In a recent column for Bloomberg, Tyler Cowen urged against extending the enthusiasm around the success of Operation Warp Speed (OWS) in spurring vaccine development to other areas where faster innovation is needed to address social problems. Applying the OWS model to clean energy in particular, Cowen argues, would not work. I disagree.
This aggressive government effort catalyzed private sector investment through direct subsidies and advance market commitments and expedited the regulatory process. These are all concepts directly out of the academic literature on innovation systems. OWS simply demonstrated that it could be done quickly. Indeed, compared to the fastest previous vaccine development, it sped the rate of innovation by at least a factor of four, which is similar to what we need in some areas of clean energy.
Of course, clean energy innovation looks different from vaccine development in several respects. Some cleantech is mature enough that the only missing ingredient is scale. In some areas, infrastructure like fast chargers for electric vehicles and transmission lines is the limiting factor. However, in other areas, we need truly novel technologies to be developed, proven, and find early niche markets.
Fortunately, the past decade has seen tremendous progress in clean energy. The cost of solar panels and batteries for electric vehicles are both down by 90 percent from a decade ago. A battery pack that added $40,000 to a vehicle’s cost in 2010 now adds just $4000, and that car doesn’t need a $2000 gearbox. As a result, electric vehicles comprised 27 percent of new cars sold across Europe in October. Similarly, renewables are expected to account for 90 percent of global power generation installed this year. But all of this is still too slow to meaningfully address the challenges from energy and climate change. If we can identify new mechanisms to warp speed adoption, we should try them. And if we find successful models in other areas, we should look hard into how the approach could be used in clean energy.
The argument that an OWS-inspired approach won’t work for clean energy is unnecessarily defeatist. Cowen offers a few points, and there are holes in each of them.
“U.S. energy expenditures are far more than $1 trillion per year, and most of that total is not green. A pre-purchase of so much energy, which in green form could prove more costly yet, would not have sufficient political support.”
Yes, by market size, energy is bigger than the market for COVID-19 vaccines. Energy investment comes in trillions while vaccines are in billions, but that’s not a problem. No one is recommending that the U.S. government buy $1 trillion of clean energy for American households. The point is for the government to buy just enough to generate economies of scale, prove reliability, and stimulate the learning-by-doing required to bring costs down. That government share can be an order of magnitude smaller than what the private sector and households will ultimately finance once early-stage difficulties are overcome. This worked with wind turbines and solar panels, with dramatic results over the past decade.
“Climate change is caused by global energy emissions, not just U.S. emissions. Yet unless the new green energy innovation is truly cheap, most of the world still won’t use it, even if the advance-purchase program succeeds within the U.S..”
We can agree that climate change is a global problem, but so is COVID-19. The goal is for the government to buy down the risky early activity so that it becomes reliable, inexpensive, and accessible to a much broader set of people. As I saw in writing a book about it, that’s what has worked with solar. The U.S. funded $2 billion of R&D, Germany provided $200 billion in demand subsidies, the Chinese scaled it up with billions in low-cost loans, and now cheap solar is available everywhere. The global benefits of this accelerated process of innovation are in the tens of trillions of reduced costs of clean energy and less climate change. You buy down technology so the rest of the world can use it. That’s not a problem; that’s the point. It certainly is with vaccines. A 95 percent effective vaccine that goes to 5 percent of the world’s population does not provide much protection from a pandemic, even to those who live in the US. The same applies to climate.
Another spatial aspect of the vaccine program is strongly similar to clean energy. OWS appears to fit neatly within the Trump Administration’s America First foreign policy. But look more closely, and you will see that Pfizer, the lead so far, is a multinational company. It developed the BNT162b2 vaccine with a German biotech firm founded by two Turkish immigrants and funded by Germany, the EU, and China. The first non-testing doses are currently being administered in the UK, and the EU has contracted for three times more doses than the U.S. Just like clean energy, vaccines depend on a global innovation system, not innovation nationalism. OWS has managed this well.
“There are few varieties of anti-COVID-19 vaccines, and they are applied to most people in the same way. It is a more daunting problem for the government to pre-order the right sizes and kinds of batteries.”
Cowen’s battery example is actually a good comparison to vaccines, not a counterexample, because in both areas, basic R&D is necessary but insufficient. Six vaccine candidates are getting funded under OWS. All six candidates may not come to market, but that’s fine. When it comes to innovation, we are always rolling dice; chance is involved. If the Department of Energy were to similarly commit to $1 billion in purchases for six novel battery cathode materials, chemistries, or designs, that would make a huge difference to the industry and U.S. competitiveness with China. Otherwise, China will surely dominate lithium-ion battery manufacturing as far as the eye can see. That seems like exactly the type of technological diversification program we need.
Cowen further argues that clean energy is harder to solve because energy involves so many other institutions.
“building a new energy infrastructure requires the cooperation of many companies and institutions, including local governments and regulators.”
Yet what industry could be more regulated than pharmaceuticals? The SEC, the U.S. patent and trademark office, the FDA, the NIH, and state health care programs all contribute to getting drugs to patients. Cowen surely knows the role regulatory streamlining has played in OWS (and would like to see more), perhaps a more important role than the finance. One can imagine a similar regulatory acceleration being extremely helpful for clean energy in, say, siting new power lines or offshore wind power, or simply allowing the sale of electricity to your neighbor.
Cowen makes the valid point that public acceptance matters. For example, people who oppose nuclear power might refuse to adopt nuclear power even if it were free. But is it not that hard to see the same problem applying with vaccines? Indeed, we may end up having to pay millions of people to get vaccinated who feel the same way about vaccines as many feel about nuclear power. This means that accelerating innovation requires taking public acceptance seriously and addressing it. OWS has no special powers over that. Persuasion and public education will be required for a widespread vaccination campaign and a clean energy transition alike.
Yes, clean energy innovation has more moving pieces than a vaccine for a single disease. Nonetheless, like OWS, support for R&D and a modest amount of public procurement are key parts of an overall strategy of reducing harm. The broader set of solutions also includes: enhancing science and engineering talent, co-funding demonstration projects, building infrastructure, market support for technological diversification and advanced manufacturing, as well as making all of it responsive to evolving consumer preferences.
There is much for the climate and energy community to learn from OWS, even if we have to adapt it, test it, rework it. Given the scale and urgency of the climate crisis, we are not in a position to dismiss something that worked so well in a different area just because it would have to be modified to address the particular innovation gaps in clean energy. It is better to do that work and build on that success to achieve similar results for a comparably urgent crisis.
Gregory Nemet is a Professor of Public Affairs at La Follette School of Public Affairs at the University of Wisconsin-Madison. He is the author of How Solar Became Cheap: A Model for Low-Carbon Innovation.