Solar on the Ground

A nice example of what can call solar's policy slump appeared in the Baltimore Sun over the weekend. It's about a possible increase in tax credits for solar installations in Anne Arundel County, Maryland. Note the very small numbers involved in the tax credits: "The tax credit would be for 50 percent of the cost of a system or $2,500, whichever is less," although the actual cost of an installation can be $30,000. The program's virtue in tough economic times is that almost no one uses it: "The current solar panel tax credit cost the county a little more than $11,000 in the past 18 months."

US solar is a patchwork of local efforts, and those continuing now have to compete head to head with "gap" payments to the staff of convalescent hospitals and the like. Nothing is more obvious than the need for a policy of national scope.

Renewable Energy Policy Moment

Writing at Renewable Energy World, Scott Sklar offers a helpful summary of the market forces currently battering renewables - declining energy demand, postponed investments in response, and more subtly, the declining impact of tax credits as the recession reduces companies' existing tax obligations.

Mr. Sklar's main solution is greatly improved procurement policies. Given the fragmented, labyrinthian nature of the federal government's programs, plus of course those of the 50 states, he writes the following:

To reorient existing federal capital (loan, guarantee and bond programs) and existing procurement programs would requite a totally new approach by the Obama Administration. New procurement tools would need to be fashioned not only to accelerate procurements but aggregate procurements and leverage them regionally in concert with other state and local government procurement programs.

This would require White House coordination with mandatory participation by OMB, GSA, DOE's Federal Energy Management Program, and even DOD to insure these procurement and coordination tools could be realized

Nice understatement. Effective procurement requires a kind of revolution in the federal bureaucracy. It would be interesting to know if the upside of the Obama appointments' bias toward the thinking of the 1990s would be some capaciaty for massive consolidation and coordination - the Manhattan Project that energy needs.

There are some good ideas coming out of the transition team. For example, read the transition team co-chair John Podesta's piece on Green Recovery.

Mid-Level Innovation

The New York Times has a good piece this morning about Amar Bhidé’s new book, The Venturesome Economy. His main argument is that the innovation that creates economic value comes not from basic research but from creative business applications. Those of us in innovation studies should think less about quantum dots and academic labs and more about Wal-Mart's brilliant logistics.

The piece is good because it also points out a key problem with this presentation:
The flaw in Mr. Bhidé’s thesis is that it amounts to a “false choice,” said Robert D. Atkinson, president of the Information Technology and Innovation Foundation, a nonpartisan research group. Most of the economic gains from technology, Mr. Atkinson agrees, do come from its innovative use. “But that doesn’t mean that the basic research is not critical,” he said.

But my favorite quote is from Bhidé, who says value really comes from “all the various forms of knowledge generated by the massively multiplayer innovations game that sustains economic growth.”

This puts the question back where it belongs: not with an either-basic - or-applied question, but with the kinds of institutions that link them together in ways that are effective because they really do pool the multiple players by treating the players equitably.

BTW, for a good overview of the Obama campaign's use of their massively multiplayer online environment, listen to this "To the Point" episode (featuring Thomas Gensemer of Blue State Digital and John Palfrey, author of Born Digital, among others).

Info Problems

Our group often talks about the difficulty with telling research from publicity in high-tech world in general. I first ran into this in the mid-1990s when reporters from Silicon Valley started to call me in Santa Barbara to talk about workplace conditions in famous SV companies whose employees wouldn't give them the time of day. They were upset that I didn't each in a business school.

Greentech has a kind of funny piece about the problem with compnay information - "Greentech's Top Eight Paranoid Companies." They actually understate the problem.

The Future of Science Literacy

Here's a nice n depressing review of basic educational level stats. The author is right to wonder where we can go without a better base than this!

On a happier note, Chris Mooney, the author of The Republican War on Science, says the war on science is over and that science has won.

Solar "Panic"

From Reuters, November 12:

Chinese solar cell maker JA Solar Holdings Co Ltd said on Wednesday the global economic slump had triggered a "panic" in the solar market, prompting it to slash its sales forecasts and sending its shares down more than 30 percent.

Sales of solar cells and panels have risen sharply in recent quarters as companies such as JA Solar ramped up production of the clean power source, but the global economic slowdown has caused that growth to slow, leading to a supply glut.

"At this moment the market reaction has been panic," Samuel Yang, chief executive officer, told a conference call.

The company, which posted a quarterly loss from its ties to defunct investment bank Lehman Brothers, said it had cut back on output of the cells that turn sunlight into electricity and would seek to renegotiate its polysilicon supply contracts.

That effort to cut costs for polysilicon, the key material in its cells, was an attempt to offset an expected 20 percent price decline in the average selling prices of its products.

"Just recently the euro depreciated dramatically, more than 23 percent. So we have to adjust our ASP (average selling price) to support our customers," Yang said.

Europe is the largest market for photovoltaic solar equipment because of the subsidy programs set up by the German and Spanish governments.

JA Solar's stock plunged as much as 32 percent to $2.27 following the announcement, bringing its loss since the beginning of September to nearly 90 percent.

"We do not believe in the 'disaster scenario' implied by the stock's sharp drop during today's session," Raymond James analyst Pavel Molchanov said in a client note, noting that the stock was trading nearly 40 percent below its book value. "JA Solar's low cost structure and healthy balance sheet place it in a strong competitive position."

JA Solar said it would seek a 20 percent drop in the price it pays its suppliers for polysilicon in 2009, and that it had already won price concessions for 2008. The company would seek to push its contracted costs for silicon below the spot market price of about $200 to $220 per kilogram.

SALES TO SLOW

The company cut its 2008 revenue forecast to between $849.5 million to $878.9 million from the $1.05 billion to $1.17 billion it had forecast in October, and said its earnings per share would be near break-even.

