How big business and overconcentration jams the wheels of innovation in the U.S. This is particularly relevant to encouraging new distributed energy resources on the electric utility grid–the poster child for monopolies.
Source: Big Business Is Killing Innovation in the U.S. – The Atlantic
Five useful insights into where the electricity industry is headed.
Much was made during the Presidential campaign of manufacturing jobs being “exported” due to unfavorable trade pacts. Yet when we look at the data since 1960, we don’t see evidence for this claim. If jobs were being exported, then manufacturing output associated with those jobs would be leaving to. Instead, as shown above, we see that manufacturing output (and value added which is the value added to production inputs, e.g., the car value after paying for the iron, aluminum, rubber and plastic) has grown steadily with momentary dips for recessions in 1981, 2001 and 2008. Meanwhile manufacturing jobs remained fairly stable from the peak in 1979 to 2001. And then the bottom fell out: employment fell one-third from 2000 to 2009.
So if those jobs weren’t exported (obviously since the output growth was largely unchanged), then what might have happened? The chart above provides one explanation: Technological innovation replaced those jobs. The chart compares a rolling five-year average of productivity gains (measured as output per job) to sector job growth. Productivity growth had an early peak in the 1970s that coincided with the flattening of job growth through the 1990s. Then in 2001 productivity growth begins to rise to a new peak just before the Great Recession and manufacturing job growth plunges to new depths. (Note that this contrasts with the decline in overall productivity cited by the St. Louis Federal Reserve Bank that I posted.) Only in the last couple of years has the sector brought back jobs in the recovery.
Data from the countries where the U.S. has supposedly “exported” jobs in fact reinforces this point–they are also losing manufacturing jobs. The simple truth is that, as happened with agriculture at the turn of the 20th century, increased productivity means that fewer jobs are needed to make ever more goods. We could never feed everyone in the world if we had stopped innovation in farming in 1900; change was inevitable and largely beneficial. We can never return to the “good old days.”
Instead of trying to stop the future, we need to turn our attention to how we help those left behind by these changes. In 1900, farmers were able to move to the cities and find jobs that paid better than their farmwork. This time around, that doesn’t seem to be the case–we can’t just “leave it to the market.”
US productivity growth 1970-2015
A good overview of what drives productivity growth and why the U.S. is currently lagging compared to past periods. In essence, we have not had significant growth because we have not had technological innovations that translate into higher output. Bullard says that changes in monetary policy will not change productivity growth and suggests focusing on three areas (although he doesn’t have specific policy proposals.)
Source: Higher GDP Growth in the Long Run Requires Higher Productivity Growth
A detailed discussion about the successes, failures, and intent of these two federal programs.
Source: What Trump and Clinton miss about clean coal and renewables subsidies | Utility Dive
This post seems particularly apt for the electricity industry. IOU CEOs typically are “executioners” not “visionaries,” and this is at the heart of their existential conumdrum.
What happens to a company when a visionary CEO is gone? Most often innovation dies and the company coasts for years on momentum and its brand. Rarely does it regain its former glory. Here’s why. Mi…
Source: Why Tim Cook is Steve Ballmer and why he still has his job at Apple • The Berkeley Blog
I was struck by the juxtapose of these two items:
California has many progressive and necessary regulations, but the state does an awful job of administering them. Too often, the bureaucrats are too wrapped up in believing the process is actually important. Instead, they should be thinking about how they can ease the permitting and compliance process so that businesses can focus on achieving everyone’s goals.
A bureaucrat should be filling in the missing blanks rather than waiting for months to kick back an application. A friend noted the all too common “NIGO” response–“not in good order.” Being NIGO’d is not conducive to good business.
Technologies and policies that enhance the development of decentralized energy resources have generated increasing interest over the last couple of years. I’ll write more in the future about what are the underlying drivers, both technological and institutional.
I’ve been interested in the question of where do we stand, and how long might it take for diffusion of these new technologies. We can look back and see how technology transformed lives in just a couple of decades. Compare kitchens from 1900 and 1930; if we walked into the earlier kitchen, most of us would be lost, but we could whip up a meal in 1930.
Or the rapid adoption of autos. In 1909, people could stand in the middle of Pike Street in Seattle and talk:
Not so safely in 1930:
Do we stand today at a point just at the onset of a new technological evolution?
