Resources

• RMI programs and initiatives
  • RMI India
  • Energy Transition Academy for work in the Global South
  • e-Lab, RMI's electricity innovation lab
  • Canary Media: RMI’s clean energy media company, which includes several podcasts
• Partnerships with RMI:
  • Global Maritime Forum
  • Mission Possible Partnership
  • Third Derivative (Climate tech accelerator)
• Related Climate Rising episodes :
  • How BlocPower is Decarbonizing Buildings
  • The Aspen Institute’s Shipping Decarbonization Initiative

Guests

Climate Rising Host: Professor Mike Toffel, Faculty Chair, Business & Environment Initiative

Guest: Jules Kortenhorst, CEO, RMI

Transcript

Editor’s Note: The following was prepared by a machine algorithm, and may not perfectly reflect the audio file of the interview.

Mike Toffel:
Jules, thank you so much for joining us here on Climate Rising.

Jules Kortenhorst:
Thanks for having me. It's a great pleasure.

Mike Toffel:
Why don't we start today by just asking you to describe your role at Rocky Mountain Institute, or RMI, as you're known?

Jules Kortenhorst:
I joined RMI about nine years ago as the CEO, and as part of that job, I of course have to help the institute raise the money to do its work, but a lot of my work is also in creating the collaborative efforts across the climate arena with companies, with industries, financial institutions, but also with other civil society organizations.

Mike Toffel:
Great. And for those who aren't familiar, can you just provide a sketch of what is RMI? What's the scope of its activities?

Jules Kortenhorst:
RMI is now an organization of 500 people around the world. We were started more than 40 years ago by Amory Lovins, a student at Harvard who saw the need for and the opportunity of the energy transition. And he created the institute in the roaring Fork Valley near Aspen because he felt that that place would be inspiring for thinking about sustainability.

Over the last 40 years, we've become the leading civil society organization in promoting the energy transition in working with businesses and industries to accelerate the transition to a zero carbon future. Folks, we are facing a planetary emergency, and just thinking about the problem is no longer sufficient. We have to really, really focus our efforts on driving impact at scale, so that's what we do.

Mike Toffel:
Great. And we're going to talk about a number of the efforts that RMI has launched to try and drive impact at scale. But before we jump into that, I wonder if you can just tell us a little bit about your journey to RMI. People, when they think of HBS graduates, they don't think of them as heading think tanks or environmental NGOs. And you didn't get there directly from HBS.

Jules Kortenhorst:
That's right. This is our 35th reunion. I go back to sitting in these rooms and thinking about the pressures of what job are you going to take immediately coming out of school? For my wife, Searl Vetter, and me, the most important thing, having met each other in business school, was figuring out where the overlap was between her locations as an American and my locations as a European. We found ourselves working for industrial companies, Proctor and Gamble, and in my case, Shell over in Europe. I spent the first 10 years of my career learning the practicalities of general management at Royal Dutch Shell, one of the largest oil and gas companies in the world, as you all know.

It was a great opportunity to work for that organization, but it was also big bureaucratic company. After about 10 years, I switched to becoming the CEO of private equity backed companies. Was involved in a number of deals and ran companies in variety of industries: industrial electronics, cosmetics, manufacturing, outsourced call center services. When I exited the last company and pondered what would be next, my family background and my upbringing led me to think about giving back, about public service.

A journey of reading and listening and talking to people very quickly crystallized in my mind that climate change, already at that time, this is now 15 years ago, is the biggest issue that we face as humanity. As a result, I decided to dedicate the remainder of my career to climate change. I first became a member of parliament in the Netherlands under the naive and optimistic idea that politicians could change the rules of the game that would lead to the decarbonization of our energy system. My experience as a politician was not a very good one. I then was the founding CEO of the European Climate Foundation, which has become the largest philanthropic vehicle for climate and energy policy in Europe. And about nine years ago, got the opportunity to come back to the United States to run RMI.

Mike Toffel:
So, RMI began as a think tank, fairly small. It's ramped up quite a bit under your leadership and faces lots of decisions about its scope of activities. Early on, I remember it was really focused on energy and energy conservation, which I think it still has this energy focus, but I wonder if you could tell us about how you think about which engagements, its scope, and then we'll dive into a couple of those, just to provide some context.

Jules Kortenhorst:
Yeah. Early on when I joined the organization, we went through a strategy cycle to figure out precisely where our focus was going to be. And climate change is a hugely complex and multifaceted problem. There is mitigation, addressing the sources of global warming, and addressing the issues with the energy transition, but there's also adaptation, helping the world adjust to a warmer climate.