It also cut its 2009 revenue forecast to $1.5 billion to $1.7 billion from the previously issued $2.0 billion to $2.2 billion.

Fourth quarter growth margins would drop to 5 to 7 percent, the company said, from 21.6 percent in the third quarter and 23.3 percent in the second quarter.

JA Solar said it lost a net $21.0 million, or 36 cents per American Depositary Receipt, in the third quarter. In the same quarter a year ago it earned $24.4 million, or 17 cents per ADS.

Excluding one-time items, the Hebei, China-based company reported earnings of 25 cents per share, just short of Wall Street analysts' average forecast of 26 cents per share, according to Reuters Estimates'

Total revenue rose to $312.3 million from $125.2 million, and beat estimates of $302.1 million, according to Reuters Estimates, as the company more than doubled its solar cell sales.

JA Solar posted a one-time loss of $100 million in investments it made with Lehman, a $7.3 million loss from the derivatives deals with the bank and a 1.1 million share dilution based on shares lent to the collapsed investment bank.

Renewable Energy - So Three-Months-Ago

This piece from the Financial Times is one of a series of reports about falling investment in the renewable energy sector. The sector is getting squeezed between the crisis in the financial markets on the one hand, and falling oil prices on the other.

When a group of us spoke in June to physicist and 3rd-Generation solar photovoltaics researcher Alan Heeger, he said he thought much of the investor motivation was driven by the high price of gasoline and not by a sincere commitment to alternative energy development. I thought this was a bit cynical at the time, but he is turning out to be correct.

The test will be what happens when the global recession keeps oil prices weak as the credit markets stabilize. If alternative energy investment doesn't come back then - even when helped by large state investment in China and perhaps even in the US - then Prof. Heeger will be, to his great sorrow, proven correct.

I personally believe the last line of the piece below.

****
Clean energy investment falls sharply

By Fiona Harvey in London, Richard Waters in San Francisco and Sheila McNulty in Houston
Published: November 10 2008 18:08 Financial Ties

Investment in low-carbon technologies is suffering its first reversal after several years of record growth, as the financial crisis dims the sector’s prospects.

Worldwide investment in clean energy companies and new clean energy capacity fell sharply in the third quarter of 2008, compared with the previous quarter, according to New Energy Finance, a market analyst company.

Venture capital and private equity investment totalled $4.4bn in the third quarter, down 24 per cent from the $5.8bn in the second quarter of 2008.

Brent Goldman, partner at BDO Stoy Hayward, said: “We are seeing less activity across the whole market.

“There will be more and more businesses without enough funds, and they will struggle.”

Clean technology investment has soared in the past four years, on the back of high conventional energy prices and fears over climate change and energy security. The cost of renewables has come down and governments have increased their subsidies.

But many clean technology companies are at an early stage, and have found it more difficult to raise funds. Longer established companies have suffered less, but some have found it harder to find funds and credit for expansion.

Capital raising in the public markets was down in the third quarter, at about $2.6bn of new money raised – most of which came from convertible issues rather than flotations or rights issues – compared to $4.9bn in the second quarter.

The biggest public capital raising was by EDF Energies Nouvelles, the French renewable energy company, raising $734m through a secondary issue.

The biggest IPO recorded by New Energy Finance from July to September, at $87m, was Energy Recovery, a Californian energy efficiency specialist.

M&A activity among clean technology companies also fell, by 21 per cent to $2.9bn in the third quarter.

But the financing of new capacity in the clean energy market, such as the building of new wind farms, remained strong at $19bn in the third quarter, only marginally down on the $23bn in the second quarter of this year.

However, as clean technology investment remained relatively strong for the first half of this year, new investment in clean energy worldwide is likely to be only about 4 per cent lower in 2008 than last year, according to New Energy Finance.

Michael Liebreich, chief executive of New Energy Finance, predicted investment would return to its previous high levels next year.

He said: “There will be a hiatus of about six months, but then capital will return. The fundamentals of this business still look good.”

Obama Energy Policy

Here's Obama the candidate offering a good short summary of his energy and innovation policies. It will be interesting to see how the program holds up.

Renewable Energy World's morning-after summary is pretty sensible.

• Hope 1: "“President-elect Obama is the first national presidential candidate who has explicitly campaigned for renewable technologies and green jobs."
• Hope 2: "Some renewable energy experts and analysts say that Obama may use the job-creating opportunity that the renewable energy industry holds as a way to usher in a stronger economy while bringing more solar and wind power into the energy mix."

On the latter point, the strongest, clearest advocate is Van Jones, whose organization and new book should be injected without dilution into the Obama administration.

Obama's Tech Team

At least one technology member of Obama's transition team has been tentatively identified by the Washington Post: Julius Genachowski, a former counsel to the Democrat side of the FCC, a managing director of Rock Creek Ventures, and a friend of Obama's from law school. He seems connected, and draws comments like this:

"Julius is a true believer in the power of technology to change lives and I think that bodes well for the Obama administration that someone like him is part of the transition team," said Rick Whitt, Google's Washington telecom and media counsel.

But the web material on him is paper-thin - I'll try to find something more concrete.

A New Consensus on Innovation?

This year, the journal Nature has been running monthly commentaries on the innovation process. In August, their editorial on the series claims that we have seen a paradigm shift in our understanding of innovation. We've dropped the "linear model" in which knowledge moves from bench to bedside, from basic research to marketplace, in exchange for bundled processes that are non-linear, interactive, multi-directional, discontinuous, and decentralized. Here's their formulation.

A more accurate picture is that of a nonlinear ‘ecosystem’, in which innovation is driven by multiple players, forces and feedback loops working simultaneously. Such an ecosystem cannot be managed — at least, not in the conventional sense of top-down control. But it can be cultivated, in the way that a gardener can try to create the right conditions for plants to grow, while accepting that unforeseen
elements ultimately dictate the outcome.

