Common Tragedies

Thoughts on Environmental Economics

How we got here

Posted by Rich Sweeney on July 30, 2008

When it comes to the current climate/ energy crisis, people often scratch their heads and wonder “how the hell did we get into this mess?” As I’ve written before, a large part of the blame belongs to Ronny Reagan, who, with his infinite faith in free markets and hatred of government, killed almost all of the solar research that was taking place in this country in the late 1970s.

Yesterday I attended a conference called “Making Big Solar Work” at the National Academies. The list of speakers was impressive and contained a good mix of government and private researchers. Literally 2/3 of them started his speech with “I was working on this same problem back in 1980 when I lost my funding…” People cited all of the impressive research Bell Labs had done in this arena back in the day, and few doubted that our predicament would be much much better today had we continued down the path of funding basic solar R&D. For an idea of what I’m talking about check out this Bell solar video from 1954.

On April 18, 1977 Jimmy Carter gave this televised address. Much of it sounds like it could have come out of last weekend’s New York Times. He then went on to set a goal of getting 20% of our energy from solar power by the year 2000. Last year solar made up about .5% of our electricity generation. As an economist I often find myself chastizing pols for attempting to pick winners. Boy to I wish we’d stuck with this winner back in 1980….

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One Response to “How we got here”

  1. John Mashey said

    I’d observe it’s a little more complicated than that.

    Put another way, Reagan disrupted the normal R&D flow (or progressive commitment) that one needs to keep making progress, but perhaps worse, slowed down the deployment of existing technologies (like solar hot water heaters or solar thermal CSP and windmills, or best of all, efficiency measures) that were deployable without much R&D.

    I worked at Bell Labs 1973-1983, and of course, that Bell Labs is no more.

    From an older discussion at Climate Progress:

    Here’s normal good R&D portfolio management, as practiced by companies and governments capable of long-term thinking, and who understand technology diffusion and inertia of huge installed bases.

    One classification (different people use different labels, and in some places, combine R2+D1, or D1+D2, or R1+D1+D2; I’ve never managed R1, have done the rest.]
    Pure Research (R1)
    Applied Research (R2)
    Exploratory Development (D1)
    Advanced Development (D2)
    Development (D3)
    Deployment & scaleup, cost reductions, etc. (D4)

    Reasonable policies are:

    a) Spending a big chunk of $$ on deployment of what works already, knowing that volume & experience will help costs come down, and of course, in this case, there are plenty of efficiencies around that are zero-cost, although they may require upfront capital.

    b) Meanwhile, spend some money on lots of little Research projects, select ones that have promise and take them further. This is usually called “progressive commitment”, i.e., you normally have lots of little R projects, and fewer, but bigger D projects, and then most of the money gets spent in deployment. VC’s love to fund things that are ready to Deploy, and they’re OK with things that take some Development. They don’t fund R, at least not on purpose.

    Between 1973 and 1983, I worked for Bell labs, an organization whose record for breakthroughs was pretty good, and which employed 25,000 people, mostly R&D, of which real R was only about 7%. Of course, that was very small compared to the 100s of thousands of people involved in manufacturing, deployment, and support. [The Bell System had more than 1M employees at one point, and really did think in terms of decades, which many businesses do not. The telephone network had some similarities with the power grid. Tiny efficiencies mattered. I recall a guy getting an award for saving a tiny fraction of the amount of gold needed for electrical contacts … but that was $Ms/year savings.]

    But we always said:
    “never schedule breakthoughs”.

    Given the scale (in the old Bell System days), we had to install things that worked, not counting on what our R folks might invent. We knew they’d invent interesting things, but we also knew it might be 20 years before we could really use them, and some things (like bubble memories) worked, but never well enough to win. Some things were deemed interesting, but really niche, when first done … like lasers, or solar cells. I know of two $B projects where they charged into fullscale Development too early, and wasted most of that money.

    As to who does this, I get very nervous when government picks winners, but it needs to:

    – support R1+R2, which are long-term research investments that relatively few companies can make.
    – minimize unnecessary overhead for businesses
    – jiggle laws to give desirable future forthcoming technologies a chance to get down the cost curves, i.e., for D4. (Solar tax credits?)

    Governments get into trouble when they try to play VC or pick among competing D3 products, but relatively few companies have 20-40-year planning cycles…

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