We explicitly decided from the beginning our focus was going to be on mitigation. As you may know, 70% of greenhouse gas emissions are part of the energy economy. The remainder–30%--is largely from land use, agriculture, forestry, a very different field of work, so we decided to remain focused on the energy emissions. And then within energy, our view is that the energy system is a complex system. a systems approach is the best way of tackling it. As you already hinted at, we always start with energy efficiency and energy conservation because if you can make the problem smaller than making the transition to a zero carbon future is easier. But also for the longest time, energy efficiency technologies have been profitable and have been applied successfully, so we start with energy efficiency but we cover the full spectrum of the energy system and its emissions. And we do that initially in the United States, but now in China, in India, in Africa, Southeast Asia, small island states, pretty much around the world.

Mike Toffel:
Yeah. When we say energy systems, we're thinking electricity generation and transportation, I imagine. And I know you're working in both of those areas. Is that the full list?

Jules Kortenhorst:
Those are two very important ones, but they're not the only ones because if you think about where we use energy, we use it, across the economy. And people immediately go in their minds to wind and solar and therefore the power system, the electricity system, and then we think about electric cars, but there is a very significant part of energy use and emissions associated with our built environment. About 40% of energy is used in buildings, so that's the demand side of some of that power that is being generated, but it is also the emissions associated with heating and cooling.

And the last sector that people often forget is industry. And in fact, much of the decarbonization of industry is still earlier on, it is more complex, it is more challenging. Sometimes we refer to those sectors as the hard to abate sectors, think about steel and petrochemicals and cement, food and agricultural products, so there's an inordinate amount of energy that is involved in the industry sectors as well.

Mike Toffel:
Right. And for those industry sectors, we're thinking also heating and cooling, like process technologies, the emissions from some of those process reactions, and also a lot on the inputs.

Jules Kortenhorst:
You just hit on one really critical point. Both steel and cement use a chemical reaction to be produced that by its nature emits CO2. Iron ore is converted into steel by reducing the iron ore with carbon, with coal to steel. And similarly, we cook limestone to produce Portland cement. And together, those two sectors are responsible for about 15% of global greenhouse gas emissions. There, it's not simply replacing the input of energy with something clean, but we actually need to fundamentally overhaul the underlying process, which is a huge challenge.

Mike Toffel:
Great. That's the landscape of the challenge. Let's dive into some of the activities that RMI is engaging in. why don't we start with electricity? which is one that I think most people are generally familiar with, like trying to figure out how to green the grid or how to move from centralized to decentralized production. What are some of the activities RMI is engaging in there?

Jules Kortenhorst:
Originally, we were significantly involved in the scale up of distributed renewables, wind and solar in particular. And these technologies have gone through an amazing learning curve over the last 20, 30 years. pretty much everywhere around the world now, it is cheaper to produce electricity from solar or wind than any other form of power generation. In fact, here in the United States, we can shut down each coal plant and replace it with wind, solar, and battery backup and be cheaper off.

But the fact that it is cheaper to shut down an existing coal plant and replace it with wind and solar doesn't mean that that automatically happens because there is a political economy around all of that. There are stakeholders, there are transaction costs, there's some misinformation, so helping these transitions accelerate is a lot of the work that we do. At the moment, we are advising a number of governments in Southeast Asia, in Africa on precisely this transition, and it is because coal represents about 40% of total emissions. If we can start to shut down existing coal plants and replace it with renewables and battery storage, then we are rapidly on the trajectory to decarbonize our electricity system, which then becomes the cornerstone of the rest of the energy system.

Mike Toffel:
Great. Well, I'm glad you mentioned battery storage at the end there because a lot of times when folks make this comparison between coal and renewables, they forget that coal's used for base load and renewables, typically, is used for peak in part because of the intermittency issue and the need for storage. When you say renewables are cheaper than coal across most of the US, that includes or excludes the need for storage?

Jules Kortenhorst:
That includes, here in the United States, the need for storage, but it is important to realize that to run an efficient and stable electricity system, we have more than only lithium ion batteries to create the integration, to create the stability of that power system. First and foremost, if regions, if continents connect their electricity system across the continent, then you can benefit from the fact that it may be wind still here in Massachusetts, but it may be very sunny in Florida or the wind might be blowing in Iowa. That grid interconnection, not easy to practically realize, but that grid interconnection is a real powerful lever for stabilizing our electricity grid.

