Driving technology change

the reduction of cost and the adoption  factors and so forth. One area you've been talking about recently is soft  technologies and so maybe you can tell us a little bit more about what you mean by soft  technologies and how those were identified to be critical factors in large infrastructure,  large renewable type energy and so forth.

information processing power of the human brain,  they can be biological in nature. So this is the broad definition of technology that I apply in my  research and some of that technology takes on a physical form and other technology doesn't, it's  basically information-based. So software is an example of soft technology but we have other forms  of codified knowledge that fall into that category of soft technology. So these can be checklists,  these can be processes that are codified in some

way through best practices, for example. These  can be institutional designs that are codified, can be repeated and essentially reproduced.  So that's how we define soft technology, and the reason I became very interested in this  with respect to climate change and the energy transition is that what we see is that the costs  associated with soft technology are becoming a larger fraction of the overall cost of some really  critical clean energy technologies. We're not

seeing as fast improvement in soft technology  as we are in hardware. Of course, software is one type of soft technology that improves  rapidly, but there are many others that matter for the clean energy transition. So these can be,  for example, processes of installing different technologies like building a nuclear fission  reactor or installing a solar energy plant.

adopted they become innovations. We could think  of examples of innovation, I suppose, that are not focused on technology. So you would maybe  have like a one-off improvement that's adopted maybe just from one period of time to the next,  so maybe, I don't know, we're organizing a one-day conference and you know the morning is organized  in some way and then through some process of innovation the afternoon is organized in some  other way, but it's not codified, then it wouldn't

fit under that definition of technology. Now, I'm  not saying my definition of technology is the one that you want to use in all cases, but because I'm  interested in many societal impacts of technology including effects on the environment, humans and  sustainability-related concerns, then it's very useful to use this broad definition so that we  can study all of these different transformations

of raw material inputs. So on this planet, we have  access to biological, geological materials, people are on trying to access resources from other  planets as well, and then the question is what are we doing with those and those transformations  that then become codified and are repeatable fall

under that definition of technology. So, the  theories and the models and the different insights that we work on developing in my research group  apply often generally to many forms of technology, and then we look at specific cases and  focus a lot on climate change mitigation.

the impact of soft technology or soft skills or  so forth. So the question is - what techniques and methodologies do you use to actually extract  this impact and causal effect of one particular parameter or change on the outcome of a problem  that is not very easy to experiment with?

in those forecasts but then we also work on  mechanistic models. So those mechanistic models are really the ones that we've developed to get  at some of these questions about what is driving technological change, what are the underlying  mechanisms and one of the approaches that we've developed is to look at the underlying mechanisms  of technology improvement. So a key step there

is to start with things that you can measure. So  whatever type of performance you're interested in, often in the case of climate change mitigation  it's cost per unit service, you look at all of the different inputs to arriving at that cost per unit  service. So you typically have price variables,

and then you have what are called usage ratios.  So the amount of whatever input it is that you need to provide a certain service, and then the  price variables would be the cost that you pay the price that you pay as a consume, the consumer  here would be, for example, a manufacturer for

that input material. And then what you do is you  can write out an equation that relates those input variables to the cost-per-unit service or other  performance realized at a given point in time, you can look at then how those variables change  over time and from there you can estimate the effects of different mechanisms. So this is what  we use to get at this question of soft technology.

The initial observation was that in the case of  many clean energy technologies it looks like soft technology is the part that isn't improving as  much and it's coming to represent a larger and larger fraction of the cost over time, so then the  question is why is that? And it turns out to be an interesting relationship between hardware  variables and the soft technology variables and so we had to really get into those  details to understand what was going on.

physical bodies, but also to process information.  So a lot of economic activity today is supported by technology. Now, that technology requires some  energy resource to drive it, right, so you always require some energy to process information, to  store information and certainly to do physical work. Around the late 1800s, we started to  use fossil fuels for this and then that's leading to this buildup of greenhouse gases in the  atmosphere which is what is driving human-caused

climate change, so that's the concern. Then the  question is what do you do about it? Do you stop using technology? Well, many people today would  say ‘well, no I'm not willing to give up all of the things that I do.’ In the US, for example, an  individual uses about 100 times the power of their own physical body through all of their activities.  So that's taking into account economy-wide activities and so forth. They're using a lot of  additional power outside of what they can generate

that - if you want to keep doing those things,  that has to come from somewhere. There's a lot of room to improve in terms of efficiency and  probably do just as much with less energy, but you can't get all the way back to just subsistence  living and basically using our own physical power and still support the standard of living that many  people enjoy today and many people aspire to enjoy in the future. It’s important to note that in many  countries in the world they're not using nearly

