Driving technology is about risk and failure

Published in the Australian Financial Review February 27 2020. If the Morrison Government wants its big talk on climate technology targets to be taken seriously, it will need to embrace the grim realities of what pushing innovation looks like.

Renewables is just the start. Over the next 30 years we will need to find better ways of storing and releasing energy (possibly hydrogen), new ways of making cement and steel without emissions (possibly carbon capture and storage) and technologies to eliminate emissions from mines, farms, planes, trains and automobiles too.

Forget the confected media image of lab coated politicians wearing ill-fitting safety glasses. Real innovation is elusive, risky and littered with failure. Less Willy Wonka, more Saving Private Ryan.

We love technologies that succeed. But we don’t see the failures. While measuring innovation is inexact, the Harvard Business School estimates 95 per cent of new products fail.

Australia’s record in climate technology innovation is a story of failure. Geothermal and wave energy, carbon capture and storage and solar thermal have all been variously held up as a breakthrough technology over the past decade, recipients of millions of dollars of private and public money. And none of them have delivered.

Geothermal energy was predicted to fill a third of the renewable energy target, while Treasury modelling in 2011 predicted it would supply nearly a quarter of Australia’s electricity by 2050. Wave energy proved to be an expensive form of wind energy. Both failed to get out of the lab.

More than half a billion dollars has been invested by the Australian Governments in carbon capture and storage technologies. The technology works, but it doesn’t capture all the greenhouse gases and consumes enormous amounts of energy to capture, compress and pump the greenhouse gases underground. It costs a bomb.

While some of the largest global technology businesses like Siemens and GE are willing to invest millions into developing new technologies, most in business want to commercialise proven technologies.

That leaves a key role for governments to step in where angel investors fear to tread. The key ingredients of successful government support are hard to define, but are likely to include an acceptance of repeat failure, competition and abundance.

The Apollo Program and the Manhattan project are the gold standard for government led innovation programs. Both produced remarkable acceleration in development of critical technologies, both were the product of “whatever it takes” government clients and the competitive threat of rivals.

To deliver success both programs were given almost limitless resources. By 1944 more than 125,000 people were working on the atom bomb. Both produced unforeseen spin offs. Nuclear science led to the development of medical imaging technologies. The minaturisation of computers the size of a room into a box led to in the personal computer revolution in the 1970s.

Australia’s government backed agencies like CSIRO, the Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC) are internationally regarded as good examples of how governments can nurture technology development.

Both ARENA and the CEFC were established in 2012 in the last days of the Gillard Government. In the simplest of terms the idea was that ARENA was the incubator and the CEFC was the developer.

ARENA’s job was to look for bright new ideas and help make them work. The CEFC’s job was then to take these often expensive infant technologies and help them scale up until they could stand on their own two feet in the market.

In practice ARENA discovered there were lots of ordinary undiscovered technologies, but not many good ones. The two organisations soon found themselves in an existential crisis when the Abbott Government was elected in 2013 and spent the next term of government threatening to close them down.

To survive ARENA and the CEFC developed a type of institutional Stockholm syndrome, avoiding execution by behaving as usefully as possible for a hostile government. ARENA talked up the potential of every new technology they saw while the CEFC acted like a commercial bank and made the government money. Both survived.

That model is now dated. More support is needed beyond energy, to develop clean technologies for the rest of the economy where two thirds of the emissions come from.

They also need to be allowed to take the risks they were designed to take. ARENA’s is still as much cheer squad as technology enabler. Recent hype around technologies like hydrogen and solar thermal suggests it’s still in the business of coaching the government to embrace climate technologies.

It would be more useful if it could lead a less populist conversation about where the biggest barriers lie and where Australia should focus its efforts.

Australia has been and will continue to be a net importer of most breakthrough clean technologies. The real value to the economy and the government is focussing our efforts on where we can make a sustained difference, recognising that risk has a cost and well intended failure is an inevitable part of the process.