Editor's Note: Serious Materials CEO Kevin Surace addressed the U.S. House of Representatives' Democratic Caucus this morning at their annual issues conference and job summit. Saying that the next industrial revolution is dawning, Surace urged lawmakers to foster U.S. leadership of the new economy, outlined challenges and opportunities, and talked about what his firm doing to meet them.
He also disclosed that his company is participating in the energy efficiency overhaul of the Empire State Building. Serious Materials plans to transform the glass in all 6,500 windows of the historic building and convert them into super-insulated, high performance energy efficient windows. Surace's speech, which is posted on the Serious Materials blog, is reprinted here with permission.
Good Morning. I want to thank Chairman Larson, Madam Speaker, Anna Eshoo and all our California representatives, and all of you for the opportunity to be here with you today. It's an honor to have a chance to share some thoughts on re-energizing America through energy efficiency, job creation and economic growth.
I'm just one Silicon Valley CEO among many who are proud of our president, and enormously grateful for the courage shown by the Democratic Party for the leadership you have already shown on these issues. And your leadership will be needed again in 2010 to lay the groundwork to kickstart America onto a path of long-term prosperity and growth. My employees thank you, my kids thank you, and I thank you, from the bottom of my heart.
In the last few years, we have learned a lot about climate change, CO2, and environmental issues. But I am not here to talk about those today and, science aside; they will likely remain difficult political issues for the foreseeable future.
But energy efficiency is a whole different ballgame.
Everyone likes to save money. And every member of Congress wants to save their constituents money. When a private sector entrepreneur like me runs the numbers on energy efficiency, it turns out there are a lot of people who can be quickly employed, and there is a lot of money to be saved by Americans. Every dollar saved by a homeowner who does a retrofit is as good as a long-term tax cut. Every dollar saved by a small business (or large) is as good as a long-term tax cut.
Right now, today, we have technologies that only a few years ago made no sense, yet today have fast paybacks. This transcends red and blue, and is as purple as it gets.
Helping Small Business Helps the Economy in a Big Way
The venture community has already figured out that the low hanging fruit is energy efficiency.
Small business, the backbone of our economy, is stepping up to the challenge, creating products and services that will literally change the landscape of this country and economy. We must all thank small business entrepreneurs in America. They take the risks, employ the most people, and are making change the fastest.
The most purple thing we can do is help small businesses create jobs. Small business is the heart of America, everyone in this room knows that, and I'm almost certain you've all said it to your constituents; it cuts across urban and rural, progressive and conservative, young and old. Small business is the engine of job creation. So please, let's create those jobs.
I grew up in upstate New York, near Syracuse in the ’60s and early ‘70s. The first time I ever heard anything about energy efficiency was of course the 1973 Oil Embargo. I was in fourth grade and this became the topic everyone was talking about. We learned about the three-color flag system, odd/even days, reduced highway speeds, year-round daylight savings time, CAFÉ standards and the Weatherization Assistance Program. We turned off lights and wore sweaters. The government funded research in solar, wind, buildings and windows. And we educated our citizens on the value of conservation. Simply put, this country responded to the emergency as a nation, together.
By the 1980s, however, all was forgotten. While some of the government programs remained, all of us went back to our wasteful ways. Energy was cheap after all, and would likely stay that way. The Cold War was ending, the Middle East loved selling us oil, and coal was homegrown and really cheap. So let's face it, we lived it up for the better part of 30 years, and forgot all we had learned.
And while we lived it up, we began to lose jobs and lose our manufacturing base. After World War II, America manufactured nearly 50 percent of the world's goods. The whole world came to us to buy everything from elevators to tractors to electronics to pipes.
America: Wake Up!
This really hit home recently as I was touring the mechanical rooms of the Willis Towers (formerly Sears Tower) in Chicago. The tower is soon to undergo a huge energy retrofit, and the owners have looked at everything in the building, every way they can reduce energy consumption. So, of course all the chillers, motors, pumps, and heating systems are up for replacement.
In walking through these floors, I noticed that every piece of equipment had been made in America. All made in 1972, when they were installed. GE, Westinghouse and a host of other names ... all proudly stamped Made in America. The steel beams and some large equipment I am not sure anyone can identify: Still, all made here. We invented it, we made it, and we installed it, right here by our American workers. God, that made me proud.
However, just a short time later I had to swallow some of that pride. Listening to the owners as they were looking to buy new equipment to replace the older machines, they tried to find American-made replacements. However in most cases, they simply weren't available any longer. That is not a choice. And these building owners are very proudly American. But it doesn't matter. While we invented all those technologies, from big iron to big motors, we just don't make any of it here any longer.
