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WILLIAM BONVILLIAN: Let me quick
do a wrap-up of where we are,

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just so you remember
our context.

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00:00:27,370 --> 00:00:29,080
Class one was really
all about growth.

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Economics, as you
all know, when we

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talked about the contributions
that Solow and Romer made,

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and they really forced us to
look at what we could call

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two direct innovation factors.

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What Solow called
technological-related

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innovation we can
sort of translate that

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as R&D. And Romer, the talent
base human capital engagement

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research was his key term.

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We read Dale Jorgensen,
and Jorgensen showed us

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that technology-based
innovation really

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was the driving causative
factor in the great growth

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spurt of the 1990s.

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That was the innovation wave
around the IT revolution,

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as you remember.

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And we talked about how there
were direct innovation factors.

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So Romer contributed those,
arguably, and others.

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But there are also
many indirect factors.

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All right?

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So less critical
factors, but this

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is a complex ecosystem
of innovation.

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Richard Nelson gives us a third
innovation factor, looking

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at innovation as a system and
the organizational elements

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within it and the connectedness
of the different actors

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and the strength of
the different actors,

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so that gives us a systems'
way of evaluating an innovation

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system, whether it's national
or regional or local.

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Nelson gives us a perspective
on how to look at that system.

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Atkinson and others contributed
on innovation wave theory.

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00:02:00,580 --> 00:02:02,560
The way in which
economies grow is

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that they bring these new
innovation waves on and scale

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them up over an
extended period of time.

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They start very gradually,
finally reach a point

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where they can scale quickly.

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There's always a bust, then
they scale more gradually.

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That's kind of the stages
we've talked about.

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We're now with
the IT revolution.

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Charles Schulz
taught us to kind of

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be aware of industrial policy.

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And we talked a lot about
the government role here,

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but that's a cautionary tale
of some problematic aspects

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of a governmental role.

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Classes 3 and 4 were really
about advanced manufacturing,

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which we did as our
first big case study.

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Obviously we'll have another
big case study today.

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We had health last week.

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Class 5 was on
innovation organization,

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and we talked about
the different models

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that kind of govern the ideology
of innovation in this country.

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The associationalist
model, which

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we could call the public-private
partnership kind of model.

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The conservative model, which
is governmental intervention.

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Government should stay
away from intervention,

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including into the
innovation system

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except at the most
basic kind of levels

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versus a national security model
which justifies intervention

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at any stage if the need is
related to national security.

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And these debates go on.

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There's a couple
of other models,

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but those are the
ones that really

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represent the core
debates that still go on.

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We talked about the importance
of looking at innovation

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from both the institutional
and the personal level.

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So people innovate,
institutions don't.

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You need to understand how
the institutions interact.

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But in the end, people
own particular innovations

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and bring them about.

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So you've got to
understand innovation

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at that personal level, as well.

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We talked about Donald
Stokes and a core issue

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in the US system, its
disconnected model.

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The fact that we tend to
focus on early stage research

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and have less focus
on the implementation

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stages further along.

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And that creates a significant
tech transition problem

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in the US system.

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Class 6 was about that how
to get across this, quote,

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"Valley of Death," which
has been the major policy

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preoccupation of US
science and technology

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policy for the
last say 25 years.

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And in contrast we read
Vernon Ruttan, another growth

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economist, who taught
us that, by the way,

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there's a whole parallel
system out there,

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there's a parallel universe
in the way in which the US R&D

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systems are organized.

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There's a highly connected
defense information system

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that's very different than
the somewhat disconnected

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civilian side R&D system.

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Class 7 was great group theory,
what does innovation look

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like at the face to face level?

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Innovation, again, is people,
it's not institutions.

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And what are the
rules sets that tend

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to govern the way in which
teams and groups of people

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working on complex innovations.

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How they come together?

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How do they assemble?

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How do they organize?

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What are their rules?

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So that's all about a
third direct innovation

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factor, innovation organization,
at both face to face

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and institutional levels.

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Class 8 was around DARPA
as a very different kind

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of model that attempts to
do both a connected model

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and innovation through
a connected model

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at the institutional
level, but it also

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operates in creating great
groups in a very conscious kind

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of way.

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And we explored the whole idea--

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revolution role
that DARPA played.

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Class 9 last week was
really about the challenges

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in the health innovation system.

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It's a early stage research,
basic research focused system.

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It's a quite disconnected model,
big organizational challenges

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through the 27
different institutes

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and centers at the National
Institutes of Health.

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Getting cross-cutting science
going between those institutes

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is hard.

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Yet we're now at a stage where a
new revolution is coming along,

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which some termed the
convergence revolution.

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That's going to mandate much
more cross-cutting science,

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and yet we've got an
institutional organizational

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problem that's not
adapted to handling

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the kind of next generation
breakthrough territories.

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And now, energy.

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So we're going to really bring
to bear here the legacy sector

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analysis model that we've been
touching on at several points.

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But today it really
comes into focus.

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Obviously, we touched on it last
week in the context of the NIH,

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but it really
comes to bear here.

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And the issue of innovating
in complex established sectors

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is a big problem for the US.

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It's a problem for everybody,
it's a particular problem here.

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If we can get around
and tackle this problem

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we could address
a lot of issues.

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Since 80% of the economy
is in these legacy sectors,

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we limit our growth
rate by essentially

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doing a new frontier kind of
innovation model of looking

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at standing up the
next big thing,

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we lose track of what
we've done in the past,

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we tend to focus our innovation
on standing up new territories.

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That affects our
growth rate, right?

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So the whole IT sector
in the United States,

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as huge as it is, is still
measured as only about 4.6%

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of the US economy.

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That includes copper
wire telephones

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and hard bound
books, too, right?

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In that information
technology sector.

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It's a challenging
issue of how to bring

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innovation of the sectors.

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If we could figure out
a better way to do it,

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if innovation is the dominant
causative factor of growth,

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then we start to think
about affecting our growth

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rate in a new kind of way.

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So that's why this
case study, I think,

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is particularly significant, not
only for energy itself, which

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is obviously very important, but
for its implications of how do

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we innovate in legacy sectors.

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So we'll start with
Socolow and Pacala.

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And who's got
Socolow and Pacala?

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Matthew?

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All right.

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I'll just briefly
summarize their work.

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As you know, both
Princeton experts,

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they helped give us a
conceptual framework

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for thinking about the challenge
coming up in energy technology.

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And the community
have been doing

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a lot of fairly sloppy
thinking about-- everybody

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had their favorite silver
bullet that was going

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to solve all problems, right?

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And Socolow and Pacala got us
thinking that, gee, there's

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not going to be a
single silver bullet,

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there's going to be a
whole series of things that

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need to be undertaken if we're
going to tackle the energy

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technology challenge.

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And so they developed
something which is now

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widely known as wedges theory.

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And when they were writing--

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if we just stabilized
CO2 and greenhouse gases,

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at the time they were writing,
that would have been enough.

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We now know that we've got
to go much more deeply.

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So it complicates this
wedges story significantly.

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But when they were
writing, as you can see,

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their assumption was
that would be the growth

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curve of greenhouse
gases and we could simply

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stabilize it by introducing
these wedges, that

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could tackle the problem.

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When they put this
out in 2004, it really

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gave everyone a new
kind of picture,

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a new kind of
intellectual framework

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to help think about
this big energy problem.

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They picked 15 different
energy initiatives,

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they argued that if you
did any seven of them

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you could grow them in a
reasonable time frame into--

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that multi decade time frame
into large enough wedges

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of energy supply that you
could bring emissions down

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over a five-decade period
to a stabilized 2005.

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So we now we've got an
80% reduction, not just

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stabilization.

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But the concept
is still with us.

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Now, some of these
wedges were clearly

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within the range of adoption,
and with a concerted effort

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they could be scaled up
in a timely kind of way.

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Others were just plain
really hard to even think

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about implementing.

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00:11:01,230 --> 00:11:06,810
For example, they called
for massive deforestation.

215
00:11:06,810 --> 00:11:09,730
A big challenge in countries
where that would need to occur.

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00:11:09,730 --> 00:11:12,630
They called for a 50%
reduction in driving

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00:11:12,630 --> 00:11:15,010
by 2 billion vehicles.

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00:11:15,010 --> 00:11:15,510
Yeah.

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00:11:15,510 --> 00:11:18,430
Good luck.

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00:11:18,430 --> 00:11:21,420
You know, massive adoption
of conservation tillage.

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00:11:21,420 --> 00:11:23,850
I mean, all these are
conceivable, right?

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00:11:23,850 --> 00:11:26,890
But some are harder than others.

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And they take not only
changes in government

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to write to policy and
technology advance,

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they require very significant
behavioral challenges,

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which is particularly
difficult to impose.

227
00:11:38,850 --> 00:11:43,560
And others, like carbon capture
and sequestration technology,

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are still, to this day, a
considerable time period away

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00:11:48,240 --> 00:11:50,400
from practical implementation.

230
00:11:50,400 --> 00:11:53,550
We don't have the
right technologies yet.

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And then there's a whole
period of development

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00:11:55,872 --> 00:11:57,330
and demonstration
that really needs

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00:11:57,330 --> 00:12:00,640
to be ongoing
before we can really

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00:12:00,640 --> 00:12:02,370
implement those approaches.

235
00:12:02,370 --> 00:12:04,870
We just don't know what the
best practices are, particularly

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00:12:04,870 --> 00:12:06,790
in the sequestration side.

237
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So that's some of
the challenges here.

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Interestingly, Socolow
and Pacala's work

239
00:12:14,410 --> 00:12:18,490
got taken up by the contending
communities battling

240
00:12:18,490 --> 00:12:22,630
over climate change
at that time.

241
00:12:22,630 --> 00:12:24,760
So Socolow and
Pacala, again, they're

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00:12:24,760 --> 00:12:27,160
only battling for
a 50% reduction--

243
00:12:27,160 --> 00:12:30,850
I mean, excuse me, they're
battling for stabilization, not

244
00:12:30,850 --> 00:12:33,580
a 50% or 80% reduction.

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00:12:33,580 --> 00:12:36,040
They argued that we
could get their wedges

246
00:12:36,040 --> 00:12:38,680
without doing a lot of
breakthrough work, right?

247
00:12:38,680 --> 00:12:40,870
That the solutions were at hand.

248
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So the environmental community
was facing a big battle

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with industry.

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00:12:45,340 --> 00:12:49,880
And the industry was saying,
sure, we'll do climate change,

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00:12:49,880 --> 00:12:52,240
see in 20 years we're
going to do some R&D

252
00:12:52,240 --> 00:12:55,330
and we should have it done
within at least 20-year period,

253
00:12:55,330 --> 00:12:56,500
no problem.

254
00:12:56,500 --> 00:12:58,210
So that was obviously
unacceptable

255
00:12:58,210 --> 00:13:00,070
to the environmental community.

256
00:13:00,070 --> 00:13:03,070
They used Socolow and Pacala
to argue, wait a minute,

257
00:13:03,070 --> 00:13:05,950
we don't need to do these
fundamental breakthroughs,

258
00:13:05,950 --> 00:13:08,890
the solutions are at hand.

259
00:13:08,890 --> 00:13:12,670
So in effect it
pulled both sides off

260
00:13:12,670 --> 00:13:17,110
of technology
development, right?

261
00:13:17,110 --> 00:13:19,090
In a period of time
where we actually really

262
00:13:19,090 --> 00:13:21,010
needed to do a lot of
technology development

263
00:13:21,010 --> 00:13:22,843
because I would argue
with you that if we're

264
00:13:22,843 --> 00:13:25,870
going to get to the
levels of CO2 reductions

265
00:13:25,870 --> 00:13:30,270
that we need to reach, there
is a lot of technology advance

266
00:13:30,270 --> 00:13:31,690
that needs to go on.

267
00:13:31,690 --> 00:13:34,420
And this kind of pulled
the debate out of that.

268
00:13:34,420 --> 00:13:38,950
It's not their fault, that's
not what they intended at all,

269
00:13:38,950 --> 00:13:46,487
but it created a kind
of positive agenda

270
00:13:46,487 --> 00:13:48,070
for the environmental
committee that I

271
00:13:48,070 --> 00:13:53,500
think in the end was misleading
to them as well as to others.

272
00:13:53,500 --> 00:13:55,630
So that was the dilemma
in what they proposed,

273
00:13:55,630 --> 00:13:57,970
but nonetheless
this wedges concept

274
00:13:57,970 --> 00:14:01,800
presents a picture of how we're
going to go after this problem.

275
00:14:01,800 --> 00:14:04,090
That remains
extremely important.

276
00:14:04,090 --> 00:14:07,330
Matt, it's all yours.

277
00:14:07,330 --> 00:14:09,880
MATT: Well, the first thing
I wanted to talk about

278
00:14:09,880 --> 00:14:14,890
was Socolow and Pacala seem
to be writing to the world.

279
00:14:14,890 --> 00:14:17,080
They talk about
global emissions.

280
00:14:17,080 --> 00:14:20,050
And here they are publishing
in Scientific American

281
00:14:20,050 --> 00:14:23,350
to popular science
readers in the US.

282
00:14:23,350 --> 00:14:25,780
I think a few people
also caught on this.

283
00:14:25,780 --> 00:14:28,960
Somewhere in the article they
mentioned that richer economies

284
00:14:28,960 --> 00:14:32,530
tend to become less
energy-dependent because you're

285
00:14:32,530 --> 00:14:35,320
not making steel or
doing these highly

286
00:14:35,320 --> 00:14:37,900
energy-intensive activities.

287
00:14:37,900 --> 00:14:41,680
So I think it's important to
talk about whose responsibility

288
00:14:41,680 --> 00:14:45,760
is it to pick up these
wedges, and is there a way

289
00:14:45,760 --> 00:14:50,440
to optimize it so that we
don't keep developing economies

290
00:14:50,440 --> 00:14:52,777
from developing in the process.

291
00:14:57,090 --> 00:14:59,670
AUDIENCE: Actually, I
kind of disagree at least

292
00:14:59,670 --> 00:15:03,570
with the notion that the more
developed economies don't

293
00:15:03,570 --> 00:15:05,320
use energy as much because--

294
00:15:05,320 --> 00:15:06,780
or at least that
they don't pollute

295
00:15:06,780 --> 00:15:08,613
as much, because at
least the United States,

296
00:15:08,613 --> 00:15:09,720
they pollute-- what is it?

297
00:15:09,720 --> 00:15:10,980
The second most in the world?

298
00:15:10,980 --> 00:15:11,640
WILLIAM BONVILLIAN: Yes.

299
00:15:11,640 --> 00:15:12,265
AUDIENCE: Yeah.

300
00:15:12,265 --> 00:15:14,300
We have like 25% of
the world's pollution,

301
00:15:14,300 --> 00:15:17,410
it's just here, even though
we're extremely developed.

302
00:15:17,410 --> 00:15:23,220
So I don't know if we can put a
lot of the blame on developing

303
00:15:23,220 --> 00:15:23,890
countries.

304
00:15:23,890 --> 00:15:26,015
It's really the pot calling
the kettle black there.

305
00:15:29,490 --> 00:15:31,240
MATT: On the other
hand, I guess pollution

306
00:15:31,240 --> 00:15:38,260
is something we can manage and
reduce without having that take

307
00:15:38,260 --> 00:15:41,620
as much of a toll on our economy
as in developing countries

308
00:15:41,620 --> 00:15:43,810
to start producing steel, right?

309
00:15:43,810 --> 00:15:45,790
AUDIENCE: Well, we
haven't done that yet.

310
00:15:45,790 --> 00:15:46,780
AUDIENCE: I think
that's interesting.

311
00:15:46,780 --> 00:15:49,270
I think there's the potential
for more developed countries

312
00:15:49,270 --> 00:15:52,210
to take a smarter approach
to how they manufacture,

313
00:15:52,210 --> 00:15:53,570
but I really like that sentence.

314
00:15:53,570 --> 00:15:57,070
It really shook me up
because almost it's

315
00:15:57,070 --> 00:15:59,500
like it implied the wealthier
that you get as a country

316
00:15:59,500 --> 00:16:01,750
the less you need to
manufacture produce.

317
00:16:01,750 --> 00:16:03,730
I don't know if I'm
really misunderstanding

318
00:16:03,730 --> 00:16:06,825
what that point was, but--

319
00:16:06,825 --> 00:16:08,950
AUDIENCE: I think the point
that you're referencing

320
00:16:08,950 --> 00:16:12,550
is on page 56 of this report.

321
00:16:12,550 --> 00:16:14,770
And they talk about
how energy or how

322
00:16:14,770 --> 00:16:18,100
manufacturers are increasingly
improving their energy

323
00:16:18,100 --> 00:16:19,000
efficiency.

