University College London (Simons)

Accelerating the Transition to a Low Carbon Future: Open Innovation and Disruptive Technologies Professor Stef Simons Director, Centre for CO 2 Technology University College London www.ucl.ac.uk/centre-for-co2-technology

Clean Technologies Now! Atmospheric levels of CO2 now 385ppm. If we’re lucky, we could stabilise at 550ppm, with a 50% chance of a temperature rise of 6 o C. We need to work together to shift our current high carbon/low efficiency energy system to a low carbon/high efficiency one. The public in the developed world is becoming (more) disengaged, with climate change fatigue. The developing world wants to use clean technologies, but these must be appropriate. New, planned, coal-fired power plants will emit more carbon than since the industrial revolution.

Carbon Reduction – What would it take? US targets are: 25% increase in Renewable Energy by 2012 Save more oil than imported from OPEC by 2015 Reduce carbon emissions by 80% by 2050 To keep the current status quo, this would require: Massive improvements in energy efficiency (could save about 30% of current consumption) Electrification of the transport system The success of Carbon Capture & Sequestration on a large scale A new, standardised, paradigm for the electricity grid The use of biomass for fuels and chemical feedstocks Barriers include costs, energy storage, manufacturing capacity, skilled workforce and incumbent infrastructures

The Party’s Over! “ There will be no combination of alternative energy solutions that might enable the long-term continuation of economic growth, or of industrial societies in their present form and scale.” “ There is no persuasive evidence that clean coal… will ever be achieved.” Richard Heinburg “Searching for a Miracle” 2009, IGF “ If modern economies are to achieve the necessary 50-80% reductions in GHG emissions, then it will occur through replacement, not marginal modification, of the fossil fuel energy system.” Mark Huberty “The Next Energy Transition”, 2009, UCB We need an energy transition away from fossil fuels to renewable energy sources, whilst at the same time massively reducing energy demand by both increases in efficiency and changing people’s behaviours, developing and deploying clean technologies in developing countries …… and slowing population growth.

Moving away from the Pipeline Model of Innovation for Clean Technologies Most policies implicitly characterise innovation as a pipeline, where new technologies are developed, demonstrated and deployed This is a flawed approach to innovation, as it does not consider the place of new technologies in society and the economy, or what needs to be done to allow new technologies to flourish Social factors play a key role – feedback loops are important and previous choices have to be considered, which may influence basic research We need new strategies for managing innovation in complex areas where problems can be confronted and changes supported

How can we achieve the 3 rd Industrial Revolution? Innovation – of disruptive technologies. Collaboration – on a massive scale, across all stakeholders. A systems approach to the energy, transportation, chemicals and agriculture sectors New business models, to create and claim value of shared IP. Engage and empower communities to encourage low carbon behaviours and take-up of clean technologies. Utilise the power of the internet and information technologies. = Open Innovation

Open Innovation Paradigm “ OI assumes that internal ideas can also be taken to market through external channels, outside the current business(es) of the company, to generate additional value.” Henry Chesborough, UCB. Tough, science-based R&D problems traditionally solved in closed enterprises devoting laboratory time and resources, but with limited access to innovative ideas. Distributed knowledge means you can’t hold on to ideas. OI accesses distributed knowledge (through the formation of collaborative networks) to realise the potential of ideas and (latent) IP. Requires new business models to utilise both external and internal ideas to create value, whilst defining internal mechanisms to claim some portion of that value – instead of managing your IP to exclude rivals, manage your IP to profit from others’ use of it, and don’t be afraid to profit from others’ IP in your own business.

A meeting regarding the 184-inch cyclotron project, held at the University of California, Berkeley , on March 29, 1940. Left to right: Ernest O. Lawrence , Arthur H. Compton , Vannevar Bush , James B. Conant , Karl T. Compton, and Alfred L. Loomis. Collaborative Innovation: The Manhattan Project

The Manhattan Project – Concerted Action to Innovate Secretive and closed, for obvious reasons Used selected people and places (at its height, involved 130,000 people at 300 sites) Cost $24billion in today’s money Led to the ultimate disruptive technology Solving the climate change issue is not a Manhattan (or even Apollo) Project. The array of technologies we need to develop and the choices to be made between them are too diverse and influenced by too many factors. Collaboration needs to be more open, with greater sharing of ideas and intellectual property, integrated with policy and regulation.

Distributed Models to Open Innovation The development of the Linux Operating System is an example of a disruptive technology developed in a distributed, open manner Informal collaboration involving the global community, using email and the Internet People did this for free, because they valued the task, there was a user need….and it was fun Now the Linux OS is used in 88% of the World’s 500 fastest supercomputers – and it’s cheaper than other server operating systems “ No matter who you are, most of the smartest people work for someone else”.

Procter & Gamble – a Model for Success Procter and Gamble are open innovation giants, with more than 35% of their new ideas coming from outside sources. Since 2001 P&G’s innovation success rate has more than doubled, while the cost of innovation has fallen. 100 new products in the last two years.

