main stake holders for helping look, weak balance sheet auto makers and suppliers to retool and retrain. We can tweak USDA rules to speed the transition from hydrocarbons to carbohydrates and probably double or triple net farm and ranch income. Partly by paying the producers for taking carbon out of the air and sticking it back in the soil where it belongs. And we can get out of our own way in other respects for example in the 48 states, outside California where we still reward utilities for selling you more energy and penalize them for cutting your bill. That's just dumbest opossum and we should stop doing it. But mainly what is going to drive this transition off oil is competitive strategy. Just think about the airline business, the airplane business in particular. In 1997 Boeing was just where Detroit is now. And the Boeing commercial airplanes introduced the Toyota Production System and lot of other wrenching changes that got their cost back on track. But what was in the pipeline after the Triple 777 maybe a sonic cruiser, well that fell prey to oil prices and other things. And meanwhile Airbus passed Boeing in output in 2003 and people where starting to ask is Boeing really going to be around for long. The following year Boeing did a stunning innovation. They said we are going to sell a super efficient plane, 787 Dreamliner which will save a fifth of the fuel and cost the same and have many advantages for airlines and passengers. It will cut the final assembly from 11 days to three by several kinds of radical simplification. Well this airplane has taken off in orders faster than any in history and sold out through 2013. And now they are rolling out those simplifications and improvements to every airplane they make before Airbus can even steer itself out of the ditch. And this change is largely based on making half the airframe out of advanced composites. So at Rocky Mountain Institute we are busy, implementing the oil end game through institutional acupuncture. We figure out where the business logic is congested and not flowing properly. We stick needles in it to get it flowing. We don't need to do much, with aviation, Boeing is already there and beating Airbus very satisfactorily. Heavy trucks, Wal-Mart is leading the charge, using its enormous demand poll to drag these doubled and I think, later tripled efficiency trucks into the market. Military is emerging now as the federal leader in getting the nation off oil. There is good progress in fuels and finance and we all knew that the toughest, hardest, slowest sector was going to be the changing cars and light trucks. But two years after we suggested that Detroit follow Boeing's lead and strategy guess what Ford Motor Company's new CEO became Alan Mulally, he is the former head of Boeing commercial aero planes. He led that strategy against Air Bus. So he brings with him all the knowledge and cultural DNA of how to do that. And he arrives in Detroit with transformational intent, watch the space. Now the United Autoworkers and the dealers are eager for this kind of innovation, a wave of creative destruction sweeping through the car industry is opening minds to previously unthinkable levels of innovation now that we know that incrementalism is the fatal strategy. Leap-frogers like China and India aren't far behind. This market is going to change the manager's minds or the managers which ever comes first. And I am very pleased by the pace of change that we are starting to see in the past year. Now this is a good thing when you reflect that the world uses a cubic mile of oil per year. And if in case you have trouble visualizing this my Military Principal Captain Scott Pugh used to drive a nuclear submarine, has a lovely way of thinking about this. He says that the 85 million barrels of oil that the world uses everyday well barrel that's 20 inches in diameter by 30 inches height. Lay it down on its side, lay 85 million of them end to end, so they go one and half times around the earth. And then take out all the ends of the barrels so it's just a continuous 20 inch pipeline and in order to get around the world one and half times in 24 hours, that amount of oil has to flow at a speed of Mach two. Does that help you visualize 85 million barrels a day? And of course the conventional view in the oil business is that after the trillion barrels we have already extracted, the rest of the oil, although there is still a lot there gets rapidly from places that don't like us and more and more exotic and expensive and carbon intensive. On the other hand if you splice into the supply curve, a world scale up of the oil endgame findings, it all slides three trillion barrels to the right and you have a lot more time to do smarter things. And prices stay low. Now whether or not you think climate protection is a problem, smart companies are busy protecting the climate to make money. Some our biggest chip makers are cutting their carbon emission six percent a year, getting their money back in two or three years. DuPont set a goal that they will cut their carbon emissions by 65 percent below the 1990 level by 2010. That sounds awfully ambitious, well yeah they have been increasing energy productivity six percent a year but still well, actually by now they have cut their green house gas emissions by 80 percent below the 1990 level and they made $3 billion profit on the deal because efficiency is cheaper than the fuel. BP similarly met its carbon reduction goals eight years early with a $1.6 billion profit. GE, known for sharp pencils, has pledged to boost its energy efficiency 30 percent