Deployment Led Innovation; a policy algorithm to create markets that fix climate change with spectacular results
In this essay I’m developing my thoughts on how we can use markets to fix climate change. I’m calling it Deployment Led Innovation. It’s based on lessons we can draw from four spectacular cleantech success stories of the past forty years.
Back to 1985
Back in 1985 I started my studies in Environmental Technology at Wageningen University & Research in the Netherlands. One of our research projects that first year was to analyze energy production, and if we saw a chance for wind energy to go mainstream. Based on our research, the very clear answer was ‘extremely unlikely’.
In 1992 I worked at the Environmental Protection Agency of the city of Amsterdam, where I ran a pilot with an electric car. It was a VW Passat on the outside, but the inside was something close to rocket science. The car was modified by ABB into a 100% battery electric vehicle (BEV). The battery chemistry was Sodium Sulfur (NaS) with a molten salt electrolyte, which required the battery to be at 350ºC all the time. It ate about 5% of it’s energy every day to maintain that temperature. Just the cost of the battery was around €200.000. It drove like a dream, but there was no way you could see that car go mainstream. Way too expensive, way too complicated.
In 1995, a friend of mine finished his PhD research in solar cell efficiency improvement. Super nerdy stuff, he shot different atoms at PV cells to increase cell efficiency, what the industry calls doping. When I asked him about the chances for PVs to go mainstream, he scoffed. There was no way that PV would ever go mainstream. The technology was simply too expensive. He called it a ‘German greenwash hobby’ to put PV panels on roofs. That money could have a much bigger impact spent elsewhere, for instance by closing their lignite (or brown coal) mines.
In 2012 I led a Community of Practice for managers in the Dutch offshore wind industry. Over a period of two years we had many discussions on how to innovate and bring down the cost of offshore wind: improving turbines, smarter operations and maintenance, easier grid connection, cost of financing. It was fascinating to be part of it, I learned so much about that industry. One of the things that I remember vividly is that nobody in the room expected offshore wind to be cost competitive by 2025.
1 A Hypothetical Bet
Let’s say you and I would have a bet, back in 1995, on the evolution of wind, solar and EVs. The bet would be to predict if these three technologies would be cheaper than their fossil fuel competitors by 2020 or not. In 1995, I would have bet on fossil fuels. No doubt. Heck, I would have taken that bet if it was about only ONE of these three technologies becoming cost competitive. And I would have taken that same bet against offshore wind in 2014.
Fast forward to 2020. I own a small share in a wind turbine coop in the Netherlands, that delivers electricity at a price that is competitive with coal fired power plants. I bought PV panels for my roof, and they are close to cost competitive in a country with lots of clouds and rain, and very little sunshine. I drive an electric car that is more comfortable and faster at a lower cost per kilometer than traditional cars. And we just had our first offshore wind tenders in the North Sea without any government subsidy.
Of course I never made those bets with anyone. But the thought experiment got me thinking. How is it possible that my expectations were too low? How did I miss this? After all, I’ve been following most of this stuff for over three decades. As a citizen I have rooted for clean technologies to be successful since my first vote. Most of my professional life I have spent trying to contribute to it, in government, in politics, in non-profits, in companies, with startups.
Talk to my friends and they will rank me from stubbornly to maniacally optimistic. But even with my knowledge, values and backed-in optimism, my expectations of the potential of these clean technologies were clearly way below what was possible. How did I miss it? And if an optimistic insider like me underestimates the potential of these clean technologies, how can we expect skeptical non-insiders to listen to us, us being the proponents of fixing climate change through innovation?
Wouldn’t it be great if we had a framework to have that discussion with the non-insiders, so we can explain our thinking to them in a more coherent way, and show the likelihood of future success based on past results?
Lucky freak accidents?
Part of why I missed it, I think, is that it feels just too good to be true. Each sounds like a miracle, a lucky freak accident. In this argument, I lost the bet simply because four lucky freak accidents happened.
