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Some thoughts on MIT’s Energy Conference last month:

1.  Government and our Energy Future
Possibly one of the most important takeaways from the conference was the sense that the US federal government recognizes the threats of climate change (and other environmental damage) on America’s future.  The DOE has been hard at work jump-starting programs to transition the structure of our energy economy onto a more sustainable path.  I think that most economists would argue that the government is not so good at selecting and directing the technologies that America needs, as much as providing the regulatory grounding and financial assistance to companies that can innovate and meet demands for clean energy.  But let’s start with this problem first, of clean energy demand.

One of the kick off discussions was a panel with clean tech financiers, Mohr Davidow Ventures, Credit Suisse, NGP Energy Technology Partners, and Steve Isakowitz the CFO of DOE.  An observation on the clean tech industry pointed to the very difficult problem of clean tech to cross the “Valley of Death”, the crucial period between productization and scaling up to production.  Building manufacturing plants and corresponding sales and marketing infrastructure is not cheap.  Especially when one considers the traditional structure of VC in rapid growth companies, this is a challenge.  There is no Moore’s Law for solar photo-voltaics, and capital requirements of producing all this stuff are relatively high.  Therefore, a particular role of government may be in “market-making”, putting in policies to ensure that markets will be there for innovators just breaking out into the Valley of Death.

In my opinion governments at US federal and state levels are engaged in a variety of second-best policy to encourage market viability of clean energy tech.  Required portfolio standards, for example, that mandate specific mixes of energy sources (eg 20% wind, 15% solar, etc) are heavy handed policies that probably aren’t choosing sources for least cost and best reliability.  A more economically desirable alternative would be to require a price on carbon and other pollutants that would leave decisions of energy mix up to the market to figure out. The government could let the market decide the appropriate price of pollution (cap-and-trade), or enact penalties on pollution emitters (i.e. tax).  Either way, the government shouldn’t be in the business of choosing technologies and then protecting the markets for them.

Perhaps a more benign role for government is in providing subsidies for clean energy innovation.  This seemed to be one of the proud strategies of Steve, CFO of DOE.  With programs like ARPA-E (tasked with finding and funding promising innovation, in a DARPA-like manner), the DOE can accelerate bringing new tech to the market that can help brin us closer to a de-carbonized energy economy.  One caveat, however, is to note the scale of such funding (only $151 million in 2009) is small compared to the overall problem and probably is much less effective without a price on carbon as a wider incentive.

2.  Incumbents in the Background…Keepin’ It Real
Remarks by John Rowe, CEO of Exelon, emphasized the practicality of the market at the level of power utilities and their customers.  Raising electricity rates are a good way to piss off customers.  So regardless of whether we are pursuing clean energy or not, keeping customers satisfied with their levels of service while minimizing their prices is an obvious priority.

John Rowe supports nuclear energy as an alternative to dirty fossil fuels, and especially with it’s historically cheap cost (at the kWh level).  Yes, nuclear has its own pollution issues, but when it comes to carbon emissions it’s pretty damn clean.  But there’s a caveat, at least in the short term foreseeable future.  Gas prices are extremely low at roughly $5/mmbtu on the spot market, and therefore gas burning power plants are the cheaper alternative compared with nuclear.  That, of course, is only if you ignore the environmental cost of burning natural gas.

So, for at least a while, we will continue down the path of fossil fuel dependency.  From Mr. Rowe’s point of view, markets are king, and if we don’t reflect the environmental, health, and other costs into the price of electricity we aren’t likely to see carbon reduction.  Nevertheless, he does acknowledge that the environmental impact of dirty energy is real.  It’s just a matter of how we deal with it in a way that’s realistic for businesses and customers that will decide how we change our energy profile.

3.  Emerging Technologies
One can’t attend an MIT event without admiring some of the awesome technologies coming out of the place.  We had some of the more predictable players represented – electric vehicle manufacturer Fisker and natural gas ala Chesepeake Energy.  But some of the incumbents in the good old oil, coal, and auto industries were missing.  Not that they had much reason to come anyway.  It wouldn’t have been an interesting conference if it were just more of the same..

Some of the cooler companies represented, however, included ARPA-E grant winners like Agrivida and FastCAP.  There cool stuff.  Agrivida is working on some plant cellulose digestion mechanisms to produce ethanol.  FastCAP has some ultra-capacitor technology that could totally change the way electric vehicles and hybrid vehicles are made.  Basically, both companies are to do things cheaper (like way cheaper) to reduce or save energy compared to what we got now.  I got a chance to talk to these guys mano a mano at one of our events for the Energy and Environment Professional Interest Council at Harvard Kennedy School.  When talking with these guys, one gets image that America’s ethanol-producing cornfields and its car industry will be massively transformed. If you’re interested, I recommend checking them out at Agrivida and FastCAP.  Don’t be surprised to see them in your car or your utility grid sometime soon!

