Against the backdrop of COP21, Bill Gates and a conglomerate of wealthy philanthropists launched the ‘Breakthrough Energy Coalition’ – aiming to boost R&D in clean energy with the goal of commercializing disruptive technologies that can outcompete traditional hydrocarbon based energy sources. A noteworthy endeavor, and the funding committed is no laughing matter. However, my message to Mr. Gates is this: in your search for technological innovation, do not overlook the need for business innovations, they represent some of the most prominent and immediate opportunities to drive drastic change in the global energy economy.

 

The reality is that a huge amount of technological innovation has already occurred in the energy sector. In electrification, advanced energy technologies are already cheaper than traditional fossil fuel based technologies in many markets, and the prices for these technologies continue to fall at astonishing rates as they scale. Today, we have only scratched the surface there is still tremendous opportunity to massively deploy these existing and proven technologies.

 

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The larger problem is that the entire energy economy faces a bottleneck in the way businesses operate. Energy companies have not figured out how to profit from energy efficiency, growing distributed generation and the mass deployment of renewable energy technologies. At the same time financial institutions are still discovering how to unlock large flows of capital for new energy oriented asset classes. Not because these technologies are fundamentally uncompetitive or too risky, but because 20th century business models don’t know how to support them. Therefore, we can continue to introduce 21st century technologies but without business innovation, the energy sector will be slowed by antiquated institutions.

 

Ultimately, if we want to facilitate a larger energy transformation it will require more than new technical solutions. It will require business model innovations that can host the rapid and voluminous deployment of new technologies. Technology disruption is absolutely part of the picture, but it cannot diminish the need to unleash the vast potential of the solutions that exist today.