The explosive idea here is that the actual, non-linear ecosystem "cannot be managed." We do say this regularly, but do we practice it? Is cutting-edge science becoming more democratic, or at least more self-organized? Have our institutions changed to allow this?

I would answer no to all of these. We can see the next paradigm but we haven't moved there. Our practice is in between paradigms. And when we talk about gardeners, we can assume that our metaphors and implied models also have a way to go.

More on this topic soon.

Nano-Glue

As I now add nano-products to my "impulse-buy" list at Home Depot, I decided to flip the extra money and get some new Nano-Glue. With childood memories of eating the thick tasty white goo between nap-times in kindergarten, picking up this tube of glue had quaint nostalgia with the "new-and-improved" force of American innovation behind it. Excited, I ran home to fix my sunglasses and enjoy a tastey nibble, only to find out the stuff just sucks. But I have found a valuable metaphor... just like glue, my nano research is globby, sticky, never goes where I want it to, and the more I play with it, the harder it is to get off.

"Lead or Leave"

I don't get to say this too often, so I'll enjoy it while I can: Tom "Flat Earth" Friedman has an excellent column today on the dumbfounding stupidity of US energy policy. After pummeling George Bush for a while, he calls for a floor of $100 / barrel for oil and $4.50 for gasoline. It'll take more than that to get renewables moving at the speed we need, but it would help. And the anger might help us jump the tracks that lead to the cliff.

It reminded me of a report by Cambridge Energy Research Associates last month about construction costs for power plants, which have more than doubled since 2000. Even if we can afford the fossil fuels to put into the plants, it's not clear we can afford to build conventional plants anymore.

Unfortunately, wind turbines have also doubled in cost since 2005. It's that much more pressure on us to do far better with conservation and efficiencies at the consumption end.

Germany's Solar Valley

While the entire Center for Nanotech nology in Society was having its site visit from our funders, the National Science Foundation, the New York Times published a piece about one of the solar companies our Innovation Group has been watching, Q-Cells of Thalheim, a town in the former East Germany. Q-Cells "surpassed Sharp last year to become the world's largest maker of photovoltaic solar cells." Some people are calling the area around Thalheim "Solar Valley." Germany gets 14% of its energy from renewable sources, has half of the worlds total PV installations, and is the third largest producer of PV modules (behind only China and Japan).

Why is solar doing so well in Germany? Q-Cells is a sample beneficiary of public support for renewable energy that is far better in Germany than what we have in the United States. One part of our lagging support is direct R&D investment. During my presentation yesterday I showed a chart from a paper of one of our partners, David Mowery, showing the literally invisible chunk of US federal R&D spending devoted to energy - about $3 billion a year in 2006, for all energy research, including under $70 million for carbon capture and sequestration. Less than one-tenth of the already small amount of $3 billion goes to all forms of renewable energy in the US.

But another piece of the story is procurement.

At the heart of the debate is the Renewable Energy Sources Act. It requires power companies to buy all the alternative energy produced by these systems, at a fixed above-market price, for 20 years.

This mechanism, known as a feed-in tariff, gives entrepreneurs a powerful incentive to install solar panels. With a locked-in customer base for their electricity, they can earn a reliable return on their investment. It has worked: homeowners rushed to clamp solar panels on their roofs and farmers planted them in fields where sheep once grazed.

The amount of electricity generated by these installations rose 60 percent in 2007 compared with 2006, faster than any other renewable energy (solar still generates just 0.6 percent of Germany’s total electricity, compared with 6.4 percent for wind).

Solar has been hurt for 25 years by "market failure" - the failure of markets to provide financial returns that support socially-desirable investment. Germany has overcome solar market failure as well as anyone. Even as the Merkel government proposes undoing this, the US should implement its own versions of feed-in tariffs that will support consumer switching.

Alternative Energy and Federal Credits

So many people mentioned this Tom Friedman piece on upside-down energy policy that I had to link it. Friedman is right about how stupid it is for Congress to have continued credits for gas and oil and stopped those for solar and wind. It's also worth noticing the testimonies in the piece about how alternative energy in the US, especially wind, attracts investment capital only with tax deals to offer investors.

“It’s a disaster,” says Michael Polsky, founder of Invenergy, one of the biggest wind-power developers in America. “Wind is a very capital-intensive industry, and financial institutions are not ready to take ‘Congressional risk.’ They say if you don’t get the [production tax credit] we will not lend you the money to buy more turbines and build projects.”

Friedman's ending is painfully true: "The McCain-Clinton proposal is a reminder to me that the biggest energy crisis we have in our country today is the energy to be serious — the energy to do big things in a sustained, focused and intelligent way."

Building blocks: bringing nano and stem cells together

In this article on a new nano & stem cell therapy for spinal cord injuries, the "nano gel" that enables stem cells to treat a spinal cord injury is referred to as a "building block" - I find this extremely interesting, given that stem cells have long been referred to as "building blocks" by numerous relevant communities (medical, media, publics). Despite stem cells' shady origins with embryos, the US public is generally very optimistic about their potential use as a medical treatment. Aligning nanotechnology with stem cells by using the most oft-associated metaphor of the "building block" is a smart move for those who want to positively shape nano's public image.

The "building block" image is used to explain how the nano-gel uses the process of self-assembly to support stem cell functions - again, this is pretty smooth, since the "self-assembly" image is one of the potentially problematic images of nano.

--Mary

Solar Mismatch

Here's an article about a nice idea for getting solar into home use: seller financing. A company like Solar City buys the photovoltaic panels, designs the system, and installs it. The homeowner pays a monthly fee to the company that's a little like a mortgage.

But then you think about it for a minute and realize that these homeowners will spend fifteen years buying technology that, given the current rate of research, is likely to be obsolete fourteen years before they stop paying for it.

