A Rising Tide: Public and Private Leadership Drives Innovation

Earlier this semester, I attended the MIT Energy Conference through the generosity of a grant from the Kleinman Center. MIT’s conference is the largest of the collegiate energy conferences, and this year’s conference covered topics ranging from sustainable aviation fuel and fleet electrification challenges to battery recycling and first-of-a-kind projects for critical mineral extraction and enhanced geothermal energy. I was especially curious to learn more about how industry leaders were thinking about mobilizing capital that has become available through recent policy developments to technological innovation.

Public Sector Enabled

In her keynote speech, the Department of Energy (DOE)’s Vanessa Chan shared how the Office of Technology Transitions drew inspiration from SEMATECH, a public-private partnership that was formed in the 1980’s to revitalize the American semiconductor manufacturing industry. Through SEMATECH, a consortium of industry leaders worked together to create a roadmap to enable local manufacturers to build key relationships with suppliers, solve common problems and regain competitiveness in global markets.

The initiative’s successful execution lent credence to the “private-sector-led, public-sector-enabled” mantra that is a hallmark of the current DOE’s approach to driving innovation. One direct result of this approach has been the creation of the liftoff reports that the DOE has published in recent years after interviewing hundreds of industry professionals, investors, and researchers across the energy industry. This wide-reaching effort has helped build industry-wide consensus on how to advance the most impactful energy transition technologies available.

In addition to helping set the industry’s long-term direction, the exercise of writing a playbook has also already started influencing policy. When speaking to developers interested in capitalizing on the Inflation Reduction Act’s lucrative tax incentives for producing clean hydrogen, the government found a chicken-and-egg problem. Since clean hydrogen was expensive to produce before the IRA’s tax incentives, there was no demand for it, and suppliers interested in entering the market to take advantage of the new tax credit opportunities didn’t have anyone to sell their hydrogen to.

To enable the private sector to surmount this obstacle, the government has launched (and committed to fund) hydrogen “hubs” around the country to create a domestic “demand-side pull”. By helping suppliers to secure offtake agreements, the hubs will help reduce the risks suppliers face, enabling them to commit time and capital towards building out a robust clean hydrogen ecosystem.

Private Sector Led

Later on, attendees had a chance to hear directly from startup founders during the conference’s flagship tech showcase. The creativity of the ideas on display was staggering—Mantel uses molten salts to capture and sequester CO₂ while VEIR uses liquid-nitrogen-cooled superconductors to increase transmission line capacity, reducing congestion on the electrical grid. Found Energy smelts small aluminum pills treated with a catalyst, storing electrical energy from the smelting process within the pills’ structures. When placed in water, the pills oxidize rapidly to generate hydrogen and heat, both of which can be used as clean power for industrial processes.

Even more exciting than the diversity of technologies was the fact that so many investors were willing to entertain them. While there remains an issue with the “valley of death” that exists between venture funding and growth equity—many speakers lamented the tendency of lenders to be “first in line to be fifth or sixth to invest”—the showcase was a reminder that even though not all technologies will be viable, their contributions to the community can still be valuable. For example, VEIR’s transmission innovation depends entirely on high-temperature-semiconducting (HTS) tapes, a technology whose costs have dropped significantly due to continued demand for the tapes from customers exploring nuclear fusion.

Without investment in fusion, a critical technology for VEIR’s success may have been out of reach, but now the HTS tapes form the backbone of a technology that is demonstration-ready even before nuclear fusion. Importantly—though this feels like serendipity, the lesson is that consistent funding enables the accrual of positive externalities like this. To stretch a metaphor–if public policy creates a rising tide, private investment builds the boats–not all will be seaworthy, but the ones that are will find the sailing much smoother.

Siddharth Challani

MBA Student, Wharton

Siddharth Challani is a 2nd-year MBA student at Wharton studying Finance. On campus, he is part of the Wharton Energy and Climate Club and is a co-chair for the 2024 Wharton Energy and Climate Conference.