as much energy and they're not consuming nearly as  much fossil fuels per capita. So there's a need to rely on other energy resources to address climate  change and bring those greenhouse gas emissions down while still supporting a high standard  of living and supporting human well-being. So that's really the challenge, and that's how  technology factors in. We can't address climate

change simply by our own individual choices and  our own behaviors. Certainly we can choose - let me revise that a bit, we can choose different  technologies, but technology really has to be a key part of the solution. Now it's important  to note that technology is not perfect, right? Any technology is going to have some  negative environmental and probably societal consequences. So environmental consequences  because you're accessing these raw materials,

you're consuming them, you're transforming them.  That's going to do something that's probably going to bring about some harm to the environment and  then societal consequences often come in the form of inequitable outcomes. So some people benefit  from this technology, others actually lose, right? So there's forms of pollution that  disproportionately affect less wealthy individuals and they're not the ones that are consuming  as much of that technology-based service.

today. The US isn't there yet, so in 2022, about  8 percent of vehicles purchased in the US were electric, but that still represents a significant  increase relative to 2021, and then in the last quarter, if we include hybrids in there in the  last quarter of this year, we've seen increases in the adoption of electric vehicles reaching up  to close to 20 percent, that's including hybrids

as well. So you have about half of that from fully  electric vehicles and then about very roughly half from hybrids, and that's just one-quarter  of data, so you really have to look at the longer term trends. We'll see what 2023 comes  out at in terms of fully electric vehicles.

Adoption is growing, but it's still a small  fraction, and I think in terms of what needs to be done to support the adoption of  electric vehicles which, by the way, is one way to reduce greenhouse  gas emissions from transportation, even today with the electricity supply that  we have in this country and in most places,

you get very significant reductions in greenhouse  gas emissions. Upwards of 30 percent, in many places 40 percent, even with the electricity  supply mix that we have today, and that takes into account all of the emissions incurred in  producing the cars and so forth. But, I mean, a couple things have to happen. Right now we're  seeing mostly wealthier individuals are able to access these electric vehicles, it's mostly people  that are using them as second cars. Expanding

charging infrastructure is really important  and in different locations. So residential charging infrastructure for people that don't have  off-street parking in urban areas, for example, is really important. Fast charging along highways,  and really being strategic about where to place chargers is key, but then also offering more  vehicles that are lower in price. So less focus solely on the luxury cars, and we are seeing  this happen, but it hasn't been fully realized

yet. Access to financing is also important,  because although you can save over in terms of the total cost of ownership of these cars, you  often have to pay more up-front for these cars.

of it. So I'm now dropping out of that  eight percent that are rising in terms of the electric vehicles. So is there - and  I'd love to have one - but is there a more practical solution involved with owning an EV and  a conventional car to address daily use issues, as well as my long-distance driving issues? Or if  we only have one car, what do we do? What are what are sort of the practical examples that people can  at least do now until we do have fast charging?

cars being sold. So if we look at the percentage  of cars on the road, it's a much lower number. But yeah, so we've done a lot of work on this and  without getting into too many of the details, thinking about how to offer convenient charging  is really important, I think, and it's something that requires considering people's behaviors in  cars and what you want to do is to be able to develop predictive models so that you know when  people tend to stop where and for how long, and

then you expand charging infrastructure based on  that knowledge. And one of the key locations for expanding charging infrastructure and specifically  fast chargers would be along highways. So the example that you presented would be one of  your like ‘higher energy’ days is what we call

them. When we look at the overall population,  around 95 percent of days for most people given how they're driving and given very accurate  estimates of the energy consumption in their cars, so that's something we've worked on a lot,  about 95 percent of days for the population, and for most people will be covered on a single  charge. So an overnight charge, when we look at

the lower-cost electric vehicles. So the cheaper  vehicles, you just have to charge them overnight, if they're ready to go when you access them in  the morning on 95 - and for many people it's higher than that - percent of days, you don't have  to think about recharging. So, you don't have to stop at gas stations, you're not losing time in  that way. That's one nice thing about electric vehicle charging is that it can fit into people's  activities if you're really strategic about where

to place those chargers. Now, on those high energy  days, on that five percent of days, maybe you have to stop for an additional 15 minutes, 20 minutes  for most. I think the delay you were describing sounds long, so I'm not sure what the power of  those chargers were that you were accessing, maybe they were the lower power chargers, but so  - it's a different experience obviously, those few long trips you take per year, are you willing to  delay your trip a little bit in order to then save

time the rest of the year? That's one question,  and is it just about getting used to it? I mean, I think it's not just about that because it's also  about expanding that charging infrastructure, and often those fast chargers are not available. So,  in your case it could be that along that route, those fast chargers weren’t available and  then for some people that are driving a lot, they have more high energy days, those would  be outliers in the population, but we have to

think about solutions in those cases as well. So  I think it's a great question, and really people are going to adopt the cars that work for them.  So it's about providing information, but it's about providing access to really convenient  charging infrastructure. It's a process, it's not going to happen overnight. We do see in  countries that are further along those exponential growth curves that the markets gain momentum.  People start to factor in also the resale value

of their cars. If the transition is happening,  are people going to want that fully electric car some years down the road - five years, six, seven,  eight, ten years, whenever I want to sell my car, and then that's factoring in, I think to people's  decisions as well. But for personal cars certainly in this country, it's not a one-size-fits-all  solution. So, we really need to consider lots of different ways in which people use their  cars and preferences and all of that as well.