The second thing is that we've always traditionally thought about the supply of electricity having to follow demands, but what if we could invert that logic? What if we could have demand follow supply? Now you'll say, "Oh, but I want my beer cold when I want my beer cold." And that is critically important, but your refrigerator doesn't have to be on all the time. Your freezer, in particular, doesn't have to be on all the time. In fact, the compressor only kicks in every 15 minutes or so. At the very peak of electricity, use at 6:00 when everybody comes home, turns on the television, you could slow down the cooling of your freezer for a moment. That principle, called demand response, is being deployed increasingly both in households and in industry.

For example, Google launched a product called Nest Renew, and we helped them think this through. Nest Renew basically tweaks the use of your air conditioner dependent on the availability of green electricity without you ever noticing that the temperature in your house might change by half a degree.

After that, we get to storage and battery storage is at the moment, the short term and high interest subject. But remember that we've had pumped hydro storage and hydro in general as a big battery in many places around the world, Pacific Northwest, in Canada, but also all across Europe, China, et cetera. That's a huge battery that we have at our disposal, and there are new longer term battery storage technologies emerging that in and of themselves are breakthroughs. Whether it is compressed air or gravity, really innovative technologies that are emerging as well.

Mike Toffel:
And so how is RMI plugging into either the demand side or the supply side?

Jules Kortenhorst:
As I mentioned, we involved ourselves with demand response early on. We saw this incredibly important need of being able to have demand follow supply rather than the other way around in the electricity system, so we've engaged very actively with companies that have developed those technologies, but also with the electricity regulators who have to allow demand response to be seen as a resource on the electricity grid.

And important to note that electricity, by its nature, is a regulated market. And regulators can have a big, big role in how to shape an electricity system that is low carbon, so advising regulators has been an important part of our work. We have an ecosystem of cleantech incubation and acceleration where we work with some of the early stage battery storage companies. But we've also advised utilities as they think about their so-called integrated resource plans, the plan that they use to lay out the future of their system.

Historically, the easiest thing for a utility, particularly a regulated utility, is to say, "Oh, we'll build another coal plant. We get a guaranteed return from our regulator anyway, or alternatively, we built a gas plant because that is currently a bit cheaper." But doing these other things like wind or solar, already a bit more complex because now your control system has to be really smart. Or integrating demand response, integrating your customer's behavior in the way you plan for your electricity system gets really complex, so working with the industry to understand that has been a core part of what we do in the arena.

Mike Toffel:
Great. Let's pivot and talk about transportation. You have a mobility focus, which I think includes, again, a bunch of technology supports, and partnerships and collaborations. Can you speak a little bit about the overview and then an example or two?

Jules Kortenhorst:
Yeah. I'm a happy Tesla driver. And for those of you who already drive electric vehicle, you'll have discovered that it is simply a better car. But here's the exciting thing: It's not only a better car, soon it will also be a cheaper car. The learning rate of battery technology is an order of magnitude 22%, meaning that every time the globally installed capacity doubles, the price comes down by 22%. Now, in the short run, the price of nickel has gone through the roof because of the horrible war in Ukraine, but in the long run, this reduction of battery cost will be a very key determinant in the shift to electric mobility. It's a better car, it's going to be cheaper. You're not dependent on volatility of gas for your fuel, it's far less maintenance. It all around makes a lot of sense to switch our mobility to electricity.

Automotive companies have now seen this. One after another, the largest automotive companies in the world have decided to pivot wholesale from internal combustion engine cars to EVs because they recognize that keeping two platforms side by side is just way too expensive. But, like in the electricity, in mobility, there are transaction costs and barriers to uptake and so on. And we all know about range anxiety and the infrastructure.

We need to massively scale up the charging infrastructure, particularly in this country. Europe is ahead on this front, China is ahead on this front. In fact, in Europe and in China, EVs now make up 20% of new vehicles being sold. Some of the work that we do is to help the scale up of the charging infrastructure, working with the government and with states to roll out that infrastructure, but also to convince fleet owners about the massive benefits they already have today from lower total cost of ownership of electric vehicles.

And the exciting thing is this is, again, not something that is only happening in the United States, our work India with the government of India for the last five years has very much focused on helping India scale up electric vehicle penetration, manufacturing now, battery manufacturing. And in India, that started with two wheelers and three wheelers and mini buses, not with expensive cars like mine. Out of that came an effort with distribution companies and eCommerce companies in India to deliver the last mile delivery of eCommerce products with electric vehicles, electric scooters, electric rickshaws. And a global campaign is emerging called Shunya, the Hindi word for zero where companies like Amazon and FedEx and UPS are committing to deliver eCommerce products with zero emissions. That's a very cool effort that we've been working on.

Mike Toffel:
Yeah. How did that India project arise? And what role do you play in deciding who's in and who's out of that collaboration?

