The Gates-led Breakthrough Energy Coalition will be investing over $1 billion dollars, the Wall Street Journal reports. The exact dollar amount pledged is unknown, but a Gates spokesperson told Tech Insider that “it represents many billions of dollars in willing capital.”
The report links to an essay by Gates, who writes,
Today’s batteries also have a far lower energy density—that is, they store much less by weight—than fossil fuels. Coal provides 37 times more energy per kilogram than the best lithium-ion batteries available today. Gasoline provides 60 times more
Like the Obama Administration, Gates thinks that throwing money at firms attempting to solve this and other problems related to energy is a good idea. I do not think that either Obama’s people or Gates are particularly skilled at this sort of investment, but I have much more respect for Gates because he is throwing money that he and other investors are providing voluntarily, rather than appropriating taxpayers’ money to fund his dubious scheme.
Unfortunately, elsewhere in the essay, Gates touts the virtues of government-funded research and development. He should read Matt Ridley’s analysis of that in The Evolution of Everything. Ridley offers a refutation of Gates’ recycled cliches.
For another optimistic take on batteries, see Seth Borenstein’s article.
I work in energy and have some modicum of expertise here. A few points
– Gates has correctly identified the most important known-unknown in all of energy. An economic battery, if technically possible, would be the most transformational energy technology since the internal combustion engine. That’s not hyperbole. He has also correctly identified the problem with batteries as energy density.
-He is far from the first person to come to this conclusion, though. The potentially transformative power of batteries has been well known for going on 50 years now. Because it has been an obvious known-unknown, there has been an endless supply of people who have thought that with 2-3 years of funding, they could solve the problem. To date, all of these people have failed. Yet, because it is an “engineering” problem and the payoff is so huge, the endless supply of such people continues. Chalk it up to standard American pathological optimism.
– The perspective of investors can perhaps be surmised by the above. As a rule of thumb, the longer someone has been in the electricity business, the more jaded and skeptical they are about batteries. There is a long line of investors who have been burned by investing in battery R&D, who after 3 or 5 years has nothing to show except some marginal IP worth perhaps 10% of the original investment.
– Gates is more or less the perfect investor for such a venture. As an investor rather than a government, whoever is doing the actual research will not have to deal with all of the issues that result from receiving money from a political process. Because he is uniquely wealthy and seems to be mainly concerned with “legacy” (negative rate of time preference?), he is more likely to be patient and can afford it if it turns into a total loss
– At a high level, because the payoff would be so gargantuan, it probably is worth it to pursue battery R&D forever, even if it turns out to be the modern equivalent of trying to discover the philosopher’s stone. Given the payoff structure of the investment, the investor really ought to be the person with the lowest rate of time preference and/or lowest cost of capital. Usually that is a government, but chasing the pot of gold at the end of the rainbow is going to be tough for governments to justify politically when the next 20 years of budgeting are going to be about how and where to cut social security and medicare.
Thanks. That was helpful.
Why batteries?
Why does government have a low rate of time preference and/or cost of capital?
Are you considering the cost of capital of those a) from whom the government takes the money or b) to whom the government could have given the money for other purposes?
Governments have the lowest cost of capital because the market assigns them the lowest default risk. The market does this presumably because governments are uniquely capable of extracting resources by force. One can reasonably argue this is unjust, but as a practical matter it’s not changing soon. One can also argue the market is incorrect in its judgement of default risk. If you wish to make that argument, you are more than free to do so with your money in the deep and liquid markets in treasury & corporate debt. For purposes of argument I take it as given.
For an individual person, if you have any debt whatsoever, then by revealed preference your rate of time preference is higher than a government’s cost of capital. There are no mortgages with lower yields than treasurys (unless you were a “Friend of Angelo” https://en.wikipedia.org/wiki/Angelo_Mozilo#Friends_of_Angelo_.28FOA.29_VIP_program). One could rationally invest on many things while having a mortgage given a) the tax benefits (IRAs, etc) or b) a judgement that the risk-adjusted returns are sufficiently high.
My argument is that a cold-eyed view of investing in battery R&D would not pass b) with a 4.0-4.5% cost of capital, which is the relevant, marginal cost of capital for a normal, mortgage-having consumer that doesn’t carry a credit card balance. This is the exact kind of person from whom or to whom the government is in practice taking/giving.
Got it. Thanks!