For wind, the freak accident would be the first oil crises and the stubborn Danish politicians that just kept going supporting an industry that was never about to make money (until it did, but that was just luck). For solar, an argument can be made that Germany preferred to spend billions of Deutschmarks and Euros to keep their lignite mines open while closing their nuclear power plants after Tsjernobyl. As a by-effect the price of solar went way down to the point where it became almost cost competitive, and then the Chinese government subsidized the last part because they thought is strategically important to own the PV manufacturing industry. For electric cars, it was all thanks to the brilliance of Elon Musk and Silicon Valley venture capital. For offshore wind, it was the offshore oil industry that was looking for new business opportunities after the oil in the North Sea ran out.
Described this way we have four unconnected events. Four fortunate freak accidents that have created a huge public value. They have created millions of jobs around the globe, relieved hundreds of millions of people of health problems and created billions of returns in euros, dollars, rupees and renminbi. All four will contribute enormously to fixing climate change.
You can’t reproduce freak accidents. You can’t plan for them, you can’t learn from them. And you certainly can’t built new policies for fixing climate change on it. Trained as a policy scientist, I deeply believe that policy should be a plan to address a societal problem based on facts, rational analysis and our best understanding of the complicated causal mechanisms in our society. No politician should give their support to a plan that basically says ‘We hope we are lucky’ (although some do). Hope is not a strategy.
2 Connecting the dots
Fortunately, there is a problem with the ‘luck’ hypothesis. One lucky miracle can happen, sure. But four? That seems too much luck for my taste. The probability of four lucky shots is quite low.
The other hypothesis is that there is a pattern here, a pattern that explains why these four cleantech breakthroughs happened. In fact, I will argue that they share more similarities than is visible on the surface. And that based on those similarities we can create a playbook that allows policy makers around the globe to create green breakthroughs in different markets, with different technologies. For instance in hard-to-abate sectors like aviation, shipping, steel and plastics. We’ll call it the Deployment Led Innovation.
But that’s the conclusion. Let’s start with connecting the dots in wind, solar EVs and offshore wind:
#1 Deployment over pilots
The first thing all these successes have in common, is that they reward deployment over experiments and pilots. They were all designed to get real products in the hands of real customers. That’s what Germany created with their feed-inn tariff, or Einspeisegesetz as it’s known there. It was a government subsidy that bridged the price-gap between electricity from fossil fuel and green alternatives like wind and solar. Most of all, it rewarded entrepreneurs and intrapreneurs over university researchers for their efforts. It created a real market. Here’s why this is crucial.
I remember very well doing research in Baden-Württemberg in 2010, looking at the uptake of solar PV in Germany. One of the places we visited was Ulm, a cute, small city of 120.000 inhabitants on the banks of the Danube river. We learned that Ulm was in a friendly competition with Freiburg in neighbouring Bavaria to have the most PV roof installed of any city in the world. We visited the city council and met with a few policy makers. They explained to us that the rules in Germany made it possible for anyone to put PV panels on their roof, and that it was subsidised to be cost competitive for up to 20 years. There was very little paperwork required to get a permit, it was fast and streamlined by the city government. The rest was up to the entrepreneurs. They told us to talk to the entrepreneurs, because they knew best how it played out.
That’s how I met Peter Adelmann, who is the founder of Phocos, a company specialized in inverters at the time. Peter not only ran the company, but had a non-profit for projects in developing countries, helped to set up a sustainable energy bachelor at the local university, he was also a teacher there, he sat on an advisory board of the mayor, etc., etc. We joined him for half a day, and it was both exhilarating and exhausting. We could barely keep up with him, with his speed, endless flow of ideas, his energy. Peter spent every minute of that day focussed on getting things done. Even during lunch (yes, schnitzel) he had three short phone calls.
I would describe people like Peter action-oriented. They see opportunities everywhere. I’ve seen hundreds of them in ClimateLaunchpad, a program/competition for green entrepreneurs. They act, and then they analyze if it works. If not they will adapt. But they get their fun from the non-stop action, from chasing the opportunity they see.
At that same time, the Netherlands had a very different approach, with a lot of central government planning instead of a creating a market. The focus was on large scale wind and solar parks, because the idea was that it would have more impact. The problem was that it took a very long time to get them built. It required lots of academic and consultancy research to determine the optimal locations, environmental impact studies, pilots to test the viability, very long permitting processes, lots local resistance, etc., etc..
When we were researching one of those processes, we met very different people than Peter Adelmann. We met very smart academics and policy makers, that researched everything very carefully, would talk about risk management and how they needed to do more research. Most of all they were incredibly friendly, reasonable and calm people.