Jules Kortenhorst:
It initially started because our founding father, Amory Lovins, made a trip to India, met with a bunch of ministers, and they asked for our help. if you start to think about 1.1 billion Indians who understandably want to develop their economy, grow their per capita income, it made sense for us to allocate the resources so we sat down with NITI Aayog, the government think tank that supports the prime minister's office, and laid out a plan in terms of the collaboration and who would we invite in? We are a big believer in open source solutions and open collaboration. It's not so much us who decide who is in, but it is the companies themselves that decide, yes, we'll be part of this. It is very rare for us to do anything where we would exclude market participants to play ball. There's of course antitrust considerations, but there's also the wonderful part of my job of running a mission driven, purpose led organization. In the end, we benefit, we do well if we achieve our impact. And the more, the merrier is very much part of that mission.

Mike Toffel:
How do you address the potential anti-competitive issues of such collaborations?

Jules Kortenhorst:
We recognize that this is on the minds of partners that we work with. They, in the first or second meeting, always bring a lawyer who is going to raise that issue. We've developed some standard materials that people sign up to to agree that what we do is so-called pre-competitive collaboration or is for the greater good and therefore not subject to antitrust considerations. But we also have to be conscious of the fact that there is going to be competitive tension around the room.

Just as one example, we have stood up a platform where the main digital companies are gathering up data about public transport as well as ride sharing as a mechanism for helping consumers understand what is the most cost effective but also the lowest carbon form of transportation, right? Well, getting Google and Apple in the same room to work on this together, that took more than one lawyer for quite a while.

Mike Toffel:
I can only imagine. When we think about the process technologies, the difficult to abate sectors, you have a program called the Mission Possible Partnership, which is a clever name.That's covering a variety of technologies. If you could tell us the technologies and dive into one of them.

Jules Kortenhorst:
Let me start by acknowledging the fact that the Mission Possible Partnership, which indeed resulted from a report called Mission Possible: We Can Do This is a collaborative effort for organizations. It is beyond RMI. The Energy Transitions Commission, a platform that was stood up by a consulting firm in our arena, Systemic. It's also the We Mean Business Coalition, which is a coalition of civil society organizations working with businesses, and finally the World Economic Forum, the hosts of Davos. Between the four of us, we've created this collaborative effort to address emissions in steel and in cement, in shipping and aviation, in petrochemicals. And if you think about it, these are indeed all the sectors where the solution is not as obvious, where the technology may not yet have been brought to maturity, where industry players have historically said, "Well, I understand that we have to decarbonize, but we all want to travel and we want to go on an airplane, and we can't think through how you can do that without jet engine fuel, so we are just not going to be part of the solution." Now, that mindset has dramatically shifted over the last three, four years. In all of these sectors, there's been a realization that the goal of society to achieve net zero emissions by the middle of this century means that they also have to decarbonize.

And in none of these sectors it is totally obvious or totally easy, but let me take two examples. Maersk, the shipping company, about five years ago stood up an effort called the Global Maritime Forum to bring together the shipping companies that were committed to address this issue. And they laid out a plan in collaboration with the International Maritime Organization to start to say, "We can imagine that our ships, in due course, can sail on green ammonia or green methanol made with green hydrogen." That was a bold commitment five years ago, but the commitment alone was not going to get the job done. We needed to convince banks to finance the investment in those green methanol ships. We needed the fuel suppliers to create the flow of green methanol, green ammonia; that’s only just starting to happen. We needed ports to start thinking about converting their infrastructure, and then we needed customers of shipping companies to say, "Yes, we're willing to pay extra for the cost associated with green shipping."

Now, the procurement guy who's in charge of the lowest cost shipping doesn't immediately get that, but in the end product of shipping a pair of jeans from Asia to the United States, the difference between green ammonia or green methanol versus marine diesel is one penny. And I think that most consumers would be willing to spend one penny more for their jeans if that would mean that they were shipped to the United States with zero carbon.

Similarly in steel, the calculation right now is that green steel, steel that is made with hydrogen as the reduction agent rather than coal as the reduction agent, that that steel is about 20% to 30% more expensive in the long run; right now it's even more. But if you assume that there's a certain learning, then it will even out at that level.

How do you convince anybody to pay 20% more for their steel? No procurement guy or gal is going to sign up for that. But Volvo and Mercedes realized that a Volvo passenger car, a Mercedes passenger car will only be about 100 euros more expensive if it is made with green steel. Those two companies have made early commitments to steel companies like SSAB and ASOLA Metal to buy green steel at a premium price so that they can have the marketing benefit of saying, "Our electric vehicles are not just electric, but they're also produced with green steel," which is the major component of greenhouse gas emissions in the production of cars.

