Bill Gates on The Energy Challenge: Optimistic on Science & Business, but Not So Much on Politics

5/10/11Follow @xconomy

When people think of Bill Gates, they probably think one of two things. He’s either a hard-driving software mogul, or warm-hearted billionaire devoted to saving the poor. But what fewer people realize is that Seattle’s most famous son also spends a lot of his time thinking about, and investing in, clean energy technologies that he hopes will have a shot at staving off a global warming catastrophe.

Gates shared some of his thinking on the subject this morning at a breakfast keynote for the nonprofit Climate Solutions, which drew more than 1,000 people downtown to the Westin Seattle. Gates, wearing a maroon baseball cap, was interviewed onstage by Jabe Blumenthal, an early Microsoft employee who now serves on Climate Solutions’ board. Gates spoke for about 30 minutes in front of this high-powered crowd of local business, political, and nonprofit leaders, about the challenge as he sees it with global warming, and what can be done about it. You can see the video here at grist.org.

Gates used this opportunity to make a few key points. He’s optimistic about the science of lots of different fields of the energy business—wind, solar, biofuels, nuclear, and energy efficiency. He’s optimistic about the business opportunities, and pointed out that he spent yesterday reviewing a number of promising ideas with the prominent venture capitalist Vinod Khosla. Gates, however, is less optimistic that governments, here in the U.S. and abroad, are willing to step up, to set mandates on carbon emission reductions, and to finance some of the basic research needed to spark renewable energy technologies.

“My key interest is that we get a solution that provides cheap energy that emits no CO2,” Gates said. “There are many paths it could go down. Anybody who thinks it will be easy is overlooking the difficulties.” It will be extremely hard to get a large percentage of the world’s energy from any one source like wind, nuclear, solar, or biofuels, Gates said. “We need to go full speed ahead on every one of them.”

There’s a lot of food for thought to consider from Gates’s high-density stream of consciousness on the climate change issue. This was the first time I’d seen him speak in person, and as I write this, I’m still processing what I really want to learn from his remarks. (I’m definitely going to let some of this marinate in my mind as I think about questions I want to ask about our upcoming event “Separating Hype from Reality in Alternative Fuels,” which will tackle one important aspect of the energy challenge on May 19).

Here’s a quick wrap of the highlights from what Gates had to say on a wide variety of questions this morning:

On the important role of cheap energy in creating the modern industrial society:

Gates said Vaclav Smil, a distinguished professor at the University of Manitoba, is one of his favorite authors on this subject. One book in particular of Smil’s, “Creating The 20th Century: Technical Innovations Of 1867-1914 And Their Lasting Impact,” has stuck with Gates. “When you look at why our society has done so well the past 300 years, a lot of it has to do with energy,” Gates said. But what worked so well as the U.S. became the world’s industrial superpower won’t work in a globalized world with 7 billion people and counting. In order to maintain the society as we know it, we will need to continue to produce cheap, abundant energy, but without all the CO2 emissions of fossil fuels. “It’s super-critical,” Gates said. “We need a breakthrough. Maybe multiple breakthroughs,” to create new sources of energy that are low-cost, and environmentally friendly.

On how climate change, and clean energy are connected with the Bill & Melinda Gates Foundation’s efforts to improve global health and development:

The foundation, Gates said, does a lot of work in sustainable agricultural practices, because about 70 percent of the poor people it focuses on have small farms. “Making them more productive is super-important,” Gates said. Clean air, clean water, and good growing conditions are obviously important for people in that situation if they are ever going to lift themselves out of poverty, he said.

On the role of government in the clean energy field:

People need to make a stronger case for more investment in basic research and development of cleantech ideas, Gates said. “You need a portfolio of investment,” he said, and while there appears to be money for “downstream” activities like building new power plants, there’s a lack of investment in the “upstream” creation of new knowledge that can lay the foundation for much better sources of power production. In terms of investment in basic R&D, industry is really nowhere to be found. “Only the government can do that,” Gates said.

On the opportunities for startups:

Yesterday, Gates said he met with Vinod Khosla, the legendary VC who spearheads cleantech investment for Khosla Ventures in Menlo Park, CA. Gates got a review of about 15 cleantech companies, and went through the science and the business of what each of them is attempting to do. He didn’t go into specifics on which companies he met, but said he thinks there are “incredible energy companies,” being built today in the U.S.

