Energy efficiency innovation

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Published Date:07-07-2017
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HIGH-ENERGY INNOVATION — A CLIMATE PRAGMATISM PROJECT — CO2 Gary Dirks, Loren King, Frank Laird, Jason Lloyd, Jessica Lovering, Ted Nordhaus, Roger Pielke Jr., Mikael Román, Daniel Sarewitz, Michael Shellenberger, Kartikeya Singh, and Alex Trembath Consortium for Science,Policy & Outcomes D E C E M B E R 2 0 1 4 at Arizona State UniversityHIGH-ENERGY INNOVATION A C L I M A T E P R A G M A T I S M P R O J E C T T H E C O - A U T H O R S Gary Dirks Roger Pielke, Jr. Center for Science and Technology Policy Global Institute of Sustainability, Research, University of Colorado at Boulder Arizona State University Mikael Román Loren King Office of Science and Innovation, Embassy Breakthrough Institute of Sweden Frank Laird Daniel Sarewitz Josef Korbel School of International Consortium for Science, Policy Studies, University of Denver & Outcomes, Arizona State University Michael Shellenberger Jason Lloyd Breakthrough Institute Consortium for Science, Policy & Outcomes, Arizona State University Kartikeya Singh Center for International Environment Jessica Lovering and Resource Policy, Fletcher School of Breakthrough Institute Law & Diplomacy, Tufts University Ted Nordhaus Alex Trembath Breakthrough Institute Breakthrough Institute CO2 This report reflects only the views of the authors, not the policies or positions of any public institutions. Consortium for Science,Policy & Outcomes D E C E M B E R 2 0 1 4 at Arizona State UniversityTABLE OF CONTENTS 3 TA B L E O F C O N T E N T S 4 E X E C U T I V E S U M M A R Y 6 I N T R O D U C T I O N 9 R A P I D E C O N O M I C D E V E L O P M E N T A N D E N E R G Y I N N O V AT I O N 17 C A S E S T U D I E S 17 Shale Gas 20 Nuclear 22 Carbon Capture and Storage 25 Solar Photovoltaics (PV) 28 C O N C L U S I O N : C L E A N , C H E A P E N E R G Y I S A G L O B A L P U B L I C G O O D 32 E N D N O T E S 39 M A P C I TAT I O N S 43 A C K N O W L E D G M E N T S H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4 3EXECUTIVE SUMMARY I n the coming decades, most of the innovation in clean energy technologies needed to combat climate change will likely occur in rapidly industrializing rather than developed nations. This report identifies and maps promising international efforts by private firms and governments in China, India, the United States, Europe, Latin America, and Africa to advance four low-carbon technologies –– shale gas, nuclear, carbon capture and storage (CCS), and solar PV –– and makes the case for more collaborations between nations. Technological innovation often occurs where demand is rising the fastest. Wealthy devel- oped nations have seen their overall energy consumption growth slow down in recent decades, along with the rates of economic growth. By contrast, energy consumption in poor and developing (non-OECD) countries is expected to increase 90 percent by midcen- tury. The so-called “BRICS” —  Brazil, Russia, India, Mexico, China, and South Africa — spend more on energy innovation (ie, research, development, and deployment) than do all 29 OECD member nations of the International Energy Agency (IEA). Today’s global energy innovation bears little resemblance to the 1980s-era model of “tech- nology transfer” from rich to poor nations, as enshrined in the United Nations Framework Convention on Climate Change. Industrializing nations have in recent years pioneered in- 4 H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4E X E C U T I V E S U M M A R Y novation of next-generation energy technologies, and are beginning to market those tech- nologies internationally. South Korea, for example, which has seen the cost of building standardized nuclear plants decline over time, is constructing advanced nuclear power plants in the United Arab Emirates for both electricity and desalination. Basic research in national laboratories is critical but insufficient. Technological progress will come from demonstrating and deploying next-generation nuclear, solar, CCS, and nat- ural gas technologies. Real-world trial and error is critical to technological progress, as the shale gas revolution, which took several decades, showed. While emerging economies will do the heavy lifting, advanced industrial economies still play important roles. Germany, the global leader in solar deployment, is developing large solar power plants in South Africa and India. US energy utilities are working with Chinese firms to demonstrate carbon capture and storage technologies in Mississippi. Shale fracking technologies developed in the United States are being deployed with the help of US firms and public research agencies in China, which has a more complicated geology and requires significant innovation to become commercially viable. Policy