We see that industry collaboration is absolutely critical across these value chains, suppliers, industry participants, their customers, and their banks and their financiers coming together. In Mission Possible Partnership, we are bringing these cross-cutting collaborations together in all of the hard to abate sectors. It is really exciting to see the commitment of these companies to move in the right direction.

Mike Toffel:
Yeah, one of the things that's so interesting to me about that story is this pre-commitment years ahead of time to procure, at a price premium, a decarbonized product. Is that something new from your vantage point? Or has that been going on all along just under the radar?

Jules Kortenhorst:
I think it is a real breakthrough because if you think about a transition in the electricity arena, it was not until wind and solar power became cheaper that companies like Google and Microsoft and Amazon and others started to buy green electricity at scale. As a result, the shift from fossil fuel power generation to renewables has taken 30, 40 years. We don't have 30, 40 years. We have to be net zero by the middle of this century. We have to eliminate 50% of greenhouse gas emissions by the end of this decade. The speed at which this transition needs to happen, our understanding of the speed at which this transition needs to happen has dramatically increased. We need to indeed get everybody involved and create commitments early on.

We've had great help in this case from the administration, Secretary Kerry, who is currently the Special Envoy for Climate for the Biden administration and has helped stand up the first mover coalition. I don't know the exact number, but 10s of companies have committed to be part of early procurement commitments for green steel, green cement, green shipping, and that is making a real difference.

Mike Toffel:
Interesting. There's some other programs that I know RMI is deeply involved in. I wonder if you can comment on Third Derivative.

Jules Kortenhorst:
Yeah. In the area of electricity, we already have most of the core technologies we need, but we can still benefit from better storage, digital technologies to better forecast the performance of the grid, and so on. And as we were just talking about hard to abate sectors there, we do need many more technology breakthroughs.

Some of you may remember the clean tech 1.0 venture capital wave of about 10 years ago. A lot of people lost a lot of money thinking that venture capital in the clean tech arena was going to be more or less the same as social media. It isn't. They are difficult technologies. They are very intensive, hard tech technologies, and as a result, getting from a lab scale innovation to deployment of that solution at scale and therefore cash flow break even, or even better takes a long time. We recognize that accelerating that innovation pipeline would be a real benefit. We've brought together about a dozen corporates, more than 75 startups and a number of venture capital firms to help push early stage companies through the various valleys of death of clean tech incubation much faster. And Third Derivative is now seen as having some of the best clean tech pipeline and great investment opportunities.

Mike Toffel:
This is an incubator sharing knowledge across organizations.

Jules Kortenhorst:
Yeah, we call it an accelerator, but yes, it is essentially an accelerator. And so far, our 75 companies have raised close to $400 million in venture capital money in the last year and a half, so it's building quite a bit of momentum.

Mike Toffel:
Wow. Another way you're trying to accelerate the transition is through the Energy Transition Academy targeting of different population. Can you share about that?

Jules Kortenhorst:
Yeah. We have to do this around the world, not just in the developed world, not just in Europe and the United States. And it is hard to keep up with all the changes, the pace of innovation, the new technologies, the solutions if you're deeply in the middle of it at RMI or if you have a department of energy with 40,000 staff. But if you are the minister of energy in Malawi or the utility regulator in Laos, then it's even more challenging. We've recognized that building the capacity for decision making and understanding in this space is really critically important.

The good news is we've all learned to become digital, so we can do this in a way that we couldn't imagine 10 years ago. The Energy Transition Academy is a digital mechanism to educate and build capacity for energy decision makers, investors, regulators, policy makers all around the world but with a special emphasis on the global science.

Mike Toffel:
Interesting. Most of the activities that RMI is engaging in could equally be engaged upon by a consultancy model. Can you say a little bit, why is RMI a nonprofit think tank instead of a for-profit consultancy?

Jules Kortenhorst:
That's a good question. And we are probably one of the more entrepreneurial business-minded nonprofits in the world. In fact, we've organized ourselves like a consulting firm as a partnership. And if you look around the table with my 24 senior partners, I would say that 20 of them have a background in the private sector, be it at consulting firms or big tech companies or, of course, in the energy sector.

Until recently, this subject was not yet fully on the agenda of the major consulting firms. And you can imagine that the partner in charge of the mining industry or the power sector or the oil and gas sector didn't really like it when the partner in charge of sustainability was too loud and too ambitious. I think we're seeing a massive realignment in the major consulting firms. I think a realization has emerged also there as it has in every boardroom that this is a planetary emergency but it is also a great business opportunity. These consulting firms are left, right and center standing up their internal climate alignment practice or their sustainability practice. They are growing their resources as quickly as they can, recruiting people out of business school but also from RMI.