Solar needs a better procurement strategy than this. It needs to be one that can make markets for leading-edge technology and then also finance the installation of the next wave, and the next, and help the customer with upgrades.

***


http://www.latimes.com/business/la-fi-solar3apr03,1,405880.story
From the Los Angeles Times
Firms seek to make solar power more affordable
Companies launch programs to cut the initial outlay for homeowners to as little as 10% of the total installation cost.
By Elizabeth Douglass
Los Angeles Times Staff Writer

April 3, 2008

Turning the sun's rays into energy is an expensive endeavor, so solar companies are cooking up financial products that lower the upfront costs for homeowners and businesses.

Foster City, Calif.-based SolarCity is the latest to jump in, launching a lease program Wednesday that would slash the initial outlay for residential customers to as little as 10% of the total installation cost.

"One of the most common reasons that people are unable to go solar is because of the high upfront cost," said Chief Operating Officer Peter Rive, who founded SolarCity with his brother, Lyndon, the company's chief executive. "We're hoping that it revolutionizes the way people purchase electricity."

Rive said an average four-bedroom home would need a 4-kilowatt solar-electric system, which could cost about $25,000 for equipment and installation. That investment pays off financially, but it's a long wait.

"The payback time is long enough that you're effectively going to invest the money into your house and not expect to get it out for a while," said V. John White, executive director of the Sacramento-based Center for Energy Efficiency and Renewable Technologies. Leasing arrangements like the one offered by SolarCity, he added, "allow people to add solar without as much money upfront, which makes it less of a rich man's game."

Under SolarCity's plan, the customer's only ongoing cost is the monthly lease payment. The homeowner gets the use of the solar power generated by the rooftop system and gets the bill credits when there is excess power that can be fed back into the power grid.

Companies such as Sun Run, SunPower Corp. and SunEdison take another route. They pay the equipment and installation costs, then sell the power at variable prices to the customer through a power purchase agreement.

SolarCity doesn't make the photovoltaic panels, but it specializes in designing and installing systems tailored to each site's needs. The panels are typically installed on rooftops, but they also can be set up on the ground.

Under the lease program, offered in California and soon in Arizona and Oregon, SolarCity would design and install a homeowner's solar-electric system, keeping ownership of the equipment and paying for maintenance and replacement parts.

SolarCity, with backing from Morgan Stanley, offers homeowners several lease options. A homeowner installing a 4-kilowatt solar system could opt for a low initial payment of $2,125, plus monthly payments of $200 for 15 years, the company said.

Homeowners focused on keeping monthly payments low could choose to pay $4,600 upfront, then pay $175 a month for 15 years. A seven-year lease would cost $6,650 down, then $215 a month. Customers who move can either transfer the lease or buy it out.

The switch generally pays off for homeowners who use enough electricity to push them into more expensive rate tiers, yielding monthly electric bills above $200, according to SolarCity. That benchmark could get easier to hit in the coming years, because all of the state's largest utilities have instituted or are pushing for large rate hikes.

elizabeth.douglass@latimes.com

How Do You Support Social Development?

I wrote about the problem with supporting solar development last month; this has come back again in the form of municipal wireless service, which is floundering in the US and doing OK in other countries. The New York Times had a good piece on Philadelphia, San Francisco, and other cities after Earthlink (among others) decided they couldn't make money in their partnerships with cities on municipal wireless.

Municipal wireless is one of the most direct fixes of the digital divide, since poor folks can get wireless for free off the utility pole and not be excluded from the information world the rest of us take for granted. The benefits are obvious, from basic information like phone numbers so you can call ahead to see if your prescription is being filled at the pharmacy you think it is, to new services for housebound people, local niche businesses, and much more. The "network effects" of universal access are well-known. If wireless becomes a utility, whether low- or no-cost (most of the failed business models charged something), who knows what could happen?

One critic of the public-private partnership noted in so many words that the social benefits - or spillovers - greatly outweigh the capacity of any one company to retain profits, and therefore the companies miscalculated - by virtue of the model itself.

"The entire for-profit model is the reason for the collapse in all these projects,” said Sascha Meinrath, technology analyst at the New America Foundation, a nonprofit research organization in Washington.

Mr. Meinrath said that advocates wanted to see American cities catch up with places like Athens, Leipzig and Vienna, where free or inexpensive Wi-Fi already exists in many areas.

He said that true municipal networks, the ones that are owned and operated by municipalities, were far more sustainable because they could take into account benefits that help cities beyond private profit, including property-value increases, education benefits and quality-of-life improvements that come with offering residents free wireless access.

I would add that Earthlink, the biggest company among the withdrawers, had a chance to rescue itself from oblivion with a very cool and distinctive project that could eventually have make it a hero to millions. It could have improved its technological analysis (it underestimated the number of routers it needed to put on poles) and then gone coast-to-coast. Without municipal wireless, Earthlink will remain another leftover from the 90s dial-up services that counts on the millions' techno-backwardness to prolong its death.

Building on stories like this, and on the work of our research partner David Mowery on the central role of "procurement" in making markets for users that take a while to settle in, we should

1. get the Obama and Clinton campaigns to sign on to a federal role for national wireless from the east to west and north to south. (The "winner" technology is already picked here, I say to the industrial policy skeptics among us.) And
   
2. think more carefully about now to develop procurement strategies for major nanoscale outputs like solar panels.

Performative Nano-Fiction

From the performance artists who brought you "POP! The First Human Male Pregnancy," there's "The Nano Medicine Revolution: NanoDocs ." NanoDocs is a website, set within a larger website of performative biotech art "RYT Hospital-Dwayne Medical Center." At NanoDocs, viewers may play around with the futuristic concept of nanoscale robots that perform medical functions.

NanoDocs was created as both a website and an art installation (2003) by Virgil Wong. Wong's own website is subtitled, "Experiments with Art, Medicine, and Technology."

