By Arnold Kling
1. Managing innovation is not like managing projects, so that the politicians who say we need a “Manhattan project” for alternative energy are idiots.
2. China’s central government has difficulty getting its constituencies to change, and it is “outsourcing” some forms of regulation and governance to the U.S. and international organizations.
3. Coal is likely to be the main source of additional energy over the next few decades.
4. Prius owners are not going to feel so good as their batteries wear out, but a new generation of batteries has more promise.The first speaker was Richard Lester, on the topic of innovation. He drew a distinction between project management and innovation. The Manhattan Project and the project to put a man on the moon were examples of projects, each with a narrow objective, a specific customer, and a single implementation. For energy policy, we have multiple objectives, no single customer, and no single implementation.
Flaws in government’s approach to energy include ideological biases (“pro-nuclear” vs. “anti-nuclear”), a very bad track record in doing demonstration projects (Synfuels, breeder reactor), over-optimism, bad management practices, and confused goals.
Innovation these days tends to be cross-disciplinary. The lone researcher is no longer effective. Researchers have to communicate with one another and with customers.
Project management has a goal of closure. It requires decisiveness and is harmed by ambiguity. In contrast, innovation is an open-ended process. Researchers must be encouraged to delve into ambiguity, and it is more important to explore possibilities than to reach quick decisions.
This reminded me very much of the Myers-Briggs distinction between J and P, with Lester arguing that P’s are needed in order to innovate. At a meeting, the J is the one who charges forward, crisply moving the consensus and making decisions in sequence. The P is the one who, after two hours, says, “I think we need to go back and revisit X,” where X is the first decision that was made in the sequence, 90 minutes ago.
During the Q&A, I asked Lester how to measure and evaluate groups that followed a “P” style. With traditional project management, you can measure results against specifications, time, and budget. With a more open-ended research environment, what do you do? He said that this is an important question. He mentioned that since cross-disciplinary connections seems to matter, that might be one measure. But he acknowledged that it is a difficult issue.
The second speaker was Edward Steinfeld. He looked at China’s situation the way it might seem to them. Among their problems:
–in manufacturing, they do mostly low-end assembly. They import high-tech components from Taiwan, Korea, and Japan, and do the final assembly to export. Their assembly facilities are often foreign-owned.
–Manufacturing employment is down since 1997, by about 20 million jobs. The gains in jobs have been in construction, retail and services. These are informal sectors, with no benefits, and often temporary work.
–At a local level, “government” consists of powerful party officials who are more interested in business than in public goods. They are outside the central government’s control, as exemplified by the fact that there are 100 gigawatts of “illegal” electric power plants in China, meaning plants not approved by the central government. (The entire nation of France uses 80 gigawatts of power. China uses 650 gigawatts.)
–China is “outsourcing” some forms of corporate governance and rules enforcement. WTO forces its companies and local governments to conform. The U.S. is forcing China’s factories to produce safer products. Listing their companies on foreign exchanges is forcing Chinese companies to be more transparent.
–China is adopting foreign institutions on a trial-and-error basis. It is authoritarian, but it is no longer centrally planned. In fact, the abandonment of socialism is quite harsh–education is no longer free, and the poor cannot afford it.
The third speaker was Ernest J. Moniz, one of the editors of a report on The Future of Coal. You can go to the link to read the executive summary and decide how much of the report to read. Basically, it argues that a lot of our incremental energy needs over the next few decades are going to be met by coal, even if carbon is heavily taxed. This in turn means that we need carbon sequestration, meaning putting carbon dioxide into liquids and pumping billions and billions of barrels of these liquids into saline aquifers.
This all sounds pretty ugly, compared to the hippie-dippy ideas of wind and solar. But Moniz thinks that coal and nuclear are the only energy sources that can really provide the scale we need for the first half of this century.
Moniz cited poll evidence suggesting that 80 percent of Americans are unwilling to pay more than $10 a month in electric bills to fight global warming. People are more favorable to paying higher electric bills if you tell them they will get an income tax rebate, but it’s still only about 50 percent willing to pay more than $10 a month.
Finally, Yet-Ming Chiang talked about batteries. He said that solar power requires batteries (how else do you store the power for when the sun is not out?), and that the cost of batteries often exceeds the cost of the solar panels.
Different battery properties serve different needs. For cars, what is needed is tremendous power and durability. He has developed new battery technology and formed a company, A123 systems. The good news is that these batteries can fully power a car, called a plug-in hybrid, which can go 40 miles without a charge (so if you commute less than 40 miles a day, you would need zero gas). A Prius can’t go up a steep hill with its battery alone, but these cars will be able to (look for the Chevy Volt in a couple of years). Also, Chiang says his batteries will be able to last 15 years. Prius owners might find that in a few years their batteries are worn out. This is not a minor event. Unlike the $100 battery in your car today, battery packs in hybrids cost thousands of dollars.
The bad news is that the production cost of Chiang’s batteries needs to fall by a factor of 2 or 3 in order to make them cost-effective. They already manufacture them in China. This not only saves money, but it enabled them to get up to speed quickly–they got a manufacturing plant up and running in 9 months. Incredible.
What is the carbon impact of switching from gasoline power to electric power? At today’s average mix of fuels for electricity, it is favorable. But my guess is that at the margin the mix leans toward coal, so that if we were using plug-in hybrids for 90 percent of our driving, I would not be surprised to see little or no improvement in terms of carbon emissions–but certainly some downward pressure on the price of oil.