And in fact, funny anecdote; one of the major consulting firms, I think of regular attendance here on campus, comes knocking on our door about a year ago. "How do you acquire a nonprofit? Would you guys be for sale?" And it was a funny conversation to explain to them that we get out of bed to save the planet rather than to make money.

Mike Toffel:
All right. I think at this point, let me ask you; many of our students and other folks I meet, folks in their 20s and 30s, very often are thinking about how to engage a career in business and climate in some manner. And I wonder if you have thoughts. What advice do you give to such folks? What resources do you point them to?

Jules Kortenhorst:
First of all, congratulations. You've landed on an area of interest that is also an area of massive opportunity. The energy transition over the course of the next 20, 30 years is going to be the largest capital formation project that humanity has ever undertaken. It is going to be a massive opportunity for incumbent businesses as well as for entrepreneurs, for investors, for consultants. I hope that many people have those thoughts here in the Harvard classroom.

I would argue that, somewhat different from five to 10 years ago, that the most important and most urgent need now is in the private sector and in the financial arena. 10 years ago, when I came to a reunion and I told my classmates that I had decided to dedicate my life to climate change, they looked a bit askance at me and said, "Yeah, yeah, always thought Jules was a liberal European," but now this is on the radar screen of every investor and of every boardroom, every business, every financial institution, so there is a massive opportunity.

If that is true, then that is also the place where the great jobs are emerging. I speak a lot to young people. We recruit out of graduate schools and we compete with some of the consulting firms and investment banks. And the opportunities now are abundant. And I would argue that we need smart, passionate, young people in the private sector and we need those organizations to feel the push from the bottom up, from young staff coming in to move in the right direction. It also will teach you skills and insights about how the private sector work. That can be very helpful no matter what you do later in your career.

The final thing I will say is that of course there are the incumbent energy companies. I started my career at Shell, I now serve on Shell's new energy advisory board and I know they're noodling very hard at how to shift that massive organization from a fossil fuel based energy company to a decarbonized energy company. But the amount of opportunity for entrepreneurship, for new ventures, for innovation is extraordinary. And there's going to be some people who become very, very wealthy and very, very successful while doing the right thing for humanity. That, in my mind, is maybe one of the coolest areas to focus on.

Mike Toffel:
Great. Thank you. Let me turn it open to the audience, our reunion HBS alums. Questions.

Audience member:
Very impressed with the work RMI does. You mentioned the role of regulators in the transition in the United States especially. With the low cost of renewable energy, which you described, and the need for electrifying everything, I feel like utilities are one of the primary institutions for driving the transition. And I wonder if you've done any stakeholder conferences, meetings to drive shareholders, regulators, even consumers to understand what the opportunity is for the utilities, for the environment.

Jules Kortenhorst:
Yes, that is a critically important part of what we do in the electricity arena. Already, some eight, nine years ago, we stood up what is called e-Lab, electricity lab, and where we bring all of the stakeholders that you just mentioned together. We also invite not just the utilities but some of the disruptors, some of the technology innovator that bring new technologies that have an impact on that sector. What is quite striking is the progress we've made over the last eight, nine years in utilities seeing everything to do as decarbonization as a threat to their business model to now most utilities understanding that this is the future, that this is where they need to be, that this is where they have to go. Not everyone, but most of them are on that journey.

The real difficulty in this country in particular is that electricity regulation is done at the state level. There are therefore 50 electricity regulatory bodies, utility commissions mostly. And that is often a job somewhat later on in your career. Not every electricity regulator may be completely up to speed on the latest technologies. Some of those appointments are possibly a touch more political. And the understanding of what can be done and what needs to be done in the utility regulatory arena is not always where it needs to be.

It is also fundamentally important for regulators to understand that the mantra that the market will fix this is not true. It is not true because electricity energy is not a storable commodity, is not a tangible commodity so you have to regulate it to make sure that that market actually emerges in a sensible way and addresses issues like capacity. What we saw in Texas about a year ago when that winter storm knocked out a lot of the gas plants, and as a result, the grid shut down because the market was going to fix it. Well, not in a crisis like that. Regulators don't always have the know how that they need to have, or they don't always have the insight in what is happening or what is needed. Critically important.

Mike Toffel:
Great. In the center.

Audience member:
You mentioned battery storage. There certainly is a lot of concern about the other environmental impacts of large quantities of battery storage. Can you talk about that and potential innovations that would address some of those concerns? Thank you.