in the next five years, why? To boost share holder value. Interfaces cut its green house gas emission nearly eight percent a year and built the strongest cost structure in the carpet business. Texas Instruments is now commissioning a new chip fab in Texas, not China, because we were able together to cut $220 million out of the capital cost while saving a fifth of the energy and a third of the water. The next one we will do better. In fact we just had a conceptual design for another one that saves two thirds of the energy, probably around half the capital costs, and gets rid of all 22,000 of chillers. So while the politicians keep debating the supposed costs of climate protection smart companies are going for the profits. They have realized that the whole political debate is based on a sign error you know, where politicians worry about cost burden and sacrifice. Practitioners know you get profits, jobs and competitive advantage. We just got the sign wrong. There is a minus sign in there somewhere and you know, if these two parallel universes of practice and politics ever converge politics will get a lot easier. We don't need to do a whole lot of energy efficiency to help climate a lot. For example economists normally assume that the energy used to make a dollar of GDP in the world will go down by one percent a year. But carbon emissions will level off if we could make that two percent a year and they drop stabilizing climate if that became three percent a year, could we do that? Well, last year we did four percent. We have done two and half to three and half percent a year drop in US Energy Intensity for many years under both high and low prices. California has done one percentage point faster than that. New houses in California use only a quarter of the energy they used to. We are still saving a lot more China did even better than California, from a less efficient base of course, but they cut energy intensity over five percent a year for over twenty years, then almost eight percent a year. Then they came off the rails temporarily, they are getting back on the rails this year. Attentive companies, of which I have named some, routinely cut their carbon emissions or intensity six or eight percent a year. So why should it be that hard to do two or three percent a year. And since everyone else makes money on the deal why should this be a costly activity? After all, we can save half of our oil and gas at a quarter and an eighth respectively of its price. We can save three quarters of our electricity, cheaper than running a coal or nuclear plant even if building it costs nothing. Even such an efficient county as Japan can triple their energy efficiency according to the Head of Tokyo University who is a very good engineer. I think he is right. And oil causes 42 percent and making electricity causes 40 percent of the climate problem. So there is a lot of profit opportunity here for protecting the climate. We know this stuff works even without new technologies. California has held its per capita use of electricity flat for 30 years while it kept going up in the rest of the country that saved Californians about a $100 billion of capital investment. And by the way California real income, mean while those 79 percent per person with flat electric use per person. And there is a revolution going on in the supply side of electricity that's very good news for climate. If you look at Micropower both the cogeneration of heat and electricity together in building and factories and distributed or decentralized renewables, all the renewable resources of electricity other than big hydro. You find that together they now make the sixth of the world's electricity, actually a little more than nuclear does. A third of the world's new electricity and together with efficiency over half of the world's new electrical services, now come from Micropower in mega watts. In fact, Micropower alone added in 2005, 11 times the capacity and four times the electricity that nuclear added. And Micropower is essentially often asked by private risk capital; in fact, just the renewable part of it got $56 billion of investment last year worldwide. There isn't a new nuclear project on earth with private risk capital, they are only brought by central planners, what does this tell us? Well I won't trouble you with the economic analysis about this; we can go into it later if you like. It is of course true that whatever options you buy there is a risk of a dry hole. May be it won't work for some reason. But in California, from 1982 to 85' we had a pretty level playing field, where our ways to save or make electricity could compete pretty fairly. And in just those four years utilities bought or were firmly offered new savings and supply, mostly distributed renewables totaling a 143 percent of the state's total peak load. And they had to shut off the bidding before they had to shut down the every fossil or nuclear plant in the state, which in hindsight might not have been such a bad idea. And these resources are also enormous. Efficiency alone, depending on whether you believe the Utilities think tank or me is two or three times or four or five times nuclear's market share. Cogeneration, just in industry is comparable in size to nuclear. Wind can produce several or many times electric needs in the US, China, the World, other renewables are even bigger. And it turns out that the variability of things like Sun and Wind is not really a problem if you properly integrate them with the grid and forecast them and disperse and diversify them. The reason it's not a problem is that