An Interview with Bill Gates on the Future of Energy

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Bill Gates has committed his fortune to moving the world beyond fossil fuels and mitigating climate change. In his offices overlooking Lake Washington, just east of Seattle, Bill Gates grabbed a legal pad recently and began covering it in his left-handed scrawl. He scribbled arrows by each margin of the pad, both pointing inward. The arrow near the left margin, he said, represented how governments worldwide could stimulate ingenuity to combat climate change by dramatically increasing spending on research and development. The push is the R&D, he said, before indicating the arrow on the right. The pull is the carbon tax. Between the arrows he sketched boxes to represent areas, such as deployment of new technology, where, he argued, private investors should foot the bill. He has pledged to commit $2 billion himself. Yes, the government will be somewhat inept, he said brusquely, swatting aside one objection as a trivial statement of the obvious. But the private sector is in general inept. How many companies do venture capitalists invest in that go poorly? By far most of them. Gates is on a solo global lobbying campaign to press his species to accomplish something on a scale it has never attempted before. He wants human beings to invent their way out of the coming collision with planetary climate change, accelerating a transition to new forms of energy that might normally take a century or more. To head off a rise in average global temperatures of 2 degrees Celsius above preindustrial levelsthe goal set by international agreementGates believes that by 2050, wealthy nations like China and the United States, the most prodigious belchers of greenhouse gases, must be adding no more carbon to the skies. Those who study energy patterns say we are in a gradual transition from oil and coal to natural gas, a fuel that emits far less carbon but still contributes to global warming. Gates thinks that we cant accept this outcome, and that our best chance to vault over natural gas to a globally applicable, carbon-free source of energy is to drive innovation at an unnaturally high pace. When I sat down to hear his case a few weeks ago, he didnt evince much patience for the argument that American politicians couldnt agree even on whether climate change is real, much less on how to combat it. If youre not bringing math skills to the problem, he said with a sort of amused asperity, then representative democracy is a problem. What follows is a condensed transcript of his remarks, lightly edited for clarity. On whether new commitments to reduce greenhouse-gas emissions expected at the United Nations climate-change conference in Paris in December mean the world is now serious about the problem: Its good to have people making commitments. Its really good. But if you really look at those commitmentswhich are not binding, but even if you say they will all be achievedthey fall dramatically short of the reductions required to reduce CO2 emissions enough to prevent a scenario where global temperatures rise 2 degrees Celsius. I mean, these commitments wont even be a third of what you need. And one of the interesting things about this problem is, if you have a country that says, Okay, were going to get on a pathway for an 80 percent reduction in CO2 by 2050, it might make a commitment that Hey, by 2030, well be at 30 percent reduction. But that first 30 percent is dramatically, dramatically easier than getting to 80 percent. So everything thats hard has been saved for post-2030and even these 2030 commitments arent enough. And many of them wont be achieved. On why the free market wont develop new forms of energy fast enough: Well, theres no fortune to be made. Even if you have a new energy source that costs the same as todays and emits no CO2, it will be uncertain compared with whats tried-and-true and already operating at unbelievable scale and has gotten through all the regulatory problems, like Okay, what do you do with coal ash? and How do you guarantee something is safe? Without a substantial carbon tax, theres no incentive for innovators or plant buyers to switch. And for energy as a whole, the incentive to invest is quite limited, because unlike digital productswhere you get very rapid adoption and so, within the period that your trade secret stays secret or your patent gives you a 20-year exclusive, you can reap incredible returnsalmost everything thats been invented in energy was invented more than 20 years before it got scaled usage. So if you go back to various energy innovators, actually, they didnt do that well financially. The rewards to society of these energy advancesnot much of that is captured by the individual innovator, because its a very conservative market. So the R&D amount in energy is surprisingly low compared with medicine or digital stuff, where both the government spending and the private-sector spending is huge. On the pace of energy transitions historically: Whats amazing is how our intense energy usage is one and the same as modern civilization. That is, for all the great things that happened in terms of human lifestyle, life span, and growing food before 1800, civilization didnt change dramatically until we started using coal in the U.K. in the 1800s. Coal replaced wood. But the wave of wood to coal is about a 50- or 60-year wave. If it was just about economics, if we had no global warming to think about, the slowly-but-surely pace of these transitions