Jules Kortenhorst:
Yeah. Batteries immediately evoke the image of end of life, recycling, and what do you do with batteries? But also in the production of batteries, you may have read about the horrors of cobalt mining in the Congo, which has both a horrible environmental footprint but also very negative human rights implications. Here's the good news. The amount of innovation in the battery arena in the last five years is through the roof. Venture capital money pouring in, research programs, government support. New battery chemistries are emerging that are eliminating particularly those rare earth minerals like cobalt.

In fact, the new Tesla Three battery does not have any cobalt in it anymore. And also, the first battery recycling plants are being built as we speak. Also important to recognize that automotive batteries can easily find a second life in storage on the grid because the repeated cycles of charging and discharging that, over the course of time, reduce the effectiveness of batteries, which is important for your range in electric vehicles, that is not as much of an issue on the grid. A lot of solutions are on the way to address this issue. In the short run, yes, it's still an issue.

But finally, also remember you need to mine and produce a battery only once for a car that then can drive hundreds of thousands of miles. The production of fossil fuels happens every day to fill your tank every day. Those horrible environmental impacts of the mining are one off in the case of batteries, where they every day when it comes to fossil fuels.

Mike Toffel:
In the back, please.

Audience member:
Thank you again for your words, for the encouragement for new students to take on these challenges. I'm from the class of '91. I'm reforesting an area in the high Amazon with edible trees at risk of extinction while monitoring wildlife that's also at risk of extinction. However, carbon credits in areas like Ecuador are unavailable. And they certainly don't reach down to those who are deforesting, so the economic incentive continues to be to cut down the trees and put in cattle. That is the structure as it is now. Where does the support come from? Thank you.

Jules Kortenhorst:
Well, first of all, thank you for what you are doing because... And let me highlight this again. We have to be net zero in greenhouse gas emissions by the middle of the century, but given the pace of capital stock turnover, it is hard to imagine that we are going to hit that target so we're going to need what is called negative emissions; we need to suck carbon out of the atmosphere. And reforestation, whether it is in the Amazon rainforest in Latin America or simply in the hills in Colorado or California that have been burned down by forest fires is a critical part of how we're going to keep climate sustainable.

Now, right now you're absolutely right; those carbon markets are not yet functioning in the way they should. There is an increased awareness of companies that they want to not just eliminate their own emissions but also use offsets for the emissions in their value chain over which they don't have control or reduce their historical emissions, eliminate the historical burden that they've put on the atmosphere. In fact, Microsoft has committed to become a net zero company over the course of its history.

As a result of that, we are starting to see corporates, financial institutions look into the market of carbon offsets, of negative emissions technologies, of forestry solutions. And these voluntary carbon markets are evolving quickly. There are a number of issues around these markets. We haven't yet fully figured out how to know for sure that the amazing re-forestry work that you're doing in Ecuador is actually making a long term contribution and that other projects that are quickly put together without as much care and thought have a different quality. Distinguishing between high quality carbon credits and lower quality credits is still a major issue. The mechanisms that civil society has created for evaluating those credits are not yet working very well, but all of this is now happening quickly.

Mike Toffel:
I'll just put a plug in for two recent climate rising episodes on the carbon offsets market. It is a mess, but there's some really interesting insights coming out. There was an episode on Oxford's approach and on Harvard's approach, which are very different but very complimentary.

Audience member:
Why isn't nuclear more part of the discussion? And do you think it should be? I guess I'm particularly thinking of the molten sulfur plants that have applicability, or seem to, in shipping, my field.

Jules Kortenhorst:
The first thing is to acknowledge that nuclear is a carbon free source, or largely carbon free source of power generation, so in that sense your question is totally valid. Why are we not deploying more nuclear? The problem is that the current nuclear efficient technologies that were created after World War II have, over the course of time, become incredibly expensive because of safety concerns. Right now, building a new nuclear plant - and there's really only one under construction in the United States, a couple of them in Europe - takes incredibly long and is incredibly costly, so nuclear is not in the money.

Does that mean that we should eliminate it completely? No. There are, in my mind, two hopeful trends. One is small modular reactors and the other one is nuclear fusion. That to me is an extremely exciting development, but we have to recognize that we've been working on the nuclear fusion for 25, 30, 45 years. And it's always 20 years from now. I'm hopeful, but we have to see and approval of the pudding will be in eating. Slightly shorter term, there is a trend towards small modular nuclear reactors, reactors that can be built in a factory in a standardized product format and then deployed in the field. That would overcome a lot of delays in capital increases that we currently face with nuclear. And it could be that that technology, in due course, can become more cost effective.