Both NanoDocs and Wong's websites are interesting to poke around.

The Nanobots are Back

The Business section of today's New York Times has an interesting article about IBM researchers who are "trying to put new zip into Moore's Law." Why interesting? Because:

1. Like most nano coverage in the NYT, it's not in the Science section but presented as business...which comports with my view that the NNI is not so much about science policy as it is industrial policy.

2. It points out, yet again, the key place that nanoelectronics has in the overall schema of nanotech.

3. For a historian (me) it's full of lots of references to the bugaboo of technological determinism - "Chips are almost ubiquitous and, where they're not, they probably will be soon."

4. Finally, at the articles end, it quotes a "professor of nanoelectronics" from SUNY-Albany who says that self-assembling nanotechnology (the focus of the article) will create better electronics as well as self-assembled "nanobots that can float in our bloodstreams, searching for cancerous cells that the bots will then eliminate."

Ah, the nanobots. No matter how hard government policy makers, scientists, and engineers try to distance themselves from the futuristic 1980s version of nanotech, it keeps coming back (like parachute pants). The shadow of Eric Drexler continues to loom large over all things nano. In order to understand public reactions, fears, and hopes for nano, this must be acknowledged, understood and, if not believed, then respected.

Energy and Innovation

Pascal Zachary is the New York Times's man in Silicon Valley, and he's done a quick tour of SV companies working on solar. This is not Zachary above, however, but T.J. Rogers, CEO of Cypress Semiconductor and also the head of its new solar company, SunPower Corporation.

Call me shallow, but I would feel less like this were less of a publicity stunt if Rogers weren't dressed like the missing member of a barber-shop quartet.

The article mentions a couple of promising tech areas - thin-film and the more original solar thermal. The technology is incredibly interesting.

1.

The business statements are incredibly boring. I mean "boring" in the clinical sense of the experience that comes from disavowing a painful truth. Boring-but-true statements #1 and #2 are:

• "Affordable solar development is also still dependent on government subsidies."
• "so much of our effort is going into short-term victories that I worry our pipeline will go dry in 10 years."

There is nothing explicit at least in SV culture or the "California ideology" of high-tech entrepreneurship that supports the government subsidies - call them public investments - that allow for long-term victories. I juxtapose this to the organizational capacities of Asia and Europe, and I worry about us.

2.

Most U.S. readers don't think this contrast between markets and government reflects reality. At least two generations of sociologists, B-school theorists and journalists have discovered the network, and consider it the crucial third term. High-tech business pulls people and resources from everywhere - government labs, universities, large corporations, start-ups, NGOs, and takes whatever it needs. In the U.S., networks are thought to make government direction obsolete, whether it's called investment, industrial policy, or something else.

A case in point is a good piece by Jason Owen-Smth and Woody Powell in the book Cluster Genesis, whose title starts making the book's core point that both research and development take place in clusters that combine disparate institutional forms and continuously and dynamically evolve. The authors look at "strategic alliance networks" in biotech in Boston and the Bay Area, identify five types of organizations and four kinds of connections among them (R&D, financial, licensing, and commercialization). The core point is that clusters and their geography form the infrastructure of biotech development. Although big firms tried to "cherry-pick" the best people and ideas, and everyone predicted biotech shake-outs and consolidation, this trend "faced significant obstacles imposed by deeply collaborative R&D efforts and a mobile scientific work force." As the sector evolved, "the pattern of dense inter-connection deepened, suggesting that the original motivation of exchanging complementary resources had shifted to a broader focus on mining innovation networks to explore new forms of collaboration and product development."

The network is thus more fundamental than financial markets or government planning, in this view, and in some sense the latter categories don't really make sense since they never operate as such. Owen-Smith and Powell find that Bay Area biotech has relied more on venture capital than Boston-area firms, which had more partnerships with academic and public-sector organizations. And yet although the Bay Area relied more on private capital, and Boston on public science, both regions did quite well, generating successful firms and valuable products.

But there are important differences in the innovation systems too. The "private" Bay Area system produced almost twice as many patents per firm as Boston's public. But another measure (variance in forward citations) is higher in Boston, suggesting that that region may engage in more "'exploratory' innovative research." In other words, the VC-fueled Bay Area folks may patent everything in sight, including incremental improvements as a defensive play.

Another important network indicator is "prior art" citations in patents, or backward citations. The "open" public-science structure of Boston-area biotech made 71 percent of its citations of prior art to non-biotech firms while that number was only 45 percent in the Bay Area. Owen-Smith and Powell interpret this to mean that the more commercially-driven, VC-based Bay Area cluster consisted of firms that were interested in their own research and that of their competitors, and less in research from outside their industry sector. When the authors compared a firm from each area that had developed competing therapies for the same condition (relapsing multiple sclerosis), they found this pattern replicated in the patent citation patterns of the respective firms.

The same pattern appears in a third indicator - product type. The Bay Area cluster produced more therapeutics more quickly - about twice as many. But the Boston cluster focused on treatments for rare diseases covered by "orphan designations" that offered "tax breaks and regulatory assistance to organizations that develop such medicines." There was a difference in strategy in the two cases, and although the authors don't use the term, Boston is closer to the outcomes one would expect of "public science" - addressing a clear need even when markets will offer modest or minimal rewards.

Thus "network" isn't so much a third term as a compound of the other two. Good empirical work redivides it into two familiar tendencies. The first cluster - the Bay Area's - is composed "largely of competitors and investors [who] are primarily concerned with speed and with commercial development, hence they pursue a more focused innovation process that relies heavily on internal R&D and attention to the efforts of direct competitors." On the other hand, there are "firms that are embedded in networks anchored by public research organizations and that lack strong investor involvement" and thus don't only "pursue immediate commercial returns." The latter, Boston model relies on external sources of knowledge and favors "more exploratory efforts at discovery." Governing ties in Bay Area firms tend to be more exclusively financial. Finally, the Bay Area model seems to be suffering some kind of lock-in, as the need for access to early capital sends firms back to the same small group of VC folks - with their same strategies, connections, and goals - again and again and again.

