J.M. Morabito - Sr. Director, Bell Labs Fellow, Chief Technology Office (CTO) February 2012

COPYRIGHT © 2012 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

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A Systems Perspective for Managing Commercial Portfolios of Research and Technology for the Solar Industry

J.M. Morabito - Sr. Director, Bell Labs Fellow, Chief Technology Office (CTO)

February 2012

•Bell Telephone Laboratory, ca. 1955


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Presentation Objectives

• Present a framework, proven in other high-technology industries, for assessing the opportunities, required resources, and complex, interrelated bottlenecks facing the solar industry and its role in building a Global Knowledge Society.

• Demonstrate how this framework can be applied to maximize solar industry value creation and its contribution to Sustainable Development.

Sustainable development is in itself a “killer application,” and

A major driver of the innovation necessary to achieve sustainability and a Global Knowledge Society

Sustainability will require limits on consumption but not Knowledge and a new focus on human well being and purpose as indicators of growth


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Solar Industry Structural Evolution• Industrial strategy is about structural evolution and market positioning to secure

a sustainable competitive advantage.

Successful strategy for the U.S. Solar Industry, will be determined by actions of multiple factors, economic conditions, policies and programs.

Anticipating/envisioning the Solar Industry’s likely evolution and supporting actions can secure a sustainable competitive advantage.

• Ultimately, the Solar Industry will dwarf the Information, Communications Digital Technologies (ICT) industry, but the Solar Industry can benefit and learn from these industries’ characteristics:

Supporting structures for long-term growth, sustained profitability, & collective response to environmental, regulatory and other challenges

Global supply chains linked by industry-wide technology roadmaps, industry & environmental standards, manufacturing diagnostics, & other collective dependencies that accelerate technology transfer, reduce cost, & facilitate innovation.

• Need to explore, in collaboration with all stakeholders, how best to nurture and develop a supportive and collaborative Solar Industry.


4


Value Migration1800 to 2050 will be remembered as a period of intense technological

expansion that fundamentally increased humankind’s ability to extract and harness energy.

Economy Economic Drivers

Infrastructure Economic Indicators

Environmental Protection

Agrarian(before 1800)

LandandCrops Dirtroadsandcouriersonhorseback

Commodityprices No

IndustrialRevolution(1800-1900)

Cheapsteel,coal,textiles

Railroads,shipping,telegraph,steamengine

Coalandpigironproduction,cottonconsumption,railroadoperatingincome

No

Mass Production(1900-1980)

Cheapenergy,especiallyoil

Highways,airports,telephones,broadcasting,electricpowergrid

Retailsales,autosales,housingstarts,industrialproduction,capacityutilization

Commandandcontroldevelopmentofstrictfederalregulations

Technology/Information(1980- 2010)

Ever-cheapersemiconductorsandphotonics,R&Dprograms,rapidtechnologychange,knowledge/software,directelectronicaccess

Satellites,fiberoptics,networks,wireless,distributedpowerWorldwideweb/theinternet

Booktobillratio,computersales,deflationinhightechprices,powervalue,hightech,tradebalance,employmentinknowledgeintensiveIndustries

Pollutionprevention,industrialecology,internationalstandards(ISO),renewableenergy


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Value Migration

1800 to 2050 will be remembered as a period of intense technological expansion that fundamentally increased humankind’s ability to extract and

harness energy.Economy Economic

DriversInfrastructure Economic

IndicatorsEnvironmental Protection

Sustainable Energy/ Information Intensity Era (post 2010) Convergence of Electric Power and Information Technology, i.e., the Digital Economy of the Global Knowledge Society

TransitionfromEXTRACTION-basedtechnologytoSUSTAINABLEtechnology.

Costs;Capital;Competition/Cooperation;China;Consumers;ClimateCarryingCapacity;Convergence

Computer-Mediated(Smart)AdvancedCommunicationNetworks.Electronicallylinkeddevicessuchassensors,activators,processors,cameras,etc.thatcommunicateinteractivelywithminimumhumaninterventionoverNetworks.SmartGrid,i.e.,theEnergyInternet.

GlobalElectrification

Globalpopulationstabilization

Employmentincleanenergytechnologies

Efficientsystemsforutilitygrids,trafficmanagement,fooddistribution,waterconservation,andhealthcare

SustainabilityAirandwaterquality

BiodiversityForestationCarbonTaxEco-incentivesRenewablePortfolioStandards&FuelEfficiencyStandards(i.e.,CAFE)

TransnationalAgreements


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New Economy

• It’s global

• It’s networked

• It’s based on information

• It decentralizes power

• It rewards openness

• It’s specialized, i.e., mass customization

Information, Communications, Digital Technologies (ICT) Portfolio

• Processors

• Advanced wireless and optical communication links

• Sensors

• Actuators

• Renewable Energy/Advanced Storage Technologies

• New materials, for example, nanotechnologies, carbon nanotube, graphene, room temperature superconductivity, etc.

