GUEST POST from Geoffrey Moore
One initiative that is top-of-mind for curtailing climate change is the electrification of ground transportation. The meteoric rise of Tesla drew the world’s attention to EVs, and China’s fast-follower public-private partnership has taken the industry to a whole new level. But now it is encountering a lull, and that raises the question, where do we go from here?
A couple of years ago LG announced a breakthrough in a battery-manufacturing technology called dry-coating that is expected to lower cost from 17 to 30%, with expected deployment in 2028. In a steady-state market, this would be welcome news indeed, but for a market that is still developing, it is not the sort of risk-adjusted return on investment (ROI) nor the kind of rate of return (IRR) that will attract private equity. LG is looking to future growth in its existing battery business to reward its efforts and counting on its investors to have the patience to wait for it.
Meanwhile, in the US, the first wave of venture returns has come and gone, and the next wave depends upon enormous amounts of capital being invested in very long-term charging infrastructure projects, the kind that are normally funded by bonds. This is reminiscent of the national commitment that underwrote the interstate highway buildout in the 20th century, but it is not clear we have the political consensus to prioritize such a project.
Ironically, we do not lack for capital to fund these efforts. The past several decades of digital transformation have created enormous pools of wealth, and financial managers are anxious to put that capital to work. The problem is that, for this phase of investment, the ROI and IRR performance metrics that accompany the creation of that wealth are neither appropriate nor available.
Private capital, for better or for worse, is driven by its compensation systems. We saw this when we tried to leverage its expertise to create carbon-credits exchanges. Not surprisingly that led to a sustained gaming of the system that has generated plenty of fees but done nothing to improve the climate situation. What we need instead is a private-public partnership based on a genuine commitment to global good.
Such a partnership is possible, but only if our political leaders are committed to such values, something we should all keep in mind when we vote this fall. At present, the electoral conversation is so consumed with personalities seeking to score points with abusive rhetoric that there is little prospect for any such partnership to emerge. But we need not capitulate to that rhetoric. If the time to change course is now, then we should hold ourselves and our country accountable for doing so.
That’s what I think. What do you think?
— Image credit: Pexels
Sign up here to join 17,000+ leaders getting Human-Centered Change & Innovation Weekly delivered to their inbox every week.