One question to be answered is whether our institutional settings will allow these new technologies. In one case, it appears that Germany has already chosen its road. But in the US, whether we rely on central power stations using transmission lines may still be a question in play. That deserves a separate post of its own.
If we assume that we choose the decentralized path, what might we expect in when these technologies are adopted widely. A couple of graphics illustrate historic diffusion rates. This is one from VisualEconomics via The Atlantic:
Another one from Forbes via The Technium shows the parallel development paths (however, I don’t like starting at the year of invention instead of a threshold adoption level):
One might interpret the upper graph as showing accelerating adoption rates. But I interpret the lower chart as illustrating at least two factors that drive diffusion: the relative importance of network infrastructure and the expense relative to individual wealth. Autos, telephones and electricity all required construction of a large network of roads or wires, often funded with public investment. Individuals can’t choose to adopt the technology until a larger public decision is made to facilitate that adoption. As to expense, refrigerators and dishwashers were large household investments for many years, and cars are still a large single expenditure. On the other hand, cell phones, radios and televisions quickly became inexpensive which lubricated diffusion. We need another graphic showing how diffusion rates relate to these two different axes.
We are still unsure where decentralized energy technologies will fall among these characteristics. They may seem small and inexpensive, but enough solar panels to power a house will still be several thousand dollars for the foreseeable future. And the how much electric network investment is required to integrate these resources is the center of the debate over technology policies.
Too often studies making forecasts and policy recommendations don’t consider what adoption rates are feasible or probable. However a study comes along and incorporates this concept as its centerpiece. A good example is the Clean Energy Vision Project’s Western Grid 2050 report. Lead by a former colleague Carl Linvill, who’s now at the Regulatory Assistance Project, it looked at several different scenarios for technology diffusion. Such studies give us a better understanding of what’s actually possible rather than what we wish for.
Improvement in new and existing technologies’ performance and costs is a function of responses to a mix of market and regulatory signals. Finding empirical measures of differing innovation influences is difficult due to confounding influences. Yet we may be able to look at broader economic trends to discern the relative merit of different approaches.
The most salient example could be the assessment of comparative performances after the fall of the Berlin Wall. The Allies conducted a 45-year experiment in which Germany was first split after World War II with largely equivalent cultures and per capita endowments, but one used a largely market-based economy and the other relied on central economic planning. When the two nations reunited in 1990, the eastern centrally-planned portion was significantly behind in both overall well-being and in technological innovations and adoption. West Germany had doubled the economic output of centrally-planned East Germany.
More importantly, West Germany had become one of the most technologically-advanced and environmentally-benign economies while East Germany was still reliant on dirty, obsolete technologies. For example, a coal-to-oil refinery in the former East Germany was still using World War II-era technology. West Germany’s better environmental situation probably arose from the fact that firms and the government were in an adversarial setting in which the firms focused on the most efficient use of resources and were insulated from political interest group pressures. On the other hand, resource allocation decisions in East Germany had to also consider interest group pressures that tended to protect old technologies and industries because these were state-owned enterprises.
The transformation of the West German economy, both technologically and institutionally, was akin to what we will need to meet current GHG reduction goals and beyond. This more clearly than any other example demonstrates how reliance on central planning, as attractive as it appears to achieving specific goals, can be overwhelmed by the complexity of our societies and economies. Despite explicit policies to pursue technological innovations, a market-based system progressed much more rapidly and further.
All Things Solar and Electric
Musings from M.Cubed on the environment, energy and water
This blog is not necessarily about biking. It's about life that is lived locally, at a human pace.
Energy, Environment and Policy
Musings from M.Cubed on the environment, energy and water
Examining State Authority in Interstate Electricity Markets
Musings from M.Cubed on the environment, energy and water
Musings from M.Cubed on the environment, energy and water
Economic insight and analysis from The Wall Street Journal.
Musings from M.Cubed on the environment, energy and water
Musings from M.Cubed on the environment, energy and water
A few thoughts from John Fleck, a writer of journalism and other things, living in New Mexico
Musings from M.Cubed on the environment, energy and water
Musings from M.Cubed on the environment, energy and water
Musings from M.Cubed on the environment, energy and water
Tips and tricks on programming, evolutionary algorithms, and doing research
Musings from M.Cubed on the environment, energy and water
A blog about water resources and law
Musings from M.Cubed on the environment, energy and water
Economics Outside the Cube 