Even scholars dedicated to network theory with excellent data point out the constant danger of market failure and the rarity of a strong foundation of Boston-style public science.

3.

There's also something about the sheer exteriority of this understanding of innovation - big and small companies, capital flows, people from famous corporations who start new ones. What about the invention process?

I happened to read this passage in a London Review of Books piece about a new book on gravitational waves.

Near the end of the 17th century, Edmond Halley examined records of medieval and ancient solar eclipses back to the time of Ptolemy. He discovered that when he used the position and trajectory of the Moon to determine retrospectively when solar eclipses should have occurred, the times calculated differed from the actual ones by up to an hour. Halley deduced that in the past the Moon must have moved across the sky from east to west more slowly than in his own time. This was a far-reaching, even heretical assertion. For the Moon to have changed its motion in such a way would imply that its course through the heavens did not repeat in periodic orbits. Such ‘secular’ changes in its orbit could eventually cause the system itself to disappear, and the Moon to fall into the Earth or escape into space. For many philosophers, to theorise that the cosmos could decay in this way was a slur on the Almighty, as it implied that God was such an unskilled craftsman as to have constructed a system of stars and planets that could fall into ruin and disorder. Nonetheless, Halley was right, as even the fundamentalists were eventually forced to concede. The question now became: what causes the secular acceleration of the Moon?

This passage amazed me. I can't imagine running these complicated hand calculations for days and weeks and maybe months, coming up with a one-hour difference over decades and centuries, and not thinking oh well, I screwed up a line of my math. How do we still find and nurture these people - the ones with the sheer courage, the mind-boggling stubbornness, to decide they are right, everyone else is wrong, there's a one-hour gap, then come up with a new theory, one that would not be bourne out for hundreds of years?

How do we remake a business system with enough space and time to allow this kind of research? How likely is it to happen in California?

Why I love Nano

Though I purport to study nanotechnology with a critical scholarly eye, I must admit to (more often than not) being swept up in the nano-hope-hype. It's hard not to be drawn in when researchers like Zhong Lin Wang (materials science, GA Tech) propose nano-enabled clothes that can harness the energy from our normal day-to-day movements (see article brief here).

On this blog and in many other CNS-UCSB venues, we've had many discussions about the science fiction rhetorics associated with nanotechnology. I wonder how many us (the critical scholarly types, of course) find themselves seduced by the science fiction-like potential of nanoscience? And is this a bad thing, really?

Human 2.0

Much of the nano & Society scholarship lacks a decent historical perspective coupled with analysis. Although it's not specifically geared toward nano, Michael Bess' article in the January issue of Technology and Culture provides an interesting historical perspective on the emerging technologies for human enhancement. Noting that how much human enhancement technologies sound like sci-fi, Bess argues that we have not connected the dots to see the total effects of these new technologies. Nonetheless, it is "ourselves who are being refashioned" with what he argues will be the defining technologies of the 21st century.

A Tight Grip Can Choke Creativity

Check out New York Times business writer Joe Nocera's overview of copyright issues in relation to Harry Potter. Potter author JK Rowling gets to play the role previously reserved for Mickey Mouse grandmaster Disney, the evil Archemandite of copyright control from the heyday of Lawrence Lessig's crusade against endless copyright extension in the late 1990s and early 2000s. The piece has a strange, dated feeling - has there really been no change in the copyright battle lines for 10 years?

Basic Research at . . . Microsoft!

The New York Times has a piece announcing that Microsoft will open its sixth "basic research" lab in July, this one headed by the mathematician Jennifer Tour Chayes (at left) and placed next door to MIT. Dr. Chayes will apparently "be one of the first women to direct a research lab run by an American corporation."

In the last couple of decades, industy has tended to close or spin-off its basic research labs, to rely on partnerships with academia, and to conduct what Intel calls "directed research" with two important features: 1) it is oriented toward short-term product development and 2) it maximizes its use of other people's research rather than developing everything in-house. Henry Chesbrough has dubbed this system "open innovation," and contrasts it with the in-house lab model. Is Microsoft partially reversing this trend?

The quick answer is no. Microsoft Research has 800 employees with doctorates. Google has 100. In its heyday, Bell Labs had well over a dozen major facilities, the largest of which, at Naperville-Lisle outside Chicago, had 11,000 employees.

Size isn't the only thing that matters. But we do know enough about the innovation process to know that randomness is a central variable - people get amazing data or have great insights at unexpected and unpredictable moments. Size does matter. Not in a linear way, where big = best, but in an unpredictable and yet semi-regular way. Throw in the fact that MSFT and GOOG are two of the wealthiest companies in history, and you are likely looking at an exception to the industry trend of oursourcing research rather than a trend that counters it.

And yet Microsoft Research is a tribute to the economic as well as the strategic value of basic research. As public university budgets are continuously squeezed, universities can afford less basic research. Given the country and the world's desperate research needs, this would be a good time for large companies - even those riding the revenue roller-coaster like Intel - to fund more basic than they are funding now.

P.S. I've avoided blogging on the Microsoft bid for Yahoo! because it makes me, well, sad. I started graduate school the same year that the IBM PC came out - 1981. As an academic I grew up with DOS, and snubbed Apple's graphical interface as kid stuff for almost 15 years. Now Microsoft and Windows are dated and stagnant, and Microsoft's amazing cash reserves (perhaps still as high as $30 billion before this offer) are a triumph of monopoly power over innovation. Joe Nocera at the New York Times sums all this up quite nicely.

Nano Roadmap

Check out the new roadmaps for nanotechnology and the path to atomically-precise manufacturing. This link takes you to the Foresight Institute where copies can be accessed.