wealthier individuals. Which, by the way, is a  huge problem if you're thinking about where are government incentives going, where are dollars  going. I mean, that's something that is very much the focus of policy efforts in many countries  including in the US is to think about how to make sure those dollars are not disproportionately  helping certain individuals, and sort of making those benefits more evenly and more  equitably distributed, that's really important.

for example. Now that reduction of half isn't  enough to get us to net zero, which is where you need to go in order to stay within global climate  targets, but they're not all the same, and so when you look at a functioning energy system like  in the US the carbon intensity of electricity is around that of natural gas. So you have some  coal, you have some natural gas, you have hydro, you have renewables, you have nuclear fission,  and so all of that gives us a certain carbon

intensity. So if we look at the US as a whole,  those numbers that I mentioned a minute ago, those 30 and 40, even 50 percent reductions,  it depends on the vehicle model that you get from switching to a battery electric vehicle are  based on those carbon intensities of electricity versus the carbon intensity of oil, and then  all of the losses as you go from this primary fuel inputs to electricity, the masses of coal,  the amount of natural gas, etc. The inputs to

providing that tractive energy that moves the car  forward in an internal combustion engine if you're using gasoline or diesel. So you have different  losses along the way and that is what gives us

that answer. So I think sometimes people  think about fossil fuels and then they think about the highest intensity fuel  which is coal, but only in a few cases, like if we look at the US there's some  regions of the US where you use a lot of coal, but even in those cases like in certain parts of  the Midwest, you still have emission savings in switching to a hybrid or a fully battery electric  vehicle. The savings of going to all electricity

in those few cases which are outlier cases are  not as significant. So you get that significant savings in going to a hybrid or a battery electric  vehicle, but then using only electricity you don't get as much savings. So that's why you know  it's important to look at individual locations, the energy mix and in my group we've  published a website called carboncounter.com

which is informational, people can go there,  look up their region. It's focused on the US, we also have one for Europe, and they can go  there, look up their regions, see what the emission savings would be for different vehicle  models that they might be interested in. So that takes into account the full life cycle emissions,  and one thing people often wonder about is the

impact of the batteries. One issue that has been  very much discussed is this question of how good or bad are batteries when you consider the fact  that switching to an electric vehicle means that you need a larger battery. What does that do in  terms of contributing to those overall emissions? And the numbers that I mentioned before take into  account the emissions of producing the battery. So you still get those significant savings. So  although you have to mine materials to build that

bigger battery, you still overall get savings. The  other thing that I'll mention is that the input to building that bigger battery, those inputs  mean that we have to mine a bit more material, but that additional material is still going to  be a small percentage of the overall material that we're mining economy-wide. We only have to  kind of look around the rooms that we're sitting in and kind of look at all of the different  materials, you might have plastics in your room,

those are often petroleum-based and so they're  coming from extracted crude oil. You probably have metals in your room, so those are all mined  materials. So if you do a check and say ‘okay, look at all these extracted materials that I have  around’ and then look outside at the cars and how

big is the car, how big is the battery? You can  see that the battery and the mined materials that go into the battery in terms of all of the impacts  - and it's not just greenhouse gas emissions there are many different societal environmental impacts  from extractive industries - but those batteries

are just a small part of the economy-wide impact.  So I think, on the one hand, there's been a lot of focus on mining for batteries and my hope would be  that that would put more focus on the overall, the bigger problem which is mining overall. Batteries  are just a very small part of that and if you look at the full set of impacts, compare an internal  combustion engine vehicle and a battery electric

vehicle, you see that there are still significant  benefits from the battery electric vehicle. But, of course no technology is perfect and there  are always going to be some negative impacts.

talking about into the equation and you can  actually see if you predict the answer. If your equation is representing all of the inputs,  because you see, do you actually predict at some point in the past what the cost was, for example.  So, you can start with that and then see why did

this technology improve? And what we learn when we  do that is that it was a combination of government policies that funded, did research and development  in government funded labs, but also government policies that stimulated market growth, that  kicked off a lot of private sector innovation. We can actually estimate the effects of these  different kinds of policies, so we can actually

then study these effects quantitatively which is  really interesting. But I think what's important is that you can start to get at causality, and  you can see what's driving what, and it's very clear because we've started with the device  and the physics and what's actually changing, you can go all the way up to, then, what companies  did and then the policies that help drive that.