In fact, while the world came to our door in 1950 to buy nearly everything, today we make less than 25 percent of the world's goods, and that is heading south, or should I say east, really quickly. When the latest statistics come out, we may be heading under 20 percent. And American manufacturing jobs lost the last few years may never come back. Companies from China and other countries simply have taken over.
This has caused huge ripples in our economy; including a jobless class of citizens, large trade imbalances and a soaring $12 trillion debt.
Invent, Manufacture, Install
And how will we pay back that debt if no one buys anything from us? One of the fastest growing exports in the last decade was financial services. Do you think anyone wants our financial services any longer? I don't think so.
To pay back this debt, and create long term growth, we have to get back to core values in this country. Simply stated; invent, manufacture, install.
We are at a unique crossroads now as we head into 2010. We have the realization that we must conserve energy. Not just to address climate change, but to save money and create jobs. We're back to 1973, on the brink of crisis. Back then, it was forced on us; this time it is our choice. We can do nothing and wait until crisis truly forces our hand again. Or we can do everything to prevent it and come out on top creating jobs and a strong domestic economy.
As (Energy) Secretary (Steven) Chu and (Pulitzer Prize-winning author and New York Time columnist) Tom Friedman reminded us, China is charging ahead with new, clean technologies. They have a national directive to lead the world in energy and efficiency technologies. China missed the Industrial Revolution by more than 100 years. They missed the IT revolution by two decades. But they will not miss this next Industrial Revolution -- the energy economy.
Why? China cannot keep up with its own energy needs, so they're innovating, and manufacturing. And if they lead the world in this, as they have committed to do, we will be buying everything from them for the next 100 years. Let's not wait until it is too late. America: Wake up.
As a country, we have the opportunity to lead the world in energy efficiency and new technologies. Our buildings alone consume 40 percent of our nation's energy, much of that going right out the window. While most of you may think a dual pane window is energy efficient. Think again.
Dual pane windows were invented back in 1865. So in 1870, they were truly best of class. But I am thinking, 140 years later and we call that energy efficient?
Measuring Window Performance
Turns out window performance is measured in R-value, just like insulation in walls. An open hole in the wall would be R-0. A single pane window is R-1. Dual pane windows are only R2. And Energy Star windows are only about R3 (compared to walls at R-10 or higher). Yep, that is all; R-3. And that is why all the heat literally goes out the window. And that's why we need high R-value windows.
Serious Materials is already making windows as high as R-11 in our plants across the country and commercial glass as high as R-20 center of glass. Yes that is right, as good as or better than walls. And high R-value windows are far more comfortable in the home, because they insulate like a wall. And our R-5 product costs the same as many R-3 products, as we have driven down costs every quarter.
Reminder: R-0 is a hole in the wall. R-3 isn't much better. R-5 and above begins to get interesting.
Saving energy is the gift that keeps on giving, year after year after year. It is long-term savings that homeowners and building owners can use to spend on other goods and services, helping kick start jobs in many sectors. And save your constituents money each year, reduce dependency on foreign oil, and actually meet our CO2 reduction goals even faster.
When compared to single pane, a dual pane window saves only about 10 percent in heating and cooling costs, yet high R-value windows can save up to 40 percent.
Now, that is what I call American innovation.
Invent, manufacture, install.
The Chicago Story
I want to share a story with you about a situation we got involved with in Chicago.
You may remember at Christmastime in 2008, the United Electrical Workers union held the first factory sit-in in this country in decades. The owner of Republic Windows was stealing equipment from the factory during the night, trying to setup a nonunion shop in Iowa. He got caught, but Republic went bankrupt immediately. The workers did not even get their 60 days of severance. So they refused to leave until Bank of America, the largest creditor, paid their severance. This is a bank that had taken billions of dollars of TARP funds.
At the same time I saw this on TV, as we all did, and watched the workers' plight. People brought them food as they huddled inside the window factory, and politicians and others were allowed in to try and resolve the situation. But after a tough battle, and getting other union members to picket outside Bank of America's Chicago headquarters, the workers finally won their severance.
However, it was a bittersweet victory. As they left the factory for the last time from their heroic sit-in efforts, they realized they were now out of jobs. At Christmas, in the dead cold of a Chicago winter, and with no hope of finding employment in the midst of the worst recession in decades. What would happen to them now?
It was about that time when I decided to pick up the phone and call the union in Chicago. Not the bank or the trustee, but the union. Yes, the union that just staged a factory sit-in. Some people would call me crazy. But I didn't care.
