Black swan thesis of energy transformation

The looming twin challenges of climate change and energy production are too big to be tackled by known solutions and time-­‐honored traditions. Incremental remedies are fine for incremental problems, but they are insufficient for monumental, potentially life-­‐altering threats, which need to be approached with a disruptive mindset. There are 5 billion people coveting the energy-­‐rich lifestyles currently enjoyed by 500 million people, mostly in the developed world. Incremental technology progress will not satisfy this craving. We need non-­‐linear jumps in technologies – Technological Black Swans!1 We can invent these future technologies.

Environmentalists have done a superb job identifying the problem, but often push impractical idealistic solutions at high cost or inconvenience to consumers. I believe that capitalism and self-­‐interest driven models of new technology adoption are the lowest risk way to achieve a low carbon social infrastructure and plentiful energy. The solution cannot be pushed by legislation or governments; it must be pulled into the market by consumers, corporations and aided by encouraging policy. The environmentalist solution is often one of “deploy the technologies we have as quickly as possible” combined with idealized hopes that the business community will start to value un-­‐priced environmental and health externalities.

These thoughts are noble, and occasionally work, but distract from our best “broad” hope: robust unsubsidized market competitiveness of “green” technologies against their fossil competitors. This should be the mantra and goal of Black Swan technology development. After all, the logic of business is to externalize as many costs (like using public roads or not reducing emissions) and maximize profits, as it should be. “Green” should be a feature that follows – rather than defies – the “laws of economic gravity,” which in essence declares that economics trump everything when it comes to mass adoption of a technology. In fact, the mindset of clean energy always costing more can be turned completely on its head in many, even most, areas; economic energy-­‐focused innovations could save consumers hundreds of billions over the next 10 to 15 years!

My basic thesis is that investment in true innovation is the key to reinventing the infrastructure of society and enabling 5+ billion people to sustainably live the energy affluent lifestyle that 500 million enjoy today. While there is no shortage of existing technology providing incremental improvements – whether today’s thin film solar cells, wind turbines, or lithium-­‐ion batteries – even summed, they are not likely to address the scale of our problems. While these technologies will continue to improve and sometimes this incremental ecosystem will result in products compliant with the laws of economic gravity, such as wind in certain locations or lithium-­‐ion batteries in certain applications, I suspect this will not be enough. Regulation and clever accounting will help many pundits justify and push these technologies, but in order to drive the necessary resource multiplication, we need to (and can) reinvent the infrastructure of society through the creation of Black Swan energy technologies.

These Black Swans are technologies that are market competitive without subsidies once scaled, and hit the Chindia price point (the price at which people in India and China will willingly purchase without subsidy) while providing sufficient scale to have measureable impact. They may have up to a 90% chance of failure, but if they succeed, everything changes. Ironically, many appear to have a high probability of failure mostly because they have not been given sufficient scientific focus. Because of this, the skeptical questions such as “wasn’t this tried before?” or “why now?” keep many people from even trying.

Author Nassim Taleb defines a Black Swan event as (1) an outlier—it lies outside the realm of traditional expectations in that evidence from the past did not predict the future event; (2) it carries a significant impact; and (3) in spite of its outlier status, it is justified by explanations that are derived and accepted after the fact. To summarize, “rarity, extreme impact, and retrospective (though not prospective) predictability.” So these technological Black Swans engender shocks that have retrospective, but not prospective, predictability and material impact in at least one large domain. So-­‐called once in a hundred year events actually happen all the time! There is a lot of error in estimating tail probabilities and they tend to be systematically underweighted, particularly in complex systems.

Thus, with several thousand Black Swan technology “shots on goal,” where most predict that each individual shot will fail, I predict we’ll see at least 10 incredible successes. Together, they will completely upend assumptions in oil, electricity, materials, storage, agriculture and the like. Improbable is not unimportant in my view. In fact, very likely, the most successful technologies will be the ones considered improbable, not those known to be safe and incremental. While the world expects lithium-­‐ ion batteries to get better, the most prevalent battery by 2020 to 2025 may be what I call a “quantum-­‐ nano-­‐thingamajigit” battery that is 10 times cheaper and 10 times more energy dense. Technically it may not even be a (chemical) battery, but rather another sort of electricity storage device. This is the essence of the Black Swan thesis of energy transformation!…

Download full article