would be okay. If you look at one of these forecasts, they all say about the same thing: What you look at is a picture thats pretty gradual, with natural gas continuing to gain at the expense of both coal and oil. But, you know, 1-percent-a year-type change. If you look at that from a greenhouse-gas point of viewif you look at forecastsevery single year well be emitting more greenhouse gases than the previous year. On whether weve ever done anything as big, as a species, as what hes asking for now: Well, sort of no. Because the scale of it is very big. People can talk about the Manhattan Project during World War IIthe challenge of Hey, should we get a nuclear weapon before, potentially, the Japanese or Germans do? The speed of innovation there really was mind-blowing. And they had to find two paths to get there. One was enriching uranium; the other was breeding plutonium. And, in fact, the first bomb was a uranium bomb; the second bomb was plutonium. Both paths gave them what theyd hoped for. So theres some amazing thingspeople look at the digital realm and see the pace of innovation. And that does kind of spoil you, because you can just put something up on the Web, and a hundred million people can download it. But what were asking ourselves to do here is change energyand that includes all of transport, all of electricity, all of household usage, and all of industrial usage. And those are all huge areas of usage. And somebodyll say to you, Well, hey, lighting, LED technology, is going to reduce energy consumption from lighting by over half. Thats true; its a miracle, its fantastic. But unfortunately, theres no equivalent in many of these other things, like making fertilizer or making electricity in a general sense. Theres opportunities to conserve that are really good. But the world is going to consume much more energy 30 years from now than it does today. On whether we should all be driving electric cars: People think, Oh, well, Ill just get an electric car. There are places where if you buy an electric car, youre actually increasing CO2 emissions, because the electricity infrastructure is emitting more CO2 than you would have if youd had a gasoline-powered car. On what it will take to accelerate the transition from carbon-emitting energy: When people viewed cancer as a problem, the U.S. governmentand its a huge favor to the worlddeclared a war on cancer, and now we fund all health research at about $30 billion a year, of which about $5 billion goes to cancer. We got serious and did a lot of R&D, and then we got the private sector involved in taking that R&D and building breakthrough drugs. In energy, no governmentincluding the U.S., which is in almost every category the big R&D funderhas really made a dramatic increase. It was increased somewhat under Carter and then cut back under Reagan, and its now about $6 billion a yearthats the U.S. piece, which, compared with the importance to our economy in general, is too low. Realistically, we may not get more than a doubling in government funding of energy R&Dbut I would love to see a tripling, to $18 billion a year from the U.S. government to fund basic research alone. Now, as a percentage of the government budget, thats not gigantic. But we are at a time when the flexibilitybecause of health costs and other things, but primarily health costsof the budget is very, very squeezed. But you could do a few-percent tax on all of energy consumption, or you could use the general revenue. This is not an unachievable amount of money. On why, considering the level of debate in the presidential campaign, he thinks this kind of investment is imaginable: Well, the success of the United States in medical research is really incredible. I mean, its phenomenal. We spend $30 billion a year of government money, and the private sector goes out and comes up with new drugs. Its an industry that the U.S. is by far the leader increating wonderful jobs, great miracle curesand that is working super, super well, but we spend more than all other countries put together. And the U.S. lead in health technologies, including drugs, is gigantic, just like the U.S. lead in digital technologies is gigantic. In the case of the digital technologies, the path back to government R&D is a bit more complex, because nowadays most of the R&D has moved to the private sector. But the original Internet comes from the government, the original chip-foundry stuff comes from the governmentand even today theres some government money taking on some of the more advanced things and making sure the universities have the knowledge base that maintains that lead. So Id say the overall record for the United States on government R&D is very, very good. Now, in the case of climate change, because theres so many possible solutions, its not like the Manhattan Project. I dont think anyones saying, Hey, pick just one approach, and pick some ranch in New Mexico, and just have those guys kind of hang out there. Here, we want to give a little bit of money to the guy who thinks that high wind will work; we want to give a little bit of money to the guy who thinks that taking sunlight and making oil directly out of sunlight will work. So theres dozens of those ideas, and theres enabling technologies for those ideas. Thats the kind of thing that we should be funding more of. On the limits of wind power and solar photovoltaic cells: Wind has grown super-fast, on a very subsidized basis. Solar, off a smaller base, has been growing even fasteragain on a highly subsidized basis. But