I talked with the local president Armando Robles and told him I wanted to buy the plant and partner with the union to retrofit it to make high-quality, high R-value windows. He asked if I was serious and then dropped the phone in shock.
But, of course, I was serious. After all it is in our name, Serious Materials.
So a week later I went to Chicago, met with union members and decided these were salt-of-the-earth, good people. Not an aggressive, scary union as portrayed by certain media, but just Americans who wanted their jobs back; jobs that were taken from them not just by a poor economy, but in their eyes, by a mean, greedy, Grinch-of-a-man.
Resuscitating the Former Republic Window Plant
Long story short, we bought the plant, honored the union contract, and slowly began bringing people back to work as we installed new equipment and got things working again. We are now delivering high R-value windows to weatherization programs and to homeowners throughout the Midwest who are anxious to save real energy. It's real.
Thanks to the Recovery Act's visionary investment in low income weatherization and the big hearts of the people in organizations like the Community and Economic Development Association of Cook County (CEDA) in Illinois, more jobs are being created every day. The people that need it the most are being helped, and real money is being saved. Every job we create in the factory creates two more outside, installing these new high R-value windows.
Last month, I went back to Chicago and invited all 250 union workers, some of whom are slowly coming back to work as we ramp the factory. I gave them each a small gift for Christmas, and gave them hope that they will all be back to work soon. I want them all to have their jobs back, and I am committed to make that happen.
To me, that is what it means to be an American.
Invent, manufacture, install.
The good news doesn't end here. It's just the beginning. Energy efficiency in buildings is not just on paper, it is real, and it is happening right now.
Greening the Empire State Building
I want to share some details on something that we have not talked about publicly until this very minute.
An iconic project we are fortunate to be involved in is the Empire State Building. I was with Tony Malkin last week, owner of the Empire State Building. He has just launched a ground-breaking energy efficiency retrofit of this great American icon. The changes he is making will save 40 percent of the total energy in the building without any government assistance, and he estimates it will pay for itself with the energy savings in only three years. Three years! But as Tony says, "I am not just saving money; I am making money because more tenants want to come here now."
And because of his vision, we were able to do something no one has ever done before. We wanted to replace all 6,500 dual pane R-2 windows with our super-insulating, high tech R-8 windows. However, Tony cringed at the waste of having to throw away all that glass from the old windows, which are just a dozen years old. The full count: 26,000 panes of glass.
So, we thought outside the box, and invented a way to build a micro-factory on the fifth floor of the Empire State Building, and manufacture new windows that are 4x more energy efficient onsite. We invented a way of removing the existing glass, un-glazing it, cleaning it, placing new spacers, suspended film, sealing, injecting gas and curing it - all on the fifth floor. And do it only at night so no one is distracted in his or her office. All existing 6,500 windows will be transformed to a super-insulating R-8 from an R-2. And here is the best part: we are re-using all the old glass. 100 percent. No wasted energy, no waste in shipping, and no wasted glass; totally sustainable.
Now that is American innovation.
Invent, manufacture, install.
There are many other companies who have invented amazing new materials and processes.
Do you realize that there are pockets of incredible innovation happening right now? Throughout this great nation people are working to address these problems right now and leading America into the next Industrial Revolution. But they need your attention and support to realize their dreams and to realize the dreams of the people they will put back to work.
You may not yet have heard of all of them, but with proper support to invent, manufacture, install: you will. Each of you can directly affect the next industrial revolution to return America to being a manufacturing and economic leader.
American Innovation at Work
Take ZETA, based in California, which is manufacturing homes and commercial buildings in factories. Once delivered and installed, they look stunning and are net-zero energy. That is right; they net-out to use no energy throughout a year. And they are 10 percent cheaper to make than a regular home of the same size. And take 75 percent less time to build. Cheaper, faster, better, cleaner. That's disruptive. ZETA could change forever the way we think about buildings.
That is American innovation.
Adura and Lumenergi, have re-invented how existing lighting can really work. Their digital control systems, sensors and ballasts work with existing fluorescent lights to interact with daylighting so that the light is dimmable and even throughout a room, all day. The net result is 50 percent to 70 percent electricity savings in offices and schools; with paybacks of three years.
That is American innovation.
And ArchRock, which has figured out how to monitor and track energy usage in data centers: resulting in 30 percent energy savings and no performance impact.
That is American innovation.
And NovaTorque, which has pioneered brand new motor technology, making motors that are over 90 percent efficient, versus 60 percent for the ones we have lived with for 100 years.
That is American innovation.
And Xcel's energy efficient smart grid city in Boulder, that has already shown a 7 percent reduction in line losses.
That is American innovation.
