The case for techno-optimism today
09 December 2022 | Louis Millon
I read with great interest Vinod Khosla’s opinion piece in the Economist from November 8th. Khosla’s reasoning, which leads him to call for keeping the old coal and gas plants in operation until something better than the current solutions come along, is based on three critical misconceptions.
The first is that it is possible to reach net-zero in 2050 without taking every possible measure to cut emissions ASAP. The path we’re on currently, which feels “rushed” to Khosla, and includes the subsidies for solar and EVs that he wants to stop, is set to miss the 2050 target by such a large margin that many scientists are now doubting that the 1.5 degree objective can be kept alive at all.
The alternative between “end coal now and reach net-zero 2050 with suboptimal spending” or “keep it on for now until better and cheaper new technology can be aggressively scaled up in the 2040s” is a false dichotomy. The tough reality is that we need to take an “all of the above” strategy, shutting down the worst assets as early as possible while deploying ever-increasing amounts of capital, private and public, into the development and scaling of new technologies.
The second is thinking of clean energy and EV subsidies as a wasteful tilting of the playing field. These “mature” technologies are competing with the fossil fuel industry, which is by far the most heavily subsidized industry in the world, to the tune of $5.9tn in 2020 according to the IMF , or 6.8% of GDP (a figure that is actually still increasing every year).
Even in the US, the fossil fuel industry receives $662bn in subsidies, direct and indirect, annually, which dwarfs the headline spending figures announced as part of the new climate bills. Worse, the vaunted “Chindia” price for energy is the most distorted in the world, with China and India spending an estimated 14.7% and 9% of GDP respectively on subsidies that keep fossil fuel (and thus energy) prices artificially low.
So, while we completely agree with Khosla that in theory subsidies to new innovations should taper off as they climb the adoption curve, we believe technologies competing with coal, oil and gas, they should be kept under perfusion of state support until fossil fuel subsidies have been eliminated (how to do so is a very complex issue, tragically beyond the grasp of Silicon Valley, and out of the scope of this post). Non-subsidized new renewables are already competitive with non-subsidized existing coal (and even natural gas) in most of the world.
The third is confusing the amount of venture capital going into a space with the underlying rate of progress of the underlying technologies. The rate of growth of private capital going into fusion in the past 2 years is very impressive, but it tells us very little about the evolution of the likelihood of getting commercial fusion within 10 years.
If there’s one takeaway from the recent (and ongoing) metaverse and crypto meltdowns, it’s that billion-dollar investments by top-tier organizations are very much subject to wishful thinking and overclaiming, because their sponsors actually need to believe that the next tech revolution is just around the corner in order to sign the big checks.
I sincerely share part of Khosla’s techno-optimism. I do. I really hope that commercial-scale fusion turns up in the early 30s to relieve part of the burden of the energy transition, and feed electrons through superconductor-based grids to power next-generation, super-efficient Direct Air Capture plants that clean up the carbon overshoot the coal plants will have emitted on our way to net zero (whether it’s a “rushed” or reasoned transition).
However, it isn’t a reasonable bet for society to bank on it. That bet is for venture capitalists, visionary or deluded, to make, and while they wait to see whether it pays off, the taxpayers’ money should be spent on solutions that are scalable within the next two election cycles.
Saudi Arabia announced last year solar PV projects which were economically viable at $0.1/kwh, well below fossil fuels. Renewables will become dominant.
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