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Editor's note: The following is adapted from the Rocky Mountain Institute's Reinventing Fire: Bold Business Solutions for the New Energy Era.
Industry has long formed the foundation of America's economy, from before the first Ford Model T factory to the military-industrial complex that grew out of two world wars to the robust economic growth and high-tech innovation that followed. And whereas U.S. manufacturing is experiencing a resurgence, its old foundation—built on cheap fossil fuels and plentiful electricity—is showing cracks. Rising and volatile fuel prices, supply-security concerns and pressures on the environment are wrecking balls thumping away at many of the underpinnings of our country's key industries—and thus our prosperity.
Fortunately, we can render these wrecking balls harmless through a systematic drive to upgrade industrial energy efficiency. Even with no technology breakthroughs such an effort can, in just over a generation, transform U.S. industry and provide 84 percent more output in 2050 consuming 9 to 13 percent less energy and 41 percent less fossil fuel than it uses today. This scenario, outlined in Reinventing Fire, a book and strategic initiative by Rocky Mountain Institute (RMI), can help U.S. industry build durable competitive advantage and keep jobs from going overseas.
These seem like incredible numbers: Twice today's efficiency? Output nearly doubled with reduced energy use? The opportunity is so significant because, in spite of efficiency gains over the past decade, plentiful opportunities for energy efficiency remain for industry. The U.S. Department of Energy's 24 industrial assessment centers, which have offered energy audits for more than 30 years, report that energy savings per recommendation increased by 9 percent between 1985 and 2005. Turning our wastefulness into profit is our biggest opportunity to reinvent fire.
Dramatic efficiency gains in industry can be enabled by transformations occurring in tandem in other key sectors of our economy. For example, the hugely energy-intensive petroleum refining industry will shrink or eventually disappear as vehicles electrify. But efficiency can be doubled in two main ways: applying new technologies to old sectors, and applying old technologies to new sectors.
Adding new technologies to old sectors
A well-known success story is the steel industry. Since it recovered from the capacity overhang and devastating mill closures of the 1970s, it has quietly expanded with state-of-the-art facilities. The energy intensity to produce a ton of steel fell 40 percent from 1978 to 2008. This was driven by a new technology well suited to our scrap-rich economy: the share of steel production from electric arc furnaces (EAFs) grew from 25 percent to nearly 60 percent. EAFs recycle steel scrap in an electric furnace to produce new steel, bypassing the energy-intensive, coking coal–powered step of converting iron ore to metallic iron, and then to steel in a conventional blast furnace. Adding EAFs close to scrap sources has also pulled steel recycling rates up to the mid-80 percent range in recent years.
Even the conventional route has a more efficient alternative that is starting to make inroads. Steel industry bellwether Nucor recently broke ground on a new direct reduced iron plant in Louisiana. This innovation replaces coal with natural gas in the iron ore conversion step. If the steel industry continues to adopt new technology, it can help lead the transition outlined in Reinventing Fire.
Some old industries have less positive stories. Pulp and paper is still struggling with declining demand for its core product, a dynamic that stymies investment in new and existing facilities. Paper mills are often net-zero or even net energy producers, so many would ask: Why bother? But pulping typically produces a potentially valuable by-product—black liquor. Gasifying it has the potential to transform the industry, unlocking the opportunity for the pulp and paper producer of the past to become the biorefinery of the future—producing a portfolio of products alongside paper, from renewable electricity to boutique chemicals and bulk biofuels.