Technologies for the No Subsidy Imperative

“Capital markets have a unique power to direct resources to the new win-win of profit and impact.”

—Alois Flatz, Co-Founder DowJones Sustainability Index, and Venture Partner, Zouk Capital LLP

COP21 kicked off yesterday in Paris. Adopting a framework that limits CO2 emissions is at the core of the negotiations. If they succeed, we may see a global agreement on climate that brings the 1997 Kyoto Protocol into a post-2020 world, and redeems the disappointing 2009 Copenhagen summit.

Yet no matter how enthusiastic or committed, politicians alone cannot determine the future of Earth’s climate. To deliver, we also need the corresponding solutions. For the energy transition to succeed, investors and governments must back technologies that are able to compete without subsidies once they reach scale. The only way to forward is through science and innovation.

The echo after yesterday’s announcement of the “Breakthrough Energy Coalition” shows that people are intuitively aware of the need to invest in price-competitive new clean energy technologies. The Coalition is a concerted multi-billion dollar program directed at the supply side of clean energy innovation, funded by Bill Gates and (to date) 27 billionaire peers including Jeff Bezos, Richard Branson, Ray Dalio, Chris Hohn, Jack Ma, Hasso Plattner, George Soros, Chris Steyer, and Mark Zuckerberg, as well as twenty national governments. The Coalition aims to invest in clean energy innovations with breakthrough potential in a range of fields where we urgently need progress, namely electricity generation and storage, transportation, industrial use, agriculture and energy efficiency. This with special attention to deployment in developing countries.

In terms of promising pathways for an efficiency revolution in field such as solar photovoltaics, wind energy, and storage, the good news is that scientists and their labs hold exciting things in store. Excellent that developing them with a “no subsidy at scale” mindset is now gaining traction, as discussed around this time last year on CleanTechIQ, reporting on the status of our scouting and review of over 9,000 clean energy startups in the context of the Exergeia project then under way.

Take solar photovoltaics, the energy transition’s staple crop: rectennas can reach microwave range efficiencies in the infrared and optical ranges, converting sunlight to electricity. Nano coating traps sunlight better in solar cells and raises efficiency. Advances in materials sciences and nanotechnology are now enabling manufacturing on a scale that finally allows translating ideas from theoretical physics into practice, such as atomic layer depositioning (ALD), a thin-film deposition technique at nanoscale consisting of the sequential application of a gas phase chemical process.

In wind energy, such advances are enabling progress in horizontal and vertical axis wind turbines. More out-of-the-box technologies such as bladeless turbines, high-altitude winds, or bionic coating as well as coating using nanotechnologies are also worth watching.

Even with relevant progress around the corner in solar and wind, these renewable sources can produce energy only intermittently. That’s why the energy transition needs to surmount a major barrier: energy storage. Energy storage plays a key role to integrate more renewables into the grid. Our way of life requires continuous and flexible supply of energy and reducing energy costs by peak shaving. A breakthrough in batteries is moreover a prime enabler of e-mobility.

Currently, electric vehicles use a large quantity of lithium-ion batteries. These batteries suffer from many drawbacks such as cost, overweight, limited capacity, reliability and risk of fire. This makes them less attractive than standard fossil fuel vehicles. New combinations such as lithium and sulfur hold the potential to dramatically raise batteries’ energy density and lower their cost. In a world where mobility is still largely beholden to the use of fossil fuel, rolling out e-mobility across the board is essential. To scale and become more than entertainment, much cheaper and better batteries are a key ingredient.

Progress in storage compares very unfavorably with advances in semiconducting. Rather than progress on a logarithmic scale in computing power, we are looking at progress on a linear scale in storage. As my new book, “Building the Impact Economy,” explains that needs to change. The need of the hour is a technology capable of effectively maximizing the output, reducing the size and weight of current systems, increasing performance and reducing life cycle costs for batteries—all while improving safety and stability under harsh conditions.

The 2022 goals set by the U.S. Department of Energy with regard to batteries and energy storage provide a useful guideline for identifying such technologies:

  • Reduce the production cost of an electric vehicle (EV) battery to a quarter of its current cost;
  • Halve the size of an electric vehicle battery; and
  • Halve the weight of an electric vehicle battery.

Achieving these goals would result in lowering battery cost from USD 500/kwh to USD 125/kwh; and increase density from 100 Wh/kg to 250 Wh/kg.

As funders of the supply side of clean energy innovation may find out in due course, even unconventional energy technologies have the potential to make a game-changing contribution at some point. Take low-energy nuclear reactions (LENR). LENR is a type of nuclear reaction theorized to occur at near room temperatures, thought to have roughly four orders of magnitude more specific energy and three orders magnitude greater peak power than gasoline. Skeptical scientists have long ridiculed LENR. The argument: the laws of physics as we currently understand them do not permit a LENR device to work.

The jury is not yet in though. Being open-minded may not be so dumb. Let us not forget that immediately before the advent of quantum physics one hundred years ago, Albert Michelson, the first American to receive the Nobel Prize in sciences, argued: “All that is left in physics is to figure out the sixth zero behind the decimal.”

Once quantum physics burst onto the scene, we learned that this assessment was wrong.

In the meantime, the good news is that we do not need “rocket science” breakthroughs on all fronts. Energy efficiency is a lot less sexy. It is also much easier to implement. In the United States, homes built in the 2000s consume a quarter less energy per square foot than those built before the oil embargo in the early seventies. Retrofits of older homes can also yield handsome efficiency gains: compared to a similar home in 1980, a typical pre-1970 house used 30 percent less energy in 2009. The power of the digital revolution and the Internet of Things are taking the efficient production, transmission and use of energy to a whole other level.

And yes, there is work to do. Today, 75 percent of the EU’s housing stock is energy inefficient. Service and residential buildings account for 40 percent of energy consumption in Europe, ahead of transportation and the industrial sector. In a country like Bangladesh, home to 160 million people, nine out of ten buildings do not even comply with the building code—let alone are they compatible with any “smart city” strategy.

To get it right, we must step up R&D. Today’s economy still benefits from inventions made more than fifty years ago such as the transistor or nanotechnology. We now need the next hardware breakthroughs. The next blog post in this series explores how to give the scientists a hand who are coming up with the technologies that enable our species’ long-term viability.

Author Bio:

Maximilian Martin is the Founder and CEO of Impact Economy. His investment and advisory work has helped define the trajectory of market-based solutions and the impact revolution in finance, business and philanthropy. Dr. Martin created Europe’s first global philanthropic services and impact investing department for UBS and the UBS Philanthropy Forum. In 2013, he wrote the primer on impact investing “Status of the Social Impact Investing Market” for the UK G8 policy makers’ conference. His new book “Building the Impact Economy” shows how to reconcile responsibility with opportunity and seize the multitrillion-dollar opportunity in the wings.

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