backup you need is less than the backup we already bought and paid for, installed and paid for, to deal with the intermittence of the big thermal plants. And you only have to buy that backup once, it's already there. I think the collapse of nuclear power of an incredible attack of market force is is a very good thing for climate protection and international security. Its good for climate protection because buying nega watts and Micropower instead as the market is doing, gives you two to ten times more climate protection per dollar and more climate protection per year. If you buy cheaper stuff, you get more of it per dollar. And if climate is a problem, we need the most solution per dollar and per year. We have to invest judiciously, not indiscriminately. Also, recognizing the market collapse of nuclear power will inhibit the spread of nuclear bombs to the like of Iran and North Korea because it's it's really the main driver of proliferation when you can get all the ingredients of do it yourself bomb kits by any of 20 or so known methods through seemingly legitimate nuclear commerce that's often heavily subsidized and is wrapped in innocent looking civilian disguise. But if we recognized what the market is telling us about best energy buys, those ingredients would tend to go away. They'd be harder to get, they'd be more conspicuous to try to get and they would be politically much costlier to be caught trying to get or supply because there'd be no doubt that what you are up to is making bombs. You couldn't claim as Iran does, that they are just making electricity. This would make proliferation impossible but it would make it a great deal more difficult and we would be more likely to get timely warning because we could focus intelligence resources on needles not haystacks. The shift away from the nuclear distraction towards the stuff that's cheaper and faster also frees up money and attention and it's interesting that if, for example, you build a compact fluorescent lamp factory in Mumbai, or a super window factory, windows letting in light without heat in Bangkok you will take about a 1000 times less capital to do that, than to expand the supply of electricity to keep running inefficient lights and air conditioners to produce the same light and comfort and you will get your money back ten times faster. So when you multiply intensity times velocity, that means you need 10,000 times less capital to do the same thing. And the power sector now eats a quarter of the world's development capital. So we could turn that around into a net exporter of capital for other development needs. I think the way to do this is arrestingly simple. Just let all ways to save or produce energy compete fairly at honest prices. No matter which kind they are or where they are or what technology they use or how big they are or who owns them and lets see who is not in favor of that way of getting a more prosperous world, a stronger democracy, a safer world, all at the same time. We conclude with this subversive thought that the most comprehensive threat to our energy security is our energy policy at a national level. It perpetuates our oil dependence in many ways, it's - we thoughtfully bailed out that bankrupt Iranian and nearly bankrupt Saudi treasuries. Ahmadinejad and Chavez and Putin are in a way are our own creation, we empowered them with lots and lots of our money. We are funding both sides of the war, impugning our moral standing in the process, warping foreign policy as Secretary Rice rightly puts it and others attitudes about us, weakening our competitiveness, making our economy in many ways more vulnerable and fragile. It gets worse. Our energy policy continues to strongly favor over centralized system architecture that makes major failures inevitable by design instead of impossible by design. I wrote in a Pentagon study in '81, how a handful of people could turn off, I didn't say exactly how could turn off three quarters of the oil and gas to the eastern states in one evening without leaving Louisiana, sorry if Katrina read that. But that vulnerability really showed how over centralized that system is. The things we are doing now against regional electric blackouts, that is more and bigger power plants and power lines will make those blackouts more frequent and more extensive. Our national policy favors and rams through building fat new terrorist targets near our cities L&G plants, more nukes and indeed one of the most successful tools of insurgence in Iraq is attacking energy infrastructure. This may come soon to a theatre near you. The center piece of our national energy policy is to create an all American Strait of Hormuz in Northern Alaska, as if we didn't have enough trouble with the other Strait of Hormuz. I think one of those is quite enough. And since the president has correctly identified the spread of nuclear weapons as the gravest threat to our national security, it seems to me odd that he is driving that spread as fast as possible and trying to revive, reprocessing which makes it a lot worse and is hopelessly uneconomic. So if these are not the kinds of national security outcomes we want, I think it's up to our security and military professionals to say so and in the months ahead I think more of them will be saying so. Now to make all these good things happen, what are we waiting for? We are the people we have been waiting for. If anything I have said seems too good to be true just remember, Marshall McLuhan's remark that "Only puny secrets need protection, great discoveries are protected by public incredulity." Thank you.