Good to realize that even if either fusion or these small modular reactors comes to fruition, you're still producing heat, which you then have to turn into steam through a generator into electricity. And right now, the cost of that steam cycle alone is about the same as producing electricity from the sun or from wind.

Mike Toffel:
In the center.

Audience member:
Here at Harvard, across the river there are lots of cells of the university that are pushing forward both in respect of carbon capture, which you mentioned, but also solar radiation management. And I wonder whether Rocky Mountain Institute is active in either of those sectors. And separate from RMIs remit, how you view either of those fitting into the climate problem more generally.

Jules Kortenhorst:
It is a very relevant question. People sometimes ask me whether I am an optimist or a pessimist, and my answer is I'm manically depressed. There are moments that I'm really optimistic because of the enormous progress that we are making in accelerating the energy transition, and then there are other moments when I deeply understand the complexity of the transition that we have to make and the pace at which we have to make that I start to realize we're not on track, we're not moving fast enough. And if that's your belief, then you start to open the space of solutions that you're willing to consider.

If you had asked me 10, 15 years ago about geo-engineering, about the solutions that are being considered across the river for tinkering with our climate system, I would've said, "Are you nuts?" But today, with eight years left to reduce emissions by 50% and about three decades before we have to be net zero and knowing the amount of capital stock turnover that needs to happen to get there, I'm starting to worry we're not on track. And if that is the case, we have to consider some of these climate repair solutions.

Of course, the big worry is that as we start to dial dials on this very complex system called the globe's climate, do we fully understand the complexity and the unconsidered implications of tinkering with mother earth? I don't think we do yet. But it's good that an academic institution like Harvard, similar efforts on the way at Cambridge in the UK, is starting to noodle on this. We will have to define very, very close safeguards around doing that so that some rogue nation doesn't suddenly decide to address climate change by exploding a couple of nuclear bombs and creating a nuclear winter. That would be an extreme form of geoengineering.

On carbon capture and storage, on the other hand, the question is more simple. Bloody hell, why hasn't that technology emerged at scale? Because fossil fuel companies had every incentive in the world to commercialize, to scale up, to deploy that technology. They haven't, and as a result, on the scale of economic viability, it's not high up there at the moment, certainly not for power generation. However, for steel and cement, where, inherent to the process, there is carbon emissions. It may well be part of the solution. We do some work on that, not extensively, but there's great work being done by the Energy Transitions Commission that we are involved in in precisely that area.

Mike Toffel:
Great. We have time for one last question, please.

Audience member:
The Western world seems to be making a sincere effort to reduce coal produced electricity. However, it is my understanding that the people's Republic of China is replacing that or even more coal powered electricity there. A, is that true? And B, generally, what is the posture of the PRC on climate and climate change, et cetera? Please. Thank you.

Jules Kortenhorst:
That is a very, very important question. And thank you for raising it because there is some misinformation around this subject and there are also very important complexities to consider. First of all, you're absolutely right, China has continued to build out coal capacity throughout the last couple of years, although we've seen the pipeline of new projects come down very dramatically. And also good news, China has stopped financing new coal plants outside of China. The so-called belt and road initiative no longer includes new coal plants, so that is good news.

Coal plants have been getting built in China to a significant extent to drive short term economic growth, not because of the fact that China needed necessarily new coal capacity. In fact, the average capacity utilization of coal plants in China is around 50% and has been falling. That doesn't make any sense, but it makes sense in the political economy of that country.

At the same time, it's important to recognize the unbelievable pace at which China is ramping up renewables and is generally pushing this transition. Like I said earlier, 20% of new cars on the road in China are electric vehicles. But let me give you another example. Just last year, China installed 17 gigawatts of offshore wind capacity in one single year. Those 17 gigawatts equate all of the capacity currently built out in Europe, the dominant offshore wind market. And for those of you who don't know, the United States has sum total of six wind turbines off Block Island. And although a pipeline is now emerging, there are significant concerns about the permitting and the sighting that may slow down further deployment of offshore wind in the United States.

More broadly, we have to be completely realistic about massive emissions from the Chinese economy at the moment in absolute terms and also per capita, but we also have to give them credit for having become the factory of the world for some of these technologies, for putting their money where their mouth is when it comes to domestic deployment. For example, China has deployed more high voltage DC, this big grid interconnections to carry renewable electricity from the west of the country to the sea shores where most of the people live. And so I would say that China is absolutely pulling its weight when it comes to deploying the new technologies, but not doing enough in shutting down fossil fuel energy.

Mike Toffel:
Jules, thank you so much for joining us on Climate Rising, and thank you to our alumni for spending some of your reunion with us. Appreciate it.