I would categorize them as knowledge-focussed people. Knowledge-focussed people will first want to know everything there is to know before they feel legitimized to act. When they act, at first it will be on a small scale: experiments and pilots, that need to be monitored non-stop. Learning will be formalized in academic papers, evaluation reports and at conferences. Once the pilots are evaluated the whole process starts again, now for scale. Roundtables with entrepreneurs and companies, events with all stakeholders present, you get the picture.
New industries are built by action-oriented people. It’s the Peter Adelmann’s, the Martin Eberhard’s and Mark Tarpenning’s, the Jigar Shah’s and the Dick Swanson’s that built new industries. The only way you to get action-oriented people to join the cause is if there is a fair chance for them to do their action-thing. So that’s why deployment should be rewarded more than experiments and pilots. That’s why using government subsidies to create green markets will beat any central government planning process in impact.
Germany got that right. So did Denmark with wind. And California did it for electric cars with the Clean Vehicle Rebate Project and before that with the Zero Emission mandate. Denmark, the UK and the Netherlands got it right with offshore wind by 2015.
#2 Create long-term markets for new solutions
Once we have our green market and the action-people active in it, we are going to need them to stay in this new space for a very long time to be successful. In all four cases, the government policy was a long game. A patient policy for many decades. In Denmark the government started promoting wind energy in the late 70ies, and in supporting it up until this day. Same for Germany, where the first feed-in tariffs were guaranteed for 20 years.
A very effective way to create a market is to require a minimum amount of a green alternative. An example of this is the Renewable Portfolio Standard, that forced energy utilities in many USA states to start buying green energy. A variation of this is the way California is pushing car manufacturers since the 90ies to lower CO₂ emissions of cars. The current regulatory framework for this is the Zero Emission Vehicle or ZEV program. Due to the ZEV program, by 2025 an estimated 22% of all cars sold in California will be battery electric cars.
What is crucial for these new markets to develop is that there is a long time horizon. Entrepreneurs and investors will only enter the market if they can see an opportunity for more than 10 years. If you want to get access to capital from Wall Street, European banks and pension funds, there needs to be an industry track record of even more than 10 years, that shows predictable risk. Once there is predictable risk, a new industry can get access to those huge pools of capital, at much lower interest rates. It’s a big part of the explanation for the rapid cost decline of offshore wind for instance. And the only way to have big impact is through those huge pools of capital.
#3 Reduce barriers to entry
To further boost the influx of corporations and startups into the new market just created, it really helps to reduce barriers to entry. It’s one of the reasons why offshore wind has become cost competitive in under twenty-five years. The way the Dutch government went about this, was to dramatically reduce the costs for companies to bid on tenders for new offshore wind parks and to run them cheaper too.
You might think that it’s fairly straightforward to punt wind turbines at sea. There is not that much you need to take into consideration. We’re at sea after all, and sea is an empty space. Well, think again. It’s a vast, sensitive ecosystem. You are going to drill mono piles into the sea bed that need to carry 400 tons of steel, with wind turbines of >200 meters hight that need to be able to resist extreme wind forces. So you probably want to do a detailed geographical survey of the soil, to figure out how deep your mono piles need to go, etc.. Then there is all the cabling: there already is a surprising high number of cables on the sea bed (internet, anyone?) and you don’t want to break those while you’re working. You need to figure out a way to bring the energy produced from the turbines to a transformer station, and from there on land. For this you need to negotiate with network operators. There are shipping routes in busy seas like the North Sea. The list goes on. Getting all that data together costs millions of euros. Costs that every bidder had to make.
The way we solved it in the Netherlands was to provide all the relevant data publicly, at no cost, to anybody who wants to consider a bid. There is a special website for it. The second thing we created was a standardise socket at sea that then delivers electricity to the grid. The bidders don’t have to worry anymore about how their electricity will get to the Dutch grid. Taking these transaction costs out of the equation has dramatically reduced the barriers to entry. Germany did the same for wind and solar by making it super simple and fast to get permits.
Another way to support new entrants is through government guaranteed loans. Although Silicon Valley tends to think everything it touches turn in to gold instantly, Tesla would probably not have survived the 2008 financial crises without a $465 million loan from the USA government so it could finish the development of the Model S.