324
00:16:19,000 --> 00:16:21,940
They don't necessarily say
that the impetus is no longer

325
00:16:21,940 --> 00:16:25,750
on the developing world or
that richer countries have

326
00:16:25,750 --> 00:16:28,510
to take on energy
reductions, but specifically

327
00:16:28,510 --> 00:16:30,520
that energy efficiency
is improving,

328
00:16:30,520 --> 00:16:34,030
and thus there is hope at
least in developed countries

329
00:16:34,030 --> 00:16:38,140
to take up some of that,
I guess an increase

330
00:16:38,140 --> 00:16:41,370
in the developing world in
manufacturing, specifically.

331
00:16:43,993 --> 00:16:46,160
AUDIENCE: I think the point
that they're referencing

332
00:16:46,160 --> 00:16:47,630
specifically was
a bit earlier when

333
00:16:47,630 --> 00:16:53,090
they say that heavy industries
like steel and manufacturing

334
00:16:53,090 --> 00:16:55,160
tend to move out of the
more developed countries

335
00:16:55,160 --> 00:16:56,930
to less developed countries.

336
00:16:56,930 --> 00:16:59,100
And my whole confusion
with that was

337
00:16:59,100 --> 00:17:02,450
that it seems like they're
saying that that was going

338
00:17:02,450 --> 00:17:06,619
to reduce emissions,
which, yes, it will reduce

339
00:17:06,619 --> 00:17:09,260
the emissions in the US
and developed countries,

340
00:17:09,260 --> 00:17:11,450
but it's just like moving
them to a new place.

341
00:17:11,450 --> 00:17:14,599
So I was confused as to
why that is something

342
00:17:14,599 --> 00:17:17,200
that they're commenting on
at all in this discussion

343
00:17:17,200 --> 00:17:18,950
because it's just
moving emissions around,

344
00:17:18,950 --> 00:17:20,119
it's not changing them.

345
00:17:25,300 --> 00:17:27,339
To the front page 52.

346
00:17:27,339 --> 00:17:27,839
Yeah.

347
00:17:27,839 --> 00:17:28,339
Sorry.

348
00:17:28,339 --> 00:17:29,958
That's on page 52, right?

349
00:17:29,958 --> 00:17:31,750
Two long-term trends
are surely improving--

350
00:17:31,750 --> 00:17:32,620
WILLIAM BONVILLIAN: I'm
really impressed, Steph.

351
00:17:32,620 --> 00:17:33,120
That's--

352
00:17:33,120 --> 00:17:33,732
[LAUGHTER]

353
00:17:33,732 --> 00:17:35,440
AUDIENCE: First, as
societies get richer,

354
00:17:35,440 --> 00:17:37,330
the services sector
grows in importance

355
00:17:37,330 --> 00:17:39,250
relative to
energy-intensive activities

356
00:17:39,250 --> 00:17:41,170
such as steel production.

357
00:17:41,170 --> 00:17:43,068
So second deeply
ingrained in the pattern

358
00:17:43,068 --> 00:17:44,860
of technology evolution
is the substitution

359
00:17:44,860 --> 00:17:47,380
of cleverness for energy, which
is their point about energy

360
00:17:47,380 --> 00:17:48,798
efficiency.

361
00:17:48,798 --> 00:17:49,840
WILLIAM BONVILLIAN: Yeah.

362
00:17:49,840 --> 00:17:52,840
And as we know from the
manufacturing case study

363
00:17:52,840 --> 00:17:57,220
earlier this semester,
that turned out

364
00:17:57,220 --> 00:18:00,160
to be a problematic
view, largely

365
00:18:00,160 --> 00:18:02,320
from economists about
the nature and importance

366
00:18:02,320 --> 00:18:05,170
of significant
production systems

367
00:18:05,170 --> 00:18:09,350
in developed economies, as well
as less developed economies.

368
00:18:09,350 --> 00:18:11,800
But it is a widespread
set of assumptions

369
00:18:11,800 --> 00:18:14,410
that economists were
pressing at the time

370
00:18:14,410 --> 00:18:16,780
that as though there
was a natural evolution

371
00:18:16,780 --> 00:18:21,880
that an economy would naturally
evolve into more service sector

372
00:18:21,880 --> 00:18:27,320
activities and forego the
need for a production cycle.

373
00:18:27,320 --> 00:18:30,490
The problem was that that
evolution, which certainly

374
00:18:30,490 --> 00:18:33,460
took place the United
States, did not necessarily

375
00:18:33,460 --> 00:18:35,590
forego the need for a
strong production sector

376
00:18:35,590 --> 00:18:40,570
as well, as we discussed back
in classes four and five,

377
00:18:40,570 --> 00:18:44,290
because it turns out that
the production sector is

378
00:18:44,290 --> 00:18:46,660
so deeply tied to your
innovation system itself.

379
00:18:49,690 --> 00:18:50,902
Sorry for the recap.

380
00:18:50,902 --> 00:18:51,610
MATT: Well, yeah.

381
00:18:51,610 --> 00:18:53,860
I was actually on
other question--

382
00:18:53,860 --> 00:18:57,250
I think Sophia asked it--

383
00:18:57,250 --> 00:19:01,210
was, now that kind of
thinking about this changing,

384
00:19:01,210 --> 00:19:04,780
and maybe we don't want
just services focused

385
00:19:04,780 --> 00:19:10,630
by sector or industry, and
we bring back manufacturing,

386
00:19:10,630 --> 00:19:14,650
does that mess up kind of
what Socolow and Pacala are

387
00:19:14,650 --> 00:19:17,968
presenting here, where
that's something--

388
00:19:17,968 --> 00:19:19,510
in their model,
that's something that

389
00:19:19,510 --> 00:19:21,230
will help us in the long run.

390
00:19:24,325 --> 00:19:25,700
AUDIENCE: Can you
say that again?

391
00:19:25,700 --> 00:19:26,200
MATT: Yeah.

392
00:19:26,200 --> 00:19:28,870
So Socolow and
Pacala are saying,

393
00:19:28,870 --> 00:19:32,438
as countries become
more developed

394
00:19:32,438 --> 00:19:33,480
than the average economy.

395
00:19:33,480 --> 00:19:37,990
They kind of move towards
this service-heavy economy.

396
00:19:37,990 --> 00:19:40,900
And that in the long run
helps decrease or ease

397
00:19:40,900 --> 00:19:43,180
that country's carbon emissions.

398
00:19:43,180 --> 00:19:46,360
But now that we've been
rethinking it and saying

399
00:19:46,360 --> 00:19:48,970
manufacturing is something we
want back here in the United

400
00:19:48,970 --> 00:19:52,390
States, that paradigm changes.

401
00:19:52,390 --> 00:19:56,050
And how much does that
disturb the presentation

402
00:19:56,050 --> 00:19:58,227
of this wedge theory.

403
00:19:58,227 --> 00:20:00,060
AUDIENCE: So, actually,
I kind of a question

404
00:20:00,060 --> 00:20:02,580
about how emissions
from the United States

405
00:20:02,580 --> 00:20:04,660
decreased in the past 30 years?

406
00:20:04,660 --> 00:20:05,815
If so, by how much?

407
00:20:05,815 --> 00:20:08,440
WILLIAM BONVILLIAN: We actually
have been decreasing emissions,

408
00:20:08,440 --> 00:20:09,920
particularly the
last seven years

409
00:20:09,920 --> 00:20:11,520
in a fairly significant rate.

410
00:20:11,520 --> 00:20:15,630
And, again, more analysis
needs to be done.

411
00:20:15,630 --> 00:20:17,110
Martha, you probably
have insights.

412
00:20:17,110 --> 00:20:18,985
AUDIENCE: Well, the only
insight they have is

413
00:20:18,985 --> 00:20:20,445
because of the
natural gas boom is

414
00:20:20,445 --> 00:20:21,820
one of the big
reasons we've been

415
00:20:21,820 --> 00:20:25,200
reducing emissions, not because
of less consumption or--

416
00:20:25,200 --> 00:20:27,810
I mean, there's some energy
efficiency, but a lot of it

417
00:20:27,810 --> 00:20:32,237
has to do with gas
being cleaner than coal.

418
00:20:32,237 --> 00:20:33,320
WILLIAM BONVILLIAN: Right.

419
00:20:33,320 --> 00:20:34,987
So we've gone through
a whole technology

420
00:20:34,987 --> 00:20:37,610
revolution led by fracking.

421
00:20:37,610 --> 00:20:40,490
And then, another factor here
is that frankly the US has

422
00:20:40,490 --> 00:20:42,380
been de-industrializing, right?

423
00:20:42,380 --> 00:20:47,120
So when we reduce manufacturing
employment by 1/3,

424
00:20:47,120 --> 00:20:51,290
that turns out not to have been
primarily productivity gains.

425
00:20:51,290 --> 00:20:53,990
That turns out to be a real
hollowing out of that sector.

426
00:20:53,990 --> 00:20:57,620
So we shut down
60,000 factories,

427
00:20:57,620 --> 00:21:03,380
as we talked about in class
four, between 2000 and 2010.

428
00:21:03,380 --> 00:21:07,700
So to some extent, these
are unintended consequences

429
00:21:07,700 --> 00:21:13,220
of some problematic
developments in our economy.

430
00:21:13,220 --> 00:21:15,950
But the big one, I think,
Martha's put us on to

431
00:21:15,950 --> 00:21:18,000
is the fracking revolution.

432
00:21:22,727 --> 00:21:24,560
AUDIENCE: Also, when
we do that measurement,

433
00:21:24,560 --> 00:21:28,190
is it based on the emissions
per production or are results

434
00:21:28,190 --> 00:21:30,763
take into account, like
how much emissions you

435
00:21:30,763 --> 00:21:31,930
do by creating the products?

436
00:21:31,930 --> 00:21:33,415
So I'm thinking
solar panels-- what

437
00:21:33,415 --> 00:21:37,190
would be the emissions to create
solar panels and produce them?

438
00:21:37,190 --> 00:21:39,265
Because that would
affect the measurement.

439
00:21:39,265 --> 00:21:39,890
AUDIENCE: Yeah.

440
00:21:39,890 --> 00:21:42,180
So I don't know
the answer to that.

441
00:21:42,180 --> 00:21:44,390
I'm guessing it
doesn't include what

442
00:21:44,390 --> 00:21:49,007
goes into the solar panels
or the wind turbines.

443
00:21:49,007 --> 00:21:50,090
WILLIAM BONVILLIAN: Right.

444
00:21:50,090 --> 00:21:51,560
And that's a tricky process.

445
00:21:51,560 --> 00:21:56,780
What is the net emissions of
a new technology, including

446
00:21:56,780 --> 00:21:59,690
its own production and
installation systems?

447
00:21:59,690 --> 00:22:01,730
Making those estimates
is not simple.

448
00:22:07,682 --> 00:22:09,623
How about one more
question, Matt?

449
00:22:09,623 --> 00:22:10,290
MATT: All right.

450
00:22:10,290 --> 00:22:11,630
Another question.

451
00:22:11,630 --> 00:22:17,600
Generally, what do people think
about the seven wedges theory?

452
00:22:17,600 --> 00:22:20,510
So I saw some people
had questions about it

453
00:22:20,510 --> 00:22:24,782
and I did too in terms of,
yeah, some of the wedges seemed

454
00:22:24,782 --> 00:22:26,240
really hard, but
some of the wedges

455
00:22:26,240 --> 00:22:28,827
seem manageable on their own.

456
00:22:28,827 --> 00:22:30,410
But once you start
putting all of them

457
00:22:30,410 --> 00:22:35,140
together, even just from
a financial perspective,

458
00:22:35,140 --> 00:22:37,320
it becomes marginally
more difficult to take

459
00:22:37,320 --> 00:22:38,240
that next wedge.

460
00:22:38,240 --> 00:22:41,700
And they don't actually
seem exclusive.

461
00:22:41,700 --> 00:22:43,520
So if you look at
power generation,

462
00:22:43,520 --> 00:22:47,150
you raise the efficiency at
1,600 large coal fired plants

463
00:22:47,150 --> 00:22:50,090
from 40% to 60%,
then another one

464
00:22:50,090 --> 00:22:53,060
is replaced 1,400 large
coal fired plants with gas

465
00:22:53,060 --> 00:22:54,200
fired plants.

466
00:22:54,200 --> 00:23:00,470
And does trying to do one wedge
cause another wedge to shrink?

467
00:23:00,470 --> 00:23:04,000
And then you're looking
at adding up a lot more.

468
00:23:04,000 --> 00:23:07,080
I thought it was helpful,
for a popular science

469
00:23:07,080 --> 00:23:09,110
magazine I thought was
a helpful framework,

470
00:23:09,110 --> 00:23:11,570
but I was wondering if
there were some shortcomings

471
00:23:11,570 --> 00:23:12,770
that people had issues with.

472
00:23:15,310 --> 00:23:17,480
AUDIENCE: I was a
little surprised by how

473
00:23:17,480 --> 00:23:19,970
fossil fuel focused it was.

474
00:23:19,970 --> 00:23:23,930
Still one of the big
solutions was carbon capture.

475
00:23:23,930 --> 00:23:29,870
And like you said, one of the
options is to keep using coal,

476
00:23:29,870 --> 00:23:31,790
but to just make
it more efficient.

477
00:23:31,790 --> 00:23:34,610
So, I mean, I
understand the reality

478
00:23:34,610 --> 00:23:38,150
that we probably will be reliant
on fossil fuels for a while,

479
00:23:38,150 --> 00:23:42,260
but I thought that this
is an interesting approach

480
00:23:42,260 --> 00:23:45,200
to continue in such a way.

481
00:23:47,642 --> 00:23:49,350
WILLIAM BONVILLIAN:
Martha, I know you've

482
00:23:49,350 --> 00:23:50,633
thought about that question.

483
00:23:50,633 --> 00:23:52,050
AUDIENCE: Well, I
guess maybe only

484
00:23:52,050 --> 00:23:54,420
thought I'm having is,
will the carbon capture

485
00:23:54,420 --> 00:23:56,970
and storage has totally
not panned out yet

486
00:23:56,970 --> 00:24:00,260
to be anything
close to economic.

487
00:24:00,260 --> 00:24:05,577
So it is a little
fanciful, a piece of it.

488
00:24:05,577 --> 00:24:06,660
WILLIAM BONVILLIAN: Right.

489
00:24:06,660 --> 00:24:09,840
On the other hand, the
possibilities that a purely

490
00:24:09,840 --> 00:24:11,580
renewables approach.

491
00:24:11,580 --> 00:24:12,290
AUDIENCE: I see.

492
00:24:12,290 --> 00:24:14,670
WILLIAM BONVILLIAN:
Is going to be doable.

493
00:24:14,670 --> 00:24:16,200
You know.

494
00:24:16,200 --> 00:24:17,810
I think that's
problematic as well.

495
00:24:17,810 --> 00:24:18,780
AUDIENCE: Right, absolutely.

496
00:24:18,780 --> 00:24:19,500
WILLIAM BONVILLIAN:
Because these are not

497
00:24:19,500 --> 00:24:20,565
baseload power systems.

498
00:24:23,100 --> 00:24:25,380
AUDIENCE: For me, I found
the most problematic pieces

499
00:24:25,380 --> 00:24:27,875
to be kind of--

500
00:24:27,875 --> 00:24:30,000
as we're commenting, it
did seem sort of arbitrary,

501
00:24:30,000 --> 00:24:32,583
but in addition to just sort of
just kind of picking whatever,

502
00:24:32,583 --> 00:24:34,830
the ones that they
picked, it came down to,

503
00:24:34,830 --> 00:24:37,200
I don't know if I would
necessarily kind of start

504
00:24:37,200 --> 00:24:39,300
if I was saying that
these are the 15 that

505
00:24:39,300 --> 00:24:41,450
are going to be the most
feasible ways to get us

506
00:24:41,450 --> 00:24:42,400
on these wedges.

507
00:24:42,400 --> 00:24:45,740
And I'm particularly looking
at stop all deforestation.

508
00:24:45,740 --> 00:24:47,615
AUDIENCE: Yeah.

509
00:24:47,615 --> 00:24:48,240
AUDIENCE: Yeah.

510
00:24:48,240 --> 00:24:51,330
I don't know if I
might need some more

511
00:24:51,330 --> 00:24:53,100
reading in deforestation,
but that seems

512
00:24:53,100 --> 00:24:55,860
to me like a variable
really interconnected kind

513
00:24:55,860 --> 00:24:57,270
of big issue there.

514
00:24:57,270 --> 00:24:59,910
And I feel like
there's a lot more,

515
00:24:59,910 --> 00:25:01,410
and agriculture
and forestry could

516
00:25:01,410 --> 00:25:03,450
have picked before
kind of blanket

517
00:25:03,450 --> 00:25:07,850
with just saying stop
all deforestation.

