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Climate for Innovation

by

Lynn Scarlett

Co-Chief External Affairs Officer, The Nature Conservancy

November 2015

Example of a solar installation in Las Vegas, doubling as a shade provider at the Las Vegas Springs Preserve. Photo © Dave Lauridsen/TNC
Example of a solar installation in Las Vegas, doubling as a shade provider at the Las Vegas Springs Preserve. Photo © Dave Lauridsen/TNC

Spurring Innovation to Yield Jobs and Lower Carbon Emissions

Call me “old school” but I believe the true titan of American technology innovation comes not from this digital age. Instead, hands down, it’s Thomas A. Edison. “The Wizard of Menlo Park” held over 1,000 U.S. patents, including the electric light bulb, the phonograph, the fluoroscope and moving pictures. Edison was successful as an inventor and a businessman, successfully monetizing a good deal of what he pioneered. He is the father of the electric power industry, creating the first investor owned electric utility, the Edison Illuminating Company. “To have a great idea,” Edison would say, “have a lot of them.” Even today, we recognize what Edison knew—that often, success is a matter of following all the leads, pursuing all the ideas, and seeing which ones really work.

America’s greatness resides in no small part in its ability to meet big challenges with ingenuity and application of market forces. No one disputes that we are at a critical moment in the evolution of America’s energy infrastructure. We have the challenge and the opportunity right here, right now, to reinvent how America fuels, generates, transports and uses its electric power.

Harnessing the Power of Markets for Success

Market forces drive much of this innovation, but public policies matter, too. Economist Lynne Kiesling points to electricity regulations. At their debut in the early 20th century, these regulations were not focused on environmental impacts of the power system. And they “embed and rigidify old technologies and old business models.” Legal entry barriers, rate structures and bureaucratic procedures all inhibit innovations that would benefit consumers and the environment.

New York and other states are looking at how to overhaul their regulations to help make the electricity marketplace look more like what Kiesling and others refer to as the “permissionless innovation” of the digital marketplace. Rooftop solar energy, automated appliance responses to electricity price changes and retail bundling of home energy management—these and other unforeseen innovations could bring us cleaner and more efficient energy use.

Despite its critics, architects of the new Clean Power Plan rule also strived to create a context for innovation. Rather than go the oft-used route of requiring businesses to adopt a government-mandated technology to limit emissions, the EPA’s proposed rule uses performance-based standards for carbon emissions. This gives states and industries the ability to explore the best ways to control carbon in their particular circumstances and deploy their own mix of approaches and technologies to reach those goals. This flexibility is why many businesses big and small have voiced support for the rule. It helps advance a “climate of innovation” around reducing greenhouse gas emissions.

Aerial photogaph showing a gas well site (pad) in front of a new wind farm being constructed on a ridge above the Marcellus Shale formation in north-eastern Pennsylvania. Photo © Mark Godfrey/TNC
Aerial photogaph showing a gas well site (pad) in front of a new wind farm being constructed on a ridge above the Marcellus Shale formation in north-eastern Pennsylvania. Photo © Mark Godfrey/TNC

Others are recommending more market-based incentives. Libertarian author Jerry Taylor of the Niskanen Institute, for instance, makes a case for scrapping the Plan and replacing it with a national (broadly applied) carbon tax that accounts for the costs carbon emissions present to our health and environment. Some states, like California and those in the northeast, have embraced a different sort of “carbon pricing” in the form of a “cap-and-trade” system. In the Northeast, the Regional Greenhouse Gas Initiative has promoted energy-efficiency measures, helping consumers save $460 million on energy bills and creating more than 14,000 new jobs in the past three years.

Many states have developed policies that incentivize innovation in solar and wind energy technology. Research by the Pew Charitable Trusts in January of this year showed that Ohio’s renewable energy goal attracted $1.3 billion in private clean energy investment from 2009 to 2013, with almost three times that predicted over the following decade (investment that is now uncertain because the state legislature placed a moratorium on implementing the goal). Financial innovations can also make a difference. A newly announced “property-assessed clean energy” program, for example, provides innovative homeowner financing for energy efficiency and renewable energy investments.

The Climate of Innovation

One report on a startup company in Cambridge, Massachusetts, offers a great example of the possibilities of new technologies. DropWise Technologies Corp. is developing a coating that can be applied to steam turbines in gas, coal and other power-generating plants. The coating makes the steam condensation process far more efficient, letting the plants burn much less fuel to generate the same amount of power. The developers at DropWise think that if the technology catches on, it has the potential to significantly reduce carbon emissions, comparable even to widespread adoption of renewable energy. Dozens of companies like Dropwise are poised to help the electric power industry innovate its way to cleaner energy.

Such advances add to the growing mix of ways existing power sources are becoming more energy efficient and increasing the economic viability of a variety of energy sources. People are also looking at better ways to store energy through smart batteries and deliver power more efficiently through the grid, like they’re doing at the Electric Reliability Council of Texas.

Precisely because of these innovations, this is an exciting time for business, according to the Advanced Energy Economy Institute. This national association of business leaders thinks that the Clean Power Plan, with its flexibility, “will spark an industry response that will make available a wide array of cost-effective compliance options” and “will drive further investment and deployment of advanced energy technologies and services, delivering emission reductions while also driving market growth, technology improvement and associated benefits ranging from grid modernization to job growth.”

The Cost of Inaction

Inaction on climate change is projected to be costly, as reported in a recent study by banking giant Citigroup. In modeling the effects on global gross domestic product from climate change in both an "action" scenario, where carbon emissions are curtailed and an "inaction" scenario, where emissions continued on their current trajectory unchanged, Citigroup found we would be losing $44 trillion in global GDP by 2060. The other path, Citi found, reducing carbon, does have costs, but these costs are dwarfed by those associated with inaction.

The path of action offers opportunities for capital investment that institutions like Citi are banking on. Citi recently announced it is investing $100 billion over the next 10 years to finance activities that reduce the impacts of climate change and create environmental solutions that benefit people and communities. Citi’s previous $50 billion goal was announced in 2007 and was met three years early in 2013.

For conservation organizations like The Nature Conservancy, who see climate change as a fundamental threat to our conservation mission and the communities in which we work, these innovations in the energy marketplace are exciting and critical. We will need a lot of ideas, and a climate of innovation, to protect the lands and waters on which all life depends.


Originally Posted on Conservancy Talk

November 18, 2015