#4 Support early adopter customers
The next dot I want to connect is to reduce the risk for customers. The first solar panels were installed by early adopters, the first wind turbines were bought by early adopters, the first EVs were bought or leased by early adopters. The first offshore wind park, Middelgrunden in Denmark, was bought by 10,001 early adopters: 50% by the local utility and 10,000 citizens that invested in the Middelgrunden Wind Turbine Cooperative.
All those early adopters were taking a pretty big risk. Will the wind turbine perform as promised? Is the company selling me this solar PV roof installation still around 3 years from now to solve a problem under warrantee? What will be the value of my Nissan Leaf five years from now? Will there be enough charging stations in my neighborhood so I can actually charge my car at night?
One way to do this is through loan programs. In Germany, KfW gave low interest loans to consumers and companies who wanted to install PV panels. (KfW stands for Kreditanstalt für Wiederaufbau, or Reconstruction Credit Institute. It was founded in 1948 as part of the Marshall Plan). In the early days installing PV panels on homes, the risk associated with it was unknown. After ten years of deployment the industry had matured, and it became possible for normal banks to step in. In the early days, no sane bank should loan money to products or services of which it can’t determine the risk.
A second way is to make sure the infrastructure is up to speed. Countries like Norway and the Netherlands subsidized the installation of EV chargers, and gave high tax benefits to the first wave of EV owners. After the industry matured, those benefits were slowly reduced and will gradually go down to zero once the price of an EV is on par with gasoline cars.
A third way is to make the early adopters feel special and give them the VIP treatment. When the Tesla Roadster went on sale in 2008, it was like an Minimum Viable Product (MVP) of a electric car. It showed the potential of EVs. In California, full EVs and plug-in hybrids were allowed to drive on the carpool lanes, even if there was only one person in the car. It certainly helped Tesla with their sales.
In my home city of Amsterdam, EV owners could request a charging station in front of their canal house. The city would install it for them and give the owners free parking and free charging to boot. The fastest way to get a parking permit in the downtown area was by getting an EV (instead of >5 years waiting lists for a normal car). Tesla’s Roadsters became a highly visible part of our canals as a result.
#5 Grow applied research funding and eduation
There is a key role for academia in Deployment Led Innovation, especially in applied research and education. Applied research can dramatically boost the learning of industries, speed up innovation, increase efficiency and reduce costs. Education provides a fresh talent pool for new, fast growing industries.
It’s not a coincidence that the biggest and best education programs and wind energy research groups in the world are at Danmarks Tekniske Universitet, the Technical University of Denmark. If you look at the Danish wind cluster, what you see is an extremely finely tuned ecosystem of big companies and interwoven supply chains, research groups, education programs, huge test sites for next generation turbines, dedicated policy departments at ministries, industry groups. It took fifty years to evolve. Amazingly, this tiny country of 5,5 million people is still the world’s leading producer of wind turbines, even though many countries, including China, have built their own wind industry.
#6 Startup Ecosystem
If there is one thing we should all learn from the success of Tesla is that startups can massively speed up market adaption of clean technologies by threatening existing players. Tesla was founded 2003 by Martin Eberhard and Mark Tarpenning (Musk was an early investor, not a founder). They built a prototype of an EV that was super fun to drive, super fast and super expensive. It was unlike any EV on the market. They struggled to get funding for the company, but many of the investors they pitched to agreed to order the car if they managed to build it.
The first car Tesla sold was the Roadster in 2008. Like I said, it was like an MVP of an EV. The company sold almost 2,500 Roadsters, and built a loyal following of early adopter-fans. In 2012 the Model S was launched, a limousine with the performance of a race car and the price of a high end German luxury car. It got raving reviews for its performance, but there were many quality issues in the first years. Luckily for Tesla, early adopters are a pretty forgiving crowd, so the fan-base of the company kept growing.
By 2014, Tesla sold more Model S’s in California than the Mercedes S-class, the BMW 7 series and the Audi A8. Combined. California is the USA’s biggest market for luxury sedans, with an economy the size of Germany. So this certainly got the attention of the luxury car brands. It took the established industry five years to come up with an answer. In 2018 Jaguar launched the i-Pace, Audi (e-Tron) and Mercedes (EQC) followed in 2019 and BMW (i4) in 2021.
