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On Renewable Energy Technology, I’ll Wager On Bill Gates Over Elon Musk

In 1999, attending a conference on renewable energy technology, I warned that for any given technologies or fuels to succeed in the long run, they needed to be roughly competitive — that is, consumers should want buy them in quantity based on cost and quality. Government support, in the form of subsidies or mandates, were unreliable, I argued, pointing to the losses at Chrysler in the mid-1980s when they assumed that CAFÉ standards would make large cars unmarketable.

This still holds true, as the recent experience of boom and bust for photovoltaics shows. However, many supporters of renewable energy, and battery electric vehicles, refuse to accept this. Instead, many argue that they are getting cheaper, and thus only need government support to boost sales until their costs fall sufficiently for them to stand on their own.

But the idea that buying more of an uncompetitive technology is the path to economic viability is largely mythical and based on the fact that photovoltaic costs have been falling at the same time as sales have been accumulating. (An example of assuming correlation equals causality, which is known as a logical fallacy.) It is true that the learning curve can reduce costs, but usually only slightly, and the same is true of economies of scale, which have long since been achieved for photovoltaics and apparently so for lithium-ion batteries.

Nonetheless, advocates of making technology viable by promoting sales insist the approach is valid, despite the fact that private industry rarely relies on it. Toyota’s Prius is cited as a prime example, but costs were high only when the car was first introduced, and appear to have moderated since. Again, for more mature technologies like photovoltaics, such progress tends to be much slower. Although there are numerous complicating factors, improvement in PV panel costs appear to have dropped to about 5% per year, Greentech Media estimates, down from more than 10% per year earlier.

Elon Musk through Tesla Motors has embraced this notion of viability through volume (and subsidies), receiving billions in government support plus very handsome subsidies for Tesla purchasers. Although he talks frequently about producing vehicles for a mass market (planning for 500,000 sales per year), to date he has only produced an expensive sports car that has admittedly performed quite well. There are still serious questions about whether or not the coming Model 3 can maintain the projected level of sales without the government rebate/tax break of $7,500 a car.

Presumably, the Tesla battery gigafactory and its advanced automation will bring battery costs down, but whether that will be enough is an open question. (In fact, most sales to date relied on the same battery suppliers as other BEV makers.) Since battery cost and performance has been the primary obstacle to broader adoption of BEVs, skepticism about Tesla’s ability to overcome this remains warranted. (Battery costs are far from transparent, and experts remain uncertain about actual numbers — though they have certainly come down in the past decade, the battery pack for a Model 3 low-end model will still be about $6,000.)

Bill Gates has taken the opposite approach from Elon Musk, joining the Breakthrough Energy Coalition, which is pushing research and innovation. The intent is to develop fuels and/or technologies that will become competitive in the market place. Without knowing what, precisely, they are planning to research, this approach appears validated by the success of the LED light compared to the compact fluorescent lightbulb (CFL). The latter was heavily promoted by governments and energy efficiency advocates, who waved aside its shortcomings (slow start-up, especially in cold weather, and poor light quality) and exaggerated its performance (the claimed 10-year life was clearly inaccurate and the source of much consumer discontent.) LEDs appear well on the way to being the lighting of choice.

Read full article at Forbes