Read the Breakthrough Coalition media releases and it will become clear that they expect this to be a “public-private” partnerships. They will invest in countries and technologies in which governments significant financing for basic and other research. So, these private investors will benefit from taxpayer funded research. It is impossible (and, likely in the view of these investors, preferable) that there will be uncompensated or under compensated bleed from public research to those private investment initiatives. Thanks, Bill and other Bill- ionairs, for proposing to rely on taxpayer spending to further your altruistic investment initiative. Yep, throwing government money in the same direction as your investment is a very good idea, indeed.
Also, why batteries? The stated goal of the Coalition is to produce zero carbon emission energy. But, how are those high energy density batteries going to be charged? Likely through even more government subsidies to wind, solar and geo-thermal “zero emission” sources.
An economic battery would change the electric power industry so radically that wind & solar would probably no longer need subsidies
Maybe. But why wouldn’t we just fill up our batteries by misusing natural gas to generate electricity, using more in the process?
We need subsidies to the battery industry in order to make the alternative energy supply industry competitive so that the former can make subsidies to the latter “probably” unnecessary. Got it.
How long have I been hearing that subsidies to alternative energy will “probably” make them competitive?
I agree with everything you said except, I would contend that we already have enough energy density, rather cost is the big obstacle.
The military and portable electronics industries have been spending millions for decades (I was familiar with a DoD super-capacitor project over 20 years ago) and have made negligible progress in coming up with any economical alternative to the lithium-polymer industry standard.
And lithium batteries only got cheaper because lithium got cheaper – materials have accounted for 99% of the cost for 30 years, there’s nothing left to squeeze out of trying to make production more efficient. Also, since interest rates are low, it should be cheaper than ever to rent large quantities of the things. But that’s not because of technological innovation.
There are lots of clever ideas out there, but they are all so expensive that none of the big developing countries are going to think about it until they’ve already exhausted all their cheap coal reserves, which would defeat the whole purported point.
Google has already tried a moonshot renewables program. They wrote up their conclusions in IEEE Spectrum. They were not promising:
http://spectrum.ieee.org/energy/renewables/what-it-would-really-take-to-reverse-climate-change
Wow, it was really nice to see such a serious effort for once. Thanks for that link, Kevin.
Let me call out one of the main points of the article:
“Even if our best-case scenario were achievable, we wondered: Would it really be a climate victory?”
This deserves way more attention! You shouldn’t have to fund a multi-million dollar effort for the principle investigators to come back and say this. You can tell before you start. You can certainly tell before you start another such project.
The root problem they are describing is that incremental changes in CO2 emissions don’t do anything for the catastrophe story pushed by people like Al Gore and James Hansen. If the catastrophe story is correct, then reducing emissions by a massive 50% would still fail to avoid the crisis. It would just delay it by a modest number of years.
50% is massive, and yet is already more than what would come from the usual suspects like Kyoto, electric cars, windmills, CAFE standards, and Energy Star appliances. The change needs to be more like a 90% reduction, which means some sort of very fundamental change in the modern economy.
A fundamental change in the modern economy seems very risky to me. Kudos to Google staff for being open about this. Maybe the rest of us should think carefully about whether we really want to take that risk. In order to stop CO2, should we give up the modern economy and the modern day-to-day conveniences we are all used to?
On the contrary, I found it to be (well written but) really dumb. “We misjudged how hard it would be to achieve our misguided goals so we quit.” Maybe it will get to the right eyes/ears and do some good, but it seemed silly to me.
Bill Gates is no Bono. At Bono has shown some evolution in his thinking in regards to solving problems.
What about government-funded basic research in science? My understanding is that the case is still strong. But here we’re talking NSF funding of universities, not helping Tesla.
Some points:
We aren’t going to solve this without a number of complementary technologies reaching a certain threshold. It is foolish to say it can’t be done because one advance or another won’t be sufficient. That’s not how advances work any more. Advances in renewables can’t solve the problem. But advances in renewables AND batteries might.
Batteries provide two functions: portability, and buffering. Buffering matters so much because the most expensive thing about energy, at least to date, is the cost of maintaining flow to match our needs in real time. Wind and solar are inconsistent on the supply side, and our demands fluctuate during any 24 hour period significantly. Smoothing that out could save trillions of dollars.
While climate change is being debated endlessly, we ignore the two other equally important reasons to move away from fossil fuels: their massive effect on geopolitical conflict, and good old fashioned pollution and its effects on our health.
Finally, it is impossible to decouple governments from energy. Until someone makes highly distributed energy generation cost effective, energy will require massive levels of public accommodation. Our current markets have this commitment, and it is so huge that it crowds out natural competition. Leaving energy alone is not an option.
The most important reason to advance beyond fossil fuels is they are not enough. CO2 can be viewed as a sub category of that. With enough energy, even inefficient sequestration becomes feasible.