The Shock of the Old: A Review

This book's full title is "The Shock of the Old: Technology and Global History since 1900" (Oxford, 2007). Its author, David Edgerton, a historian at Imperial College, manages not to use the word "nanotechnology" a single time in 270 pages. Yet the book is directly relevant to nano-issues. In addition to insights about innovation that I discuss below, the analysis can be taken as an antidote to the pressure on all nanoscale fields to develop faster than any previous wave of technology.

Edgerton's title is obviously saying, "the old is important too." The book has a huge number of examples of old technology and low technology that continue to affect society long after they supposedly peaked. Hybrids spring from every page: there are the traditional Thai long boats joined to V-8 car engines - remember the flying-boat chase scenes in the Bond film Tomorrow Never Dies? Edgerton always stresses the overlooked efficiency of old tech in new situations. For example, he traces Rwanda's "spectacularly fast genocide" in 1994 in part to the machetes stockpiled in advance: "most victims were killed machetes (38 per cent), clubs (17 per cent) with firearms accounting for only 15 per cent of deaths."

Edgerton is right that we underestimate the role of the old. But his second and most important theme concerns why we do this. His explanation is that we make the mistake of centering our histories of technology on innovation rather than on use. We date advancement and progress from the moment a technology appears or is first applied, and downplay the long and winding road of adoption, imitation, diffusion, improvement, recycling and hybridization. And yet it is this long haul that decides the impact of a technology on society, and not its exciting first revelation.

Important things follow from retelling the history of technology as the history of use.

• it changes technological time, slowing it down, stretching it out, and shifting its major impacts, usually to a much later date.
  

• it allows us to follow the social uptake of technology, and tell the stories of its actual deployment.
  

For example, steam power "was not only absolutely but relatively more important in 1900 than in 1800." Similarly, "the world consumed more coal in 2000 than in 1950 or 1900." If we date steam power from its earlier appearances in Britain in the 1700s, we will identify it with the "dawn of the industrial revolution," see its importance as ended by other energy forms (oil, electricity), and miss steam's long and influential presence in later decades. If we do look at use rather than invention or first adoption, we can, to take another case, recognize the continuing importance of coal to China's current round of spectacular industrialization, and appreciate the extent to which it will "win" by using the old.

Seeing the power of the old doesn't mean we can ignore the new or the processes of innovation that create it. But we will redefine innovation when we keep the old in view.

Innovation begins to look different in Edgerton's chapter on nations. I will start a list of the core changes:

1. high levels of research and development (R&D) spending correlate with higher levels of national wealth and growth in gross domestic product (GDP).
   
2. high levels of R&D do NOT correlate with high levels of innovation OR with high levels of economic growth.

We should pause to think about these points, since they undermine the central justification for R&D spending, which is that this spending always boosts the national economy.

Edgerton offers some examples of his claims. "In the 1980s Italy overtook the United Kingdom in output per head . . . while spending much less on R&D than Britain did" (109). Similarly, "Spain was one of the most successful European economies in terms of rates of growth in the 1980s and 1990s, and yet this is a country which spends less than 1 per cent of GDP on R&D." Edgerton notes that the USSR spent as much or more of its GDP on R&D than did the US in the 1960s and 1970s, and yet is regarded as "having contributed practically nothing novel to modern industry" (110). Or take China vs. Japan. Japan has long had one of the highest rates of R&D spending in the world, but "while China has transformed itself and flooded the world with manufactures, the much more innovative Japanese economy has been, by comparison, stagnant" (109). This kind of data - which has been known by specialists since the 1960s - leads to further claims:

3. imitation as at least as important as innovation to economic growth.

4. "global innovation my be the main determinant of global economic growth, but it does not follow that this is the case for particular nation states" (113).

We can restate (3) to make it more compatible with Edgerton and with the work that we're doing here at the CNS:

3a. uptake and use of technology are more important than innovation as such to economic growth.

Innovation has not been demoted here so much as it has been yoked to diffusion, spillovers, transfer, and technology sharing. Technological innovation has meaning (and economic value) only as a social process.

This general principle does not help explain a central mystery in this book: why the US has been the great exception to the rule that innovation and growth do not go hand-in-hand? "By mid-century . . the USA was a clear leader in industrial research and innovation by any standard: it dominated both world production and world innovation. As such it was wholly atypical" (112).

Edgerton is disappointingly unwilling to dig more deeply into the American Anomaly. We must explain it, though, because the belief that effective R&D leads to greater economic growth continues to drive technology policy. Policymakers could accept points 3a and 4 above, and respond as follows: R&D certainly does improve economic growth (4), and the problem is with freeriders who take your great new stuff without paying you properly. Thus (3a) just means that we need stronger intellectual property protections, including international agreements like TRIPS, to prevent countries like Italy and Spain and China from borrowing - i.e. stealing - their way to the top.

Edgerton would reject this interpretation, since he rejects the "linear model" that lies behind it (see below): he would deny that most innovation comes from official R&D lab sources, that imitation is so different from invention, and that use is theft. I'm getting ahead of myself here, but I mention this now to suggest that the stakes are very high, and that it is not enough for historians to say the linear model (in which R&D leads to growth) isn't always true or generally true. They must also do more to spell out a non-linear model that will encourage policymakers to do more than just patch the linear model with stronger IP - which is where most policy rests right now.

But back to the book: Edgerton does say that the US enjoyed high rates of growth in earlier periods because it applied itself to borrowing and adapting technology first developed in Europe: this continued, and may explain the "golden age" growth of the 30 years following World War II. Historians of US technology would also suggest that the US benefited from massive Cold War military investment and from its long experience with the highly skilled coordination of large-scale engineering projects. The most famous of these was the Manhattan Project (actually the "Manhattan Engineering District") that produced the atomic bomb during World War II. As Edgerton points out, this "builds on decades of experience in large-scale research and development" (199). Technology sharing and ambitious, well-coordinated projects are a major part of the US economic story, and they lead to a further point.