its absolutely fair to say that even the modest R&D thats been done, and the various deployment incentives that are there, have worked well. Now, unfortunately, solar photovoltaic is still not economical, but the biggest problem of all is this intermittency. That is, we need energy 24 hours a day. So, putting aside hydrowhich unfortunately cant grow muchthe primary new zero-CO2 sources are intermittent. Now, nuclear is a non-CO2 source, but its had its own problems in terms of costs, big safety problems, making sure you can deal with the waste, making sure the plutonium isnt used to make weapons. So my view is that the biggest problem for the two lead candidates is that storage looks to be so difficult. Its kind of ironic: Germany, by installing so much rooftop solar, has it that both their coal plants and their rooftop solar are available in the summer, and the price of power during the day actually goes negativethey pay people to take it. Then at night the only source is the coal, and because the energy companies have to recover their capital costs, they either raise the price because theyre not getting any return for the day, or they slowly go bankrupt. There are many people working on storagebatteries are a form of storage, and theres a few others, like compressed air, hot metals. But its not at all clear that we will get grid-scale economic storage. Were more than a factor of 10 away from the economics to get that. On the self-defeating claims of some clean-energy enthusiasts: They have this statement that the cost of solar photovoltaic is the same as hydrocarbons. And thats one of those misleadingly meaningless statements. What they mean is that at noon in Arizona, the cost of that kilowatt-hour is the same as a hydrocarbon kilowatt-hour. But it doesnt come at night, it doesnt come after the sun hasnt shone, so the fact that in that one moment you reach parity, so what? The reading public, when they see things like that, they underestimate how hard this thing is. So false solutions like divestment or Oh, its easy to do hurt our ability to fix the problems. Distinguishing a real solution from a false solution is actually very complicated. On the role of private investors: I think dozens and dozens of approaches should be funded at the R&D level, and then people like myself, who can afford to take big risks with start-up companies, shouldbecause of climate changebe willing to put some number of billions into the spin-offs that will come out of that government-funded activity. You cant expect that it will be like a digital thing. So you do have to bring a more patient investor, and even a lower return threshold, to this than to other things. People often talk about, Well, the solution that gets us beyond the CO2-based energy economy will be a mix of things. And it will be a mixbut a few will be very big. And so the companies that find whatever turns out to be the mainstream, they will do super, super well. But there wont be as many successes here as there are in an area like software, where theres a lot more variety. On why energy is a global challenge: People can always say, Well, my country is such a small part of itwhy should I make the sacrifice? Because I dont know for sure that the other countries are going to do their part of it. We dont have a world government. Fortunately, we dont have that many world problemsmost problems can be solved locallybut this one is a world problem. Carbon is not a local pollutant. It mixes in the global atmosphere in a matter of days. So it doesnt really matter whether its a coal plant in China or a coal plant in the U.S.the heating effect for the entire globe is the same. On the dangerous certainty of environmentalists: The heating levels have not tracked the climate models exactly, and the skeptics have had a heyday with that. Its all within the error-bar range. To me, its pretty clear that theres nothing that relieves this as a big problem. But when people act like we have this great certainty, they somewhat undermine the credibility. Theres a lot of uncertainty in this, but on both the good and the bad side. By overclaiming, or even trying to ascribe current things more to climate change than to other effects, environmentalists lend weight to the skeptics. Like, in the near term, the Pacific oscillation, this El Nino thing, has a much bigger impact on current weather than climate change has had so far. Now, climate change keeps climbing all the timeit just keeps summing, summing, summing, and adding up. So, as you get up to 2050, 2080, 2100, its effect overwhelms the Pacific oscillation. So we have to have dramatic change here. Its unprecedented to move this quickly, to change an infrastructure of this scaleits really unprecedented. And, when you turn to India and say, Please cut your carbon emissions, and do it with energy thats really expensive, subsidized energy, thats really putting them in a tough position, because energy for them means a kid can read at night, or having an air conditioner or a refrigerator, or being able to eat fresh foods, or get to your job, or buy fertilizer. Thats why we really need to solve that dilemma, we need innovation that gives us energy thats cheaper than todays hydrocarbon energy, that has zero CO2 emissions, and thats as reliable as todays overall energy system. And when you put all those requirements together, we need an energy miracle. That may make it seem too daunting to people, but in science, miracles are happening all the time. On the central role of rich countries: Im a big believer in foreign aid, but the climate problem has to be solved in the rich countries. China and the U.S. and Europe have to solve CO2 emissions, and when they do, hopefully theyll make it cheap enough for everyone else. But the big numbers are all in the developed economies, where Chinas defined into that term. On whether hes really read all 36 books by Vaclav Smil, his favorite author and a leading scholar of the history of energy use: I have read all of Smil. Theres a book about the transition of the Japanese diet. I dont recommend it. On the limitations of a campaign to force university endowments and other funds to divest from fossil-fuel companies: If you think divestment alone is a solution, I worry youre taking whatever desire people have to solve this problem and kind of using up their idealism and energy on something that wont emit less carbonbecause only a few people in society are the owners of the equity of coal or oil companies. As long as theres no carbon tax and that stuff is legal, everybody should be able to drive around. So Ive been saying, Hey, come onbroaden your message to be proR&D. And even the same people who are divesting those stocks of energy companies, ideally some of that money would come into this pool that is funding these high-risk innovations. And so thats a message that Ive started to get out. I dont know if that will be successful. On the surprising wisdom of government R&D: When I first got into this I thought, How well does the Department of Energy spend its R&D budget? And I was worried: Gosh, if Im going to be saying it should double its budget, if it turns out its not very well spent, how am I going to feel about that? But as Ive really dug into it, the DARPA money is very well spent, and the basic-science money is very well spent. The government has these Centers of Excellence. They should have twice as many of those things, and those things should get about four times as much money as they do. Yes, the government will be somewhat ineptbut the private sector is in general inept. How many companies do venture capitalists invest in that go poorly? By far most of them. And its just that every once in a while a Google or a Microsoft comes out, and some medium-scale successes too, and so the overall return is there, and so people keep giving them money. On why he thinks Congress may not be hopeless: The U.S. Congress does support solar and wind subsidies, which have been quite generous. So Congress isnt completely absent on this. The House actually passed a climate-change bill [in 2009], when it was a Democratic Congress. Theres a class of voters who care about this, that I think both parties should want to compete for. So I dont think its hopeless, because its about American innovation, American jobs, American leadership, and there are examples where this has gone very, very well. On the centrality of government to progress on energy, historically: Everyone likes to argue about how much the shale-gas boom was driven by the private sector versus government; there was some of both. Nuclear: huge amount of government. Hydropower: mind-blowingly governmentbecause permitting those things, those big reservoirs and everything, you cant be a private-sector guy betting that youre going to get permitted. People think energy is more of a private-sector thing than it is. If you go back to Edisons time, there wasnt much government funding. There were rich people funding him. Since World War II, U.S.-government R&D has defined the state of the art in almost every area. But energy moves really slowly. Theres this thing Vaclav Smil says: If Edison were reborn today, he would find our batteries completely understandable, because its just chemistry. He would say, Oh, cool, you found lithium, that was nice. Nuclear-power plants, he would go, What the hell is that? That, he would be impressed with. And chips, which we can use for managing data and stuff, hed be impressed with. But he could visit a coal plant and say, Okay, you scaled it up. He would visit a natural-gas plant and that would look pretty normal to him; he would look at an internal-combustion engine and he wouldnt be that surprised. On his faith in human ingenuity: If you told me that innovation had been frozen and we just have todays technologies, will the world run the climate-change experiment? You bet we will. We will not deny India coal plants; we will run the scary experiment of heating up the atmosphere and see what happens. The only reason Im optimistic about this problem is because of innovation. And innovation is a very uncertain process. For all I know, even if we dont up the R&D, 10 years from now some guy will invent something and itll take care of this thing. I dont think thats very likely, but nobody has a predictor function of innovationwhich is weird, because the whole modern economy and our lifestyles are an accumulation of innovations. So I want to tilt the odds in our favor by driving innovation at an unnaturally high pace, or more than its current business-as-usual course. I see that as the only thing. I want to call up India someday and say, Heres a source of energy that is cheaper than your coal plants, and by the way, from a global-pollution and local-pollution point of view, its also better. I think if we dont get that in the next 15 years, then as much as people care about this thing, we will at least run the 2-degree experiment. Then theres the question of Okay, do we run the 3-degree experiment? Do we run the 4-degree experiment?