Throwing Money at the Energy Problem Isn’t Enough

Today the U.S. Energy Department announced major funding for 37 cutting-edge energy research projects, from biofuel-producing bacteria to CO2-eating enzymes. The goal, as department secretary Steven Chu put it, is to “spur the next industrial revolution in clean energy technologies.” That’s an inspiring notion — but throwing money at clean-tech is a partial solution at best, no matter how revolutionary the research.

America has always had a love affair with technology, and president Obama is as smitten as Secretary Chu. Obama was in Boston on Friday just a few miles from our offices, touring an MIT clean energy lab and plugging the energy and climate bill now lodged in the Senate. He was clearly dazzled by the innovation he saw — “windows that generate electricity by directing light to solar cells; light-weight, high-power batteries that aren’t built, but are grown…; more efficient lighting systems that rely on nanotechnology” and so on.

But here’s the problem. No technology exists in a vacuum. Consider this: President Obama would like to see a million plug-in hybrids and electric vehicles on the nation’s highways in five years. But though automakers may have the technology and capacity to churn out that many electric cars, who’s going to buy them if there’s nowhere to plug them in? That was a hot topic at a plug-in vehicles conference held in Detroit last week, where “range anxiety” — fear of getting stranded with a dead battery — dominated conversations. Electric cars won’t seriously compete with gas cars until there’s a robust infrastructure of recharging stations as reliable and convenient as gas stations are now. Similarly, biofuel from bacteria won’t power much transport until the systems for large-scale production, refining, and distribution are in place. It’s a classic chicken-and-egg problem. But there is a solution.

Technologies can only flourish as part of a complex system involving interdependent business models, markets, and regulatory environments. In their Harvard Business Review article “How to Jump-Start the Clean-Tech Economy“, Innosight’s Mark Johnson and Josh Suskewicz argue that Edison didn’t just invent a light bulb. He created a coherent commercial system to support it. He designed a technical platform that included generators, meters, and transmission lines; he piloted the project in an ideal test market (lower Manhattan, teeming with enthusiastic early adopters); and he used his clout to get the regulatory support he needed, fighting off the lamplighters’ union, among other things. In short, he imagined the business ecosystem his light bulb would need and set about methodically creating it.

The billions of dollars being funneled into clean-technology development are necessary but not sufficient. Governments and businesses should be thinking as creatively about the infrastructure, business models, and regulatory regimes that clean technologies will need as they are about the cool technologies themselves. “What will it take to transition from a fossil-fuel economy to a clean-tech economy powered by renewable energy?” Johnson and Suskewicz ask. “The key,” they conclude, “is to shift the focus from developing individual technologies to creating whole new systems.”