makers ought to view energy innovation as a global public good. The benefits of creating cheaper and cleaner energy sources are shared by all –– not monopolized by indi- vidual nations. For instance, the success of nuclear and shale gas in China depend largely on the successful development of similar technologies in the United States. Similarly, the United States may likely benefit from cheaper and safer nuclear, solar, or CCS developed in China. The broader picture is one of shared economic and environmental interests from creating cheap and clean energy. Governments, industry associations, and philanthropies all have important roles to play in coordinating and contributing to accelerated low-carbon technology innovation within and among nations. While philanthropies have funded major international efforts to increase agricultural yields and improve public health, no such initiative yet exists on energy inno- vation. Policy makers, for their part, should seek to expand these promising initiatives for both economic and environmental reasons. Such an approach is more likely to succeed than efforts that require shared sacrifice. Governments have long encouraged and invested in technological change to access to cheaper, cleaner forms of energy for economic growth, national security, and environmental quality. H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4 5INTRODUCTION E nergy consumption is essential to human development, and global en- ergy use will thus increase significantly over the next century as poor nations achieve mod- ern living standards. This is an overwhelmingly positive process in terms of life expectancy, health, and quality of life. Higher levels of energy consumption will also have significant environmental impacts . Some of the effects will be positive, as electricity and liquid fuels allow people to move away from wood and dung as primary fuels, which contribute to res- piratory disease and deforestation. At the same time, rising fossil energy consumption re- sults in high levels of air pollution in rapidly growing megacities and contributes to global 1, 2 warming, with potentially larg e economic and environmental costs. Past energy transitions show a trend toward cheaper, cleaner, more abundant, and more- reliable new fuels, as well as the replacement of old energy-conversion technologies with new ones. For more than 200 years, nation-states and private actors have worked to move nations up the “energy ladder,” from wood, dung, and charcoal to diversified modern systems consisting of fossil fuels like coal, oil, and natural gas and low-carbon technologies 3 like hydroelectricity, nuclear, and renewables. This is a long-term trend toward less pollu- tion and fewer carbon emissions. To be sure, every nation’s geography, energy reserves, and technical capacities differ, and so each national energy modernization process is unique. But the collective desire for cheaper, cleaner, and more reliable energy is behind this emer- gent global phenomenon of decarbonization. 6 H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4I N T R O D U C T I O N Given the importance of climbing the energy ladder for human development, continuous technological innovation of energy systems has been a priority for prosperous nations since the Industrial Revolution. Rich nations, in turn, have understood their role in linking energy 4 to human development as one of “transferring” technologies to poor countries. This model has been directly applied in international efforts to address global warming, for example, 5 through the United Nations Framework Convention on Climate Change. In the last decade, the center of gravity on energy innovation has shifted decisively to rapidly indus- trializing countries. Rapidly industrializing nations dominate the manufacturing of solar, wind, biofuel, and other technologies, and are rapidly deploying and innovating on nuclear, 6 hydroelectricity, and natural gas. Innovation tends to occur where demand for new technologies is growing fastest, and en- 7, 43 ergy is no exception. As most of the new energy infrastructure over the coming decades 8 will be built in industrializing countries, it is there that we should expect to see — and should work hardest to accelerate — energy innovation. This innovation will create global economic and environmental benefits, as cheaper energy technologies literally fuel produc- tivity gains across all sectors of society. Thus, as this report argues, clean energy innovation is a global public good to be pursued collaboratively by nations seeking to advance ideals of global economic, social, and environmental well-being. In contrast to this report’s view that clean energy innovation requires international collab- oration, a number of analysts and policy makers over the past decade have framed energy innovation as a “clean tech race,” a