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America's public energy conversation

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boils down to this question:

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Would you rather die of A.) oil wars,

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or B.) climate change,

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or C.) nuclear holocaust,

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or D.) all of the above?

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Oh, I missed one: or E.) none of the above?

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That's the one we're not normally offered.

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What if we could make energy do our work

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without working out undoing?

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Could we have fuel without fear?

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Could we reinvent fire?

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You see, fire made us human;

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fossil fuels made us modern.

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But now we need a new fire

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that makes us safe, secure, healthy and durable.

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Let's see how.

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Four-fifths of the world's energy

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still comes from burning each year

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four cubic miles of the rotten remains

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of primeval swamp goo.

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Those fossil fuels

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have built our civilization.

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They've created our wealth.

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They've enriched the lives of billions.

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But they also have rising costs

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to our security, economy, health and environment

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that are starting to erode, if not outweigh their benefits.

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So we need a new fire.

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And switching from the old fire to the new fire

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means changing two big stories about oil and electricity,

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each of which puts two-fifths of the fossil carbon in the air.

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But they're really quite distinct.

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Less than one percent of our electricity is made from oil --

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although almost half is made from coal.

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Their uses are quite concentrated.

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Three-fourths of our oil fuel is transportation.

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Three-fourths of our electricity powers buildings.

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And the rest of both runs factories.

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So very efficient vehicles, buildings and factories

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save oil and coal,

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and also natural gas that can displace both of them.

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But today's energy system is not just inefficient,

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it is also disconnected,

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aging, dirty and insecure.

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So it needs refurbishment.

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By 2050 though, it could become efficient,

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connected and distributed

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with elegantly frugal

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autos, factories and buildings

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all relying on a modern, secure

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and resilient electricity system.

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We can eliminate our addiction to oil and coal by 2050

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and use one-third less natural gas

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while switching to efficient use

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and renewable supply.

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This could cost, by 2050,

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five trillion dollars less in net present value,

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that is expressed as a lump sum today,

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than business as usual --

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assuming that carbon emissions

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and all other hidden or external costs are worth zero --

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a conservatively low estimate.

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Yet this cheaper energy system

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could support 158 percent bigger U.S. economy

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all without needing oil or coal,

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or for that matter nuclear energy.

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Moreover, this transition needs no new inventions

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and no acts of Congress

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and no new federal taxes, mandated subsidies or laws

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and running Washington gridlock.

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Let me say that again.

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I'm going to tell you how to get the United States

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completely off oil and coal, five trillion dollars cheaper

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with no act of Congress

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led by business for profit.

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In other words, we're going to use our most effective institutions --

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private enterprise co-evolving with civil society

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and sped by military innovation

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to go around our least effective institutions.

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And whether you care most

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about profits and jobs and competitive advantage

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or national security, or environmental stewardship

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and climate protection and public health,

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reinventing fire makes sense and makes money.

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General Eisenhower reputedly said

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that enlarging the boundaries of a tough problem

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makes it soluble by encompassing more options and more synergies.

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So in reinventing fire,

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we integrated all four sectors that use energy --

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transportation, buildings, industry and electricity --

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and we integrated four kinds of innovation,

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not just technology and policy,

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but also design and business strategy.

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Those combination yield

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very much more than the sum of the parts,

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especially in creating deeply disruptive business opportunities.

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Oil costs our economy two billion dollars a day,

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plus another four billion dollars a day

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in hidden economic and military costs,

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raising its total cost to over a sixth of GDP.

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Our mobility fuel goes three-fifths to automobiles.

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So let's start by making autos oil free.

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Two-thirds of the energy it takes to move a typical car

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is caused by its weight.

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And every unit of energy you save at the wheels,

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by taking out weight or drag,

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saves seven units in the tank,

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because you don't have to waste six units

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getting the energy to the wheels.

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Unfortunately, of the past quarter century,

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epidemic obesity has made our two-ton steel cars

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gain weight twice as fast as we have.

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But today, ultralight, ultrastrong materials,

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like carbon fiber composites,

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can make dramatic weight-saving snowball

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and can make cars simpler and cheaper to build.

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Lighter and more slippery autos

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need less force to move them,

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so their engines get smaller.

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Indeed, that sort of vehicle fitness

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then makes electric propulsion affordable

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because the batteries fuel cells

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also get smaller and lighter and cheaper.

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So sticker prices will ultimately fall to about the same as today,

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while the driving cost, even from the start,

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is very much lower.

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So these innovations together can transform automakers

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from wringing tiny savings

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out of Victorian engine and seal-stamping technologies

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to the steeply falling costs

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of three linked innovations that strongly reenforce each other --

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namely ultralight materials, making them into structures

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and electric propulsion.

