When the first microwave oven hit the market in 1955, it cost roughly $12,000 in today’s dollars. These days you can pick one up at Walmart for $50.
It’s not hard to figure out why the cost dropped so dramatically. Microwaves had new features that customers liked, and they did some things better than gas or electric ovens. As demand for them rose, more companies got into the game, finding ways to make them more efficiently, building supply chains, and driving the price down. As microwaves got cheaper, more people bought them, which attracted more innovation, and so on in a virtuous cycle.
Some clean-energy products work the same way—solar power has become dramatically cheaper over the past few decades—but many don’t. At least, not yet.
Most green technologies are still more expensive than whatever they’re trying to replace, a cost difference I call Green Premiums. They don’t do the job better (other than contributing less to climate change, of course)—and in many cases, they do the job worse.
This is bad news for the fight against climate change. The world needs to eliminate greenhouse gas emissions by 2050, and reaching that point will take inventing and deploying many more clean-energy products. Although it’s great that governments are putting more money into green recovery programs and people are becoming more willing to pay the Green Premium for, say, building materials, innovation isn’t coming fast enough. Products aren’t getting cheaper or better fast enough, and the market isn’t growing as fast as it could—or needs to.
Climate change isn’t the only reason we should speed things up. Research shows that U.S. voters understand how developing clean technologies will spark new industries, creating blue-collar jobs in fields like American manufacturing that have seen big declines in the past few decades.
To accelerate the virtuous cycle of innovation, we need a new model for financing, producing, and buying new clean-energy technology.
One new model is being created by Breakthrough Energy Catalyst, a coalition of philanthropists, companies, and governments. The goal is to make the other green products follow the same cycle of early adoption, innovation, and cost reductions that made solar power and microwave ovens so much cheaper.
Catalyst has identified four areas that are ripe for this approach. In each area, there are some new technologies that are out of the research and development phase and ready to be deployed, but they’re not yet mature enough to draw major investors. So a relatively modest infusion of cash can make a big difference.
The four areas are:
- Long-duration energy storage to allow energy to be stored for months at a time, versus the handful of days that today’s best batteries are capable of. A breakthrough in this area would make solar and wind power more practical in more places.
- Sustainable aviation fuels that can power cargo planes and large passenger jets, which are far too large and heavy to ever be powered by batteries.
- Direct air capture to remove carbon dioxide from the atmosphere. We won’t be able to get rid of all carbon this way, but a cheaper way of doing it would put us much closer to the zero-by-2050 goal.
- Inexpensive green hydrogen. Hydrogen fuels are really promising—they can provide more power than batteries and so could be used to run large planes and industrial processes. Unfortunately, they’re very expensive when made in ways that don’t emit more greenhouse gases.
How will Catalyst work in practice? Let’s say an airline wants to contribute meaningfully to fighting climate change. Its most obvious option is to buy sustainable fuel—but that fuel is in short supply, because so little of it is made, and it’s very expensive.
Through BE Catalyst, the airline will be able to invest in a large refinery that produces a high volume of sustainable fuel. As the refinery gets going, the airline can start buying fuel there. Even better, once the plant’s design is proven to work, the cost of building subsequent plants will drop. With more refineries in operation, the volume of available fuel will go up and the price will come down, which will make it more attractive to buyers, which will draw more innovative companies into the market. The virtuous cycle will accelerate.
You may be wondering: What’s in it for the airline? This is not some vague feel-good gesture. Catalyst and its nonprofit partner CDP are creating a tool that will allow everyone who invests in Catalyst to calculate how much their funding will drive down future emissions. In short, the tool will say: Invest $1 and this is the impact you’ll have in the years ahead. In that way, investing in clean-energy projects can become a competitive advantage.
And aviation is just one example. Catalyst is also relevant for utility companies that need long-duration storage, steel manufacturers that need green hydrogen, and companies that need direct air capture to meet their commitments on emissions.
Just like any investment that grows in value over time, the earlier a company gets in, the more impact they’ll have. They’ll be able to tell potential investors: “We know how much we’re contributing to the world’s zero-emissions goal. If this is something you value, invest in us.”
CDP will publish a report in September explaining how the tool will work, and we expect to launch an interactive version at the COP26 in Glasgow.
Catalyst will fund its first projects next year, and we’ve already announced its first major funding partnership. Over the next five years, the European Commission and Catalyst will mobilize a total of $1 billion (€820 million), in partnership with the European Investment Bank, to build large-scale, commercial demonstration projects in Europe that fit within the four areas I mentioned earlier. Our goal is to reduce the costs of these approaches, get them deployed faster, and help deliver on the EU’s ambitious climate goals. I hope to be announcing more partnerships like this one later this year.
I’m excited about Catalyst and think it can help make clean-energy innovations more available and affordable for everyone.