Energy tech innovation threatened by economy

At the MIT Energy Conference, industry and policy experts say that the slumping economy and outdated regulations stand in the way of rapid energy technology adoption.

Martin LaMonica Former Staff writer, CNET News
Martin LaMonica is a senior writer covering green tech and cutting-edge technologies. He joined CNET in 2002 to cover enterprise IT and Web development and was previously executive editor of IT publication InfoWorld.
Martin LaMonica
4 min read

CAMBRIDGE, Mass.--The outpouring of technology innovation in green technologies could be stymied without healthier financial markets and significant changes to government policy.

Numerous speakers at the MIT Energy Conference on Saturday said the economy and current regulations are barriers to cleaning the energy industry fast enough to mitigate the effects of climate change.

"We see technology innovation completely unprecedented, certainly in my memory, in the technology sector," said Ernie Moniz, MIT professor and director of MIT's Energy Initiative. "We also heard (today) that to get scale-up in time will take more. It will take policy innovation...and business model innovation."

To stabilize greenhouse gas emissions in the next 20 years, the energy industry needs to start investing now in a range of technologies, including renewable energy, efficiency, and underground storage of carbon dioxide, different speakers said.

The problem, though, is that the energy industry moves slowly and is influenced by political lobbying, Moniz said, creating a "large inertial system" that takes time to change.

Also, the meltdown of the financial markets has made building new renewable-energy projects, such as wind farms or solar plants, very difficult. That has created a situation where the government needs to take a more active role in clean energy, argued Theodore Roosevelt IV during a panel on policy. Roosevelt, the great-grandson of President Theodore Roosevelt, is managing director at Barclays Capital and an outspoken conservationist.

"We now have in financial markets something equivalent to an overloaded electricity grid...We have something close to a blackout" because banks are afraid to lend money to other financial institutions, he said. "If we want to see investments in alternative energy, Uncle Sam is going to have to put some money into these."

As a "good Republican and good investment banker," he is wary of government involvement but he said the current situation demands the federal government take the lead on energy projects with industry and possibly states sharing some of the investment risk.

"Diversification of our energy is a good goal in itself. It's prudent risk management. Climate change...we need to try to rise to that challenge," Roosevelt said.

Room for auto start-ups?
The pace of "decarbonizing" the transportation industry is also threatened by the economy, argued John Casesa, the managing partner at Casesa Shapiro Group and a leading auto industry analyst. The recession has dramatically cut revenues at large automakers, a situation that is likely to slow the pace of technology innovation.

"I think it's unstoppable. There's been a societal change in terms of the demand for clean energy," Casesa said in an interview. "I also think, though, that some of this stuff that might have been quickly accepted is going to face a longer adoption cycle because of the economics."

For example, if the large incumbent automakers were allowed to go into bankruptcy, there would be a "big hole to fill" for smaller companies with new technologies, he said.

Casesa predicted that by 2020, the internal combustion engine will still be the dominant powertrain, with electric cars remaining a small percentage of cars.

Hard questions on policy
On policy, many speakers endorsed the basic idea of putting a price on carbon emissions. The Obama administration has called for a cap-and-trade system where big polluters have to purchase permits to emit carbon dioxide. The idea is that the auction will generate revenue that can be used for clean-energy infrastructure and research. Allowing permits to be bought and sold is a market-based mechanism for settling on a price for carbon emissions, say advocates.

"The president has it right: let's do a price signal," said Wayne Leonard, the CEO of utility Entergy, who argued that the United States should take the lead on climate change in global negotiations.

Leonard said that there should be an increase in government-funded research in technology to store carbon dioxide underground at coal plants, called carbon capture and storage.

He warned, though, that carbon regulations will push up the price of electricity.

U.S. Rep. Jay Inslee (D-Wash.), who delivered a keynote talk at the conference, said that creating regulations to restrict carbon dioxide emissions, even if they do increase the price of electricity, is more prudent than inaction.

In an interview with the media after his talk, Inslee said that there are already a number of economic problems being caused by climate change, such as a drop in agricultural production in California because of the drought. Also, in the history of regulation, businesses have complained that the cost of compliance would be too high but, in the end, found technical and business solutions, he said.

"Innovation gives us the possibility that there won't be" an increase in electricity prices from carbon regulations, he said.

Regulations, like those in California that give utilities incentives to be more energy-efficient, could also mitigate increases in the electricity rates, he said. "Even if the per-watt rate went up, your monthly bill may not go up--that's the ultimate issue," Inslee said.

There are legislative efforts under way to pass an energy bill this year that would create a national requirement for renewable energy at utilities. Carbon regulations could also be voted on this year. The exact details on how these policies are structured will make a big difference on how quickly new energy technologies will be adopted, say observers.

"One must say, (we are) only beginning to address the really hard questions on policies," said MIT's Moniz.