zero-sum game played by nations competing to dom- 9 inate low-carbon energy industries for domestic economic advantage. This view was rein- forced by trade disputes over solar panel manufacturing. Efforts by China, the United States, and the European Union to accelerate the deployment of solar power helped drive down costs, but also sparked an international trade war, as manufacturers in rich countries 10 could not compete with cheap Chinese panels. Such competitive framing is ultimately self-defeating. The economic benefits that flow to individual countries by being competitive in manufacturing advanced energy technologies are small compared to the overall public — including economic — benefits of energy that is both cheap and clean. As such, the crucial yet complex role of energy innovation in global development needs to be reconceived from the bottom up. A new and empowering understanding starts with the recognition that opportunities for energy innovation and decarbonization on our “high- H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4 7I N T R O D U C T I O N energy planet” are concentrated in rapidly industrializing economies, and that for wealthy countries to contribute decisively they will need to play a different role than either technol- ogy provider or economic competitor. This report builds on prior reports, Climate 11 1 Pragmatism and Our High-Energy Planet, to argue that rising energy consumption is an opportunity to advance both human development and environmental protection through pragmatic policies — chief among them technological innovation to make energy cheaper, cleaner, more reliable, and more abundant. 8 H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4RAPID ECONOMIC DEVELOPMENT AND ENERGY INNOVATION N ew, transformative technologies are rarely invented in the research lab- oratory and unveiled to a grateful world. Rather, new materials, processes, and physical phenomena are discovered both in and outside the laboratory. They are applied in new contexts, tinkered and combined with other technologies, sometimes in research laborato- ries but mostly in the real world — be it a factory floor, battlefield, hospital operating room, or farm. The study of innovation over the past several decades, across multiple contexts, economic sectors, and stages of technology development and use, has consistently con- cluded that processes of invention and innovation are neither linear nor easily delineated. Invention, innovation, diffusion, and use feed back into and depend upon one another in 12 complex, indirect, and unpredictable ways. These observations are illustrated by the rise of the Internet and the World Wide Web, two innovations that have revolutionized our world. These drivers of social and economic change were not designed from scratch or even imagined far in advance; they emerged over many decades from advances in information and communications technologies, in network theory and other fundamental sciences. Above all, the Internet and the web as we know them today are the result of the demands, ingenuity, and experience of users, from scientists in academic laboratories, to entrepreneurial individuals and firms looking for new products 13 and markets, to government agencies trying to better deliver services and information. H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4 9R A P I D E C O N O M I C D E V E L O P M E N T A N D E N E R G Y I N N O V A T I O N The implications of these dynamics are significant for global energy innovation efforts. If, as is likely the case, energy technology deployment over the coming decades is over- whelmingly concentrated in developing economies, then that is where most energy tech- nology innovation will likely occur. Innovation activities that are divorced from or not well integrated with the sites of deployment and use are likely to fail. Furthermore, because a nation’s capacity to innovate and deliver abundant, cheap energy across its economy are inextricable from broader processes of socioeconomic advancement, energy innovation efforts must be grounded in and contribute to ambitious development agendas. These dynamics challenge the long-standing framework for global energy innovation. 