518
00:25:07,850 --> 00:25:08,370
And yeah.

519
00:25:08,370 --> 00:25:11,440
So I think within each
sector there could probably

520
00:25:11,440 --> 00:25:14,180
be a more meticulous approach
to kind of make them exclusive,

521
00:25:14,180 --> 00:25:16,180
so you don't have this
sort of overlapping power

522
00:25:16,180 --> 00:25:19,830
generation between coal fired
plants and things like that.

523
00:25:19,830 --> 00:25:23,050
That was my main
issue with the wedges.

524
00:25:23,050 --> 00:25:25,930
AUDIENCE: I thought it
was a very academic paper.

525
00:25:25,930 --> 00:25:29,170
I think it's a really good
lens to look at the problem.

526
00:25:29,170 --> 00:25:30,940
But in terms of
practicality, I don't

527
00:25:30,940 --> 00:25:33,400
think it would be practical.

528
00:25:33,400 --> 00:25:36,760
It seems like it's kind
of idealized, like outside

529
00:25:36,760 --> 00:25:38,022
reality.

530
00:25:38,022 --> 00:25:39,730
The approach I would
take with this paper

531
00:25:39,730 --> 00:25:43,120
is to look at their assumptions
and then go out into the market

532
00:25:43,120 --> 00:25:44,988
and talk to factories
and people who

533
00:25:44,988 --> 00:25:46,780
are using these
technologies and figure out

534
00:25:46,780 --> 00:25:48,197
how they think
about these things,

535
00:25:48,197 --> 00:25:50,840
because they might just be like,
that's not going to happen.

536
00:25:50,840 --> 00:25:55,180
So I think it's a good
lens, but I wouldn't--

537
00:25:55,180 --> 00:25:56,598
I don't see it as practical.

538
00:26:00,580 --> 00:26:01,830
AUDIENCE: I just looked it up.

539
00:26:01,830 --> 00:26:05,240
Robert Socolow actually wrote
a follow-up article in 2011

540
00:26:05,240 --> 00:26:08,630
called Wedges Reaffirmed
in Climate Central

541
00:26:08,630 --> 00:26:11,415
to talk about the reception not
only from the general public,

542
00:26:11,415 --> 00:26:13,040
but also from the
scientific community,

543
00:26:13,040 --> 00:26:14,780
from the policy
making community.

544
00:26:14,780 --> 00:26:20,112
And he seems to sort of be
of the opinion that he--

545
00:26:20,112 --> 00:26:23,210
they not only overshot the
science of carbon capture,

546
00:26:23,210 --> 00:26:25,370
but also really we're
trying to pander

547
00:26:25,370 --> 00:26:27,500
to the quote-unquote
"general American"

548
00:26:27,500 --> 00:26:32,000
and we're not as
sort of hard-hitting

549
00:26:32,000 --> 00:26:35,810
with these solutions that
they could have proposed

550
00:26:35,810 --> 00:26:37,790
in the magazine article.

551
00:26:37,790 --> 00:26:41,780
And in particular talked
about how people commented

552
00:26:41,780 --> 00:26:45,170
on the concessions
that they made

553
00:26:45,170 --> 00:26:49,260
leading to benign
outcomes on fossil fuels,

554
00:26:49,260 --> 00:26:52,827
as you were saying, and that
they would foster complacency.

555
00:26:52,827 --> 00:26:54,410
And he says that he
doesn't understand

556
00:26:54,410 --> 00:26:56,180
that fear because
when he tells someone

557
00:26:56,180 --> 00:26:58,550
that we could be lucky to
figure out the technology,

558
00:26:58,550 --> 00:27:00,800
then the listener completes
a sentence and says,

559
00:27:00,800 --> 00:27:03,000
or we could be unlucky.

560
00:27:03,000 --> 00:27:05,150
So he seems to say
that we're kind

561
00:27:05,150 --> 00:27:07,640
of between a rock
and a hard place

562
00:27:07,640 --> 00:27:11,450
on trying to convince people to
create a framework for energy

563
00:27:11,450 --> 00:27:14,750
reduction while also
sort of maintaining

564
00:27:14,750 --> 00:27:17,627
our standard of living and also
caring about the environment.

565
00:27:17,627 --> 00:27:19,460
So he seems to have
gotten a lot of backlash

566
00:27:19,460 --> 00:27:21,377
that he reflected
on for some time.

567
00:27:21,377 --> 00:27:22,460
WILLIAM BONVILLIAN: Right.

568
00:27:22,460 --> 00:27:26,570
Both of these folks are
very shrewd, talented people

569
00:27:26,570 --> 00:27:28,170
and very perceptive.

570
00:27:28,170 --> 00:27:31,130
And part of the
story here was what

571
00:27:31,130 --> 00:27:35,120
we thought was the
case in 2004 and 2005,

572
00:27:35,120 --> 00:27:37,850
which is just stabilization
at 2005 levels

573
00:27:37,850 --> 00:27:44,000
would do it if we've got to get
a much deeper set of reductions

574
00:27:44,000 --> 00:27:44,990
in the place.

575
00:27:44,990 --> 00:27:46,573
AUDIENCE: I think
even when they wrote

576
00:27:46,573 --> 00:27:48,350
this they suggested
that in the long term

577
00:27:48,350 --> 00:27:49,460
we need to bring it down.

578
00:27:49,460 --> 00:27:50,502
WILLIAM BONVILLIAN: Yeah.

579
00:27:50,502 --> 00:27:53,330
All right they were aimed
at a 50 year period.

580
00:27:53,330 --> 00:27:58,487
They recognized that
in that later period

581
00:27:58,487 --> 00:28:00,320
there would really have
to be breakthroughs.

582
00:28:00,320 --> 00:28:02,420
But they avoided the
breakthrough problem

583
00:28:02,420 --> 00:28:05,240
in the 50 year period,
but it's now on us.

584
00:28:05,240 --> 00:28:06,425
Right?

585
00:28:06,425 --> 00:28:08,800
We're going to have to have
a level of technology advance

586
00:28:08,800 --> 00:28:12,750
that was passed what they were--

587
00:28:12,750 --> 00:28:15,600
and what policymakers in general
were thinking about that time.

588
00:28:15,600 --> 00:28:17,100
That's a good closing
thought, Matt.

589
00:28:17,100 --> 00:28:18,640
Anything else to add on them?

590
00:28:18,640 --> 00:28:19,140
MATT: Yeah.

591
00:28:19,140 --> 00:28:21,000
I think it's generally a good--

592
00:28:21,000 --> 00:28:23,310
I thought it was a good
first article just that way,

593
00:28:23,310 --> 00:28:26,840
but like Bush's
innovation pipeline,

594
00:28:26,840 --> 00:28:28,680
there's a lot more
complexity in the test

595
00:28:28,680 --> 00:28:30,060
that we need to work through.

596
00:28:30,060 --> 00:28:31,935
WILLIAM BONVILLIAN:
That's a good comparison.

597
00:28:31,935 --> 00:28:32,920
Thanks, Matt.

598
00:28:32,920 --> 00:28:34,440
All right.

599
00:28:34,440 --> 00:28:36,285
So we're now going
to dive into--

600
00:28:41,060 --> 00:28:44,690
Chuck Weiss and I affected
a whole book on this.

601
00:28:44,690 --> 00:28:54,110
This is just a kind of
snapshot, but the idea

602
00:28:54,110 --> 00:28:58,660
we tried to get across here is
that challenge is big enough

603
00:28:58,660 --> 00:29:01,730
that we're going to have to get
inside the kind of black box

604
00:29:01,730 --> 00:29:05,480
of innovation, innovation
policy, innovation proposition.

605
00:29:05,480 --> 00:29:09,740
So there'd been a lot of
articles around the time we

606
00:29:09,740 --> 00:29:13,010
worked on this, 2009 timetable.

607
00:29:13,010 --> 00:29:16,040
And a lot of major
studies, and the studies

608
00:29:16,040 --> 00:29:21,610
always said, and we're going to
need some technology advances,

609
00:29:21,610 --> 00:29:23,840
let's do a lot of R&D, right?

610
00:29:23,840 --> 00:29:26,900
And that's kind of
as far as they went.

611
00:29:26,900 --> 00:29:31,910
And what we were attempting
to do in the book, as well

612
00:29:31,910 --> 00:29:36,500
as pieces that came out of it,
like what I had you all read,

613
00:29:36,500 --> 00:29:43,130
was really dig into how that
innovation system worked

614
00:29:43,130 --> 00:29:47,650
and understand it in a more
coherent and real kind of way,

615
00:29:47,650 --> 00:29:51,380
getting us in there to that
black box of innovation policy

616
00:29:51,380 --> 00:29:53,450
and figure out
what could be done.

617
00:29:53,450 --> 00:29:58,760
Just as a few background points,
historically, the government

618
00:29:58,760 --> 00:30:00,650
has been much more
interventionist

619
00:30:00,650 --> 00:30:04,160
in the energy sector than
most other sectors, right?

620
00:30:04,160 --> 00:30:07,280
Government is historically very
interventionist in the health

621
00:30:07,280 --> 00:30:10,250
sector, it's been very
interventionist in the energy

622
00:30:10,250 --> 00:30:11,990
sector as well.

623
00:30:11,990 --> 00:30:13,970
And the political
parties tend to have

624
00:30:13,970 --> 00:30:18,590
their favorite
technologies, which

625
00:30:18,590 --> 00:30:22,730
complicates the political agenda
here for a technology agenda.

626
00:30:22,730 --> 00:30:25,160
It will complicate it for the
next several years for sure.

627
00:30:25,160 --> 00:30:28,160
We're already seeing
some of those slides.

628
00:30:28,160 --> 00:30:31,280
And then there's
another reality here,

629
00:30:31,280 --> 00:30:38,050
which is we don't have a
lot of the technologies we

630
00:30:38,050 --> 00:30:40,240
need at hand yet.

631
00:30:40,240 --> 00:30:45,910
There's still a very significant
technology development effort

632
00:30:45,910 --> 00:30:48,550
that needs to go on and a
series of these really important

633
00:30:48,550 --> 00:30:49,270
strands.

634
00:30:49,270 --> 00:30:51,998
We can see what
the pathways are,

635
00:30:51,998 --> 00:30:54,040
but a lot of the technologies
we're going to need

636
00:30:54,040 --> 00:30:55,960
are still not
technology ready, much

637
00:30:55,960 --> 00:30:58,180
less being economically
ready, where

638
00:30:58,180 --> 00:31:00,250
it's ready for market adoption.

639
00:31:00,250 --> 00:31:05,320
So that complicates this
challenge very significant.

640
00:31:05,320 --> 00:31:07,810
Energy is scale, right?

641
00:31:07,810 --> 00:31:10,540
It is a gigantic sector.

642
00:31:10,540 --> 00:31:14,582
And you can't
consider energy policy

643
00:31:14,582 --> 00:31:15,915
unless you're considering scale.

644
00:31:18,780 --> 00:31:21,540
There is a technological,
economic, political, social

645
00:31:21,540 --> 00:31:28,170
paradigm that creates barriers
to change in the energy sector

646
00:31:28,170 --> 00:31:30,090
that are quite significant.

647
00:31:30,090 --> 00:31:33,090
Private sector R&D,
and obviously this

648
00:31:33,090 --> 00:31:34,500
is private sector technology.

649
00:31:34,500 --> 00:31:36,865
The government is not in
control of this technology

650
00:31:36,865 --> 00:31:38,640
to say the least.

651
00:31:38,640 --> 00:31:42,450
Private sector R&D is
discouraged by wild price

652
00:31:42,450 --> 00:31:45,150
oscillations in energy markets.

653
00:31:45,150 --> 00:31:48,820
We'll look at some of
those in just a minute.

654
00:31:48,820 --> 00:31:54,660
$20 a barrel in 1998, $140 a
barrel in 2008, $35 a barrel

655
00:31:54,660 --> 00:31:57,600
in 2016.

656
00:31:57,600 --> 00:32:01,440
It's very hard to do R&D
against those kinds of price

657
00:32:01,440 --> 00:32:03,390
disruptions.

658
00:32:03,390 --> 00:32:07,380
The public sector has
been working on energy R&D

659
00:32:07,380 --> 00:32:11,040
and comparatively few
technologies have transitioned.

660
00:32:11,040 --> 00:32:14,295
Again, fracking frankly is the
major technology development

661
00:32:14,295 --> 00:32:17,460
that really has transitioned.

662
00:32:17,460 --> 00:32:20,610
And you've got to think
about parallel and supporting

663
00:32:20,610 --> 00:32:24,390
policies, not only on
technology, but also on price.

664
00:32:24,390 --> 00:32:25,200
Right?

665
00:32:25,200 --> 00:32:28,290
So it's technology, supply,
but that's dramatically

666
00:32:28,290 --> 00:32:30,150
affected by pricing.

667
00:32:30,150 --> 00:32:34,270
So very large in
scale and scope.

668
00:32:34,270 --> 00:32:36,420
The problem of energy,
as I said before,

669
00:32:36,420 --> 00:32:39,030
really is the problem of scale.

670
00:32:39,030 --> 00:32:41,880
You can think about a large
scale kind of activity,

671
00:32:41,880 --> 00:32:45,990
like an Apollo type
project for pursuing this,

672
00:32:45,990 --> 00:32:50,580
but you would not have an
Apollo type project that's

673
00:32:50,580 --> 00:32:53,460
government contract-led, right?

674
00:32:53,460 --> 00:32:56,950
We're not going to solve this
except in the private sector,

675
00:32:56,950 --> 00:33:00,300
which makes the effort
considerably more complicated.

676
00:33:00,300 --> 00:33:02,895
And as Socolow and
Pacala suggested to us

677
00:33:02,895 --> 00:33:04,270
in the reading we
just discussed,

678
00:33:04,270 --> 00:33:07,540
this is a 50 year project.

679
00:33:07,540 --> 00:33:09,960
So the United States has never
done a 50 year technology

680
00:33:09,960 --> 00:33:11,400
project.

681
00:33:11,400 --> 00:33:14,580
We're lucky if we do three year
technology projects these days.

682
00:33:14,580 --> 00:33:17,610
Apollo was a nine
year project, right?

683
00:33:17,610 --> 00:33:20,970
That's about as long
as we can stand, much

684
00:33:20,970 --> 00:33:22,590
less a multi-decade problem.

685
00:33:22,590 --> 00:33:24,430
And then, with a
multi-decade problem,

686
00:33:24,430 --> 00:33:27,720
we run the problem of
locking in prematurely

687
00:33:27,720 --> 00:33:30,000
to wrong technologies.

688
00:33:30,000 --> 00:33:32,790
So that's the
fundamental problem

689
00:33:32,790 --> 00:33:36,820
with corn-based ethanol,
which 1970s already

690
00:33:36,820 --> 00:33:39,870
felt like, great, corn-based
ethanol, what could be better?

691
00:33:39,870 --> 00:33:44,130
Farmers get rich, they grow
our energy for us, how nice.

692
00:33:44,130 --> 00:33:48,660
But it turned out to be not
as significant emissions

693
00:33:48,660 --> 00:33:50,970
reduction, if anything,
maybe the opposite.

694
00:33:50,970 --> 00:33:52,440
So locking in.

695
00:33:52,440 --> 00:33:56,610
We're now every bit as addicted
to corn as we are to oil,

696
00:33:56,610 --> 00:34:00,270
and locking in prematurely on
a technology is a big problem.

697
00:34:00,270 --> 00:34:04,260
How do you maintain a certain
amount of technology neutrality

698
00:34:04,260 --> 00:34:05,640
over a 40 year period?

699
00:34:05,640 --> 00:34:09,600
We have never tried anything
as complicated as that before.

700
00:34:09,600 --> 00:34:12,929
And arguably, you need to
organize around barriers

701
00:34:12,929 --> 00:34:18,940
to market launch, not just
throw R&D money at the problem.

702
00:34:18,940 --> 00:34:20,280
So we'll get into all of that.

703
00:34:20,280 --> 00:34:24,330
But energy arguably requires
a new unified theory

704
00:34:24,330 --> 00:34:29,070
of innovation because it
is such a complex project.

705
00:34:29,070 --> 00:34:31,469
You can't just do
a pipeline model,

706
00:34:31,469 --> 00:34:34,000
you can't just do in an
induced innovation model,

707
00:34:34,000 --> 00:34:35,430
you can't just do
a manufacturing

708
00:34:35,430 --> 00:34:38,100
led innovation model.

