Why Clean Tech and Clean Energy Face Challenges in Silicon Valley
Entrepreneurs and investors in Silicon Valley often showcase disruptive technological innovations, but they seem to talk less about clean tech and clean energy. This may seem peculiar given the importance of environmental sustainability, but there are valid reasons for this shift. This article delves into the reasons behind this trend and provides context for the current energy landscape.
The Role of Economic Factors in Energy Choices
One key factor that influences the focus of entrepreneurs and investors lies in the economic benefits tied to traditional energy sources. In the mid-2000s, the energy sector experienced significant technical advancements that have since influenced the energy market.
Technological Advancements and Energy Boom
Technological advancements in the oil and gas industry have revolutionized extraction methods, making it more profitable to access previously inaccessible reserves. This transformation is largely attributed to the combination of horizontal drilling and hydraulic fracturing, collectively termed fracking. Since 2008, this method has caused a significant increase in oil production in the United States, leading to a substantial drop in natural gas prices. This energy boom has profound implications for the economy and the energy market.
The Current Energy Landscape in the United States
The United States has seen a remarkable transition from a net importer to a net exporter of oil and gas, at least in the near term. Despite this, the country remains far from being energy self-sufficient, and developments in the oil and gas industry imply that America can expect to be largely energy independent within the next few decades. This newfound abundance of cheap oil and gas will likely stimulate economic growth and create a plethora of new job opportunities, fueling the economy and driving technological innovation.
Demand-Side Innovations Enabled by Abundant Energy
The very cheap availability of natural gas is driving demand-side innovations. As infrastructure is built to take advantage of this cheap energy, there will be a surge in innovations that improve the utilization of this form of energy. This trend is likely to continue, extending beyond natural gas to other forms of traditional energy sources as the market demands efficient and reliable energy solutions.
Technological Advancements and Energy Availability
Furthermore, the energy industry's ongoing technological advancements suggest that cheap oil and gas will persist for a longer period than previously estimated. For instance, current extraction techniques only recover about 8% of shale oil from the ground. Improved understanding of the underlying geology and science could increase this recovery rate significantly. Additionally, the economics of the energy industry suggest that, at some price point, it will become more profitable to extract 100% of the oil from shale. These advancements alleviate concerns about the exhaustion of known oil and gas reserves, maintaining abundant resources for the foreseeable future.
Renewables and the Long-Term Horizon
Renewable energy sources and clean tech also have a vital role to play in the long-term energy strategy. The prices of renewable technologies are expected to continuously decrease, driven by advancements in technology and mass production. However, in the short term, the unanticipated challenges in developing and scaling renewable energy technologies keep them more expensive. Coupled with the increased availability of oil and gas resources, the urgency to transition fully to a renewable economy is delayed.
Timing and Market Readiness
The emphasis on clean tech and renewables in the mid-2000s was not fundamentally wrong but premature. The venture capital landscape operates on a decade-long timescale, necessitating accurate timing for profitability. Currently, it is more strategic to allow these technologies to mature while ensuring that the global economy does not fall into an energy-induced depression in the interim.
In summary, the reduced focus on clean tech and clean energy by Silicon Valley's entrepreneurs and investors is driven by a combination of economic benefits, technological advancements, and the longer-term viability of traditional energy sources. While clean tech remains a crucial component of sustainable development, the current context highlights the importance of economic stability and innovation in the energy sector.