All in all, the car manufacturing industry will spent an estimated $300 billion on going electric until 2030. What thirty years of policy push couldn’t achieve, one startup from Silicon Valley got done. Now the thing is: anywhere else on planet earth that startup would have failed. The funding needed for Tesla (and all the other very expensive failures in EV startups) is simply not available outside of the San Francisco Bay Area.
Startups are the turbo boost for deployment led innovation. They supercharge change in industries. But the startups can only succeed if there is a rich startup ecosystem, with plenty of investment funds, a good legal setup (IP, stock compensation, bankruptcy laws), infrastructure (incubators, accelerators), etc.
#7 Play to your strength
Another dot that rises up from all these cases is that countries should play to their strengths. Wind? Yes, Denmark of course! Off shore technology? What better place than the Netherlands, being 40% under water already? EVs? Silicon Valley would be the best place to create a computer on wheels. For charging infrastructure, Norway hasthe highest income of Europe and with >97% green (mostly hydro)energy.
The one where the fit is not that great is solar. Germany is certainly not the country in the world with the highest PV potential. However, what Germany does really well is engineering. A lot of the equipment that is used to produce solar panels is still dominated by German companies, even though most of the production is happening is Asia.
3 The result: an algorithm for green growth
You can probably see the reinforcing loop that is created in all four cases. Long term government policy creates a market that puts deployment over pilots. It attracts action-oriented people, both inside large corporations and startups. The lowering of barriers to entry further increases the influx of companies and new startups, looking for opportunities in the new market.
Support for early adopters customers lowers their risk, which helps to boost demand. The resulting growth of the industry leads to learning, which leads to lower prices, which again leads to more demand, which leads to growth, which leads to more learning etc.. Applied research funding brings academic scrutiny, further improving learning curves. The education programs create motivated young talent that is eager to start working in these new, fast growing industries.
That is how Deployment Led Innovation works. Steve Jobs would say: ‘It works like magic’, like he famously said about the onscreen keyboard at the iPhone launch in 2007. But as we all know, it’s not magic. That smartphone keyboard of yours works because there is an algorithm backed in the software that allows it to predict your typing. Similarly, the rise of wind, solar and EVs is not magic. It’s pretty basic economics and innovation theory, with spectacular results in these four cases. It’s an algorithm for transforming economic sectors and for green growth.
Results
In the process, millions of jobs were created, billions in revenue and profits were generated, millions of people got to breath cleaner air and enormous amounts of CO₂ were prevented from ending up in the atmosphere. It’s hard to pull the global numbers together of all these amazing results, but let’s just take wind energy in Denmark. The wind energy industry in Denmark is responsible for 85,000 jobs and € 7 billion in exports. It represents 3% of Denmark’s GDP.
The thing that I find the most staggering is how the cost of all these industries have come down. It’s nothing short of spectacular. Since the 1970ies the price of solar PV panels have come down by around 99.5%. See the graph below. It’s really amazing when you think about it. The solar panels that I put on my roof in 2013 for around €6,000 would have cost over €500,000 in the 70ies. And prices have continued to drop since 2013.
For wind, Li-ion batteries and offshore wind, the numbers have been similarly impressive. The graph below shows that between 2010 and 2018 the price of Li-ion batteries came down with 85%.
This is in the end the key reasons why I would not have taken that bet in 1995. Human brains are, or at least my brain is, not very good in seeing the power cumulative, small reductions in cost over a long period of time. As it turns out, given enough time and enough learning, a 99% price reduction is very possible. But it’s very hard for the human mind to see that possibility, even for an optimistic insider.
Repeatable and Scalable Business Model
One thing I’d like to stress is that innovation is not only about technology. In the end it’s about finding a repeatable and scalable business model. Case in point is SunEdison. The company was founded by Jigar Shah in 2003. As Shah describes in his book Creating Climate Wealth, he and his co-founders figured out a way to finance solar projects for corporations. There was hardly any technology involved. Most of the puzzle they solved was about financing these solar panels, delivering the energy they produced to the customer and the legal contracts needed for it all to work well. Solar electricity as a service.