14 Dating back to the famous UN-commissioned Brundtland Report, which in 1987 artic- ulated a vision for pursuing global sustainability, this framework helped set the agenda for international energy and environmental initiatives. It imagined that poor countries, through the transfer of low-emitting energy technologies from rich nations, could develop their energy systems along trajectories that are radically different from those traversed by early industrializing societies. The Brundtland Report was a product of energy and development thinking dominant among well-meaning Westerners in the 1960s and 1970s. European and US environmental and development critics, living in the wealthiest and most secure political economies in history, disavowed the modernization pathways their countries had followed. To avoid global environmental, economic, and demographic strife, these critics claimed, poor coun- 15 tries could not follow our example. Influenced strongly by E.F. Schumacher’s “appropri- 16 ate technology” prescriptions, Amory Lovins’s warnings against energy consumption 17 and centralized energy systems, and the Club of Rome’s dire projections of global 18 resource shortages, a new framework emerged: the soft-energy paradigm. This frame - work is predicated on two core assumptions: first, that “a low-energy path is the best way 16 toward a sustainable future,” as the Brundtland Report insists; second, that existing re- newable energy technologies will replace most fossil fuel use, obviating the need for sub- 19 stantial innovation. The Brundtland framework provided the normative principle for the United Nations and its Framework Convention on Climate Change (UNFCCC), the main instrument by which the international community endeavors to mitigate the climate impact of human activi- 20 ties. It is also the paradigm for low-carbon development initiatives like the Global 10 H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4R A P I D E C O N O M I C D E V E L O P M E N T A N D E N E R G Y I N N O V A T I O N Environment Facility (GEF), Climate Investment Funds (CIF), and Clean Development 21 Mechanism (CDM). The UNFCCC reinforced the Brundtland Report’s conviction that poor countries could assume novel development pathways through minimized energy con- sumption and renewable energy deployment, especially through provisions that allow rich countries to meet their emissions reduction commitments most cost effectively by support- 22 ing low-carbon projects in developing countries. Unfortunately, approaching energy system development in poor countries with a single- minded focus on non-emitting renewables — energy technologies with significant limita- tions for meeting the needs of energy-starved, rapidly urbanizing developing countries — undermines the creation of a robust, diversified energy infrastructure. Off-grid renewables can in some cases provide limited energy access more quickly or cheaply than conventional 23 baseload power and grid expansion. But the priorities of energy system expansion efforts in the developing world, and the donor countries and organizations that work there, must be consistent with broader development objectives that include agricultural modernization, the creation of domestic industrial capacity, and meeting the needs of rapidly growing 1 cities. Powering the development of modern urban, agricultural, and industrial infrastruc- tures requires large quantities of cheap, baseload power and liquid fuels. A recent analysis from the Center for Global Development compares access rates in sub- Saharan Africa with a hypothetical 10 billion energy project investment portfolio that comprises only renewables and another with only gas. The gulf in access rates is enormous: “A natural gas-only portfolio could provide electricity access to 90 million people versus 20 to 27 million people with a renewables-only portfolio.” A project investment portfolio of two-thirds natural gas projects and one-third renewables would support energy access 24 for 70 million people, or at least 40 million more than renewables alone. Simply transferring existing renewable technologies to developing countries cannot provide the energy necessary for modernization. Nor can this mechanism catalyze the economic activities necessary to spur indigenous capacities for technological innovation. Perhaps, then, rich countries will develop the low-carbon hardware necessary both to leapfrog fossil energy use and to power high-energy modern economies, and transfer this next generation of innovative energy technology to the developing world? The reality is wealthy economies are unlikely to offer either the motivation or context in which rapid clean energy innovation might occur. In developed countries, energy demand H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4 11R A P I D E C O N O M I C D E V E L O P M E N T A N D E N E R G Y I N N O V A T I O N projections are flat or decreasing. With energy infrastructure and transitions lasting several decades at least, it makes little economic sense for developed nations to make large invest- ments in clean energy innovation. Power plants in the United States have a replacement 25 26 cost of 1.5 trillion. Sunk costs are a tremendous incentive against disruptive innovation. Of the wealthy nations, only Germany and Denmark are making a comprehensive effort to transform their energy systems to low-carbon ones, and the outcomes of those experi- 27 ment are both highly uncertain and far in the future. National interest has often played a key role in driving innovation. The United States’ de- velopment of light-water nuclear reactors was borne out of defense concerns, with the de- 13 sign originally created for military submarines. The original funding for shale gas exploration — funding that kick-started a decades-long process that ultimately led to frack- 28 ing — was justified by US concern with its dependency on foreign oil. Energy independ- 29 ence was also a reason for France and Sweden’s rapid transitions to nuclear. FIGURE 1. WORLD PRIMARY ENERGY CONSUMPTION, 1990-2040 900 Non-OECD OECD 675 450 225 0 1990 2000 2010 2020 2030 2040 Source: US Energy Information Administration. International Energy Outlook 2013. 