The conclusions of that study are detailed in a new book—Unlocking Energy Innovation (MIT Press, 2012)—by Richard Lester, the Japan Steel Industry Professor of Nuclear Science and Engineering at MIT, and David Hart, a professor of public policy at George Mason University. The project was supported by a grant from the Doris Duke Charitable Foundation. The study was carried out at the MIT Industrial Performance Center and involved faculty and students from nine MIT departments.

Neither the failure of global and US climate policy nor the emergence of other pressing issues changes the facts about climate and energy. Business as usual is unsustainable over the long run. The build-up of greenhouse bases in the atmosphere continues unabated, and its environmental and human costs are mounting. For each year of delay it will be necessary to “bend the curve” of carbon emissions that much more sharply if the worst consequences of climate change are to be averted.

Yet recent events also reveal and important truth that advocates of the need for a low-carbon energy transition must face. Broad public support for bold action does not exist in the United States. Until it does, no long-term, comprehensive national policy will be sustainable. The energy transition will require the exertion of public authority on a large scale, and it will touch the lives of almost everyone in a direct and tangible way. If the consent of the governed is granted only grudgingly or not at all, such a program will inevitably be hamstrung by resistance and will remain at constant risk of reversal.

The energy/climate debate of rent years has been dominated by the idea that the price of fossil fuels must be raised to reflect the full cost of their use. What is needed now is a different focus for the debate, one with the potential to build public support over time. Innovation should become that focus. A carbon price must surely be a part of any energy transition strategy. But the pain imposed by the stick of higher prices must be counter-balanced—in the public mind and in practice—by the carrot of better, safer and (ultimately) cheaper energy services made possible by new technologies, new business models, and new institutions.

—“Unlocking Energy Innovation”

Lester notes that innovation requires a productive ecosystem, including public and private research laboratories; small and large firms; financial intermediaries ranging from huge banks to individual “angel” investors; schools, community colleges and universities; and local, state and federal agencies.

We face a very big innovation challenge over the next few decades, bigger than most people recognize. And the system as a whole isn’t close to being up to the task.

—Richard Lester

Lester and Hart identify four stages through which an innovative technology becomes an established part of the energy infrastructure. Of those, the first stage—the discovery of new technological options—and the final stage—fine-tuning of technologies already in commercial use—are relatively well-managed, Lester says, though both will require more investment.

However, the two middle stages are less well-managed. These stages, spanning what is often referred to as “the valley of death,” include the development of prototypes to demonstrate viability in the marketplace and the initial implementation of the first full-scale systems by early adopters in the marketplace. These intermediate stages are costly and pose high investment risks, and a modest carbon price will do little to accelerate them.

Lester and Hart’s analysis of past advances reveals several steps that tend to foster energy innovation:

• encouraging competition (and always leaving space for new market entrants);
• making rigorous and timely selections of promising concepts; and
• matching the scale of the system to the scale of the need.

The current system satisfies none of these.

—Richard Lester

Lester says that it is essential to pursue parallel innovation strategies aimed at different timescales:

• changes over the next decade focused on efficiency improvements such as building insulation and gas mileage;
• midrange efforts to reduce the costs and risks of known low-carbon energy-supply and electricity-storage technologies; and
• from about 2050 on, a third wave of technological deployments drawing on fundamentally new developments in fields such as materials and catalysis.

All three waves of innovation must be pursued in parallel, immediately.

—Richard Lester

Since coal and natural gas represent about 70% of all electricity generation nationally, finding cost-effective ways of replacing those fuels and mitigating their emissions will be critical, the book says. One specific idea the team advocates is a regional approach to managing and financing the intermediate stages of innovation. Lester suggests that such a regionally based system, with decisions made by innovation users, would be more effective than the present system where decision making often rests with the federal government, a system that so far has proved only partly successful.

The federal government is structurally unable to play this role effectively, Lester suggests. The proposed approach would expand the scale of the energy-innovation system considerably, but reduce the federal role, he says.

Current difficulties in Washington only add to the case for regionalization. Implementation will probably have to happen from the bottom up, he says; “It will have to be an organic process.