It resulted in what the industry now knows an PPAs: Power Purchase Agreements. Companies agreed to buy the electricity of the panels that were installed on their property for a certain amount of years, while the panel ownership is still with the company that installs them. The work by SunEdison created a new industry standard, that over time was accepted by Wall Street banks as a viable investment with a predictable risk. In other words, a repeatable and scalable business model. It opened up many new markets, including panel leasing by home owners, generating billions and billions of dollars, euros, rupees and renminbi in revenue.
4 Policy: Deployment Led Innovation Playbook
In closing, let’s look at Deployment Led Innovation as a policy and discuss some boundary conditions for it to succeed.
The term
But first, let me explain where the term Deployment Led Innovation comes from. In early 2020 I was listening to the Energy Gang podcast (one of the best podcasts on clean energy, highly recommended). The gang was discussing the future of cleantech policy. Jigar Shah is one of the three hosts and he made the argument for what he called Deployment Led Innovation. I thought that term was spot on, and I was working on a EU project where a framework like that could be really helpful.
So I went online to search for an academic article or a book that laid out the concept. I got exactly zero hits and emailed Jigar to get some reading suggestions from him. He wrote back, saying he came up with the term, but didn’t write anything about it. And he challenged me to do just that. So here it goes. From now on, if somebody is searching for deployment led innovation there will be one hit!
Boundary conditions
To be sure, the Deployment Led Innovation playbook will not work in every context. For instance, if you make a historical analysis of how the policy frameworks got in place in these four successful cases, you’ll see that in each case it required a enormous amount of political capital to get the policy in place, and to keep it in place.
Without Hermann Scheer, a member of parliament and the father of the German Energiewende, it’s unlikely the policy would have survived that long. Since it’s inception in the late 80ies, Scheer spent every ounce of his political capital to keep it alive and improve it, as I have described earlier (and at the same time his wife ran the European Association for Renewable Energies).
The Netherlands, Germany’s neighboring country, did not have an equivalent of a Scheer in parliament. In my country we had the same bold targets as Germany for renewable energy production, but our policies changed with every new (coalition) government. This created uncertainty for entrepreneurs, and we never got the reinforcing loop that Germany created. The long term impacts of these policy changes are staggering. In Denmark 60% of all electricity is produced in a green way. Germany is at >45%. My country the Netherlands sits around 12% (and yes, it hurts).
Secondly, success is not guaranteed. What Denmark did with wind-energy was a bold gamble, that might not have paid off. Ultimately, the success lies in exports. If exports don’t pick up, it would have been the wind-equivalent of France, with its huge nuclear industry and its high speed trains that both have not really taken off in other countries. Keeping industries running on just your home market is expensive, especially for small countries. It’s the export that created the new jobs and the industry profits for Denmark.
Thirdly, be aware of competition. The German government created an artificial market for new clean energy solutions by subsidizing the price difference. As a result, the industry took off in impressive ways. Many new companies sprung up and started producing solar panels, inverters, installation, etc.. Industry learning lead to big price drops. However, when China decided it wanted to be the industrial powerhouse for solar panel production and did so by throwing in huge subsidies, most of the German solar companies were acquired or died. There is still a healthy industry base for production technology of solar though.
Lastly, it doesn’t come cheap. It requires extreme amount of investments to turn around an industry. The Germany Energiewende has cost hundreds of billions of euros. That is also why we can’t expect existing companies to take this on. The risk involved for individual companies is unacceptable from any sound management principle. It explains why in all four cases the government has played such a pivotal role. It can take on the collective risk of industries, and co-fund that risk.
However, as the four cases show, when set up consistently, the impact and the economic rewards are spectacular. It’s really a policy algorithm to create green growth.
5 A First Thought Experiment for Hard-to-abate Industries
The question is what would happen if we applied the Deployment Led Innovation playbook to hard-to-abate industries. Can we expect the same, extreme cost reductions that we have seen in solar, wind and EVs? There is no good reason to think why it would not work, if we apply the algorithm as described above.
Let’s do a little thought experiment with one of the hard-to-abate industries. I’ll pick a personal favorite, the aviation industry, and see how we could apply the deployment led innovation playbook to create an an aviation industry that emits no CO₂. For that to happen we need lighter planes, new types of propulsion, kerosine made from CO₂ that is recycled out of the atmosphere, and many things we can’t even predict right now.
