The Third Energy Revolution

08/09/2013 03:11 pm ET | Updated Oct 09, 2013

Energy is at the core of who we are and our activities every day. Whether it is firing synapses, moving cranes, or powering our homes, we run on energy. And our dependency is only growing: 7,000,000,000 humans with an annual growth rate of more than 1 percent translates to one more person on Earth every 13 seconds. We need to find solutions at the local, state, national, and international level soon, but that starts with a long-term perspective and hope.

The third energy revolution will consist of three main drivers:

1. Science: Laboratory methods become commercially available via grants, subsidies, or venture capital
2. Government: Regulatory agencies make it easier to adopt new technologies and create a culture of innovation internally
3. Entrepreneurs: Innovators work together to push the boundaries of business and technology

Looking at the past, reflecting on a Stanford class on energy policy with IPCC lead author John Weyant, and conversations with Khosla Ventures, we can then think about the future of energy from a policy, finance, and technology perspective. We need to be patient and expansive in our approach, have constant checkpoints, and make sure we are developing talent to think about these solutions. Not only will this three-pronged approach help us in energy, but also with the economy in general.

Our Progress

The First Energy Revolution: Lessons from the Past

The first energy revolution began with Thomas Edison, Charles Coffin, and Nicola Tesla in the late 1800s. Along with great men like Frank Sprague, J.P. Morgan, William Sawyer, the Edison Company made electric light possible in New York City and eventually throughout the U.S. It was the first time that we could work past darkness and was the first step to bring science into mainstream consciousness.

But for that expansion to occur, Thomson-Houston and Edison had to combine to form the GE Company, GE needed investment from J.P. Morgan personally, talent like Tesla and Sawyer had to believe in the vision, and NYC regulators had to take a leap of faith in science and safety. In addition, the private landscape of failed companies, ideas, and dozens of years it took for the successes we think about today are often disregarded. In many ways, that confluence of people, financing, and vision is what we need today in order to challenge the even more complicated energy problem.

The Second Energy Revolution: An Expanding Hypothesis

The first energy revolution has morphed into challenges of electrical efficiency and extreme use cases, but continues to evolve today. The second energy revolution is the development of energy generated from solar, gas, wind, and other natural elements. Like the first revolution, this movement began several hundred years ago but began to commercially grow in the 1800s. For solar it was the scientific developments with selenium and UV, for gas it was welling and infrastructure development in early America, and for wind it was windmill adoption in 11th century Europe and colonial America. But what really sparked commercialization were research, investment, and the standardization of infrastructure in America, probably among other factors.

As the world grew more complex, more entities needed to work together to commercialize energy technology successfully. First, there were incentives for all three technologies: lab grants (solar), World War II (gas), and survival (wind). These incentives and teamwork help explain why technologies that have been developing since BC became commercial within about one hundred years. Checks were also put in place for regulation. In the same way today, we are experiencing an international awareness of climate change, population growth, and the need for new energy.

The Present

Learning from lessons of the past, we can see that our problems are both more complex and pressing, but our technology is also more advanced. A common thread through the development of energy has been research reaching commercialization through a pipeline of people, timing, and regulation -- aspects that will always hold for energy innovation. Today, we are developing novel technologies with a supportive cast of entrepreneurs, financiers, executives, and government.

Having recently taken a class with Stanford professor John Weyant of the Intergovernmental Panel on Climate Change (which jointly won the Nobel Prize with Al Gore in 2007), we explored the policy that is shaping our national energy consumption and new ways to invest in energy. Whether it is fishing problems in Asia, melting polar caps, or subsidy control in China versus US, these policies focused on balancing the line between over-regulation and no protection/support. The venture capital support and attitude of experimentation are also critical to funding promising new technologies.

A few months ago I had the chance to sit down with Petr Johanes who had worked with Kholsa Ventures in Menlo Park. We discussed Vinod Khosla's vision and that of the firm. For them, identifying "black swans" was critical: companies that could change entire landscapes within energy. Given their early-stage venture model this makes sense financially but it also makes sense from a technology standpoint: Incremental changes have added up to large advances in the past, but that final push often requires brute force (Edison) or genius.

Tying together government and the private sector, Petr and Professor Weyant mentioned the importance of ARPA-E grants, which grew out of the famous ARPA grants that funded the evolution of the Internet in the 1960s. The Chinese subsidy given to startups and particularly solar companies was another point of contention -- how can private markets compete? In the end, we concluded that it takes an international effort to bring about these technologies, and Nash equilibria may hinder our ability to solve these tough problems.

What We Need

Looking at our past and to our present, there are lessons we can learn and apply to our future.

1. An expanding ecosystem:
a. In the 1800's it was scientists, wealthy individuals (J.P. Morgan), and private companies that pushed energy forward
b. In the 1900's it was universities, scientists, and government that helped develop new forms of energy technology
c. Today, it is universities, private companies, government, venture capitalists, and angel investors that are pushing forward energy innovation
2. An accepting mainstream culture:
a. Wind and gas were developed for their immediate utility, whereas solar and other experimental technologies where developed through aided research
3. Talent
a. Talented scientists and students of energy are always needed in the field and probably are the most important characteristic of a changing energy ecosystem

In the end, the process starts one step at a time but encompasses almost every aspect of our lives: educating our youth for talent, creating helpful government programs, and developing an attitude of accepting failure and experimentation in the media, classroom, and in business. If we can accomplish this triumvirate, our chances of reducing the cost of solar and developing new future technology like piezoelectricity rapidly grow. Let's hope it is true for the future.