Institutional Drivers for Open Innovation Global expansion of large new markets Expansion of globally distributed science-technology base Improved market institutions for knowledge (IPR, standards, VC) Digitisation – the internet makes large-scale global knowledge exchange possible The Climate Challenge Highly systemic Involves the formation of new technical platforms Requires strong elements of coordination and collaboration of stakeholders Involves many SMEs, naturally more open and reliant on relationships, but lacking in capability to investigate alternative application areas E.g. Smart Grid: an emerging eco-system (worth $20 billion today, $100 billion in 2030), with emergent interface standards and technologies, product markets, involving incumbents and public authorities as system integrators

Smart Grid: A New Technical Platform Integrating sensors, meters and routers into a communication network akin to the Internet Integrating a diversity of sustainable sources (wind and wave power, solar panels, biogas, etc.) Making dynamic pricing possible (to create incentives to save in peak hours)

Open Innovation of Tangible Products A clear manifesto, focus and direction A core team to drive and coordinate development (can be geographically distributed) Tightly controlled specifications (standards?) Modular design of complex products (so this can be done in a distributed way) Product safety and liability are important considerations A fair balance between community and commercial requirements Open Innovation is not Open Source. Producing tangible products for commercialisation is much more complex and risky. It requires: Thus, there are more boundaries to openness than OS.

We need to engage the Public tired and bored of hearing about climate change despite being aware of it cynical about the Government’s motives in pushing for action on climate, viewing it as a means of increasing taxation or as being hypocritical in light of recent decisions such as allowing the building of the third runway at Heathrow doubtful about the effectiveness of adopting lower-carbon behaviours when other people, companies and countries are still emitting elsewhere resentful of being made to feel guilty about their lifestyles dismissive of environmentalists and ‘green’ products as ‘smug’ and ‘self-righteous’ put off by the cost of choosing lower-carbon options. [“Now People” are the party people, living life to the full and wanting/needing to be at the centre of the action. They are sociable, flashy and drivers of fashion and trends. They are highly motivated to consume.] The UK’s Centre for Public Policy Research has found that “Now People” are:

Getting people involved in Clean Tech. Development (and Deployment)

Other models for Getting Outsiders to Innovate InnoCentive.com provides a portal for businesses seeking solutions to problems to access 160,000 “solvers”. In return for prize money ($5,000 to $1M) to a selected solver, the seeker gets the IP. Theme areas include clean technology and renewable energy. An example of a winning solution was one that reduced the energy requirement of kiln processes … and there are others…

Universities as Key Partners and Facilitators Used to collaborating in networks/consortia Used to dealing with ideas creation and solving problems Well connected to government departments/agencies Used to accessing funding opportunities to collaborate with SMEs Impartial, independent, connected to local community Have alumni networks across the world (personal relationships matter) Have an increasing number of collaborative arrangements e.g. with Chinese and Indian counterparts Can provide rapid prototyping of ideas, leading to product differentiation and improvements, commercial spin-outs OI requires inter-organisational relationships, networks, as the locus of innovation, not a single organisation. However, universities can play a key role in the OI paradigm by facilitating collaborations and managing the innovation process. Universities are:

Challenges to successful OI of clean technologies Creative use of IP Raising funding from Governments, Charitable Foundations and VC firms Managing networks and flow of ideas In regards to developing countries, dealing with local complexities, transaction costs, making evidenced based decisions Exploiting expertise in product design Influencing governments on necessary policy and regulatory frameworks Success criteria

Creative use of IP: Arcadia Biosciences Develops agricultural products to capitalise on opportunities that benefit the environment and enhance human health, e.g. nitrogen and water use efficient crops. Has set up public-private partnerships, with USAID, for technology transfer to India and donation of IP to African Agricultural Technology Foundation (for African rice). Giving IP for free to China, in return for a slice of the value of expected carbon credits, if Govt. brings in such regulation (50% reduction in nitrogen use could lead to a potential $30-40 billion/yr in carbon credits) Why do they do this? Enables technology transfer Provides links to potential new markets Accelerates commercial development Broadens collaborative networks Engages broader range of stakeholders Explores new business models

Funding is there for Innovation "History should be our guide. The United States led the world’s economies in the 20th century because we led the world in innovation. Today, the competition is keener; the challenge is tougher; and that is why innovation is more important than ever. It is the key to good, new jobs for the 21st century. That’s how we will ensure a high quality of life for this generation and future generations. With these investments, we’re planting the seeds of progress for our country, and good-paying, private-sector jobs for the American people." PRESIDENT BARACK OBAMA, AUGUST 5, 2009

Funding from Foundations and VCs Bill & Melinda Gates Foundation Supports Sustainable Agricultural Development through Science & Technology, awarding $120 million in nine new grants to organizations and research partners to work on the effort, focusing primarily on small-scale farming in sub-Saharan Africa. Kleiner Perkins Caufield & Byers has announced an historic alliance with Generation Investment Management to find, fund and accelerate green business, technology and policy solutions with the greatest potential to help solve the current climate crisis. The partnership will provide funding and global business-building expertise to a range of businesses, both public and private, and to entrepreneurs. As a result of the collaboration, the chairman and co-founder of Generation, former Vice President of the United States Al Gore, will join KPCB as a Partner. KPCB will co-locate their European operations at Generation’s offices in London.

Achieving a Low Carbon Future through Open Innovation Disruptive technologies and innovations will be developed involving the global community, facilitated by hub academic institutions with the expertise and know-how of fostering entrepreneurship and engaging with investors, policy makers and business Begin with focussed areas, with highly motivated partners, on, for instance, energy systems (Smart Grid, energy storage) Engage public on ideas for products and processes to encourage low carbon behaviours (e.g. by making it fun, desirable, cool) http://www.thefuntheory.com/ My vision:

Formation of Network Discussions/Plans already underway at UCL and UC Berkeley The GVL forum would be a natural one for expansion of the network Let solving the climate challenge be the goal for Global Venture Contact: [email_address] [email_address]

University College London (Simons)

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