A playbook for aviation
Where to start? It’s unlikely that this will happen in the current market conditions for aviation. Building planes is a duopoly between Airbus and Boeing, with a lot of innovation happening between them, but mostly on the ‘evolution’ scale of things. There are a few new entrants trying to get into the market with electric planes, like the Israeli startup Eviation that is working on a 9-seater plane for regional transportation. There are two well funded German startups working on drone like air taxi’s, Volocopter and Lilium. And the list goes on.
For these electric startups to grow into the Tesla of green aviation, what they need is a few things: first of all, market mechanisms that boost deployment of their innovations. It’s not hard to imagine a Zero Emission Plane mandate, comparable to California Zero Emission Vehicle program. It would require airlines to have a certain percentage of their fleet be zero emission. That would open the market for challengers like Eviation, Volocopter and Lilium. It would also get the attention of Airbus and Boeing, and force them to put R&D euros and dollars in that direction. Just like in the car industry. The key is that we keep this market mechanisms in place for at least 10 years, and that the percentage of zero emission planes grows over time.
It will help tremendously to lower the barriers to entry for the challengers. This can be done by making certification of green alternatives free, and with costs incurred by the companies fully or partly compensated.
Supporting the early adopter customers is not hard to imagine. The VIP treatment of green airlines and their passengers is easy. Airports can be forced to reserve a certain percentage of their slots exclusively for zero emission planes. It would be the equivalent of the parking spots that Amsterdam reserved for electric cars on the canals, and how EVs are allowed to use HOV lanes in California. An insurance program to guarantee the after market value of electric planes would reduce the risk for airlines a lot. Etc.
To support this emerging green aviation industry we’ll create massive global research collaborations between the world’s leading universities, so industry learning is rigorous and fast. There will be new ‘green aviation’ studies that delivers highly skilled young talent to the industry, with state-of-the-art knowledge of green technologies that can be deployed in aviation.
We’ll optimize funding opportunities for startups through fund-of-funds and tax incentives, so there will be ample and deep pools of patient capital for deep tech startups with long development cycles. We’ll get the airlines involved in that process, together with the supply chains of the airplane manufacturers, boosting startup acquisition and boosting scaling up of innovations. There is a lot to be learned from big pharma, where huge companies have figured out how to create startup ecosystems around them.
Another thing we can regulate is that aviation starts using carbon neutral drop-in fuel in kerosine, be it biofuel or synthetic fuels. That would be a huge boost to the biofuel industry and the nacent carbon capture and usage industry. It would create scale, which will reduce costs, which will increase demand, with results in even more scale. Etc.
Lastly, given the amount of complicated problems that need to be solved just for aviation, there are many ways that country can play to their strengths in this transformation. Countries that already have an industry have a head start, but there is a lot of room for new players too. Europe and the USA have a lot to lose, given their current domination of the industry.
6 Let’s bet
If a playbook with these type of policies were to be put in place for aviation, what would be the result 30 years from now? Well, based on what humanity achieved in wind, solar and EVs, I’m willing to take a bet. My bet is that by 2050, green aviation is cheaper and better than the current aviation. I’m willing to bet that in 2050, any customer can fly from Amsterdam to New York for a lower price than today (in today’s euros), emitting zero carbon, and with more comfort. Provided of course that we put a Deployment Led Innovation policy framework in place somewhere in the next five years. And I’m willing to take that bet for any of the hard-to-abate industries like steel, plastics, cement, shipping and long distance road transport.
Rules of the bet
So who is willing to bet with me? I’m willing to take a 1,000 bets on transforming hard-to-abate sectors. For me to take on your bet, here are a few rules:
- Describe the specific elements of Deployment Led Innovation policies that need to be implemented for an industry;
- We will then agree on a minimum set of elements that need to be implemented within 5 years;
- Each bet is €10 or $10, and the winner will donate the money to a good cause we agree upon beforehand;
Feedback?
Apart from your proposed bets, I’d love to hear your thoughts on Deployment Led Innovation. Did I miss dots that need to be connected? Lapses in argumentation? Literature that I should read? I’d love to hear from you. In the mean time I’ll work on a next article to dive a bit deeper into the hard-to-abate industries. Because fixing the carbon problem of those industries is by far the biggest economic opportunity of the 21st century.