5. technological and economic development depend on advanced infrastructure and coordination, which historically arise more from sophisticated institutions than from markets.

Evidence of this last point comes in the form of Edgerton's stress on the role of very large firms in the innovation process. Major advances have continuously come from companies like BASF, Hoechst, Bayer, AGFA, General Electric, AT&T, IBM, Du Pont and Eastman Kodak: "all these firms were already very large, innovative in 'science-based' technologies, and employed an abundance of scientists and engineers" (193). They created internal R&D operations, and these generally remained productive for decades at a time. "At least fifteen out of the twenty-three firms listed as the top R&D spenders in 1997 (and 2003) were formed before 1914" (194).

Taking points 1-5 together reminds us that there has never been such a thing as "closed innovation," in which development took place inside one institution. Analysts like AnnaLee Saxenian (Regional Advantage), Clayton Christensen (The Innovator's Dilemma) and Henry Chesbrough (Open Innovation) have made much of the new dependence on innovation networks that no company or even nation can control. The history of technology shows that there is nothing new about the sheer dispersal, the boundary-crossing, the institutional mixing and sharing, or the global scale of invention. A whole range of motives, participants, organizations, and sectors are always involved in any major technological wave. And this insight leads to a further major point:

6. "Most invention has taken place in the world of use (including many radical inventions) and furthermore has been under the direct control of users" (187).

This is a fantastically important idea. It puts practitioners of every kind at the center of innovation throughout history. It puts use at the center of invention. It puts the street and the shop next to the state-of-the-art academic lab. It puts imitation at the heart of invention. It truly displaces the "linear model" (from bench to bedside, from lab to market, from specialist to customer, from agent to recipient, from producer to consumer, from smart to dumb). It discredits the basic categorical distinctions on which that model generally rests.

Once technological development is defined through use, we can push Edgerton's point for heuristic purposes and say:

7. The history of technology is the history of everybody. That is, of everybody's uses of it.

which implies:
7a. the importance of laboratories to technology has been greatly overrated.

or more precisely and helpfully:

7b. There is no "downstream" (public) to try to push "upstream" (scientific laboratories), because in the history of technology, there is no "upstream." In other words, at different points in a technology's history, everyone is upstream.

or:

7c: technology develops variously all over a global field, one that mixes technique, infrastructure, know-how, facilities, social frameworks, and social needs. Tech development must be studied this broadly.

This means that the study of the history of technology must become as radically interdisciplinary as technology itself. Economists and historians need to work together regularly. Institutional sociologists need to be there too. So do specialists in cultural and artistic change, which are part of the same process. The intellectual task needs to be seen in all its profound difficulty before it can be resized and broken down enough for progress to be made on its parts, correctly interrelated to one another.

Our innovation group at CNS is particularly interested in the institutional capacities that link research and use. We seek to develop the non-linear development model. Edgerton's book confirms and extends our existing thinking. It teaches a few other things about innovation in general:

• "the twentieth century was awash with inventions and innovations, so that most had to fail. Recognising this will have a liberating effect. We need no longer worry about being resistant to innovation . . . Living in an inventive age requires us to reject the majority that are on offer" (210).
• "we are free to oppose technologies we do not like."
• we are free "to research, develop, innovate, even in areas which are considered out of date by those stuck in passe futuristic ways of thinking."
• while our technology has been highly innovative, our technology policies have not.

Though the non-linear model does not emerge here, Edgerton does build pieces of the foundation for more innovative policies about innovation. Ironically this means seeing innovation as not-so-central to technological change, seeing innovation as common, and seeing the rejection of innovation as essential to sustaining it.

It also means seeing that innovation is often opposed to innovation. In my favorite single sentence in the book, Edgerton says, "calling for innovation is, paradoxically, a common way of avoiding change when change is not wanted" (210). Edgerton is thinking of climate change: perhaps we call for new technology as an alternative to creating the new social arrangements that would truly renew the impacts of technology.

Any valid non-linear model will need to consider the function of publicly funded basic science in government and university laboratories. The issue is given additional urgency by the fact that the American research university system has been the key element in creating the American Anomaly mentioned above, in which the US translated innovation into greater economic gain than did other countries. As Edgerton's work implies, the difference probably does not flow from a linear tech transfer system in which academic research results are rapidly transferred to product developers in the private sector. The decades of high economic growth preceded the modern university-industry tech transfer system, and decades of work in research economics have shown the importance of the public funding of basic research to economic development. The research university mostly likely helped the economy by staying apart from it, and concentrating on basic research aimed at the far horizon, whose payoffs would arrive in 20-50 years.

The Internet is a classic example of the long development process for a transformative technology, which was underway in government and university labs at four decades before its commercial emergence. Nano is another example: as the work of CNS researchers Patrick McCray and Cyrus Mody - among others - has shown, key nanoscale techniques, concepts, goals, and materials have been in development since the 1970s, if not before.

If Edgerton's first theme is the power of the old, and his second is putting use before invention, his third is that innovation is the frequent enemy of progress. Innovation today occurs during "the expansion of a new kind of poor world, a world which has been almost continuously at war, and in which millions have been killed and tortured" (211-12). Technology has done well by war and killing (the titles of two of Edgerton's chapters on R&D). Edgerton adds on the book's final page, "Technology . . . has been responsible for keeping things the same as much as [for] changing them."

The social and cultural study of science doesn't say that the third theme dominates the first two. But it does reject their segregation, and tries to "see technology whole" in its relations to the world overall. It asks us to interpret technology through its social and well as economic effects. Finally, it says to all of us in the nanoenterprise: history will refuse to made any exceptions for nano.