12 H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4 Quadrillion BTUs (quads)R A P I D E C O N O M I C D E V E L O P M E N T A N D E N E R G Y I N N O V A T I O N At times, energy innovation can be a means to gain a comparative advantage in inter - national trade, as has been suggested of China’s recent push into solar photovoltaic (PV) 6 manufacturing. But at its core, countries are driven to innovate in the energy domain because cheap, reliable (which often means domestically produced), and abundant energy is essential to economic growth and national prosperity. For most developed countries, cheap and abundant energy already exists. By contrast, rapidly industrializing countries are power hungry. As illustrated in Figure 1, nearly all the growth in energy markets and the majority of new energy technologies 8 deployed in the coming decades is projected to occur in the developing world. This is a direct result of building out energy systems to support development ambitions and provide citizens with access to the energy they need to prosper. Societies that have successfully accelerated their development have done so by expanding modern diversified energy systems, building the knowledge and experience necessary for 30 improved performance and continual learning in the process. The pattern of gradually strengthening innovation capacity, specific to historical and national contexts, has been central to the modernization of every industrialized and industrializing nation, from 31 England to the United States to South Korea to Brazil. All the components of a country’s energy system — power plants, pipelines, electricity grids, and so on — are tightly interdependent. In other words, energy systems are an ex- ample of “technological lock-in,” where complementarities between individual technolo- 32 gies and infrastructure are very strong. This locked-in aspect of a nation’s energy system means that technological innovations that fit relatively seamlessly into the existing regime are adopted far more quickly than those that do not. This is why, as we discuss in more de- tail below, the fracking revolution occurred in the United States and accounted for the speedy reductions in carbon emissions, in contrast to the much slower diffusion of renew- ables. Fracking was made possible by incremental improvements of existing hydrocarbon extraction technologies, and the resulting natural gas could be incorporated into existing 28 energy infrastructure. Such “path dependencies” are characteristic of modern, locked-in energy systems. H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4 13R A P I D E C O N O M I C D E V E L O P M E N T A N D E N E R G Y I N N O V A T I O N FIGURE 2. CARBON-FREE ENERGY AS PORTION OF ADDED ENERGY CONSUMPTION, 1966-2012 700 Fossil Energy Carbon-Free Energy 525 350 175 0 -175 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: BP. “Statistical Review of World Energy 2012.” If rich countries are constrained by technological lock-in and path dependencies, in devel- oping countries the relative lack of preexisting infrastructure means energy innovation can explore new and diverse technologies and development pathways as they build out their energy systems to meet their economic and social needs. This presents both an opportunity and a challenge: On the one hand, developing countries are less invested in the prevailing fossil fuel regime. On the other, developing countries will continue to exploit fossil fuels as 1 the most efficient path to modernization. No country has succeeded in achieving significant human development or economic growth without a leading role for fossil fuels, along with other modern technologies like 33 large hydroelectric power. To date, there are no countries even attempting to pursue a de- velopment path similar to that encapsulated by the Brundtland’s low-energy framework. The world’s growth in fossil fuels consumption is still far outpacing that of clean energy 34 (see Figures 2 and 3). 