709
00:34:38,100 --> 00:34:40,560
You've got to think much more
deeply about how you bring

710
00:34:40,560 --> 00:34:44,400
all these models to bear using
an innovation organization

711
00:34:44,400 --> 00:34:45,889
approach.

712
00:34:45,889 --> 00:34:49,320
It's kind of no way of getting
out of that box in the energy

713
00:34:49,320 --> 00:34:50,210
sector.

714
00:34:50,210 --> 00:34:50,909
AUDIENCE: Is there
a paper that's

715
00:34:50,909 --> 00:34:52,570
looking to pass
energy revolutions

716
00:34:52,570 --> 00:34:57,762
and figure out like the
main kind of pushers?

717
00:34:57,762 --> 00:34:59,970
WILLIAM BONVILLIAN: Well,
we went on too many, right?

718
00:34:59,970 --> 00:35:03,120
So I don't know how
many million years it

719
00:35:03,120 --> 00:35:05,460
took, but we did wood fire.

720
00:35:05,460 --> 00:35:06,300
We did that.

721
00:35:06,300 --> 00:35:09,030
That was big.

722
00:35:09,030 --> 00:35:12,600
Then, from wood we did coal.

723
00:35:12,600 --> 00:35:16,290
And [INAUDIBLE] tells the story
that William Barton Rogers,

724
00:35:16,290 --> 00:35:19,860
the esteemed first
president, and frankly,

725
00:35:19,860 --> 00:35:29,100
genius behind the MIT
model, he died on the podium

726
00:35:29,100 --> 00:35:33,060
during an MIT graduation choking
on the terms by [INAUDIBLE]

727
00:35:33,060 --> 00:35:35,550
coal revolution, right?

728
00:35:35,550 --> 00:35:38,460
So that was the big
revolution in that era.

729
00:35:38,460 --> 00:35:41,520
We moved from wood the coal.

730
00:35:41,520 --> 00:35:42,990
So that's how slow it is.

731
00:35:42,990 --> 00:35:47,940
In a remarkably quick period
of time, you know 60, 70 years,

732
00:35:47,940 --> 00:35:49,630
we actually moved to oil.

733
00:35:49,630 --> 00:35:50,130
Right?

734
00:35:50,130 --> 00:35:52,350
That was remarkably quick.

735
00:35:54,930 --> 00:35:58,320
And you know we've been on
that fossil fuel revolution

736
00:35:58,320 --> 00:35:59,490
ever since.

737
00:35:59,490 --> 00:36:03,360
And it's not easy
to shift, so these

738
00:36:03,360 --> 00:36:07,230
are very long-term projects.

739
00:36:07,230 --> 00:36:09,270
And you really have
to think about time

740
00:36:09,270 --> 00:36:14,400
and scale over and over again
when we think about undertaking

741
00:36:14,400 --> 00:36:15,750
energy technology change.

742
00:36:18,480 --> 00:36:20,400
So we talked about
some of the models

743
00:36:20,400 --> 00:36:23,880
previously just to remind you
we know the pipeline model well.

744
00:36:23,880 --> 00:36:25,980
For sure there is going
to be a profound need here

745
00:36:25,980 --> 00:36:29,390
for breakthrough research.

746
00:36:29,390 --> 00:36:33,300
There is a big valley of death
problem in that pipeline model

747
00:36:33,300 --> 00:36:35,347
that we've got to
think very hard about.

748
00:36:35,347 --> 00:36:36,930
But that's not the
only problem, we've

749
00:36:36,930 --> 00:36:38,855
got induced innovation here.

750
00:36:38,855 --> 00:36:40,230
In other words,
industry is going

751
00:36:40,230 --> 00:36:43,140
they have to take responsibility
for a lot of these particularly

752
00:36:43,140 --> 00:36:44,580
incremental advances.

753
00:36:44,580 --> 00:36:46,050
But how do you
encourage that when

754
00:36:46,050 --> 00:36:48,810
the industry is locked
into a set of technologies

755
00:36:48,810 --> 00:36:51,300
that you want to mitigate?

756
00:36:51,300 --> 00:36:54,180
That really complicates the
induced innovation model.

757
00:36:54,180 --> 00:36:56,120
Well, it was in the article.

758
00:36:56,120 --> 00:36:58,320
Chuck and I've been
thinking since then

759
00:36:58,320 --> 00:37:00,510
because from the book
there's an extended pipeline

760
00:37:00,510 --> 00:37:02,370
model, the whole defense
sector model where

761
00:37:02,370 --> 00:37:05,370
the government engages not
just at the upfront stages,

762
00:37:05,370 --> 00:37:08,670
but the later stages through
implementation as well.

763
00:37:08,670 --> 00:37:10,080
What can we use in that model?

764
00:37:10,080 --> 00:37:11,940
And that's a Defense
Department-owned model

765
00:37:11,940 --> 00:37:12,910
by and large.

766
00:37:12,910 --> 00:37:15,800
And we'll talk later when we
talk about the Dorothy Rubin

767
00:37:15,800 --> 00:37:18,270
reading about whether
that's applied.

768
00:37:18,270 --> 00:37:19,195
Manufacturing led.

769
00:37:19,195 --> 00:37:20,820
In other words, we're
not going to have

770
00:37:20,820 --> 00:37:23,710
carbon pricing for a
significant period of time.

771
00:37:23,710 --> 00:37:26,220
So unless you drive
the price down,

772
00:37:26,220 --> 00:37:29,080
these technologies
will never enter.

773
00:37:29,080 --> 00:37:31,350
So the way you
drive price down is

774
00:37:31,350 --> 00:37:34,200
through manufacturing
advances and process advances

775
00:37:34,200 --> 00:37:36,300
and that becomes very
much part of what

776
00:37:36,300 --> 00:37:39,150
you've got to consider in
an energy innovation model

777
00:37:39,150 --> 00:37:40,150
as well.

778
00:37:40,150 --> 00:37:41,760
So innovation organization.

779
00:37:41,760 --> 00:37:44,130
How do you put these
complex pieces together

780
00:37:44,130 --> 00:37:47,910
for a new model is really
at the core of this.

781
00:37:47,910 --> 00:37:51,630
So just to summarize so far,
it's a problem of scale,

782
00:37:51,630 --> 00:37:53,490
we're up against a
technological, economic,

783
00:37:53,490 --> 00:37:55,970
political, social paradigm--
we'll talk about that

784
00:37:55,970 --> 00:37:56,820
in a minute--

785
00:37:56,820 --> 00:38:00,420
in a very complex
established legacy sector.

786
00:38:00,420 --> 00:38:02,790
And maintaining
technology neutrality

787
00:38:02,790 --> 00:38:06,390
over a 50 year period, a
really critical problem,

788
00:38:06,390 --> 00:38:09,840
which needs a tremendous amount
of thought and organizing.

789
00:38:09,840 --> 00:38:13,140
And then we've got to
undertake the integration

790
00:38:13,140 --> 00:38:16,170
of the different models by
which the dynamics of innovation

791
00:38:16,170 --> 00:38:17,790
get played out, right?

792
00:38:17,790 --> 00:38:20,100
You can't just do pipeline
here, you can't just

793
00:38:20,100 --> 00:38:22,645
do extended pipeline.

794
00:38:22,645 --> 00:38:24,270
You've got to really
bring all of these

795
00:38:24,270 --> 00:38:27,250
to bear because they're
all part of that solution.

796
00:38:27,250 --> 00:38:31,110
So innovation organization
becomes central here

797
00:38:31,110 --> 00:38:35,100
to an energy
technology revolution.

798
00:38:35,100 --> 00:38:37,680
Let's look at
investments in energy.

799
00:38:41,350 --> 00:38:47,590
So US federal R&D spending
on new energy technology

800
00:38:47,590 --> 00:38:49,660
when we wrote this
piece was about half

801
00:38:49,660 --> 00:38:55,940
of what it was in actual
dollars because it was in 1980.

802
00:38:55,940 --> 00:38:58,570
So the blue is public
sector investment.

803
00:38:58,570 --> 00:39:02,230
You can see the high
watermark about 1980,

804
00:39:02,230 --> 00:39:04,450
and it's come down since then.

805
00:39:04,450 --> 00:39:07,120
The gray line is private
sector investment levels.

806
00:39:07,120 --> 00:39:09,580
You can, again, see
that that's basically

807
00:39:09,580 --> 00:39:12,220
through this 2005 time
period and it hasn't

808
00:39:12,220 --> 00:39:15,390
gotten much better since.

809
00:39:15,390 --> 00:39:17,812
That basically fell in
half, as well, right?

810
00:39:17,812 --> 00:39:19,270
So this is not the
picture you want

811
00:39:19,270 --> 00:39:23,290
to have if you're going to
do a technology revolution,

812
00:39:23,290 --> 00:39:24,250
all right?

813
00:39:24,250 --> 00:39:27,460
Let's look at the way in
which innovating industries,

814
00:39:27,460 --> 00:39:31,810
how do they spend when they're
trying to do major technology

815
00:39:31,810 --> 00:39:34,870
implementations?

816
00:39:34,870 --> 00:39:37,900
The semiconductor
industry invests 16%

817
00:39:37,900 --> 00:39:42,160
on average of annual
revenues in R&D.

818
00:39:42,160 --> 00:39:44,710
And they've got to
stay on Moore's Law.

819
00:39:44,710 --> 00:39:47,320
Moore's Law may have just
ended, but that was a long term

820
00:39:47,320 --> 00:39:51,460
project for them and they had to
keep investing in R&D to do it.

821
00:39:51,460 --> 00:39:54,820
The pharmaceutical
sector invests 18%

822
00:39:54,820 --> 00:39:56,850
because their drug
terms keep running out.

823
00:39:56,850 --> 00:39:59,800
They've got to stay on
top of the R&D side.

824
00:39:59,800 --> 00:40:02,680
The biotech sector invests 39%.

825
00:40:02,680 --> 00:40:04,780
That may be a little
unfair comparison

826
00:40:04,780 --> 00:40:07,360
because a lot of
the biotech industry

827
00:40:07,360 --> 00:40:10,210
has no revenues at all, so it
may skew the numbers a bit.

828
00:40:10,210 --> 00:40:13,000
But the other two are
probably pretty good signals.

829
00:40:13,000 --> 00:40:14,200
Established industry.

830
00:40:14,200 --> 00:40:16,330
The electronics
industry, 8% of sales.

831
00:40:16,330 --> 00:40:19,720
The auto industry, at least
before the great recession,

832
00:40:19,720 --> 00:40:22,810
was around 3% to
3 and 1/2 percent

833
00:40:22,810 --> 00:40:27,725
of annual revenues in R&D.
Those are pretty mature sectors.

834
00:40:30,590 --> 00:40:35,540
Average R&D to annual revenues
for all of US industry is 2.6%.

835
00:40:35,540 --> 00:40:37,880
That includes dry
cleaners, right?

836
00:40:37,880 --> 00:40:41,120
That's everybody, that's all in.

837
00:40:41,120 --> 00:40:46,580
Private energy R&D as
a percentage of R&D--

838
00:40:46,580 --> 00:40:51,872
R&D as a percentage of annual
revenues is less than 1%.

839
00:40:51,872 --> 00:40:54,860
How are we going to do this?

840
00:40:54,860 --> 00:40:57,440
And this does not--

841
00:40:57,440 --> 00:40:59,580
this is not good, right?

842
00:40:59,580 --> 00:41:02,670
Now, why is it so low
in the energy sector?

843
00:41:02,670 --> 00:41:06,040
Well, part of the story is that
the revenues are so enormous,

844
00:41:06,040 --> 00:41:06,540
right?

845
00:41:06,540 --> 00:41:11,760
This is a powerful
revenue-generating sector.

846
00:41:11,760 --> 00:41:16,840
So that's part of it, but
it's not a full explanation.

847
00:41:16,840 --> 00:41:19,050
This is a sector that's
got an economic model

848
00:41:19,050 --> 00:41:22,560
and it's sustaining
that model, and it's not

849
00:41:22,560 --> 00:41:25,320
all that interested
in diversification

850
00:41:25,320 --> 00:41:30,920
from what's an extremely
successful set of approaches.

851
00:41:30,920 --> 00:41:35,810
Now, let's say we up
the federal R&D, right?

852
00:41:35,810 --> 00:41:38,070
To kind of offset not a
terribly pretty picture

853
00:41:38,070 --> 00:41:39,500
on the private sector R&D side.

854
00:41:43,940 --> 00:41:46,910
When the feds really
want to do something big,

855
00:41:46,910 --> 00:41:49,190
what kind of money
do they spend it on?

856
00:41:49,190 --> 00:41:51,020
The Apollo program,
over nine years-- now,

857
00:41:51,020 --> 00:41:52,820
this is both R&D
and implementation.

858
00:41:52,820 --> 00:41:58,580
That was $185 billion in 2002
dollars over that nine year

859
00:41:58,580 --> 00:42:00,020
period.

860
00:42:00,020 --> 00:42:03,050
Carter-Reagan defense
buildup, right?

861
00:42:03,050 --> 00:42:06,530
That got us know all the
stuff we read about in DARPA,

862
00:42:06,530 --> 00:42:10,700
precision, stealth,
UAVs, submarines

863
00:42:10,700 --> 00:42:14,180
that nobody likes to talk
about, a bunch of fancy stuff.

864
00:42:14,180 --> 00:42:17,600
That was $445 billion
over eight years.

865
00:42:17,600 --> 00:42:21,650
Doubling NIH was $138
billion over five years.

866
00:42:21,650 --> 00:42:23,480
The ballistic missile
defense program,

867
00:42:23,480 --> 00:42:27,080
which until fairly recently
was the largest technology

868
00:42:27,080 --> 00:42:29,500
initiative the government had
going, its first six years

869
00:42:29,500 --> 00:42:32,580
was $145 billion.

870
00:42:32,580 --> 00:42:34,580
That's what the government
spends when it really

871
00:42:34,580 --> 00:42:37,760
wants to get technology done.

872
00:42:37,760 --> 00:42:39,670
It's not spending
this on energy.

873
00:42:39,670 --> 00:42:40,170
OK?

874
00:42:40,170 --> 00:42:41,253
We're not at those levels.

875
00:42:43,660 --> 00:42:51,310
Interestingly, this is energy
in R&D spending compared

876
00:42:51,310 --> 00:42:52,930
to the price of crude oil.

877
00:42:52,930 --> 00:42:57,570
And you can see the remarkable
similarities in these lines,

878
00:42:57,570 --> 00:42:58,600
right?

879
00:42:58,600 --> 00:43:01,180
Price of oil goes up,
let's throw some R&D at it.

880
00:43:01,180 --> 00:43:04,060
Price of oil goes down,
pull that R&D back, right?

881
00:43:04,060 --> 00:43:07,987
You can't run an R&D program
with sustained results on kind

882
00:43:07,987 --> 00:43:09,070
of a roller coaster model.

883
00:43:09,070 --> 00:43:10,240
It just doesn't work.

884
00:43:13,077 --> 00:43:15,160
This story is not just
true for the United States.

885
00:43:15,160 --> 00:43:19,680
These are all the developed
countries, the OECD countries.

886
00:43:19,680 --> 00:43:22,570
You can see a high
watermark about 1980

887
00:43:22,570 --> 00:43:24,838
and similarly coming down
to less than half of that.

888
00:43:24,838 --> 00:43:26,380
The black line is
the one to look at.

889
00:43:29,560 --> 00:43:31,210
The International
Energy Agency--

890
00:43:31,210 --> 00:43:33,810
which is the energy arm
of the OECD countries,

891
00:43:33,810 --> 00:43:36,520
a highly respected
data collection,

892
00:43:36,520 --> 00:43:39,700
energy analytical crew--

893
00:43:39,700 --> 00:43:42,250
in 2008 they did a
major study and they

894
00:43:42,250 --> 00:43:44,380
concluded that
reducing emissions

895
00:43:44,380 --> 00:43:50,550
to 50% below 2005 levels.

896
00:43:50,550 --> 00:43:53,910
When they added up the R&D
as well as the technology

897
00:43:53,910 --> 00:43:56,100
implementation that
need to be undertaken,

898
00:43:56,100 --> 00:44:01,260
they estimated that
at a $45 trillion

899
00:44:01,260 --> 00:44:09,210
project over a 50 year period,
about $1.1 trillion worldwide,

900
00:44:09,210 --> 00:44:14,580
$1.1 trillion per year
in R&D implementation.

901
00:44:14,580 --> 00:44:17,790
So, you know, that
number may be way off.

902
00:44:17,790 --> 00:44:20,070
They were guesstimating, we
got to do this much solar,

903
00:44:20,070 --> 00:44:21,600
we got to do this
much wind, we have

904
00:44:21,600 --> 00:44:23,010
to do this much
advanced nuclear,

905
00:44:23,010 --> 00:44:26,010
we have to have this much carbon
capture and sequestration.

