The end of innovation?
- 08 February 2013
By Jim Walker, Co-founder and Director of International Programs and Strategy, The Climate Group.
The Economist magazine recently commented on a range of studies that suggest that the rate of human innovation is coming to an end. “Has the ideas machine broken down?” reviews opinions ranging from Paypal founder Peter Thiel to economist Tyler Cowen. The main thrust of the pessimists’ argument is that there are no more major breakthroughs to invent that measure up to the social and developmental impact of, for example, the flushing toilet and the internal combustion engine.
The low hanging fruit has gone and anticipated new leaps have not materialized, as embodied in Thiel’s quote in the article: “We wanted flying cars, instead we got 140 characters.”
The Economist focuses on arguments around the role of innovation in driving economic growth. But I’m focusing here on the notion that we are destined to a future of tweaking and incremental improvement in what we've got.
Are there no more breakthroughs to be made? Anyone familiar with the perfect storm of resource scarcity, population growth and climate change will know that we've still got quite some innovating to do if we want to continue this grand experiment in human development past the end of the century.
The art of the possible is already being demonstrated by energy and resource start-ups like Tesla, Nest, CINTEP, Ecovative, BrightSource, PassivSystems and SilverSpring Networks, and I suspect that reports of the death of innovation are premature (next year we will even have the flying cars, but that’s another matter).
True, the products and services offered by some of these start-ups might be characterized as incremental innovation, but together they and other pioneers in the space are offering a step change in how we are able to convert natural resources into human prosperity.
The future of human development, particularly of those at the ‘bottom of the pyramid’, depends today as much on reinvention of our energy and resource systems as it does on sanitation and access to healthcare.
The time scales for payback have historically been viewed differently, with solving health challenges an immediate need, and solutions to climate and resource benefits coming to fruition for future generations. But they are increasingly converging – both challenges answerable, to channel Dr Martin Luther King, to the fierce urgency of now.
In clean technology, as in the pharmaceutical sector, the disconnect between what is possible and demonstrated today, and what is mainstream and available to the mass market continues to be unacceptable -- but at the same time a spectacular business opportunity.
There is no greater energy and resource mine available to us today than the waste inherent in the systems we have already created. Less than 0.5% of the energy in gasoline does useful work moving people around. This means we burn some 7.5 million barrels of gasoline a year making heat and noise and transporting heavy metal boxes from A to B, reserving 40,000 barrels for their intended purpose. This systemic waste is giving our kids (and China's kids) asthma and other chronic diseases.
Less than 10% of the energy in coal burned at a power station to light an incandescent bulb actually generates light. Lighting is some 19% of electricity use, so up to 1.3 billion* tons of coal a year is burned to heat wires and light bulbs around the world, and that’s just taking the coal directed at lighting.
Coal is costing the US an estimated US$340 billion per year in health and environmental costs (the bulk, $270 billion, from health impacts and fatalities), and together with tailpipe emissions, coal combustion pushed Beijing's air quality off the scale last month.
Solving these challenges presents incredible opportunities to save money, resources and to make leaps forward in public health.
Right now we can already deploy electric vehicles that can save more than 40% on the emissions wasted by internal combustion engines (depending on electricity source), and we have shown that LED lighting that saves 60-80% of energy at the bulb.
The solutions open up a ‘Saudi Arabia’ of energy efficiency. What’s more, they are better products than their incumbent competitors. Further down the line we can reinvent our transport systems - lightweight vehicles, accessible mass transit, telecommuting.
The scope for innovation is immense, is urgently needed, and it's underway today. So what’s holding us back?
The economic downturn has knocked the wind out of the sails of the clean tech sector. Institutional investors are backing out and venture capital has declined in 2012.
What appears to be entering the vacuum is the corporate innovation program. From Siemens to Sainsbury's, companies are seeking out disruptive solutions and combining them with their scale, procurement clout and access to market.
Our Agile Cities partnership shows cities are making welcome moves in the same direction, opening up information marketplaces to developers of apps and services for energy efficiency and conservation.
For clean tech this is a welcome trend. With a few notable examples like Tesla and Nest, the sector has struggled with the 'push' model for innovation, and in addition to clear policy signals, collaborative partnerships are needed to change market drivers around new energy systems.
A growth area
Like Thomas Edison, today’s energy innovators need to innovate whole systems, not just products and services, and it’s tough to do that alone.
This is another parallel with pharmaceuticals** where innovators have reached markets faster and easier in partnership with the sector incumbents. It's a growth area. For example, leading VC firm VantagePoint has established partnerships with a cohort of major companies including BP, Best Buy and Schlumberger. Other companies like Broadscale are now acting as go-betweens for utilities and energy innovators, looking to create scaling opportunities.
At Rio+20 The Climate Group called for every major business to have a significant low carbon business play by 2015 (GE’s Ecomagination, Toyota’s Hybrid Synergy Drive, and Philips’ LED business are examples of what we are looking for). We believe this will differentiate those at the table in the coming resource revolution from those who will inevitably be the entree.
Forging partnerships between incumbents and disruptors is central and we are stepping up our efforts to make new connections and facilitate new partnerships with start-ups that have the power to disrupt carbon emissions were they to reach scale.
Significant energy and resource users will adapt or die in the coming decade through this process.
Innovation is not over.
*this is my rough estimate based on 10% efficiency of incandescent lighting, a 19% share of electricity use for lighting and 7.6 billion tons of coal consumed globally per year. There are additional energy losses at the power station and in transmission of electricity (underestimating waste), but there are also more efficient forms of lighting installed than incandescent bulbs (overestimating waste).
** I’m grateful to a Alan Salzman of VantagePoint for this insight.
Read more on The Climate Group blogs.