14 H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4 Million tonnes oil equivalent (Mtoe)R A P I D E C O N O M I C D E V E L O P M E N T A N D E N E R G Y I N N O V A T I O N FIGURE 3. PROJECTED GLOBAL PRIMARY ENERGY CONSUMPTION, 2010-2050 900 Biofuels Non-hydro Renewables Hydro Nuclear Gas Oil 675 Coal 450 225 0 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: MIT Joint Program on the Science and Policy of Global Change. “MIT Energy and Climate Outlook 2014.” Yet the sheer scale of providing the energy necessary to power economic and social growth has compelled developing countries to invest in a wide range of technologies. Whether it 35 is experiments with renewables and storage in the United Arab Emirates’ Masdar City, 36 37 grid expansion in Brazil, or underground coal gasification in South Africa, industrial- izing countries are not restricting themselves to conventional fossil fuels. Indeed, developing countries may transition to advanced energy systems faster, with a greater variety of energy 38 sources, and more efficiently than has been the case in the United States. China, in particular, is heavily investing in clean energy, partly as a means to gain a com- petitive advantage but mostly to pursue an “all-of-the-above” strategy and deal with mount- ing pollution problems in its cities. The country is pioneering fourth-generation nuclear reactors, such as sodium-cooled fast reactors, high-temperature gas reactors, and salt-cooled 39 reactors. Combined, the emerging economies of Brazil, Russia, India, Mexico, China, H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4 15 Exajoules (EJ)R A P I D E C O N O M I C D E V E L O P M E N T A N D E N E R G Y I N N O V A T I O N and South Africa provide as much public funding on energy research, development, and 40 deployment as do all 29 wealthy member countries of the International Energy Agency. Of course large-scale investments in clean energy are not occurring evenly or equally across the developing world. Clean energy innovation requires a robust industrial base, with easy access to both suppliers and consumer markets. In most developing countries, the process of industrialization is still in its infancy and research and manufacturing capacities remain modest — weaknesses that will be ameliorated as these countries work to expand their energy systems. They are doing this in part with help from affluent donor nations, but mostly (and most pragmatically) with the assistance of rapidly developing countries, most notably China. Our focus is thus squarely on rapidly industrializing countries. Substantial research, com- mercial, trade, and investment potentials already exist in these countries. Coupled with growing demand for essentially everything, and especially energy, it is in industrializing countries that policy makers should target interventions aimed at advancing and acceler- ating clean energy innovation. 16 H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4CASE STUDIES B elow we evaluate energy innovation progress on four technologies with the potential to provide cheap, clean, and reliable baseload power through rapid deploy- ment in industrializing economies. We focus on these four not to suggest that they should be the only energy technologies pursued by international efforts, but rather to illustrate the distinct challenges facing different technologies, including their innovation and diffusion in different national contexts. SHALE GAS The recent boom in natural gas production in the United States, brought about through technical innovations in the recovery of natural gas from previously inaccessible shale rock formations and land-use policies that favor private development, has helped lower electricity 41 costs and benefitted the petrochemical and manufacturing industries. Even more signifi- cantly, it has contributed to a drop in US carbon dioxide emissions to their lowest levels in 42 two decades, as inexpensive natural gas accelerates the closure of aging coal plants around the country. Though hydraulic fracturing’s diffusion across the United States since 2005 has been 43 rapid, the actual innovation process occurred over decades. The technique of fracturing H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4 17C A S E S T U D I E S 18 H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4C A S E S T U D I E S rock to recover fuels was invented in the late 1940s, but it required many additional inno- vations — the result of public-private partnerships and federal investments at many points 28 in the process — to develop a method of fracking that was economically viable. The version of fracking that came to dominate was the one that took advantage of resources available to US companies, particularly the abundant water supplies that made it feasible 43 to inject millions of gallons of water into underground rock formations. Fracking’s economic success also depended on external factors such as the continuous improvements to the country’s energy infrastructure, especially its natural gas pipelines. The