By Kurt Sheline 9/19/13
A recap of REFF-West's session on Innovation in the Energy Industry
The panel consisted of a phenomenal representation of the full foodchain of energy innovation, from university and federal labs to large and growing corporations. The speed of innovation in the industry has increased rapidly, but what else can be done? Is it possible to cut the pace to market of new energy technologies in half? The panel offered several anecdotes suggesting the feasibility of this goal.
At Argonne, one of 17 DOE national labs that emphasizes innovation in material science, focus has been placed on redefining incentives and better collaborating with industry. Work is currently being conducted to incentivize scientists to measure their impact by market adoption of new products rather than the number of high quality publications produced. The lab is also engaging industry much differently than it was even five years ago, opting now to discuss the needs of large and small corporations openly through multi-day forums in an effort to direct resources to those needs.
At GE, partnerships are utilized to develop technologies externally. The firm is currently working on bringing the venture capital inspired executive-in-residence concept to its R&D functions. In addition, a recent experiment with crowdsourcing engineering solutions in its aviation practice resulted in the development of 900 prototypes for the redesign of a 30-year incumbent bracket. Ultimately, the cheaper replacement was 80% lighter. GE tapped into a worldwide supply of over 50,000 engineers for the project (compared to 400-500 internal engineers focused on aviation).
At Stanford, federal budget pressures have forced the university to diversify. The university has had a long history of working with industry partners (GE, Schlumberger, Exxon, Dupont), and also utilizes the funds of private donors to support faculty and students in seed-funding research. The number of students determined to make energy innovation happen is enormous.
At SolarCity, competition is key. When any disruptive technology is changing any industry, the monopolies or incumbents will focus on stopping change rather than becoming a part of it. This is extremely visible in the energy space, and a natural course of the industry’s revolution. Eventually, the right product will win. When the solar investment tax credit drops to 10% in 2017, the solar industry will need to reduce cost by around 20%. This drop will not come from panel manufacturers, but from delivery. The industry will need to realize greater economies of scale and get more throughput from its existing op. ex. infrastructure. As utilities get into the space, we should expect to see a tipping point in how quickly transformation occurs.
How about the impact of natural gas? Will it stifle innovation elsewhere? Any opportunities?
While the panel believed that opportunities abound in natural gas (technologies to improve fracking, downhole communications, commercialization technologies, catalysts that allow oil-based chemicals to be made from natural gas, replacement of coal with natural gas for electricity generation), concern was voiced over becoming complacent. The will to innovate, particularly in an unfavorable budget environment, cannot be lost. The bridge may be long, but it will end. We must push ahead while we still have the chance.
With this changing dynamic of energy innovation in mind, the panel offered its thoughts on what we will see over the next 10-years: a car that can drive 500 miles on a charge, a true smart grid, advanced manufacturing, sensors everywhere, low-toxicity batteries, distributed/local generation and storage, and 10% of cars on the road with plugs.
Kurt is currently a graduate student at the Haas School of Business at UC Berkeley. Previously, he has worked in the financial services industry, beginning at Merrill Lynch in San Francisco, and at Pathway Capital in Irvine, CA. He has focused on the placement of capital in the private equity and venture capital markets.