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The sales can grow and the prices fall even faster

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with temporary feebates,

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that is rebates for efficient new autos

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paid for by fees on inefficient ones.

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And just in the first two years

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the biggest of Europe's five feebate programs

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has tripled the speed of improving automotive efficiency.

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The resulting shift to electric autos

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is going to be as game-changing

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as shifting from typewriters to the gains in computers.

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Of course, computers and electronics

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are now America's biggest industry,

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while typewriter makers have vanished.

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So vehicle fitness

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opens a new automotive competitive strategy

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that can double the oil savings over the next 40 years,

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but then also make electrication,

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and that displaces the rest of the oil.

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America could lead this next automotive revolution.

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Currently the leader is Germany.

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Last year, Volkswagen announced

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that by next year they'll be producing

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this carbon fiber plugin hybrid

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getting 230 miles a gallon.

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Also last year, BMW announced

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this carbon fiber electric car,

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they said that its carbon fiber is paid for

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by needing fewer batteries.

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And they said, "We do not intend to be a typewriter maker."

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Audi claimed it's going to beat them both by a year.

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Seven years ago, an even faster and cheaper

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American manufacturing technology

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was used to make this little carbon fiber test part,

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which doubles as a carbon cap.

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(Laughter)

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In one minute -- and you can tell from the sound

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how immensely still and strong it is.

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Don't worry about dropping it, it's tougher than titanium.

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Tom Friedman actually whacked it as hard as he could with a sledgehammer

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without even scuffing it.

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But such manufacturing techniques

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can scale to automotive speed and cost

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with aerospace performance.

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They can save four-fifths of the capital needed to make autos.

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They can save lives

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because this stuff can absorb

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up to 12 times as much crash energy per pound as steel.

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If we made all of our autos this way,

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it would save oil equivalent to finding

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one and a half Saudi Arabias, or half an OPEC,

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by drilling in the Detroit formation a very prospective play.

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And all those mega-barrels under Detroit

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cost an average of 18 bucks a barrel.

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They are all-American, carbon-free

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and inexhaustible.

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The same physics and the same business logic

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also apply to big vehicles.

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In the five years ending with 2010,

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Walmart saved 60 percent of the fuel-per-ton-mile

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in its giant fleet of heavy trucks

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through better logistics and design.

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But just the technological savings in heavy trucks

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can get two-thirds.

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And combined with triple to quintuple efficiency airplanes,

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now on the drawing board,

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can save close to a trillion dollars.

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Also today's military revolution in energy efficiency

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is going to speed up all of these civilian advances

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in much the same way that military R&D

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has given us the internet, the Global Positioning System

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and the jet engine and microchip industries.

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As we design and build vehicles better,

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we can also use them smarter

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by harnessing four powerful techniques

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for eliminating needless driving.

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Instead of just seeing the travel grow,

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we can use innovative pricing,

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charging for road infrastructure by the mile, not by the gallon.

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We can use some smart I.T. to enhance transit

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and enable car sharing and ride sharing.

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We can allow smart and lucrative growth models

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that help people already be near where they want to be,

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so they don't need to go somewhere else.

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And we can use smart I.T.

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to make traffic free-flowing.

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Together, those things can give us the same or better access

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with 46 to 84 percent less driving,

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saving another 0.4 trillion dollars,

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plus 0.3 trillion dollars from using trucks more productively.

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So 40 years hence, when you add it all up,

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a far more mobile U.S. economy

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can use no oil.

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Saving or displacing barrels for 25 bucks

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rather than buying them for over a hundred,

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adds up to over a trillion-dollar net saving

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counting all the hidden costs at zero.

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So to get mobility without oil,

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to phase out the oil,

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we can get it efficient and then switch fuels.

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Those 125 to 240 mile per gallon equivalent autos

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can use any mixture of hydrogen fuel cells,

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electricity and advanced biofuels.

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The trucks and planes can realistically use

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hydrogen or advanced biofuels.

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The trucks could even use natural gas.

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But no vehicles will need oil.

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And the most biofuel we might need,

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just three million barrels a day,

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can be made two-thirds from waste

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without displacing any cropland

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and without harming soil or climate.

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Our team speeds up these kinds of oil savings

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by what we call "institutional acupuncture."

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We figure out where the business logic

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is congested and not flowing properly,

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we stick little needles in it to get it flowing,

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working with partners like Ford and Walmart and the Pentagon.

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And the long transition is already well under way.

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In fact, three years ago mainstream analysts were starting to see peak oil,

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not in supply, but in demand.