So this virtuous cycle is not just some nice  kind of fluffy term, we actually see in the data that it's very clear that government policy  kickstarted a lot of innovation, and then markets began to grow and now there's a lot of momentum  in these markets, and so this is the virtuous cycle. Can this apply to other technologies? Well,  we're seeing this to some extent for lithium-ion

batteries, we've looked at that as well.  Although in that case it's not all policy driven, because you had a lot of development that came  through incentives to support the adoption of better personal devices, digital devices there  was incentive already without policy to improve lithium-ion batteries for that, but there's  also a policy component there. And you can really look at any technology in this way,  either retrospectively or prospectively,

and obviously what we care about is what could  happen in the future. And for both soft technology and for hardware, you see that there is a lot of  potential to be strategic about what mechanisms you're investing in, what strategies companies  pursue, what engineering approaches people take,

for example, in the field and on construction  sites, and what policies are supported. So we talked before about soft technology, I think there  is room to be more deliberate about improving soft technology by really understanding what driving  good performance or not-so-good performance.

in that area is that the different articles you  read give you a different sort of perspective. You read about electrification for transportation and  then you read something about the fact that ‘well, it's going to be very difficult for putting that  into ships and air and so forth as opposed to land transportation’, and then you sort of  walk away with the confusion that - to what

extent one technology is able to help a particular  sector, what's your perspective on this? I mean, obviously we can be hitting in all different  technologies and we can be hitting for hydrogen and looking for different modes of renewable, but  from an economics perspective, right, there's an investment that has to go somewhere, and over time  - infinite time, maybe - we'll figure it all out, but tomorrow where should we be putting our  money and what are the factors? How do we

think about the system-level questions?  It's just - it's daunting a little bit.

way of thinking about this is to apply portfolio  theory. We can draw some concepts from finance, there are some differences when we look at  technology portfolios, but what I always say is that although forecasting is uncomfortable, we  never know exactly what's going to happen in the future, if we take information from data-driven  forecasts and also understanding of the underlying mechanisms of what can improve technology more  rapidly, more slowly, which technologies improve

more slowly, more quickly, then we can do better  than random guesses and making forecasts. So the way to solve this technology portfolio problem  that you're talking about out is to forecast, although it's uncomfortable. You always want  to understand and ideally forecast uncertainty associated with your prediction, but you also  want to understand if youcan't quantify that

uncertainty. That's going to push you to more  diversification, that's going to push you closer to that ‘all of the above’ solution, but you're  never going to be right there at the ‘all of the above’ solution and economy-wide, we now know  some things are working, some things are not as far along in terms of certain technologies. Like  if we take shipping fuels for example, there's a lot of uncertainty about will it be ammonia? Will  it be methanol with carbon capture and storage?

What portion of ships can we electrify, etc.  That's an area where you want to diversify more, but this portfolio theory, and thinking about the  problem as a technology portfolio problem I think

is very useful for informing our decisions.  We shouldn't be aiming for perfection, but we can do better than randomly guessing, and the  benefits of that can be huge, because if you're thinking about technologies changing by orders  of magnitude sometimes over a couple decades, and you forecast that they're not going to change  at all or you didn't take into account past

information and informing your decisions, you will  be very far off from an optimal investment. Now, you might not have been able to perfectly forecast  what happened but you could probably do better, and maybe you’re one order of magnitude closer,  the returns to that are huge and the returns here are not just financial returns, they're of  course returns in terms of societal well-being and

our ability to actually address climate change. Munther: But has this been done? These forecasting and the portfolio optimization problem? Yeah, it's happening more  and more. So what I would say is, if we look back at the forecast by major  institutions and different groups that that are in the business of forecasting and data analysis  and also groups that rely on expert elicitation, we've seen that many forecasts of technological  change in the past have been very far off. They've

essentially not been very accurate at all, they've  been wrong. But what we are starting to see now is a movement toward more data-driven approaches,  more systematic approaches and not purely relying on subjective inputs from experts. You can also  bring those expert inputs into this whole process, and so we actually are seeing - Munther, it's  interesting - we are seeing a movement toward using these methods, these more formal methods  and making forecasts and people do talk about

applying technology portfolio theory, I would say  that there's still a ways to go there. I think as humans we're often very driven to follow  our intuition and even if we do the analysis, we see some number it's like ‘oh no, this  can't possibly…’ for whatever reason, it's forecasting too fast technological improvement.  We know there's what's called a pessimism bias in some cases for humans in terms of technology  improvement. So there can be some discomfort,

there's still a push to follow intuition. I'm  not saying throw that out, but we are seeing these methods, these more formal  methods gain more attraction.