906
00:44:26,010 --> 00:44:30,610
They were kind of adding up
what the bill might look like.

907
00:44:30,610 --> 00:44:32,640
So it could be
significantly off--

908
00:44:32,640 --> 00:44:35,910
but by the way, even if
it's off by a whole lot,

909
00:44:35,910 --> 00:44:38,040
we're not in range.

910
00:44:38,040 --> 00:44:44,220
So so far, we've been
talking about this

911
00:44:44,220 --> 00:44:47,630
as though it was a problem we
could just shovel money at.

912
00:44:47,630 --> 00:44:48,130
Right?

913
00:44:48,130 --> 00:44:51,640
That's we've been talking about
for the last five minutes.

914
00:44:51,640 --> 00:44:55,480
But everybody in
this class knows

915
00:44:55,480 --> 00:44:59,140
that innovation and a
complex legacy sector,

916
00:44:59,140 --> 00:45:03,100
like energy, it's much
more complicated than just

917
00:45:03,100 --> 00:45:04,700
throwing money at the problem.

918
00:45:04,700 --> 00:45:08,440
So you've seen
these slides before.

919
00:45:08,440 --> 00:45:12,460
The US is a covered wagon
technology culture, right?

920
00:45:12,460 --> 00:45:18,910
We like to leave our old
neighborhoods behind and move

921
00:45:18,910 --> 00:45:22,030
new technology into
open field new frontier

922
00:45:22,030 --> 00:45:25,060
kind of innovation, we take
our covered wagons west,

923
00:45:25,060 --> 00:45:27,130
we go over the mountain,
we settle new technology

924
00:45:27,130 --> 00:45:28,222
territories.

925
00:45:28,222 --> 00:45:30,430
That's what we're pretty
good at, we like to do that.

926
00:45:30,430 --> 00:45:34,270
We're not good at
this problem, right?

927
00:45:34,270 --> 00:45:37,450
Bringing technology advanced
back into established sectors.

928
00:45:37,450 --> 00:45:39,490
We don't do this.

929
00:45:39,490 --> 00:45:42,640
And that technology, as
we've discussed before,

930
00:45:42,640 --> 00:45:44,003
it has to parachute in.

931
00:45:44,003 --> 00:45:45,670
And by the way, the
incumbents are going

932
00:45:45,670 --> 00:45:48,110
to shoot at it on the way down.

933
00:45:48,110 --> 00:45:51,370
So it's not just a matter
of throwing R&D money

934
00:45:51,370 --> 00:45:52,210
at this problem.

935
00:45:52,210 --> 00:45:55,180
We've got a much
bigger problem, right?

936
00:45:55,180 --> 00:45:55,750
Max.

937
00:45:55,750 --> 00:45:57,410
AUDIENCE: Quick question.

938
00:45:57,410 --> 00:46:00,660
You said that we're not very
good at going in covered wagons

939
00:46:00,660 --> 00:46:01,160
east.

940
00:46:01,160 --> 00:46:04,440
Is there anyone that is?

941
00:46:04,440 --> 00:46:08,260
WILLIAM BONVILLIAN: You know,
developing countries that

942
00:46:08,260 --> 00:46:12,100
don't have mature
legacy sectors tend

943
00:46:12,100 --> 00:46:16,120
to be able to innovate
in many, many areas.

944
00:46:16,120 --> 00:46:19,450
So that is the story
of the stunning growth

945
00:46:19,450 --> 00:46:23,410
numbers that China has built
over the last 30 years, right?

946
00:46:23,410 --> 00:46:25,990
Because there wasn't
much there, so they

947
00:46:25,990 --> 00:46:28,360
didn't have to overcome
these legacy sectors.

948
00:46:28,360 --> 00:46:31,430
They were working in
innovating in every sector.

949
00:46:31,430 --> 00:46:36,160
So they build this remarkable
10% a year growth rate.

950
00:46:36,160 --> 00:46:37,990
They've now built
out a lot of it.

951
00:46:37,990 --> 00:46:40,830
So their growth rate is going
to finally come down a bit

952
00:46:40,830 --> 00:46:43,180
and it's starting to do so.

953
00:46:43,180 --> 00:46:45,430
But that gives you a signal
of the kind of growth rate

954
00:46:45,430 --> 00:46:49,070
you could have if you were able
to innovate across the board,

955
00:46:49,070 --> 00:46:51,360
not just in frontier areas.

956
00:46:51,360 --> 00:46:51,860
Martha.

957
00:46:51,860 --> 00:46:54,068
AUDIENCE: But is it not just
because they didn't have

958
00:46:54,068 --> 00:46:57,390
anything there in China,
because they're so top-down,

959
00:46:57,390 --> 00:46:57,890
they could--

960
00:46:57,890 --> 00:46:58,180
WILLIAM BONVILLIAN: Yeah.

961
00:46:58,180 --> 00:47:00,490
I mean, there's organizational
issues like that too.

962
00:47:00,490 --> 00:47:07,990
But you can look at Korea,
you're looking at Taiwan,

963
00:47:07,990 --> 00:47:11,920
and you can look at the IT
economy in India, right?

964
00:47:11,920 --> 00:47:17,590
Another staggering success story
of stunning rates of advance.

965
00:47:17,590 --> 00:47:20,290
The government had
kind of fenced off

966
00:47:20,290 --> 00:47:24,850
most of hard industries into a
fairly socialist kind of system

967
00:47:24,850 --> 00:47:27,170
and pretty inefficient.

968
00:47:27,170 --> 00:47:29,770
They haven't fenced
off the IT sector

969
00:47:29,770 --> 00:47:34,240
and that was not a
heavy governmental hand,

970
00:47:34,240 --> 00:47:36,490
that was just take off, right?

971
00:47:36,490 --> 00:47:37,720
And it's a remarkable story.

972
00:47:37,720 --> 00:47:39,850
So it's not always the
way-- you don't always

973
00:47:39,850 --> 00:47:44,620
need that governmentally hand,
but it's an important point.

974
00:47:44,620 --> 00:47:47,990
So the US just doesn't
do this very well.

975
00:47:47,990 --> 00:47:51,370
The example on the
slide is, we don't

976
00:47:51,370 --> 00:47:53,590
go back and fix the health
care delivery system.

977
00:47:53,590 --> 00:47:56,750
We've been fighting over
that for about 15 years.

978
00:47:56,750 --> 00:47:59,350
We're pretty good at
doing biotech, right?

979
00:47:59,350 --> 00:48:00,850
That worked.

980
00:48:00,850 --> 00:48:03,270
But taking on a whole
health care delivery system

981
00:48:03,270 --> 00:48:06,400
has proved elusive
to say the least.

982
00:48:06,400 --> 00:48:08,105
AUDIENCE: [INAUDIBLE]

983
00:48:08,105 --> 00:48:10,480
WILLIAM BONVILLIAN: Yeah,
hospitals and the whole service

984
00:48:10,480 --> 00:48:11,890
side of health care.

985
00:48:11,890 --> 00:48:15,630
And there's technology
tied to that across, too.

986
00:48:15,630 --> 00:48:20,480
So a complex established sector
is not a level playing field,

987
00:48:20,480 --> 00:48:20,980
right?

988
00:48:20,980 --> 00:48:23,620
One of the advantages
of technology

989
00:48:23,620 --> 00:48:26,100
stand up in a frontier
is there's no incumbent,

990
00:48:26,100 --> 00:48:27,080
you just do it.

991
00:48:27,080 --> 00:48:27,580
Right?

992
00:48:27,580 --> 00:48:29,650
That's the India story, right?

993
00:48:29,650 --> 00:48:32,678
That's the story of the
IT revolution in the US.

994
00:48:32,678 --> 00:48:34,720
There wasn't anything
really quite like computing

995
00:48:34,720 --> 00:48:36,400
before computing, it just--

996
00:48:36,400 --> 00:48:39,820
there was nobody in the way.

997
00:48:39,820 --> 00:48:45,250
Similarly, biotech didn't
really have anybody in the way,

998
00:48:45,250 --> 00:48:47,680
whereas these health care
delivery or energy problems are

999
00:48:47,680 --> 00:48:51,460
much more complicated because
you're up against established

1000
00:48:51,460 --> 00:48:52,300
incumbents.

1001
00:48:52,300 --> 00:48:58,120
And these incumbents have strong
technology models and systems

1002
00:48:58,120 --> 00:49:00,430
often with vast
infrastructure, right?

1003
00:49:00,430 --> 00:49:04,480
Think about gas stations
and gas pipeline systems.

1004
00:49:04,480 --> 00:49:07,270
They have an economic model and
they've driven down the cost

1005
00:49:07,270 --> 00:49:09,910
curve, so it's a
remarkably efficient system

1006
00:49:09,910 --> 00:49:13,600
with remarkably low
energy prices in the US.

1007
00:49:13,600 --> 00:49:16,870
There's a massive political
support system, right?

1008
00:49:16,870 --> 00:49:21,490
These are strong regional
employers and important parts

1009
00:49:21,490 --> 00:49:23,080
of local and regional
economies, they

1010
00:49:23,080 --> 00:49:25,900
are very strong politically.

1011
00:49:25,900 --> 00:49:29,020
And there's a whole
social support system.

1012
00:49:29,020 --> 00:49:33,190
For many decades, chemical
engineering departments

1013
00:49:33,190 --> 00:49:37,510
were essentially at every
unit major university,

1014
00:49:37,510 --> 00:49:40,350
were essentially part of
the fossil fuel system.

1015
00:49:40,350 --> 00:49:43,000
That's obviously
changed, but there

1016
00:49:43,000 --> 00:49:47,590
was a whole set of
academic social support

1017
00:49:47,590 --> 00:49:49,150
systems that are there.

1018
00:49:49,150 --> 00:49:52,780
And, look, the US public
has an expectation

1019
00:49:52,780 --> 00:49:55,040
that we get cheap energy prices.

1020
00:49:55,040 --> 00:49:55,540
Right?

1021
00:49:55,540 --> 00:49:58,850
Try taking that one
on, politically, right?

1022
00:49:58,850 --> 00:50:00,850
That's one of the political
problems with trying

1023
00:50:00,850 --> 00:50:02,960
to impose a carbon tax.

1024
00:50:02,960 --> 00:50:04,570
What a wonderful message--

1025
00:50:04,570 --> 00:50:07,870
hey, all your energy prices
are going to go up, you know?

1026
00:50:07,870 --> 00:50:12,405
It's not a terribly
attractive political message.

1027
00:50:12,405 --> 00:50:14,530
And part of the problem
here is that the new energy

1028
00:50:14,530 --> 00:50:18,580
technologies have got to be
price competitive the moment

1029
00:50:18,580 --> 00:50:21,420
they arrive in the marketplace.

1030
00:50:21,420 --> 00:50:24,070
So we'll get to that
problem in a minute.

1031
00:50:24,070 --> 00:50:27,200
A carbon charge was going
to be a way to adjust this.

1032
00:50:27,200 --> 00:50:30,670
In other words, it would bring
the fossil fuel prices up,

1033
00:50:30,670 --> 00:50:32,470
and therefore, the
new technologies

1034
00:50:32,470 --> 00:50:35,860
didn't have to drive down nearly
as much down the cost curve.

1035
00:50:35,860 --> 00:50:38,230
It would be easy
to introduce them.

1036
00:50:38,230 --> 00:50:40,661
They, in effect, have a
significant incentive.

1037
00:50:43,370 --> 00:50:45,500
We're not going to
do that, at least

1038
00:50:45,500 --> 00:50:47,790
for a significant
period of time.

1039
00:50:47,790 --> 00:50:50,600
So what do we do?

1040
00:50:50,600 --> 00:50:52,400
Some things we've
talked about already,

1041
00:50:52,400 --> 00:50:54,860
we've got to have a
large program that's

1042
00:50:54,860 --> 00:50:57,667
sizable in scope.

1043
00:50:57,667 --> 00:50:59,750
In the US, it's going to
have to be private-sector

1044
00:50:59,750 --> 00:51:05,000
led because that's where all the
technology and infrastructure

1045
00:51:05,000 --> 00:51:06,650
is.

1046
00:51:06,650 --> 00:51:11,372
Government doesn't control
it except in certain ways.

1047
00:51:11,372 --> 00:51:13,580
That means a public-private
partnership kind of model

1048
00:51:13,580 --> 00:51:15,200
is going to be needed.

1049
00:51:15,200 --> 00:51:17,300
You've got this problem
of technology neutrality

1050
00:51:17,300 --> 00:51:21,080
and avoiding technology lock-in.

1051
00:51:21,080 --> 00:51:22,790
And, again, we're
going to have to think

1052
00:51:22,790 --> 00:51:26,910
about organizing this one we're
getting into now around launch

1053
00:51:26,910 --> 00:51:27,410
pathways.

1054
00:51:27,410 --> 00:51:31,880
So we came up with a kind of
a four-step way of looking

1055
00:51:31,880 --> 00:51:34,350
at launching technologies.

1056
00:51:34,350 --> 00:51:38,065
So there's lots of
literature on R&D

1057
00:51:38,065 --> 00:51:40,190
and you've read now a fair
amount of it by the time

1058
00:51:40,190 --> 00:51:43,010
we reach class 10 here.

1059
00:51:43,010 --> 00:51:46,640
But there's very little
literature on market launch.

1060
00:51:46,640 --> 00:51:51,770
It just is not a topic
that has been taken up

1061
00:51:51,770 --> 00:51:55,100
by the science and
technology policy literature.

1062
00:51:55,100 --> 00:52:01,040
So the essentially idea was,
think about launch pathways.

1063
00:52:01,040 --> 00:52:03,810
Different technologies going
to launch in different ways.

1064
00:52:03,810 --> 00:52:06,320
Launching batteries into
an automotive sector

1065
00:52:06,320 --> 00:52:12,770
is a really different project
than launching biofuels

1066
00:52:12,770 --> 00:52:13,970
into the transport sector.

1067
00:52:16,790 --> 00:52:18,650
But figure out the
launch pathways

1068
00:52:18,650 --> 00:52:20,240
and figure out for
some common launch

1069
00:52:20,240 --> 00:52:22,630
pathways that certain
kinds of technologies have,

1070
00:52:22,630 --> 00:52:24,590
and we'll get to
that in a second.

1071
00:52:24,590 --> 00:52:29,570
Then, step two is tie those
launch pathways to whatever

1072
00:52:29,570 --> 00:52:35,190
means of policy support you can
put to those launch pathways,

1073
00:52:35,190 --> 00:52:37,160
right?

1074
00:52:37,160 --> 00:52:39,260
Do a gap analysis in
the innovation system,

1075
00:52:39,260 --> 00:52:42,320
both front end and
back end, and then

1076
00:52:42,320 --> 00:52:44,810
work on filling in the gaps
in that innovation system.

1077
00:52:44,810 --> 00:52:46,790
So a four-step process.

1078
00:52:46,790 --> 00:52:49,940
We'll take these
apart for a minute.

1079
00:52:49,940 --> 00:52:52,430
The US has never tried to do
anything this tough, right?

1080
00:52:52,430 --> 00:52:55,160
I think there have been
technology challenges

1081
00:52:55,160 --> 00:52:57,770
themselves that are
harder than this, right?

1082
00:52:57,770 --> 00:53:00,332
Because we can kind
of see the strands

1083
00:53:00,332 --> 00:53:02,540
that we're going to get over
the next 25 or 30 years.

1084
00:53:02,540 --> 00:53:03,320
They're kind of out there.

1085
00:53:03,320 --> 00:53:05,090
We kind of know what
solar is going to be like,

1086
00:53:05,090 --> 00:53:07,075
we kind of know what
wind is going to be like,

1087
00:53:07,075 --> 00:53:08,450
we can see what's
going to happen

1088
00:53:08,450 --> 00:53:10,790
in storage to some extent.

1089
00:53:10,790 --> 00:53:13,620
We kind of know what the
paths are going to be.

1090
00:53:13,620 --> 00:53:15,993
And these are not--

1091
00:53:15,993 --> 00:53:18,410
this is not like the Manhattan
Project, that was a tougher

1092
00:53:18,410 --> 00:53:20,310
technology project.

1093
00:53:20,310 --> 00:53:23,960
But this is such a tough
implementation task,

1094
00:53:23,960 --> 00:53:28,200
we have never ever tried to do
anything this complex before.

1095
00:53:28,200 --> 00:53:32,400
So it's a challenge
worthy of your careers.

1096
00:53:32,400 --> 00:53:34,950
It is the big one.

1097
00:53:34,950 --> 00:53:35,483
Martin?