possibility of cheaper and cleaner energy from shale gas has prompted interest from governments around the world. If it can achieve the necessary innovations for tapping per- haps the largest shale gas reserves on the planet, China may be able to reduce its depend- 44 ence on coal and shift to a lower-carbon economy. European countries such as the United 45 Kingdom are also exploring the possibility of exploiting shale gas. However, caution is warranted. The large deployment of fracking technology faces signif- icant hurdles outside of the US context. China’s nascent industry is plagued by technical 46 bottlenecks, lack of adequate water supply, and poor infrastructure. Drilling an ex- 47 ploratory shale gas well in China still costs much more than it does in the United States. 22 In Europe, the challenges are more likely to be political and legal. Unlike in the United States, European landowners do not automatically own the rights to extract the resources from the ground beneath their property, making the building of new extraction plants 48 fraught with political difficulties. From this example, three lessons are clear. First, incremental innovation within an existing and powerful segment of the energy sector has lowered American carbon emissions and 48 reaped substantial benefits to the economy. The shale gas revolution has reduced US power sector emissions on the order of 150 to 200 megatons annually over the past decade, 49 and cheaper energy costs have provided a 100 billion-per-year boost to the US economy. Second, the diffusion of energy technologies beyond the techno-economic system from which they emerge is rife with challenges. Third, and precisely because this process is so hard, the transfer of expertise and technical knowledge (rather than merely dropping in hardware) is critical to accelerating diffusion. Countries have tried to do this by attracting the expertise of US firms. Mexico, for example, 50 has opened up its oil and gas sector to foreign investment in order to acquire the H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4 19C A S E S T U D I E S horizontal drilling and hydraulic fracturing techniques that can help it access one of the 51 world’s largest reserves of shale gas and tight oil. And a Chinese energy company, Sinopec Group, paid Devon Energy (which had previously acquired Mitchell Energy, the firm that co-created the shale gas revolution with the US government) billions of dollars to work with it on fuel extractions projects, in the hope of gaining access to the US firm’s 28,52 expertise. Other countries are enthusiastically exploring the possibility of shale gas 53 production , including Argentina, South Africa, and Poland. NUCLEAR Nuclear power is energy dense, provides reliable baseload power, and offers a range of highly advantageous end uses, such as the ability to generate large quantities of process heat for desalination and other industrial uses. Rising capital costs and systemic barriers to nuclear innovation over the past four decades have limited its ability to make a significant dent in fossil fuels’ dominance. Most of the growth in commercial nuclear power over the coming decades will occur in rapidly industrializing countries like China and South Korea, and Middle Eastern countries like Saudi Arabia and the United Arab Emirates. Indeed, 28 of the 67 reactors currently 54 under construction in the world are being built in China. By contrast, the dominant rich- world markets for nuclear power –– including the United States, France, Sweden, and Japan –– have either dramatically slowed their nuclear build-out or pursued a path of accelerated 27 decommissioning, as in the case of Germany. And nuclear is unlikely to be an option in poor nations that lack strong scientific, technical, and regulatory establishments. In the 1960s, conventionally constructed thermal reactors became the “locked-in” dominant technology at the expense of other designs, including thorium-fueled, pebble-bed, 55 gas-cooled , and fast reactors. Five decades later, nuclear innovation is occurring with both conventional light-water reactors and next-generation reactors that use new coolant and fuel designs. For instance, the Chinese Academy of Sciences is currently building on re- search into a molten salt reactor (MSR), initiated and later discarded by the United States’ Oak Ridge National Laboratory in the 1960s, with the aim of constructing a thorium- breeding MSR prototype in Shanghai by 2015. The US Department of Energy is collabo- 56 rating on the project, which reportedly has a start-up budget of 350 million. Bill Gates reportedly has been in talks with the China National Nuclear Corporation about developing 57 his idea for a traveling-wave reactor. 20 H I G H - E N E R G Y I N N O V A T I O N , D E C E M B E R 2 0 1 4

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