I know what you’re thinking. There’s still snow outside. It’s cold and rainy. You’re still planning your next ski trip. BUT…talk of summer internship is all the rage right now, and it looks like everyone has some kind of plan to get out of Cambridge and into something exciting.

What about me? It looks like I’ll be spending another summer in Vietnam! Yes. The land of Communism, cheap beer, and motorcycles. I’m not exactly sure what I will be doing in Vietnam. This will be decided in due time. But the important facts about being there and lined up. And yes, it will be bittersweet coming back to my motherland…

Last summer seems like it wasn’t that long ago at all. I took an advanced Vietnamese course funded through the Fulbright program, which was quite awesome. I barely had time to update the blog during that season, but I definitely have the pictures to prove that it happened. I hope that this time around I will be able to get a closer look at the Vietnamese economy in addition to working on my language skills.

You may have heard about Vietnam’s latest issues. Macroeconomic troubles are on the horizon for the country…that is, if it doesn’t fix it’s financial regulatory and currency regime. It has had q number of infrastructure projects lined up…some with a great deal of trouble…and in all sorts of sectors, from transportation to nuclear power. In some optimistic scenarios, within 10 years, Vietnam will have it’s own high speed rail system (going 100+ mph), a new metro train system in Saigon, new deep water seaports, a brand new international airport in Saigon, elevated highways, nuclear power, a burdeoning healthcare and pharmacutical industry, an electronics manufacturing cluster, etc. Basically, people think that the place is goingto develop fast.

But who’s right? Are there economic troubles on the way? Or a bright future for this country that is just starting it’s climb from post-colonial, post-Communist beginnings. I think you will just have to wait and see. There are a number of people studying these issues, including the Harvard Kennedy School’s Vietnam Program and the Fulbright School in Ho Chi Minh City. The verdict is still out…

After a semester around some of the world’s toughest public policy problems, the issue of climate change seems to be one of the most relevant and timely. My energy policy class with Henry Lee briefly touched on American consumers and disbelief of climate change as a legitimate or even noteworthy matter. The issue of climate change seems to be all the more relevant currently, and even though there’s currently a huge UN conference on the subject, few Americans care to acknowledge it.

According to a study by the Pew Research Center, only 35% of all Americans believe that climate change is a serious problem. Other countries, on the other hand, have much higher rates of alarm, with both China and India above 50%… and not surprisingly, Japan and France at about 65%.

I’m sure there have been intelligent analysis done regarding American consumers and the climate problem, but many experts (including Maxine Savitz, VP of the National Academy of Engineering) admit that out of all the aspects relating to climate change, consumer behavior in markets and toward policies is the least understood side of the problem. Perhaps it’s just obvious why Americans refuse to acknowledge climate as an issue. Perhaps it’s not. I’d like to make some unqualified claims about the reasons for US skepticism.

1. A strong preference for an “American” way of life. More crucially, a critical departure is just acknowledging that conventional aspects of it are more dangerous (and possibly more expensive) than previously thought.

2. Distrust in the “establishment”. This includes media, scientific community, and the government. In short, I think Americans are deep down skeptics…they need to “see it to believe it” and even then, they may not even believe “it” at all.

3. Faith in technology. The can-do attitude in the US helps us innovate the best technology on earth from the internet to nuclear or solar power. I would imagine most Americans thinking, can’t technology just fix this?

Rather than judge the values of Americans I’d be interested to see what factors drive the average US citizen to think and to act they way she does. Can America be persuaded? Could they be “nudged” into what others across the world demand as “responsible” action? Which factors in decision making and behavior to make an impact?

One of my Afghan colleagues came into the office this morning looking pretty tired. Apparently he spent all yesterday, our weekly day off, looking for a new “used” Toyota Corolla.

His family had sold their last one, so…they’ve decided to trade down. That’s right, trade DOWN. Whereas they had an early 200x model Corolla, they’re now looking for an older one. A 1997 or 1998 model. You’re probably wondering, “Why for god sakes?” Afghans are getting more affluent by the day, especially with the steady influx of foreign capital, job creation, recycled money, etc.