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And Deutsche Bank even world oil use could peak around 2016.

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In other words, oil is getting uncompetitive even at low prices

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before it becomes unavailable even at high prices.

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But the electrified vehicles

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don't need to burden the electricity grid.

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Rather, when smart autos exchange electricity and information

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through smart buildings with smart grids,

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they're adding to the grid valuable flexibility and storage

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that help the grid integrate

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varying solar and wind power.

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So the electrified autos

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make the auto and electricity problems

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easier to solve together than separately.

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And they also converge the oil story

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with our second big story,

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saving electricity and then making it differently.

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And those twin revolutions in electricity

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will bring to that sector

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more numerous and profound and diverse disruptions

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than any other sector,

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because we've got 21st century technology and speed colliding head-on

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with 20th and 19th century institutions, rules and cultures.

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Changing how we make electricity gets easier

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if we need less of it.

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Most of it now is wasted

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and the technologies for saving it

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keep improving faster than we're installing them.

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So the unbought efficiency resource

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keeps getting ever bigger and cheaper.

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But as efficiency in buildings and industry

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starts to grow faster than the economy,

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Americans' electricity use could actually shrink,

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even with the little extra use required

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for the efficient electrified autos.

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And we can do this just by reasonably accelerating existing trends.

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Over the next 40 years, buildings,

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which use three-quarters of the electricity,

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can triple or quadruple their energy productivity,

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saving 1.4 trillion dollars, net present value,

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with a 33 percent internal rate return

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or in English,

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the savings are worth four times of what they cost.

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And industry can accelerate too,

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doubling its energy productivity

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with a 21 percent internal rate of return.

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The key is a disruptive innovation

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that we call integrative design

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that often makes very big energy savings

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cost less than small or no savings.

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That is, it can give you expanding returns,

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not diminishing returns.

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That is how our 2010 retrofit

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is saving over two-fifths of the energy in the Empire State Building --

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remanufacturing those six and a half thousand windows on site

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into super windows that pass light, but reflect heat.

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plus better lights and office equipment and such

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cut the maximum cooling load by a third.

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And then renovating smaller chillers instead of adding bigger ones

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saved 17 million dollars --

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a capital cost which helped pay for the other improvements

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and reduce the payback to just three years.

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Integrative design can also increase

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energy savings in industry.

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Dow's billion-dollar efficiency investment

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has already returned nine billion dollars.

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But industry as a whole has another half-trillion dollars

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of energy still to save.

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For example, three-fifths of the world's electricity runs motors.

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Half of that runs pumps and fans.

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And those can all be made more efficient,

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and the motors that turn them

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can have their system efficiency roughly doubled

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by integrating 35 improvements, paying back in about a year.

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But first we ought to be capturing bigger, cheaper savings

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that are normally ignored and that are not in the textbooks.

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For example, pumps, the biggest use of motors,

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move liquid through pipes.

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But a standard industrial pumping loop

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was redesigned to use at least 86 percent less energy,

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not by getting better pumps,

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but just by replacing long, thin, crooked pipes

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with fat, short, straight pipes.

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This is not about new technology,

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it's just rearranging our metal furniture.

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Of course, it also shrinks the pumping equipment

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and its capital costs.

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So what do such savings mean

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for the electricity that is three-fifths used in motors?

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Well, from the coal burned at the power plant

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through all these compounding losses,

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only a tenth of the fuel energy

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actually ends up coming out the pipe as flow.

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But now let's turn those compounding losses around backwards,

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and every unit of flow or friction that we save in the pipe

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saves 10 units of fuel cost, pollution

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and what Hunter Lovins calls "global weirding"

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back at the power plant.

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And of course, as you go back upstream,

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the components get smaller and therefore cheaper.

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Our team has lately found such snowballing energy savings

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in more than 30 billion dollars-worth of industrial redisigns --

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everything from data centers and chip fabs

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to mines and refineries.

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Typically are retrofit designs

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save about 30 to 60 percent of the energy

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and pay back in a few years,

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while the new facility designs save 40 to 95-odd percent

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with generally lower capital cost.

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Now needing less electricity

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would ease and speed

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the shift to new sources of electricity, chiefly renewables.

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China leads their explosive growth and their plummeting cost.

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In fact, these solar powered module costs

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have just fallen off the bottom of the chart.

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And Germany now has more solar workers

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than America has steel workers.

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Already in about 20 states

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private installers will come

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put those cheap solar cells on your roof with no money down

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and beat your utility bill.

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Such unregulated products

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could ultimately add up to a virtual utility

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that bypasses your electric company

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just as your cellphone bypassed your wireline phone company.