On the political environment:

Gates made reference to his work with the American Energy Council—a group of business leaders that included GE CEO Jeff Immelt, Xerox CEO Ursula Burns, the venture capitalist John Doerr, and others—which urged the U.S. government to triple spending on energy R&D, to $16 billion a year. Gates said he supported the Obama Administration’s stated goal of reducing carbon emissions by 80 percent by 2050, although he reiterated that it’s not possible without breakthroughs in technology and politics compared with where we are today. The American Energy Council also said that government needs to put a price on carbon emissions, although as the New York Times noted last June, it didn’t endorse a specific method like a carbon tax or cap-and-trade plan.

The business group’s proposal didn’t succeed, Gates said, partly because of the political environment which makes it very tough to increase spending, when there is so much pressure to lower taxes and cut spending throughout government. “In a normal environment, we’d probably be successful,” Gates said. He added: “President Obama did see us. He said nice things, and I think he meant them,” Gates said, setting off a few laughs in the audience.

Gates, without singling out Obama, offered some harsher analysis of the nation’s political situation, which has led to inaction on this issue for decades. “The lip service that’s been paid to energy innovation over the past few decades has been disappointing,” Gates said. But he also added that government hasn’t been all bad on this issue—he specifically cited the ARPA-E program, which seeks to invest in potentially groundbreaking ideas for energy, much like the U.S. Defense Advanced Research Projects Agency (DARPA) has invested in groundbreaking technologies for decades, which gave rise to the Internet we use today.

On what really needs to happen in technology to fix the problem:

The amount of carbon dioxide emissions that gets put into the atmosphere can be boiled down to a pretty simple formula, Gates said. It’s dictated by four key factors: global population, the amount of services used by each person, the efficient use of energy, and how much carbon gets emitted per unit of energy burned.

The formula, which Gates has discussed before in TED talks, is somewhat sobering. Global population is going up, not down. The amount of services used per person is going up as globalization drives economic growth in China, India, and other parts of the world—meaning they will increase energy usage. Energy efficiency offers some opportunities—like fluorescent light bulbs instead of incandescent bulbs—but there are many important products that can’t be produced more efficiently, Gates said, citing steel and fertilizer as examples. That means “you’ve got to do extremely well” on the last part of the formula—the amount of carbon that gets emitted per unit of energy used.

What that means is that over the next couple decades, “we will need to invent, pilot, and deploy” a wide variety of carbon-emissions reducing technologies—things like nuclear, carbon sequestration, and renewable fuels, Gates said. Citing his favored author, Vaclav Smil, Gates said history has shown energy transformations like this can take 60 years to gain widespread adoption. “We are talking about moving faster now to change than we ever have before. We’re asking for something pretty impressive to get done,” Gates said.

On the differences between the computer industry and cleantech:

In the world of software, product life cycles are only two to three years, and it’s not subject to any complex regulatory regime, Gates said. In energy, if you want to build a new natural gas, nuclear, or renewable facility, investors need to look at a 40-year time horizon for the investment to make sense. “The decision you have to make now is based on government policy way out there decades in the future,” Gates said.

On the U.S. as a center for cleantech innovation, compared with China:

In terms of innovation, “The U.S. still has a dominant position,” Gates said. While manufacturing costs and land costs may be lower, and the Chinese government has made some big investments, most of the real innovation is still occurring in the U.S., he said. The innovation will flow from the place that has the most great universities, and a culture for financing risky startups.

“I know of 100 great new energy ideas, and I’d say 70 percent of them are here in the U.S., even if they are looking at doing some manufacturing there [in China],” Gates said.

On the potential for nuclear energy, particularly TerraPower, the company Gates is backing with Nathan Myhrvold:

TerraPower is “so cool” on paper, Gates said, but he cautioned against people getting irrationally exuberant about its potential for clean, low-cost nuclear power. While TerraPower has “brilliant people” working together here in Seattle, “the difficulty in going from what’s on paper to an actual plant is immensely difficult,” Gates said. Terrapower is really “one of 1,000 cool companies we need to get behind to maximize our chance that 15 years from now we’ll have multiple technologies that will work, and are cheap, and can move into maximum deployment mode.”

On the potential for innovators to help solve the climate problem:

The amount of sun that hits the Earth is “gigantic,” Gates said, and so is the amount of energy released from a uranium reaction. Meeting scientists who think about harnessing ideas that like that is “a lot of fun,” Gates said, but also worrisome. The U.S. is the richest country on Earth, and “we ought to take the lead,” in investing in clean energy technologies, Gates said. But the European Union also hasn’t done enough, and China “will have to be pushed,” he said. Some of the debates about climate science are disturbing, Gates said, making him sometimes wonder, “Do facts matter?” But then again, he said the political system we have today has helped give rise to continual improvements in the standard of living in developed countries, so maybe it’s not completely broken, Gates said. “You gotta persevere,” he said.

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