So I'm going to start today by telling
you three things I bet you already know
and one thing that you might not. The
first is that we're facing a massive
global climate and energy challenge. In
order to avoid the most
catastrophic results of climate change,
we need to reduce our emissions to a
quarter of what they are today. But
instead we're on track to double them.
This is an enormous gap in a really big
problem.
The second thing is that innovation is
going to be critical for solving this
problem.
Bill Gates said we need an energy
miracle and he's completely right.
we probably need several. The third is
that it doesn't matter how good an
innovation is or how promising and
energy miracle is if it doesn't make it
out into the commercial marketplace into
the hands of consumers and businesses.
It's not going to make a difference. It
won't make a dent in that top line
problem that we care about. The fourth
thing is that that process for bringing
something from innovation to the
commercial market, the commercialization
pathway as I'll call it, is not working for
us. It's broken for energy.
So what do I mean by that let's start by
looking at the commercialization pathway
as you currently think about it, whether
you realize it or not. It's how I think
about it is how most of us do and it
starts with a great idea.
So an innovator has a great idea and
that idea is so good and so promising
that someone gives them money. And the
innovator uses that money to develop
the product, pay for materials and
resources and people and office space
month after month to develop this
product or something that's commercially
ready and ready for market and someone
buys it. Now
yes I've made this sound simple but the
thing is that this is how the process
works in many cases. It works for some
industries. It works for software which
is part of why it's shaped how we all
think about it. But it doesn't work for
energy and I want to show you why.
So let's start with this pathway as we
just walked through it and let's look at
what breaks down for clean energy. So
starting at the end what we've got is an
incumbent established industry that's
not especially receptive to disruptive
new innovations. This is a legacy sector
with established supply
chains established systems that is not
signaling a desire to buy new products.
Products being new ways of producing and
using energy. So let's break down number
one - it's not clear there's a customer
here that's ready to take these new
products on. Let's put that aside for a
moment and look at what happens when
some capital does go into a new concept
or promising idea. Now in the clean
energy sector many of the disruptive
innovations that we need are complex
physical hardware innovations that are
really expensive to build. We're talking
about next-generation wind turbines and
grid-scale energy storage and biofuel
production at scale. This is not the
stuff of coders hacking away in the
shared workspace. This needs capital
equipment. It needs testing facilities,
demonstration sites, and manufacturing lines.
This is hard and it's expensive. So let's
say that a great idea received the money.
It's not actually going to get to the
point where it can prove itself out.
Let's break down number two. The money is
not going to go very far.
Now look at this from the perspective of
a capital provider and investor.They
look down this pathway and see two things -
my money is not going to go very far and
there's not necessarily customer there
even if something works. So why exactly
would I invest here. I don't think I will.
I think I'm not going to get a good
return there. I'll go invest in some
software app instead. And so let's break
down number three is that the money
isn't going in because of breakdowns one
and two.
So now you can see this is a pretty
flawed pathway but it's actually even
worse than this. Because now I want you
to take the perspective of an innovator
at the front end and they're looking
down this pathway and they see a string
of red lights before they're even out of
the gate so they think I'm not gonna
launch this new energy future i'm going
to take a different turn instead. And
what we see is a negative feedback loop
that results from all these prior
breakdowns that diminishes the incoming
pipeline of new ideas and further
weakens this whole system. Now if we were
talking about the future of the planet,
this might be okay. If we were talking
about faster computers or more accurate
trades, things like this, all good things;
this will be alright. You would see slow
progress you
a few things trickle through and we
would make some progress. But the fact is
we are talking about the future of the
planet and this system is really
woefully inadequate for the enormity of
the challenge that we face over the next
couple of decades powering the entire
planet sustainably. So what are we going
to do?
Can we fix these breakdowns on the
pathway or could we even reimagine what
this pathway looks like? The form that it
takes to speed innovations to market.
Well we think we can and we can learn a
few things from other industries. Let's
look at pharma. So the pharmaceutical
industry is a 400 billion dollar
industry in the U.S. today. Back in
the nineties it looked not so different
from how cleantech looks today. And it's
developed this robust innovation
structure that has supported this growth
What has pharma gotten right and what can
we learn. I'm going to list four things first
you've got established industry that
actually welcomes disruptive innovations.