And CalStar which has re-invented bricks that use 85 percent less energy to make compared to traditional bricks. And because of that, they can actually be made cheaper. Yes, energy savings is a competitive advantage. And their first plant is ready to start up in Wisconsin: in America.
That is American innovation.
Our schools are not only where our kids learn, they are also a place where we, as taxpayers, pay the energy bills. And our schools, nationwide, spend nearly $10 billion per year on energy alone, generating 65 million tons of CO2, equivalent to 10 million cars.
That money could be going to education, classroom supplies, and teachers' salaries. Some of this is for electricity, but much is for heating, including oil and natural gas.
Across the country, a school averages about $100,000 per year in energy costs. But in the colder areas of the country, those numbers are often 10 times higher.
Five months ago I met Jayni Chase, who has been greening schools for 30 years. Jayni and Chevy Chase have been strong advocates of energy efficiency in schools, among other items such as improved cafeteria food, recycling and gardens which the kids can tend to.
Jayni is proud of the handful of schools she has impacted through the years. And she should be, because each one took tremendous effort on her part.
I was moved and I got it. It has to start with our kids; just as I learned about energy efficiency back in fourth grade.
But as I was moved inside, I was also moved to take action. I told Jayni, and I quote, "Jayni, at this rate, we will all be dead before we really have an impact." She was nearly driven to tears as she realized that I was right.
But from that statement came a big idea: how we could create a coalition of manufacturers, installers, unions, and a non-profit, and make 25,000 schools energy efficient -- all within 24 months. Why not? Why didn't anyone think of this or have the guts to do this before?
Energy Efficient Schools
We would include all of the technologies that can install quickly, and save energy on day one, including high R-value windows, digital sensors and lighting controls, classroom monitoring and feedback and wireless networked thermostats.
And top it all off with an experiential learning course on energy usage in buildings, which would include the older kids actually doing the energy modeling and audits. We could be teaching the next generation about energy audits, conservation and efficient technologies -- all hands-on. For real: not just textbooks.
And we could leverage the Tax Credit Bonds already authorized in the Recovery Act to pay for the upfront cost. So basically, the whole program would be free for the schools, because the energy savings each month far outweighs the bond payments.
We call it the Energy Efficient Schools Initiative.
And this initiative alone will need 50,000 workers to make it happen. And a private coalition of five manufacturers and led by a nonprofit.
We are now working with the National Wildlife Federation as the lead NGO, we have talked with the construction and teachers unions, and have visited 6 states to discuss retrofitting every school in their state with these advanced products fast; all in essence at no cost to the schools.
We even modeled Whitney Young High School in Chicago, which is where Michelle Obama went to school. They currently spend $1.1 million dollars per year on energy.
I can assure you, in that school, most of the energy is going right out the window. But with this program, we could save them nearly $200,000 per year, and that is after making payments on the bonds. That is enough to hire 5 teachers, and a janitor. And that is just one school. They have over 600.
Free money for the teachers, kids, curriculum … whatever: All paid for from the energy savings.
Heck, it was their money to begin with. All we are doing as a coalition is getting some of it back for them.
And to be clear, we intend to make this happen. Someone has to; it might as well be us.
That is American innovation.
So how can we capitalize on all this good news, and turn it into American jobs today and long-term prosperity for our children?
We need to incent people to make their homes and buildings more energy efficient; far more energy efficient. By using higher performing technology and products that exist today.
The Empire State Building, for example, could have saved over 60 percent of their energy usage; however the last 20 percent would not have paid back quickly enough without government incentives.
And homes can be far more efficient when high R-value windows enter the picture, something that could not have been considered a few years ago.
We need to create jobs right now, save energy, and give Americans that savings for years to come.
While "cash for caulkers" didn't make the jobs bill in the house, the general concept is likely the fastest way this country can create 1 million jobs.
Eight Policies for a More Sustainable Tomorrow
On to policy: You write the laws, and that sets up the rules that we follow. So what you do really, really matters.
Members, if you remember only one thing I said, I hope it's one of the eight key policy ideas I have for you. These eight ideas stem from everyday concerns.
It's what gets me up in the morning and gets me going. How do I get every single one of the union workers from Republic Windows, back on the job, as soon as possible, so that they can provide for their families and then create more jobs?
1. We need to provide continuity in funding for energy efficiency - - particularly where the Federal Government is paying the energy bills. Most importantly, this means weatherizing low income households, public housing and other HUD-assisted properties, and in Federal buildings.
2. In all legislation, reward great performance with higher incentives. Simply settling on Energy Star, which is often a very low bar, doesn't get the country where it needs to go.