1098
00:53:35,483 --> 00:53:36,900
AUDIENCE: So your
focus is policy,

1099
00:53:36,900 --> 00:53:40,300
Weis's is government because
you both wrote a book together,

1100
00:53:40,300 --> 00:53:40,928
right?

1101
00:53:40,928 --> 00:53:41,970
WILLIAM BONVILLIAN: Yeah.

1102
00:53:41,970 --> 00:53:48,087
Chuck was-- he and I
taught at Georgetown

1103
00:53:48,087 --> 00:53:49,670
and he was chairman
of the department,

1104
00:53:49,670 --> 00:53:54,010
so he was the one who kicked me
into teaching some years back.

1105
00:53:56,940 --> 00:53:59,310
And then, we just got to
know each other, decided

1106
00:53:59,310 --> 00:54:01,950
let's take this book on
because we saw that the science

1107
00:54:01,950 --> 00:54:06,210
and technology policy world,
it just not really thought

1108
00:54:06,210 --> 00:54:09,492
about the details of the
technology policy for energy.

1109
00:54:09,492 --> 00:54:11,200
Obviously, this one,
a lot of literature.

1110
00:54:11,200 --> 00:54:12,460
AUDIENCE: Because I was thinking
it would be interesting if you

1111
00:54:12,460 --> 00:54:15,520
talked to like a Sloan
strategy professor,

1112
00:54:15,520 --> 00:54:17,970
like a [INAUDIBLE] strategy
because they would have some

1113
00:54:17,970 --> 00:54:19,130
insights into--

1114
00:54:19,130 --> 00:54:20,853
because it's not
intuitive, usually,

1115
00:54:20,853 --> 00:54:22,770
like a business component
strategy, especially

1116
00:54:22,770 --> 00:54:24,420
for complex sectors,
but it definitely

1117
00:54:24,420 --> 00:54:25,800
is a way of doing it.

1118
00:54:25,800 --> 00:54:29,000
Usually you focus
on very niche market

1119
00:54:29,000 --> 00:54:31,530
that you know no one would try
to fight you at the beginning

1120
00:54:31,530 --> 00:54:33,300
and then you grow and you grow.

1121
00:54:33,300 --> 00:54:33,780
WILLIAM BONVILLIAN: Right.

1122
00:54:33,780 --> 00:54:35,738
And we're going to get
into exactly that point,

1123
00:54:35,738 --> 00:54:38,220
too, Martin, that's a very
key step in our strategy

1124
00:54:38,220 --> 00:54:39,860
for a lot of these technologies.

1125
00:54:39,860 --> 00:54:41,155
AUDIENCE: And another
thing-- another reason too

1126
00:54:41,155 --> 00:54:41,910
is because it's not simple.

1127
00:54:41,910 --> 00:54:44,285
Since it's complex, you'll
need different business models

1128
00:54:44,285 --> 00:54:45,900
for different kinds
of products, so I

1129
00:54:45,900 --> 00:54:48,083
feel like they can
make a matrix that

1130
00:54:48,083 --> 00:54:49,500
might be really
useful, especially

1131
00:54:49,500 --> 00:54:51,542
like MIT Energy Initiative,
because I'll be like,

1132
00:54:51,542 --> 00:54:53,170
oh, if you have this
kind of strategy,

1133
00:54:53,170 --> 00:54:55,670
this is a task-- this is how
I would go about growing it.

1134
00:54:55,670 --> 00:54:58,320
And with MIT especially,
you have mentors

1135
00:54:58,320 --> 00:54:59,790
that are going to be there.

1136
00:54:59,790 --> 00:55:01,470
There are some connections--
it'd be really interesting.

1137
00:55:01,470 --> 00:55:02,100
WILLIAM BONVILLIAN: Right.

1138
00:55:02,100 --> 00:55:04,110
And look-- a lot of
this thinking I did

1139
00:55:04,110 --> 00:55:06,900
was because I got pulled
into the MIT Energy

1140
00:55:06,900 --> 00:55:09,540
Initiative in
various ways, and had

1141
00:55:09,540 --> 00:55:11,910
to think with the
faculty teams that

1142
00:55:11,910 --> 00:55:14,920
are developing these
amazing reports that MITI

1143
00:55:14,920 --> 00:55:17,006
did over the years.

1144
00:55:17,006 --> 00:55:18,600
I had to understand
those reports

1145
00:55:18,600 --> 00:55:20,700
because I had to help
those communities bring

1146
00:55:20,700 --> 00:55:23,100
their reports to
the policy world,

1147
00:55:23,100 --> 00:55:24,790
so I had to read
in pretty deeply--

1148
00:55:24,790 --> 00:55:30,330
so a lot of what I'm stumbling
onto in the article you read,

1149
00:55:30,330 --> 00:55:33,630
but also the book that is
a larger statement of it

1150
00:55:33,630 --> 00:55:35,940
really comes out of
my MIT experience.

1151
00:55:35,940 --> 00:55:37,680
And of course Sloan
was pretty deeply

1152
00:55:37,680 --> 00:55:41,730
involved in each one of
those, which was part

1153
00:55:41,730 --> 00:55:44,300
of what made them powerful.

1154
00:55:44,300 --> 00:55:47,280
But Martin, when I
do the next edition,

1155
00:55:47,280 --> 00:55:51,160
I'm going to get you to
do the business side.

1156
00:55:51,160 --> 00:55:53,100
So let's go back
to step one we'll

1157
00:55:53,100 --> 00:55:56,500
do a little more detail here so
you get what I'm talking about.

1158
00:55:56,500 --> 00:55:59,190
Let's categorize the
launch categories, right?

1159
00:55:59,190 --> 00:56:02,730
So we know we've got to
do a bunch of wedges--

1160
00:56:02,730 --> 00:56:04,440
different technologies
often embedded

1161
00:56:04,440 --> 00:56:07,830
in each different wedge.

1162
00:56:07,830 --> 00:56:09,960
How do we look at
launch pathways

1163
00:56:09,960 --> 00:56:12,060
as a way of looking at
the different launch

1164
00:56:12,060 --> 00:56:14,980
pathways in energy, and
seeing if some are similar,

1165
00:56:14,980 --> 00:56:17,090
then you could aggregate
the policy support

1166
00:56:17,090 --> 00:56:18,250
mechanisms around those.

1167
00:56:18,250 --> 00:56:23,040
So some technologies
are experimental,

1168
00:56:23,040 --> 00:56:25,710
and are just going to
require long term research.

1169
00:56:25,710 --> 00:56:28,090
So Max, that's
your paper, right?

1170
00:56:28,090 --> 00:56:32,580
Fusion is still long
term, incredible potential

1171
00:56:32,580 --> 00:56:34,560
if we could get there.

1172
00:56:34,560 --> 00:56:36,620
We're not really
ready for much more

1173
00:56:36,620 --> 00:56:40,060
beyond R&D and some
demonstration commitments

1174
00:56:40,060 --> 00:56:42,210
at this stage.

1175
00:56:42,210 --> 00:56:45,990
So that's a federal R&D role--

1176
00:56:45,990 --> 00:56:49,820
hydrogen fuel cells, a
similar kind of problem.

1177
00:56:49,820 --> 00:56:52,070
So that's experimental
technologies--

1178
00:56:52,070 --> 00:56:53,330
that's one category.

1179
00:56:53,330 --> 00:56:55,900
Just do R&D for those folks.

1180
00:56:55,900 --> 00:56:59,420
The second category would
be potentially disruptive

1181
00:56:59,420 --> 00:57:01,750
innovations that could be
launched in-- you guessed it,

1182
00:57:01,750 --> 00:57:02,660
Martin--

1183
00:57:02,660 --> 00:57:05,030
niche markets, right?

1184
00:57:05,030 --> 00:57:09,740
So that's typically
how induced innovation

1185
00:57:09,740 --> 00:57:11,788
works in the private sector.

1186
00:57:11,788 --> 00:57:14,330
A private sector company will
identify market opportunities--

1187
00:57:14,330 --> 00:57:16,490
typically a niche market--

1188
00:57:16,490 --> 00:57:19,505
take that market, move into
it, and start to scale up

1189
00:57:19,505 --> 00:57:21,110
a new technology advance.

1190
00:57:21,110 --> 00:57:25,280
That's the LED story--
remarkable success story.

1191
00:57:25,280 --> 00:57:27,350
They found niche
markets that couldn't

1192
00:57:27,350 --> 00:57:31,730
be dealt with by either
of their incandescent

1193
00:57:31,730 --> 00:57:34,940
or fluorescent
technology competitors.

1194
00:57:34,940 --> 00:57:38,726
They found niche markets
where LEDs were--

1195
00:57:38,726 --> 00:57:41,690
a so much better answer
than the competitors,

1196
00:57:41,690 --> 00:57:44,150
and then they scaled
into those niche markets,

1197
00:57:44,150 --> 00:57:47,120
and they used that
opportunity to drive the price

1198
00:57:47,120 --> 00:57:49,580
down so that, when
the time came,

1199
00:57:49,580 --> 00:57:52,760
they could actually compete
over that extended time

1200
00:57:52,760 --> 00:57:54,560
period of driving the
cost down to compete

1201
00:57:54,560 --> 00:57:55,518
with the other sectors.

1202
00:57:55,518 --> 00:57:59,570
So that's a classic example of
launching into a niche market.

1203
00:57:59,570 --> 00:58:02,780
Solar PV has had some of
that opportunity as well--

1204
00:58:02,780 --> 00:58:07,340
that's been launched into
a bunch of niche markets.

1205
00:58:07,340 --> 00:58:09,330
But then, there's a more
complicated category,

1206
00:58:09,330 --> 00:58:11,840
and these are--

1207
00:58:11,840 --> 00:58:13,820
we'll call them
secondary innovations,

1208
00:58:13,820 --> 00:58:15,770
or component
innovations, and this

1209
00:58:15,770 --> 00:58:18,350
is a lot of what energy is.

1210
00:58:18,350 --> 00:58:20,450
Secondary innovations
are components

1211
00:58:20,450 --> 00:58:26,270
in larger systems that face
immediate price competition

1212
00:58:26,270 --> 00:58:33,200
based on price, but they can
launch in an uncontested way

1213
00:58:33,200 --> 00:58:38,080
if the owner of that larger
system wants them, right?

1214
00:58:38,080 --> 00:58:44,770
If that technology is acceptable
to that system owner, operator,

1215
00:58:44,770 --> 00:58:45,910
then they can be accepted.

1216
00:58:45,910 --> 00:58:47,702
So all they have to do
is drive price down,

1217
00:58:47,702 --> 00:58:49,360
and then they can
come in, right?

1218
00:58:49,360 --> 00:58:52,940
So batteries for
plug-in hybrids--

1219
00:58:52,940 --> 00:58:56,320
that's a great
example here, right?

1220
00:58:56,320 --> 00:59:00,880
The auto sector-- they've been
burned so many times by fossil

1221
00:59:00,880 --> 00:59:03,490
fuel prices that's
complete wrecked them--

1222
00:59:03,490 --> 00:59:06,490
we're on time number three now--

1223
00:59:06,490 --> 00:59:10,930
that they're happy to have a
much larger share of hybrids,

1224
00:59:10,930 --> 00:59:15,490
or indeed electrics, in
their auto portfolio.

1225
00:59:15,490 --> 00:59:18,040
So this would not be a
contested launch-- they're

1226
00:59:18,040 --> 00:59:20,030
willing to take this stuff.

1227
00:59:20,030 --> 00:59:21,610
But you've got to
get the price down,

1228
00:59:21,610 --> 00:59:24,068
which we still haven't been
able to achieve yet from really

1229
00:59:24,068 --> 00:59:25,210
widespread introduction.

1230
00:59:25,210 --> 00:59:29,470
But that would be an example
of a secondary innovation

1231
00:59:29,470 --> 00:59:32,900
with an uncontested launch.

1232
00:59:32,900 --> 00:59:38,180
The hard stuff is
secondary innovations

1233
00:59:38,180 --> 00:59:39,920
with a contested launch.

1234
00:59:39,920 --> 00:59:43,410
That's carbon capture
and sequestration.

1235
00:59:43,410 --> 00:59:46,880
So the message to a utility
company in that situation is--

1236
00:59:49,590 --> 00:59:54,310
hi, we want you to do carbon
capture and sequestration.

1237
00:59:54,310 --> 00:59:58,960
This is going to reduce the
efficiency of your plant by 40%

1238
00:59:58,960 --> 01:00:02,070
and add 50% to your costs, or
numbers somewhat like those.

1239
01:00:02,070 --> 01:00:03,470
Is that ballpark
numbers, Martha?

1240
01:00:03,470 --> 01:00:04,970
Is that in range?

1241
01:00:04,970 --> 01:00:06,520
MARTHA: And there's no upside--

1242
01:00:06,520 --> 01:00:07,415
I mean there's no financial--

1243
01:00:07,415 --> 01:00:09,498
WILLIAM BONVILLIAN: Yeah,
what's the benefit here?

1244
01:00:09,498 --> 01:00:11,170
And finance it too--

1245
01:00:11,170 --> 01:00:12,910
you finance it, right?

1246
01:00:12,910 --> 01:00:15,520
And nail your utility
customers, right?

1247
01:00:15,520 --> 01:00:16,280
Good luck.

1248
01:00:16,280 --> 01:00:16,780
Right?

1249
01:00:16,780 --> 01:00:18,760
That's what you call
a contested launch.

1250
01:00:18,760 --> 01:00:20,920
The only way these people
are going to do this

1251
01:00:20,920 --> 01:00:24,077
is if you tell them--

1252
01:00:24,077 --> 01:00:25,660
they're going to
violate criminal laws

1253
01:00:25,660 --> 01:00:26,480
unless they do it.

1254
01:00:26,480 --> 01:00:27,820
I mean, that's about
all you can do here.

1255
01:00:27,820 --> 01:00:29,530
You have to regulate
these, right?

1256
01:00:29,530 --> 01:00:32,680
There's no other move.

1257
01:00:32,680 --> 01:00:34,790
I mean, there are some
other categories here, too,

1258
01:00:34,790 --> 01:00:38,440
that we need conservation and
end-use efficiency always needs

1259
01:00:38,440 --> 01:00:41,320
work, and advances
in manufacturing--

1260
01:00:41,320 --> 01:00:42,610
technologies for scale up.

1261
01:00:42,610 --> 01:00:44,290
Those are important
as well, but these

1262
01:00:44,290 --> 01:00:49,040
are the four major territories,
the four major launch pathways,

1263
01:00:49,040 --> 01:00:49,540
we have.

1264
01:00:49,540 --> 01:00:53,680
And then we've got a whole set
of policy packages, all right?

1265
01:00:53,680 --> 01:00:56,200
So for front end support, right?

1266
01:00:56,200 --> 01:00:59,110
We do R&D, and--

1267
01:00:59,110 --> 01:01:01,480
it would be great to
grow some of that R&D.

1268
01:01:01,480 --> 01:01:03,400
That will help us with
experimental, that'll

1269
01:01:03,400 --> 01:01:05,480
help us in all four
categories, because all

1270
01:01:05,480 --> 01:01:08,950
these technologies need work.

1271
01:01:08,950 --> 01:01:13,540
Back end incentives, to
encourage the technology

1272
01:01:13,540 --> 01:01:16,150
deployment, right?

1273
01:01:16,150 --> 01:01:19,180
That's really needed for
secondary or component

1274
01:01:19,180 --> 01:01:24,130
technologies, particularly
when they've gotten--

1275
01:01:24,130 --> 01:01:26,460
the need for both
contested and uncontested.

1276
01:01:26,460 --> 01:01:30,730
But you could really use
these incentives to encourage,

1277
01:01:30,730 --> 01:01:33,190
and we've done it, lower
prices of automobiles

1278
01:01:33,190 --> 01:01:35,200
that happen to be hybrids
or electrics, right?

1279
01:01:35,200 --> 01:01:36,130
So we've done those.

1280
01:01:36,130 --> 01:01:37,930
You can see what I'm
talking about here--

1281
01:01:37,930 --> 01:01:40,780
tax credits, loan
guarantees, price guarantees,

1282
01:01:40,780 --> 01:01:43,990
government procurement programs,
new product buy-down programs--

1283
01:01:43,990 --> 01:01:46,120
we've tried a whole
series of these.

1284
01:01:46,120 --> 01:01:48,640
And Congress just renewed
a lot of the tax incentives

1285
01:01:48,640 --> 01:01:51,010
that have been so
important to wind and solar

1286
01:01:51,010 --> 01:01:52,780
for a multi-year
period last year,

1287
01:01:52,780 --> 01:01:55,720
so those are going to
remain in place for a while.

1288
01:01:55,720 --> 01:02:00,370
But front end, R&D support.