So most pharma disruptive innovations
that make it to market do so through a
large pharma company even if they
started attending university or at a
start-up. That's the pathway to market
second there are very clear consistent
transparent checkpoints along the way
during a technology development process.
These are set forth by the FDA and they are
embraced by the entire industry as the
way to determine if an individual
solution should be discontinued or
requires more resources. And this is a
way to fail fast or to quickly identify
with some capital efficiency successful
promising ideas. So these markers
actually become risk benchmarks for
incoming capital. Third there's a whole
innovation infrastructure. A set of
organizations that collectively exist
their entire business is to support
these technology developers and
evaluating whether or not individual
solutions should get to the next
checkpoint or whether they fail and the
resources should be spent elsewhere. So
this is essentially an entire shared
infrastructure that individual
technology developers can tap into and
not have to develop all on there own.
So stack these three things together -
an industry landing pad and clear
checkpoints and a shared infrastructure
and you can see why capital flows into
the sector. Even though it faces some of
the same challenges that we see in
energy like the fact that it's really
expensive to scale and it takes a long
time to develop these products. Now stack
all those four things together and you
can see why the pharma industry has this
robust innovation system with
innovations flowing in and receiving
capital - getting validated or not - but
failing fast if not. Getting picked up by
industry if they look promising and
making their way out into the world
where they can make a difference in
people's lives.
So what does any of this mean for clean
energy. No, the analogy is not perfect
but we think we can learn something.
What like this look like? Let's start by
looking at one of the ways that the
players in the system in this pathway
could work together differently?
Imagine a world where industry connects
with disruptive innovators early on. It
didn't have to be the first movers in
industry those who recognize that if
they gain an edge in the clean energy
economy they're going to be winners.
So the industry partners they say to
these innovators, if your solution works
if this can work for me - I'm in. I'll be
your customer or I'll be your supplier
I'll be your partner. So that industry
partner is providing a market signal and
they're providing a checkpoint. Now in
that world you'd start to see capital flow
in a way that we're not seeing it float
today because there'd be a market signal.
There be a way to determine success
versus failure. Now an investor still
don't know if an individual solution is
going to work or not but if it works
there's a pathway to success. Now imagine
that these innovators who are building
really hard physical products that costs
a lot to build, they have access to
shared resources they have access to
labs and testing facilities and
demonstration sites and Industry test
beds and all the rest so that it's
actually less expensive to build these
products in the first place. So that
both failure and success can be
identified more quickly.
What does that look like now from the
perspective of the capital providers? Now
not only is there market signal and a
checkpoint these innovators now have
access to these shared resources so the
money can go further and you would
expect more capital providers to come in
and support perhaps not just the
innovators but this entire support
system that's growing around them.
Let's take a look at this. In this
environment an innovator is actually
more likely to launch a disruptive new
solution in the first place.
There's a positive feedback loop that
increases the flow of upstream new ideas
and strengthens these conditions further.
So looking at this it's not linear right
it's complex and its interconnected.
What I want you to take away from these
15 minutes if nothing else is that if we
have a shot at solving the climate
crisis, we have to reimagine this pathway
to market. We have to build a better way
and it's not going to look like that
it's going to look something more like
this. And this is what we think it's
possible to build and this is what we're
working to build. Its a robust and
efficient high-functioning
interconnected system of stakeholders
and resources that is collectively
working to bring disruptive clean energy
technologies to market. I work on the
tech market team at EERE which is the
world's largest funder of clean energy
innovation. This is our vision and with
it we're helping the solutions reach the
market have an impact and change the
world through our initiatives we're
imagining all these elements work
together. Our programs are doing things
like bringing small businesses and
entrepreneurs into national shared
facilities so that they can build their
products cost effectively and
prepare them for industry partnerships
and investment. We're putting
National Lab researchers in connection
with the marketplace to test the
commercial potential of their ideas and
better prepare them for capital
investment. But this is just the tip of
the iceberg and there's a lot more we
can do.
It's going to take new ways of doing
business to pull this off. It's going to
take new mechanisms and new models for
getting these partners
to work together differently. It's
going to require government investment
and private sector involvement and a
shared common vision of what we can
accomplish.
We're going to need risk-takers and
first movers. It's going to take all of
these elements firing together to solve
the global climate and energy challenge
but this is possible and we need your
help in building it. Thanks.