3. Focus on cost-effective energy efficiency as the core of comprehensive energy and jobs legislation. It can buy two decades of great jobs, consumer savings, economic strength, and environmental gains.
4. Pass Home Star jobs legislation quickly -- and make sure it rewards higher performance with higher incentives. It should be a tiered system that extends past 50 percent in overall energy savings; the more you save, the larger the incentive.
5. Continue to Support the Weatherization Assistance Program at the current rate of $2.5 billion per year. It has finally ramped-up, and everyone wins here.
6. Continue to support the DOE's building efficiency R&D. It continues to deliver world-class results.
7. Support PACE legislation, so that the upfront cost of upgrades stays with the savings no matter what happens to the ownership of the building.
8. Pass comprehensive energy and climate legislation as soon as possible – with energy efficiency a central feature.
And let's make sure that all incentives require people to use products substantially made in America. While my solar friends hate it when I bring this up, I just don't understand how we can incent people to buy solar panels made overseas, when plants in the U.S. are struggling for business. We invent the technology here, send all the jobs to China to make the panels, only to put them on a ship for 6,000 miles and send them back here. And they call that green?
That isn't green. It is irresponsible. And it has to stop.
We don't have to put up barriers to imports. We just have to create incentives so that we grow market demand for products manufactured right here; in our country. This creates jobs in towns across America. From factories to shops to installers, we can incent energy efficiency
In America, we have led the world in the most important and impactful inventions for 200 years. Our culture, our way of life, our freedom, our protections and our willingness to takes risks has worked better than any society in the history of mankind, from the digital camera, to lasers, to microwave ovens, to the microprocessor. America has truly led the world at every turn.
In fact, no country has been more innovative than America. Ever.
A flurry of invention took place during the Industrial Revolution. While England was the world power and had already been in the midst of their Industrial Revolution, we decided to get in on the act. And frankly, we stole all the thunder. We became the dominant industrial player, and thus became the world's superpower.
That Industrial Revolution was driven by fossil fuels. The cost of energy was only 1 percent of today's price. And with energy so cheap, we could use all we wanted. And thus, everything we invented at that time used a lot of energy to produce it. And we built buildings to house our growing population. And with energy so cheap, who cared if it went out the window.
But the opportunity today is to start over; to literally re-make everything. Because the premise of the first Industrial Revolution of cheap energy is no longer true. Making products with less energy makes companies more competitive. Making buildings that use less energy make them less expensive to operate. And retrofitting homes to use less energy make them more affordable for all our citizens.
We have upon us the next Industrial Revolution, where companies who make products that embody energy efficiency now have a worldwide advantage. Other countries have already stated they will lead the world in this next Industrial Revolution. But we can't let them, because this is our calling, as Americans.
Invent, manufacture, install.
Members of Congress, everything is up for re-invention, and we are just the people to do it.
The last time this happened was the mid 1800s. And we won. We invented it all, made it all, and installed it all.
The world gave us their money, and we gave them quality goods in return. Our companies were the most competitive on the planet. We were the lowest cost producer, and had the highest quality and the most advanced technology.
And we will again, because this should be our destiny. There is no reason why we can't lead the next Industrial Revolution: to create jobs today, tomorrow, and to make our country even stronger for future generations.
As I have said 20 times today. The key to jobs now and in the future is invent, manufacture, install.
And by bringing manufacturing back to America, by helping our companies develop energy efficient processes that make them the most competitive anywhere, by incenting people to move their homes and buildings higher up the ladder of efficiency, by not settling for old technologies and pushing the ones that can save more money, by creating huge market demand for American made products, by not sitting idle as our best inventions move overseas to be made, we can knock this one out of the park.
By doing all these things, we not only create jobs right now, but we will lead the world in new energy and efficiency technologies, create an environment where we become a net exporter again, pay down our debt, and ensure our future.
In fact, ensure our very way of life.
And this brings us full circle to the complete connection between energy efficiency in industry, buildings, homes, transportation and jobs. The two are directly connected as the new economy will demand it. Millions of jobs can be had, and long term economic growth solidified. Who can ask for more than that?
This country is great, and has been for all of my lifetime, my parents' and grandparents' before them. I want it to be even greater for my children and grandchildren.
The opportunity is upon us, right now, to act.
I leave it in your hands to do the right thing.
Thank you.
Kevin Surace is chairman and CEO of Serious Materials. He recently was named 2009 Entrepreneur of the Year by Inc. Magazine.
Empire State Building image CC licensed by Flickr user Tony the Misfit
Sears Tower photo Image CC licensed by Flickr user HAM guy.
All other images courtesy of Serious Materials.