The neat feature to this story is that newer Toyota Corollas actually have a steep discount, compared to older models. The reason…Afghans are more likely to get kidnapped in a new car. ..or so the belief suggests…

Like in Iraq, kidnapping is becoming a profitable pastime in Afghanistan. There’s lots of wealthy returnees coming back to the country, and with the current state of lawlessness, corruption, and wealth disparity we’re seeing a rise in kidnap-for-ransom. Therefore, you are supposedly targeting yourself for with the ‘nappers every time you step into that shiny-yet-dusty ‘05 Corolla you so proudly purchased.

So how that plays back into our story can be broken down with an analysis of supply and demand. An old Toyota Corolla…’97 or ‘98 costs about $11K here. And a newer ‘05 or 06 model also costs about $10K. Usually, you’d see a discount for the older vehicle, rather than the newer one. But because demand is so high for the older models (no one wants to stick out), and newer models keep coming in (the supply continually increases)…we see a steeper price on the older models. Go figure.

The funny part of the purchase decision is that there’s lots of Corollas around. Good for convenience — bad for selection. About 70% of the cars in Afghanistan are Toyota Corollas. Yep. All those used Corollas are disappearing from the streets and lots of Canada, US, Japan, and Dubai… find their way to Afghanistan. What that also means is that there’s plenty of auto shops here, and labor is certainly cheap. Sooo…”total cost of ownership” on a used car (including maintenance fees) comes out to less when you consider the risk of being kidnapped in a brand-new or late model car.

Thus, there’s lots of old, used Toyota Corollas on the street, and they’re priced high — not just because of transport costs — because of the increased risk with purchasing a newer model. Who’da known that getting a new “used” car would put your life in danger….

I spend a decent amount of my day trying to understand “genius.” How does a person become acquire intellectual or business genius? Is genius innate? Is genius just highly potent acumen or is it something supernatural? What are its affects? Is there such thing as an everyday genius? What becomes of the genius? Does insanity equate genius? Are geniuses always rejected (or misunderstood) by society?

Of course, all this thinking is out of some sort of envy of society’s geniuses. Ultimately I try to understand so that I can become, but we all know that too much understanding and not enough practice is just silly mental exercise. Nevertheless–

I recently wrote an e-mail to a former roomate and historian of science, referring him to an interesting (yet somewhat cliche) article on genius and the establishment. You can see the article by the New York Times yourself (you might have to pay for the article if it’s lived past its freebie-period). The article reflects the common American opinion that genius (especially genius in the commercial sense) requires some sort of discontinuity with previously established thought. In the technology world, geniuses bring about ideas for “paradigm shifts,” for new products, platforms, and services. However, NY Times would like to remind us that true shifts in thought rarely happen–and that the less glamorous side of productive genius is the everyday exploitation of new markets, products, and services…all with tools and frameworks that are less than flattering of their intellectual (or business-savvy) progenitors. So OK, Sergey Brin and Larry Page can bring us a wonderful rebellion in the world of web, but it still takes everyday foot soldiers to fight that insurrection.

In the face of othodoxies, establishments, and think-boxes, genius in the commercial sense has some sort of mystique as anti-intellectual or anti-corporate. This hidden genius is entrepreneurial. It satisfies social misfit while splashing on the stereotypes. Yet it still pulls in the green. Or in the words of my old roomate John Potapenko,

“…yes, but as the article hints one must be careful not to become the establishment itself. bill gates fought the ibm black suit mentality that computers belonged in governments and corporations and so became the granddaddy of the personal computer revolution. that’s visionary. now we have millions of PCs running the same uniform, buggy, and worst of all closed operating system and plenty of software patents to boot. that stifles innovation — the very kind of innovation that brought us the PC, DOS, and Windows. another ny times article.

examples of the visionary gone myopic abound. take einstein — difficult to find someone more revolutionary than a man upturning three centuries of physics while claiming space and time aren’t absolutes. he was in some ways the founder of quantum mechanics, but ironically wasn’t able to accept the core principles of this new field — that at bottom the universe is inherently unpredictable, but rather probabilistic — saying, “You believe in the God who plays dice, and I in complete law and order in a world which objectively exists”. no, the universe is far stranger than even einstein could imagine.

i don’t think that this myopia is inevitable — there are those that manage to renew themselves right up to senility. but momentum works against you and it takes energy to keep an open mind. google strikes me as a company that tries to fight this well, giving employees 20% of time to brainstorm on pet projects. so far it’s working for them.

but in the end we must realize our own individual limits. fortunately, nature provides the ultimate force of renewal: death.”

Hmm. A little dismal, but consistent. One day I’ll figure it out or hopefully just live it firsthand…