Hurt in our pocketbooks, we've recently had an impassioned awakening of desire to drive real efficiency and productivity. We need our businesses to be more competitive and our governments less expensive.
What Mr. Friedman clearly points out is that this is not just a “nice to have.” Some businesses can make do with less, but many governments at the municipal, state and federal levels, and some large for-profit corporations, are finding the gap (and the margins) between the prior business model and today's business model too large to manage in a lower-revenue world.
The social and technical investments required to retool the economy - to become a generator of green jobs and technologies - are large. Unfortunately, the gap between what the U.S. and countries like China are spending is large and growing (see chart below).
Why is China's larger investment in this area a competitive issue for the U.S.? Innovation in this area - in terms of design, build, delivery and implementation - is like an engine. Right now, China's innovation engine is being fed a lot more fuel than ours.
The gap in investment is extreme when considering the average compensation paid to those doing the work in China; Chinese scientists, entrepreneurs, engineers, and marketers today are still being paid a fraction of what their U.S. counterparts are. That means not only is the U.S. spending less, but we also have disproportionately fewer new products, businesses and projects underway because our projects are more costly. China has more raw investment dollars, is paying more people to do work in these areas and is spawning more projects, technologies and businesses.
What makes this situation even more worrisome, however, is the learning that China's innovation engine is generating right now. Chinese scientists, entrepreneurs, engineers and marketers are learning what works and what doesn't work far faster than we are. They're learning this on the basis of having more projects, developed and implemented faster, fueled by more investment.
Some might argue that the quality of U.S. innovation work is better, a point that may be debatable. However, our innovation engine is sucking wind compared to the supercharged Chinese green technology economy. We're working hard on selective parts of the glittery future promised by wind, solar, hydrogen and other forms of alternative energy, but we're not keeping pace.
What isn't getting enough play in our green technology economy is work we can and need to undertake right away: A serious coordinated effort to deploy network-based portfolio-management energy efficiency strategies and measures across our buildings and fleet transportation systems as rapidly as possible.
Here's one specific area for consideration. United States commercial real estate (all buildings except residential housing and goods-producing industries like manufacturing, agriculture and construction) consumes energy at a substantial and growing rate. It will grow at two-thirds the rate of gross domestic product through 2025, according to the Annual Energy Outlook 2005 published by the U.S. Energy Information Agency. In 2003, the commercial building sector, which is made up of 4.9 million commercial buildings covering more than 71.6 billion square feet of floor space, consumed 17,548 trillion BTUs of energy. Estimating a conservative nominal energy cost of $10 per MMBTU, the energy bill for commercial buildings in the U.S. exceeds $175 billion annually.
What is absolutely criminal is that today, somewhere between 20 percent and 40 percent of that energy is wasted, even from buildings built within the last 10 years. This energy is wasted, or lost, because the many systems, subsystems and components that make up buildings degrade over time. A motor bearing fails, a steam trap sticks, a blower gets clogged, a thermostat isn't accurate. These failures may individually be so small that people in the buildings don't notice them as they go about their business. Failures begin from the moment that a building enters operation, and these failures pile up over time, leading to successively larger and larger energy losses.
Evan Smith is a leadership, innovation and sustainability consultant. He is a founding member of Metamorphosis Management Group and is part of the Team Carbon consortium, which is focused on bringing rapid-cycle, results-focused innovation to government and corporate clients.
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