The green energy revolution shows what real innovation looks like

Silicon Valley has long had an almost religious obsession with the concept of innovation. Venture capitalists and tech startup entrepreneurs continually portray themselves as breaking through the shell of establishment dogma to create new, buccaneering technologies of the future.

It’s strange, then, that the tech industry has been engulfed in a series of irrational manias over the past decade. The first was cryptocurrency, which was supposed to be a new, revolutionary financial technology that would bypass Wall Street, but it turned out to be a speculative orgy infected to the marrow with deception. Then there was the NFT craze, which was supposed to provide a new method of digital scarcity, but turned out to be land rush style speculation madnessexcept without land.

And now we have “artificial intelligence” that is set to revolutionize work by automating all kinds of tasks. Now I’ve experimented a bit with AI and it certainly seems to have the most potential. But so far everyone has demonstrated legitimate use case requires careful data surveillance and expert supervision – quite expensive worktonic tool, not the incredibly powerful virtual personal assistant that CEOs are working on, and it would justify trillions of dollars in market capitalization in AI companies.

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Meanwhile, as film editor Michael Sweeney – Bluesky emphasizestruly massive economic changes are taking place in the US (and global) energy system – on par with the industrial revolution itself. Energy from fossil fuels is being forgotten and replaced by renewable energy so cheap that it is a catalyst for spectacular innovations in all long-established industries. It doesn’t get a tenth of the attention of the AI ​​bubble, but that’s what real innovation looks like.

Just consider investing in solar energy, wind energy and ecological production. In 2023, the US solar industry was installed Power 32 gigawattswhich means an increase of 50% compared to 2022. The wind industry has not been so spectacular lately, but still increased from 118 gigawatts of capacity in 2020 to 141 gigawatts in 2022. Grid battery installation capacity roughly doubled in 2023 and is projected to double again in 2024, to more than 30 gigawatts, the White House said – indicates the information sheet. Electric vehicle sales increased from 20,000 per month in 2020 to 90,000 in 2023 (representing about one-tenth of total vehicle sales that year).

Renewable energy is cheap and getting cheaper, especially solar. In places with lots of sunlight, there may be so much power during the day that its price drops to almost zero. This is a problem for the traditional network, but also an opportunity. In addition to offsetting this with the cost of storing energy in batteries, scientists (in both government and the private sector) and entrepreneurs are coming up with all kinds of new business ideas that use this cheap energy to revolutionize manufacturing markets that have long been considered mature.

For example: Here’s the company with a plan to replace industrial heat from fossil fuels – which is about a quarter All energy consumption – with “hot rocks” heated by renewable energy. Here is the company building two green steel mills in Mississippi and Ohio, the first of their kind in the U.S., thanks to a federal grant. Here’s another company that sells power line monitoring devices that enable transmission to the grid 40 percent more electricity. But here’s a company proposing to use green energy to create iron from the toxic “red mud” that is a byproduct of aluminum refining, while cleaning up the mess in the process. And these are just a few of thousands of examples.

Importantly, almost all of these events were catalyzed by or directly caused by government policy. The Inflation Reduction Act, the CHIPS and Science Act, and the bipartisan infrastructure legislation directed a flood of subsidies to green energy and manufacturing, building on decades of federal support for green technologies. Many of today’s breakthrough technologies that have reached commercialization were originally developed in government laboratories or in… government subsidies. The Loan Programs Office at the Department of Energy directs loans worth hundreds of billions of dollars to the most promising green companies.

These stories should cast doubt on the innovation narrative behind even the most successful technology companies. Facebook is still useful as a phone book of sorts, I guess, but at the cost of eating up half the journalism industry and pushing countless baby boomers toward conspiracy theories and extremism. Google used to be a very useful search engine, but the company’s latest innovation of incorporating artificial intelligence capabilities is here to stay causing errors and irritating users; so far, the company has either lost or given up on the war against SEO spam and distracting advertising, and it has swallowed up the other half of the journalism industry. Amazon’s product ratings are systematically wrong and its store is full of counterfeit and fraudulent products, not to mention the company’s unfair labor practices and harmful environmental impact.

As the Apperceptive newsletter draws attention, software and website companies are extremely unusual in that they generally have relatively low capital costs and almost no marginal costs. A building full of programmers and some server racks is much cheaper than, say, a car factory. For example, once you develop Microsoft Word, each additional copy costs almost nothing to create—and your profits remain stable and protected by a government-granted monopoly. In short, creating such a business is relatively simple – or at least it was in the Wild West days of the Internet, when most of today’s tech giants were founded – largely because of the first-mover advantage.

On the other hand, business innovation involving real objects is hard, especially in markets such as energy, steel and automotive, where production processes have been developed and improved over centuries. For example, labor productivity in American steel increased by approx 500 percent just between 1980 and 2015. And we’re not just talking about improving the state of the art here and there, we’re talking about renovation the entire production process all at once, thanks to innovative technology that improves the status quo from the very beginning.

These are the real innovators-heroes of our time: scientists whom no one has heard of in the laboratories ironing creases in perovskite solar panels to gain a few extra percentage points of efficiency; chemists and materials scientists develop new projects decreased significantly battery price; physicists and engineers working on heat pumps that can operate in very low temperatures; and so on.

It would be more fun to watch a golf-wearing megalomaniac on stage promising that his app will save humanity. But what will really drive the 21st century economy is a group of largely unknown, unrecognized people performing thankless, difficult and often boring technical tasks.