1289
01:02:00,370 --> 01:02:03,130
Back-end incentives,
carrots-- typically

1290
01:02:03,130 --> 01:02:05,740
for uncontested launch.

1291
01:02:05,740 --> 01:02:09,957
Niche-- remember, the industry,
if it can find a market niche,

1292
01:02:09,957 --> 01:02:11,290
you don't have to do this stuff.

1293
01:02:11,290 --> 01:02:13,857
They're going to need help on
the front end R&D probably,

1294
01:02:13,857 --> 01:02:15,940
but if you can launch into
a market niche-- that's

1295
01:02:15,940 --> 01:02:18,398
why it's so attractive to try
and find a market niche where

1296
01:02:18,398 --> 01:02:20,230
we can launch these
technologies, right?

1297
01:02:20,230 --> 01:02:22,750
Because that's a way of
starting to scale up,

1298
01:02:22,750 --> 01:02:26,740
and then buying yourself time
to drive down the price curve.

1299
01:02:26,740 --> 01:02:30,580
The hard one is sticks, right?

1300
01:02:30,580 --> 01:02:33,310
So for secondary technologies
where you're going to have

1301
01:02:33,310 --> 01:02:36,280
a contested launch-- the
industry sector doesn't want

1302
01:02:36,280 --> 01:02:38,440
it--

1303
01:02:38,440 --> 01:02:40,630
you're going to have to
use regulatory requirements

1304
01:02:40,630 --> 01:02:44,300
and mandates to require
this to occur, right?

1305
01:02:44,300 --> 01:02:48,290
And-- a carbon tax
is a form of this.

1306
01:02:48,290 --> 01:02:52,730
It's organized around-- creating
a new kind of financial reality

1307
01:02:52,730 --> 01:02:54,050
for these kinds of firms.

1308
01:02:54,050 --> 01:02:59,570
So pick your energy
technology, see

1309
01:02:59,570 --> 01:03:01,550
if you can group it
into a launch category,

1310
01:03:01,550 --> 01:03:05,390
and then step two-- tie
your incentive package

1311
01:03:05,390 --> 01:03:08,210
to those launch pathways.

1312
01:03:08,210 --> 01:03:10,750
Follow me so far?

1313
01:03:10,750 --> 01:03:13,350
OK.

1314
01:03:13,350 --> 01:03:16,780
Step three-- you're
familiar with this by now--

1315
01:03:16,780 --> 01:03:18,530
look at the gaps in
the innovation system,

1316
01:03:18,530 --> 01:03:20,420
and you've got to look at
the gaps on the front end,

1317
01:03:20,420 --> 01:03:22,590
and you got to look at
the gaps in the back end

1318
01:03:22,590 --> 01:03:24,200
of the innovation system.

1319
01:03:24,200 --> 01:03:26,390
And then step four--

1320
01:03:26,390 --> 01:03:26,990
duh.

1321
01:03:26,990 --> 01:03:31,130
Fill the gaps, right?

1322
01:03:31,130 --> 01:03:33,070
In that innovation pipeline.

1323
01:03:33,070 --> 01:03:35,730
And that moves from every stage,
from research and development,

1324
01:03:35,730 --> 01:03:37,730
all the way through
prototype and demonstration,

1325
01:03:37,730 --> 01:03:40,700
and testing, and deployment,
into a commercial market--

1326
01:03:40,700 --> 01:03:43,100
you've got to look at all
of those stages, right?

1327
01:03:43,100 --> 01:03:47,390
And the production phase
too, as we've talked about.

1328
01:03:47,390 --> 01:03:49,840
We've talked about identifying
the gaps in the innovation

1329
01:03:49,840 --> 01:03:50,340
system--

1330
01:03:50,340 --> 01:03:51,980
I'm going to skip this--

1331
01:03:51,980 --> 01:03:55,250
some mechanisms that we'll talk
about in this class for filling

1332
01:03:55,250 --> 01:03:56,780
some of those gaps.

1333
01:03:56,780 --> 01:03:59,930
ARPA-E, arguably-- and we'll
talk about this in a bit--

1334
01:03:59,930 --> 01:04:02,660
filled a gap in the
US energy R&D system

1335
01:04:02,660 --> 01:04:07,100
for breakthrough
technology advances.

1336
01:04:07,100 --> 01:04:10,070
Maybe we need a better
government mechanism

1337
01:04:10,070 --> 01:04:13,920
for large scale
testing and deployment.

1338
01:04:13,920 --> 01:04:17,810
There's a sore need in carbon
capture and sequestration,

1339
01:04:17,810 --> 01:04:21,080
and we lack a
government corporation

1340
01:04:21,080 --> 01:04:23,528
that can conduct this kind
of demonstration level.

1341
01:04:23,528 --> 01:04:25,070
That's part of the
reason why we just

1342
01:04:25,070 --> 01:04:27,403
haven't been able to get there
in terms of demonstration

1343
01:04:27,403 --> 01:04:29,240
of that technology.

1344
01:04:29,240 --> 01:04:33,020
Those are some gap standards--
test beds are part of the gaps.

1345
01:04:33,020 --> 01:04:37,300
In energy, there is this big
problem of new functionality.

1346
01:04:37,300 --> 01:04:42,550
That's a technology problem you
need to understand in energy.

1347
01:04:42,550 --> 01:04:48,660
IT created new functionality
from the outset.

1348
01:04:48,660 --> 01:04:50,720
So you've heard me
tell this story before.

1349
01:04:50,720 --> 01:04:54,500
I was happy to spend a
ridiculous amount of money

1350
01:04:54,500 --> 01:05:00,530
on my Apple 2E because it
did all kinds of stuff for me

1351
01:05:00,530 --> 01:05:03,470
that I couldn't
do before, right?

1352
01:05:03,470 --> 01:05:05,510
That would be new functionality.

1353
01:05:05,510 --> 01:05:09,930
Spreadsheets, all kinds
of stuff like that, right?

1354
01:05:09,930 --> 01:05:13,200
Energy technologies--
first generation,

1355
01:05:13,200 --> 01:05:17,662
by and large, don't give
you new functionality.

1356
01:05:17,662 --> 01:05:19,245
The nice thing about
new functionality

1357
01:05:19,245 --> 01:05:22,620
is that people are willing
to pay a premium if they

1358
01:05:22,620 --> 01:05:24,810
can do something entirely new.

1359
01:05:24,810 --> 01:05:28,470
But I don't know
whether my laptop

1360
01:05:28,470 --> 01:05:34,590
is plugged into coal or nuclear
power, or hydro, or the sun--

1361
01:05:34,590 --> 01:05:35,910
I have no idea, right?

1362
01:05:35,910 --> 01:05:38,700
There's no product
differentiation for me

1363
01:05:38,700 --> 01:05:40,510
in the way in which
I get electricity.

1364
01:05:40,510 --> 01:05:42,235
Now some utilities--

1365
01:05:42,235 --> 01:05:43,860
Connecticut is an
interesting example--

1366
01:05:43,860 --> 01:05:46,740
are attempting to
create that background

1367
01:05:46,740 --> 01:05:49,440
knowledge for consumers, so they
can actually pick technologies

1368
01:05:49,440 --> 01:05:51,430
they're interested
in, but that's

1369
01:05:51,430 --> 01:05:53,520
not a widespread model yet.

1370
01:05:53,520 --> 01:05:56,790
So there's not much new
functionality in electricity--

1371
01:05:56,790 --> 01:06:00,090
they're all still electrons.

1372
01:06:00,090 --> 01:06:03,030
It's tough to do
product differentiation.

1373
01:06:05,910 --> 01:06:08,310
Cars, right?

1374
01:06:08,310 --> 01:06:15,350
There is a difference
between a Tesla and--

1375
01:06:15,350 --> 01:06:18,660
the thing I drive, right?

1376
01:06:18,660 --> 01:06:24,360
Because if you happen to be into
rapid torque and acceleration,

1377
01:06:24,360 --> 01:06:27,300
Tesla does provide you
similar functionality--

1378
01:06:27,300 --> 01:06:29,090
but that's about it.

1379
01:06:29,090 --> 01:06:31,100
In most driving
circumstances, it's just not

1380
01:06:31,100 --> 01:06:32,850
all that different,
and a hybrid certainly

1381
01:06:32,850 --> 01:06:35,430
is not all that different.

1382
01:06:35,430 --> 01:06:38,670
Tesla brilliantly
figured out, as did

1383
01:06:38,670 --> 01:06:46,500
Prius, brand differentiation
in their market launch.

1384
01:06:46,500 --> 01:06:50,010
They figured out how to
create a really cool vehicle,

1385
01:06:50,010 --> 01:06:52,980
and you could sell it on
your image of yourself

1386
01:06:52,980 --> 01:06:54,798
as being cool for
buying a Tesla, right?

1387
01:06:54,798 --> 01:06:56,215
It worked very
well in California,

1388
01:06:56,215 --> 01:06:57,880
and still does does, right?

1389
01:06:57,880 --> 01:07:00,307
And Prius did something
similar, right?

1390
01:07:00,307 --> 01:07:01,890
You're not just
driving a car-- you're

1391
01:07:01,890 --> 01:07:05,640
bragging about your
environmental outlook

1392
01:07:05,640 --> 01:07:06,690
on the world, right?

1393
01:07:06,690 --> 01:07:09,480
So this is a way of
getting around the fact

1394
01:07:09,480 --> 01:07:11,910
that there isn't that much
product differentiation,

1395
01:07:11,910 --> 01:07:13,850
there's not that
much functionality

1396
01:07:13,850 --> 01:07:15,220
in the energy sector.

1397
01:07:15,220 --> 01:07:18,720
I think there will be.

1398
01:07:18,720 --> 01:07:21,690
I'd like to--

1399
01:07:21,690 --> 01:07:24,330
LEDs are quite neat,
and you can have

1400
01:07:24,330 --> 01:07:27,140
a light wall, or a light floor.

1401
01:07:27,140 --> 01:07:29,250
And I'd pay for that--

1402
01:07:29,250 --> 01:07:32,620
that would be cool, as opposed
to a light bulb hanging

1403
01:07:32,620 --> 01:07:34,790
overhead.

1404
01:07:34,790 --> 01:07:37,350
That's new functionality,
so I'd pay for that.

1405
01:07:37,350 --> 01:07:40,770
But that's not first generation
of energy technologies--

1406
01:07:40,770 --> 01:07:42,930
that's not happening yet.

1407
01:07:42,930 --> 01:07:49,270
It's harder to create product
differentiation and new

1408
01:07:49,270 --> 01:07:51,370
functionality in the
first generation of energy

1409
01:07:51,370 --> 01:07:55,420
technologies, which
underscores how complicated

1410
01:07:55,420 --> 01:07:56,440
the market launch is.

1411
01:07:58,678 --> 01:08:00,220
AUDIENCE: There are
some technologies

1412
01:08:00,220 --> 01:08:01,952
that can offer new
functionality, if not

1413
01:08:01,952 --> 01:08:03,952
for the consumer, then
for the people are paying

1414
01:08:03,952 --> 01:08:06,260
for it-- like the utility.

1415
01:08:06,260 --> 01:08:07,580
One example would be--

1416
01:08:07,580 --> 01:08:09,033
fusion produces
lots of neutrons,

1417
01:08:09,033 --> 01:08:11,200
and you could use that to
get rid of nuclear waste--

1418
01:08:11,200 --> 01:08:14,198
could be nice, and there's
virtually nothing else

1419
01:08:14,198 --> 01:08:14,990
that could do that.

1420
01:08:14,990 --> 01:08:16,073
WILLIAM BONVILLIAN: Right.

1421
01:08:16,073 --> 01:08:19,404
So yes, that may be the silver
bullet-- we're just still

1422
01:08:19,404 --> 01:08:20,459
a while away from it.

1423
01:08:20,459 --> 01:08:23,001
AUDIENCE: Nuclear waste is like,
a trillion dollar market, so

1424
01:08:23,001 --> 01:08:23,501
[INAUDIBLE].

1425
01:08:23,501 --> 01:08:24,584
WILLIAM BONVILLIAN: Right.

1426
01:08:24,584 --> 01:08:26,640
And the problem for
the utility companies

1427
01:08:26,640 --> 01:08:29,040
is, to adopt new technologies
they-- generally speaking--

1428
01:08:29,040 --> 01:08:30,510
have to pay more, right?

1429
01:08:30,510 --> 01:08:33,050
Although we're working on
driving those costs down.

1430
01:08:33,050 --> 01:08:33,240
[INTERPOSING VOICES]

1431
01:08:33,240 --> 01:08:34,350
WILLIAM BONVILLIAN: We
made a lot of progress.

1432
01:08:34,350 --> 01:08:37,410
AUDIENCE: What I'd look into
[INAUDIBLE] like a process,

1433
01:08:37,410 --> 01:08:42,240
it's a whole supply chain
for energy, so lines,

1434
01:08:42,240 --> 01:08:45,870
where you produce it, when it
gets over, and what dissipates.

1435
01:08:45,870 --> 01:08:48,210
So figuring out how
the supply chain

1436
01:08:48,210 --> 01:08:51,812
is flawed to create products
that fix the supply chain,

1437
01:08:51,812 --> 01:08:54,270
so it's a lot better, and they
don't have those [INAUDIBLE]

1438
01:08:54,270 --> 01:08:55,140
by the way.

1439
01:08:55,140 --> 01:08:57,000
That's the product, right?

1440
01:08:57,000 --> 01:08:59,859
This system is broken, I fix
the system with this product,

1441
01:08:59,859 --> 01:09:02,130
and so because energy
is going to come out

1442
01:09:02,130 --> 01:09:04,140
either way the same way, right?

1443
01:09:04,140 --> 01:09:05,460
That's how I think about it.

1444
01:09:05,460 --> 01:09:05,910
WILLIAM BONVILLIAN:
Right, and you

1445
01:09:05,910 --> 01:09:08,520
can think about smart grid
options that do create

1446
01:09:08,520 --> 01:09:10,229
new functionalities as well

1447
01:09:10,229 --> 01:09:11,646
AUDIENCE: Or mobile
energy sources

1448
01:09:11,646 --> 01:09:13,812
that can be near cities,
because then you don't have

1449
01:09:13,812 --> 01:09:15,000
to transport them long ways.

1450
01:09:15,000 --> 01:09:17,910
And-- especially for
disrupting big companies,

1451
01:09:17,910 --> 01:09:20,357
they spend so much money
on putting the lines,

1452
01:09:20,357 --> 01:09:21,899
and they have to
pay for regulations,

1453
01:09:21,899 --> 01:09:23,380
and it slows them down.

1454
01:09:23,380 --> 01:09:26,967
So a new mover can do something
like that, and disrupt them.

1455
01:09:26,967 --> 01:09:28,050
WILLIAM BONVILLIAN: Right.

1456
01:09:28,050 --> 01:09:30,187
Finding those market
niches is a task

1457
01:09:30,187 --> 01:09:31,770
that is now upon us,
because we're not

1458
01:09:31,770 --> 01:09:34,859
going to do a carbon tax.

1459
01:09:34,859 --> 01:09:37,770
So let me just
recap for a minute.

1460
01:09:37,770 --> 01:09:40,620
You have to apply all
the innovation models--

1461
01:09:40,620 --> 01:09:43,500
pipeline, induced,
extended, manufacturing led,

1462
01:09:43,500 --> 01:09:44,640
innovation, organization.

1463
01:09:44,640 --> 01:09:46,979
You've got to think about
this, and [INAUDIBLE]

1464
01:09:46,979 --> 01:09:49,470
by looking at all the
dynamics of innovation

1465
01:09:49,470 --> 01:09:51,720
and how to organize them.

1466
01:09:51,720 --> 01:09:54,210
And we need the four step
process here-- figure out

1467
01:09:54,210 --> 01:09:58,920
the launch categories, group
them with similar technologies,

1468
01:09:58,920 --> 01:10:03,320
apply the right incentive
package to that category.

1469
01:10:03,320 --> 01:10:05,070
Look at the gaps in
the innovation system,

1470
01:10:05,070 --> 01:10:06,720
and work on filling those gaps.

1471
01:10:06,720 --> 01:10:12,690
So that's the four-step
process we've got so far.

1472
01:10:12,690 --> 01:10:13,980
That's enough.

1473
01:10:13,980 --> 01:10:16,920
Why don't we do some Q&A here?

1474
01:10:16,920 --> 01:10:19,860
Sorry for that extended
wrap, but you basically

1475
01:10:19,860 --> 01:10:21,030
now know everything I know.

1476
01:10:24,038 --> 01:10:24,830
Who's got this one?

1477
01:10:24,830 --> 01:10:25,620
MATT: I have.

1478
01:10:25,620 --> 01:10:27,200
WILLIAM BONVILLIAN: All
right, Matt, all yours.

1479
01:10:27,200 --> 01:10:27,330
MATT: Yeah.

1480
01:10:27,330 --> 01:10:29,730
I think you managed to be
more thorough than the reading

1481
01:10:29,730 --> 01:10:30,230
example.

1482
01:10:31,973 --> 01:10:33,640
WILLIAM BONVILLIAN:
That's because there

1483
01:10:33,640 --> 01:10:35,280
was a book behind
it, but I didn't

1484
01:10:35,280 --> 01:10:38,670
want to make you buy two of
my books-- one is enough.

1485
01:10:38,670 --> 01:10:42,090
MATT: I guess my main innovation
was very similar to Max's.

1486
01:10:42,090 --> 01:10:44,960
I think all of the other
readings for this week--

1487
01:10:44,960 --> 01:10:48,000
look at things that
the US is trying,

1488
01:10:48,000 --> 01:10:50,430
but I think it would be
really interesting to talk

1489
01:10:50,430 --> 01:10:52,780
about learning opportunities.

1490
01:10:52,780 --> 01:10:56,280
You mentioned China, and it
still seems like that's-- maybe

1491
01:10:56,280 --> 01:10:57,390
to me at least--

1492
01:10:57,390 --> 01:11:02,370
not going back east as
much as going into--

1493
01:11:02,370 --> 01:11:03,700
AUDIENCE: The centralization?

1494
01:11:03,700 --> 01:11:04,200
MATT: Yeah.

1495
01:11:04,200 --> 01:11:05,440
AUDIENCE: [INAUDIBLE].

1496
01:11:05,440 --> 01:11:06,810
MATT: Sure, yeah.

1497
01:11:06,810 --> 01:11:11,130
And just not making the
same mistakes that we made,

1498
01:11:11,130 --> 01:11:12,053
setting up first.

1499
01:11:12,053 --> 01:11:13,470
WILLIAM BONVILLIAN:
Well, they are

1500
01:11:13,470 --> 01:11:17,940
standing up two
thousand-megawatt coal-fired

1501
01:11:17,940 --> 01:11:19,160
power plants a week still.

1502
01:11:22,800 --> 01:11:27,930
MATT: So are there true examples
of really innovating, where you

1503
01:11:27,930 --> 01:11:29,520
already have a legacy sector.

1504
01:11:32,843 --> 01:11:34,260
WILLIAM BONVILLIAN:
You know, when

1505
01:11:34,260 --> 01:11:38,970
we read that reading on DARPA
a couple of classes ago,

1506
01:11:38,970 --> 01:11:43,590
as we talked about at the
time, the defense sector--

1507
01:11:43,590 --> 01:11:45,420
it's a legacy sector, right?

1508
01:11:45,420 --> 01:11:48,330
It's very locked into
its technologies,

1509
01:11:48,330 --> 01:11:52,440
into its social organization,
into its economic and budgeting

1510
01:11:52,440 --> 01:11:53,640
models.

1511
01:11:53,640 --> 01:11:55,300
It's very hard to
innovate there--

1512
01:11:55,300 --> 01:12:00,030
you're up against a lot of
established systems there.

1513
01:12:00,030 --> 01:12:07,260
Yet DOD has been able to
bring on a whole set of very

1514
01:12:07,260 --> 01:12:09,600
interesting advanced
technologies over the last 25

1515
01:12:09,600 --> 01:12:10,890
or 30 years.

1516
01:12:10,890 --> 01:12:15,840
So it does tell you that this
is not Mission Impossible,

1517
01:12:15,840 --> 01:12:18,690
and there are
organizational lessons--

1518
01:12:18,690 --> 01:12:21,450
as you've read in the textbook--

1519
01:12:21,450 --> 01:12:26,790
that we can pull out of DOD.

1520
01:12:26,790 --> 01:12:29,652
Part of it has to do
with some of the rules

1521
01:12:29,652 --> 01:12:31,110
that we've talked
about previously.

1522
01:12:31,110 --> 01:12:32,690
Part of it has to
do with finding

1523
01:12:32,690 --> 01:12:36,580
a community of change agents,
and that's very, very critical.

1524
01:12:36,580 --> 01:12:39,810
So you need to develop
the new technologies.

1525
01:12:42,430 --> 01:12:45,070
You use an island
bridge model to attempt

1526
01:12:45,070 --> 01:12:47,860
to get the decision
maker community

1527
01:12:47,860 --> 01:12:52,190
to force your approach
on the overall system.

1528
01:12:52,190 --> 01:12:53,815
And then to do that
is going to require

1529
01:12:53,815 --> 01:12:55,930
a community of change agents.

1530
01:12:55,930 --> 01:12:58,378
And there are communities
of change agents

1531
01:12:58,378 --> 01:12:59,920
that we're starting
to see in energy.

1532
01:12:59,920 --> 01:13:04,410
I do think that we are entering
into a very significant energy

1533
01:13:04,410 --> 01:13:06,250
innovation wave,
and we can already

1534
01:13:06,250 --> 01:13:08,960
start to see some
of the outlines.

1535
01:13:08,960 --> 01:13:11,450
We've seen a fracking
revolution in the United States

1536
01:13:11,450 --> 01:13:17,610
that has completely changed
the landscape of US energy

1537
01:13:17,610 --> 01:13:22,430
dependency, and
it's very dramatic.

1538
01:13:22,430 --> 01:13:25,200
I mean, the entire energy supply
system of the United States

1539
01:13:25,200 --> 01:13:27,330
has been turned upside down--

1540
01:13:27,330 --> 01:13:30,650
something which nobody ever
thought was conceivable, right?

1541
01:13:30,650 --> 01:13:32,570
And that is a set of
technology advances

1542
01:13:32,570 --> 01:13:35,300
that were originally pushed
by several of the energy

1543
01:13:35,300 --> 01:13:38,660
laboratories, developed
that core technologies

1544
01:13:38,660 --> 01:13:43,420
behind fracking,
and proceeded to--

1545
01:13:43,420 --> 01:13:46,190
it was implemented over about
a 15-year period as something

1546
01:13:46,190 --> 01:13:49,910
by a wildcat maverick community
in the natural gas sector that

1547
01:13:49,910 --> 01:13:53,930
took these technologies up and
worked on implementing them,

1548
01:13:53,930 --> 01:13:55,910
and it really changed things.

1549
01:13:55,910 --> 01:13:58,220
And the United States leads
that technology revolution,

1550
01:13:58,220 --> 01:14:00,800
so we have 100,000-- now
there's a lot of debate

1551
01:14:00,800 --> 01:14:03,920
about a lot of these operations,
the environmental consequences

1552
01:14:03,920 --> 01:14:05,030
of them.

1553
01:14:05,030 --> 01:14:10,280
We have about 100,000, roughly,
net fracking operations

1554
01:14:10,280 --> 01:14:12,200
ongoing now in
the United States.

1555
01:14:12,200 --> 01:14:16,290
The country closest to us is
China-- it has about 6,000,

1556
01:14:16,290 --> 01:14:17,300
all right?

1557
01:14:17,300 --> 01:14:21,530
So we have a big lead on that
energy technology revolution.

1558
01:14:21,530 --> 01:14:25,190
We have-- we can see--

1559
01:14:25,190 --> 01:14:27,200
solar and wind
now, which are now

1560
01:14:27,200 --> 01:14:30,830
scaling up to trillion-dollar
worldwide energy sectors.

1561
01:14:30,830 --> 01:14:33,440
They're going to be
very, very big, right?

1562
01:14:33,440 --> 01:14:36,350
So this revolution is
now starting, right?

1563
01:14:36,350 --> 01:14:38,117
The real question for
the US-- and we'll

1564
01:14:38,117 --> 01:14:39,950
talk about this more
later-- is whether it's

1565
01:14:39,950 --> 01:14:41,336
going to play, right?

1566
01:14:41,336 --> 01:14:42,878
Whether it's going
to ride this wave.

1567
01:14:46,223 --> 01:14:48,640
MATT: Yeah, it definitely seems
like a theme of the class.

1568
01:14:48,640 --> 01:14:52,190
DARPA worked-- let's
try ARPA-E for energy,

1569
01:14:52,190 --> 01:14:54,518
or a DARPA-like
funding model for NIH.

1570
01:14:54,518 --> 01:14:56,810
WILLIAM BONVILLIAN: But it's
a more complicated process

1571
01:14:56,810 --> 01:14:58,140
than just having a DARPA.

1572
01:14:58,140 --> 01:14:59,870
DARPA can be a change
agent, but you've

1573
01:14:59,870 --> 01:15:02,020
got to get these
steps down too, right?

1574
01:15:02,020 --> 01:15:02,930
MATT: Right.

1575
01:15:02,930 --> 01:15:05,222
WILLIAM BONVILLIAN: When you
work on the implementation

1576
01:15:05,222 --> 01:15:06,180
side.

1577
01:15:06,180 --> 01:15:08,870
AUDIENCE: Actually,
regarding the ARPA-E.

1578
01:15:08,870 --> 01:15:11,663
I notice that DARPA has a
budget of funds like $5 billion?

1579
01:15:11,663 --> 01:15:12,746
WILLIAM BONVILLIAN: Three.

1580
01:15:12,746 --> 01:15:15,380
AUDIENCE: OK, $3 billion--
whereas ARPA-E has a budget

1581
01:15:15,380 --> 01:15:15,950
of--

1582
01:15:15,950 --> 01:15:16,940
maybe $100 million?

1583
01:15:16,940 --> 01:15:17,898
Couple hundred million?

1584
01:15:17,898 --> 01:15:19,330
WILLIAM BONVILLIAN:
$300 million.

1585
01:15:19,330 --> 01:15:20,330
306, Martin, right?

1586
01:15:20,330 --> 01:15:21,705
AUDIENCE: How is
it we can expect

1587
01:15:21,705 --> 01:15:24,260
that ARPA-E is going
to do what DARPA did

1588
01:15:24,260 --> 01:15:25,642
if it has a tenth the budget?

1589
01:15:25,642 --> 01:15:28,100
WILLIAM BONVILLIAN: So I want
to save exactly that question

1590
01:15:28,100 --> 01:15:30,020
for our ARPA-E piece.

1591
01:15:30,020 --> 01:15:30,800
Is that OK?

1592
01:15:30,800 --> 01:15:32,660
Would you forgive me,
but bring it back?

1593
01:15:32,660 --> 01:15:33,577
AUDIENCE: That's fine.

1594
01:15:33,577 --> 01:15:35,360
WILLIAM BONVILLIAN: All right.

1595
01:15:35,360 --> 01:15:35,930
How about it?

1596
01:15:35,930 --> 01:15:39,150
What else we got, Matt?

1597
01:15:39,150 --> 01:15:41,140
MATT: I don't know if
you want to go here,

1598
01:15:41,140 --> 01:15:45,710
but you did mention and
allude to this earlier, that--

1599
01:15:45,710 --> 01:15:47,390
beyond energy like
this is a framework

1600
01:15:47,390 --> 01:15:51,350
that can be used for
any legacy sector.

1601
01:15:51,350 --> 01:15:53,990
I think a lot of our papers
are applying the framework.

1602
01:15:53,990 --> 01:15:59,790
It's interesting to see if
there were any insights into how

1603
01:15:59,790 --> 01:16:05,305
it becomes specific to whatever
industry wants [INAUDIBLE]..

1604
01:16:05,305 --> 01:16:07,883
I don't know if you wanted
to move away from energy.

1605
01:16:07,883 --> 01:16:09,800
WILLIAM BONVILLIAN: It's
a very good question,

1606
01:16:09,800 --> 01:16:12,050
and the purpose of our
textbook was really

1607
01:16:12,050 --> 01:16:13,940
to take lessons that
we've thought about

1608
01:16:13,940 --> 01:16:17,690
in energy with the
realization-- oh, we

1609
01:16:17,690 --> 01:16:20,490
knew energy was a legacy
sector, and we realized--

1610
01:16:20,490 --> 01:16:21,380
oh, wait a minute.

1611
01:16:21,380 --> 01:16:23,590
Most of the economy
is a legacy sector.

1612
01:16:23,590 --> 01:16:27,560
Oh, we came up with this
four step process energy.

1613
01:16:27,560 --> 01:16:29,990
Maybe we could think about
that four step process

1614
01:16:29,990 --> 01:16:31,600
for a lot of other stuff, too.

1615
01:16:31,600 --> 01:16:35,670
That was frankly-- a little
more sophisticated than that,

1616
01:16:35,670 --> 01:16:40,060
but that was the essence of our
conceptual realization process.

1617
01:16:40,060 --> 01:16:44,810
So-- I do think that
these steps here

1618
01:16:44,810 --> 01:16:48,230
are steps that you've got
to think through when you're

1619
01:16:48,230 --> 01:16:49,850
innovating in a legacy sector.

1620
01:16:49,850 --> 01:16:52,230
You've got to think about the
different innovation models

1621
01:16:52,230 --> 01:16:54,843
you've got, and how to
organize those in new ways,

1622
01:16:54,843 --> 01:16:57,260
because all of them are going
to be required in the legacy

1623
01:16:57,260 --> 01:16:59,747
sector-- but you also
have to think about,

1624
01:16:59,747 --> 01:17:01,080
what are your launch categories?

1625
01:17:01,080 --> 01:17:02,360
What are the barriers to launch?

1626
01:17:02,360 --> 01:17:04,235
How are you going to
overcome those barriers?

1627
01:17:04,235 --> 01:17:06,800
What's the right incentive
package and support system?

1628
01:17:06,800 --> 01:17:10,815
Can you do niche launch, which
gets you out of this whole box?

1629
01:17:10,815 --> 01:17:12,690
What are the gaps in
your information system?

1630
01:17:12,690 --> 01:17:15,170
I think you've got to
go through all of those

1631
01:17:15,170 --> 01:17:17,895
when you think about legacy
sector innovation in general,

1632
01:17:17,895 --> 01:17:20,270
and we did a little of that
in the health care discussion

1633
01:17:20,270 --> 01:17:22,348
last week.

1634
01:17:22,348 --> 01:17:23,890
AUDIENCE: When I
was looking at this,

1635
01:17:23,890 --> 01:17:27,320
I was thinking a lot about edge
cases in computer science--

1636
01:17:27,320 --> 01:17:31,300
like, what if I got the
best product, right?

1637
01:17:31,300 --> 01:17:33,250
And then tried to go
through the framework,

1638
01:17:33,250 --> 01:17:34,960
and see how I would pan it out.

1639
01:17:34,960 --> 01:17:36,330
So say like fusion, right?

1640
01:17:36,330 --> 01:17:39,460
How would it work out, and
how is the system structured

1641
01:17:39,460 --> 01:17:41,740
to help bring innovation?

1642
01:17:41,740 --> 01:17:44,410
So-- in ideal innovation,
how would it work,

1643
01:17:44,410 --> 01:17:46,027
and how would the dynamics be?

1644
01:17:46,027 --> 01:17:47,860
And then also, a horrible
innovation, right?

1645
01:17:47,860 --> 01:17:49,630
It's really not even innovation.

1646
01:17:49,630 --> 01:17:51,880
I think Tesla got caught on
this, that they were doing

1647
01:17:51,880 --> 01:17:54,130
the same battery technology that
ARPA-E [INAUDIBLE] figured out,

1648
01:17:54,130 --> 01:17:56,088
and they're trying to
get government incentives

1649
01:17:56,088 --> 01:17:57,270
and go through.

1650
01:17:57,270 --> 01:17:58,900
And so-- that way,
you can figure out--

1651
01:17:58,900 --> 01:18:00,650
this is really not
innovating, but they're

1652
01:18:00,650 --> 01:18:02,323
trying to use these resources.

1653
01:18:02,323 --> 01:18:04,240
So I think that was a
really interesting thing

1654
01:18:04,240 --> 01:18:06,040
to maybe try to
do in the future--

1655
01:18:06,040 --> 01:18:08,350
different types of-- because
there's all the categories

1656
01:18:08,350 --> 01:18:09,460
of energy technologies.

1657
01:18:09,460 --> 01:18:11,892
What if you try to figure
out the ideal solution,

1658
01:18:11,892 --> 01:18:13,600
and try to push it
through the framework?

1659
01:18:13,600 --> 01:18:15,112
How would they be
able to function?

1660
01:18:15,112 --> 01:18:16,570
Because that way,
you can also find

1661
01:18:16,570 --> 01:18:20,530
organizational gaps, like the
politics would not allow it,

1662
01:18:20,530 --> 01:18:22,495
or other things.

1663
01:18:22,495 --> 01:18:25,560
I thought it was interesting.