Features of the Sustainable Energy/Information IntensityNew Economy and Digital Technology of the Global Knowledge Society


77


Population & Economic Growth

6

3

2

1

0

4

5

BC

40

0B

C2

00

AD

12

00

40

06

00

80

01

00

01

10

01

20

01

30

01

40

01

50

01

60

01

70

01

80

01

90

01

97

51

99

32

00

0

Worl

d P

op

ula

tion

(B

illion

s)

Year

The technological advances of this era have enabled modern economies and the human population to grow rapidly.

Total Industrial production

300

200

100

1930 1950 1970 1990

Index (1963 = 100)

industrial production/capit

a

World Industrial ProductionWorld Population


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Carbon Dioxide Concentration in the Atmosphere

Sources: L. Machta; T. A. Boden

380

360

340

320

300

1860 1880 1900 1920 1940 1960 1980 2000

Actual atmospheric measurements

Parts per million by volume

Source: www.eia.gov

Environmental Impact

The US Energy Information Administration (EIA) forecasts an annual average 1.5% growth in CO2 emission levels (based on projected Kaya factors) through 2035, representing a 49% increase in 2008 levels.


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Computational Learning Curve

Source: R. Kurzweil, “The Singularity is Near”

The Global Knowledge Society


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Effect of Electrification on Birth Rate and Income

Electrification and Birth Rate

• About one quarter of the human race lives today without access (Inclusion Gap) to modern energy services, Information and Communications Digital Technologies (ICT).

• This energy and ICT Inclusion Gap tends to be greatest in those regions where population is growing most rapidly and would offer the greatest benefits.


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Effect of Electrification on Birth Rate and Income

Electrification and Per Capita Income

Source: gapminder.org, Effect of Electrification on Birth Rate and Income


12


ImprovingaccesstoelectricityandInformation, Communications Digital Technologies (ICT) mustplayacentralroleinmanagingsustainablegrowthbecause:

•Electricityallowsfordiversityinprimaryenergysupply,yetisanintrinsicallycleanenergycarrier.

•Itisgeneratedat60/50Hz.,butcanbeconvertedtoanyfrequencyinthespectrum:infrared,ultraviolet,andmicrowave.

•ElectricservicesandICTenablethemoderntechnologicalinnovationessentialtohumanopportunity.

•ApplicationofICTwillenablecarbonemissionreductionfivetimesthesizeofthesectorsowncarbonfootprint(Source:Smart2020Report),i.e.,Decarbonization.

•ApplicationofICTwouldreplacegoodsandserviceswithvirtualequivalenceandalsoprovidetechnologytoenableenergyefficiencyinkeyopportunityareas–travel/transport,buildings,electricgridsandindustrysystems,i.e.,Dematerialization.

•Sustainability will require limits on consumption and a new focus on human well being and purpose as indicators of growth.

•Sustainabilityisdefinedaslivinginharmonywitheachotherandourplanetbyexperiencingfreedomandprosperityonagloballevel.

The Sustainability Challenge to the Global Knowledge Society


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The Kaya Identity

• First described by Y. Kaya in a paper submitted to the IPCC Energy & Industry Subgroup, Paris, 1990.

• Numerical example: 2008 World Data (Source: US Energy Information Administration, www.EIA.gov)

PP

Y

Y

E

E

CC

2011) IEO A10,(Table MetricTons 910 30.2 MetricTons 910 30.3

persons )6106731(person

PPP) 2005, (US,Dollar GDP9773

PPP) 2005, (US,Dollar GDPBTU310

7.7BTU910

MetricTons8.59

C

C


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Global Environmental Dilemma: Projected (2008-2035) CO2 Emission Levels and Associated Kaya Factors (World)

• The US Energy Information Agency (www.eia.gov) projects an ~1.5% average annual percent increase in world CO2 emissions based on the above projected average annual percent changes for the 4 Kaya factors, through 2035.

• Projection: 49% increase in 2008 world CO2 emission levels by 2035.

• Most significant driver of growth in CO2 emissions is economic output per capita (Y/P).

Governments generally pursue policies that increase Y/P.

• Population growth (P) is projected to increase everywhere except Japan & Russia.

• Energy Intensity (E/Y) is generally indicative of energy efficiency.

• CO2 Intensity (C/E) is indicative of regional fuel source mix (renewables).

Change in CO2

Emissions= Change

in CO2 Intensity

+ Change in Energy

Intensity+ Change in

Per Capita GDP

+ Change in Population

+1.5% = -0.2% + -1.8% + +2.6% + +0.9%

Opportunity for

Technology


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"Enabling Effect" of the ICT Industry: Projected Reductions in World Emissions (2008-2035) by ICT Enabled Innovations

The Climate Group Report: “Smart 2020: Enabling the Low Carbon Economy in the Information Age”, page 30, 2008

• 7.8 GtCO2e of ICT-enabled abatements are possible out of the total BAU emissions in 2020 (51.9 GtCO2e)

• The SMART opportunities including dematerialisation were analysed in depth


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"Enabling Effect" of the ICT Industry: Projected Reductions in World Emissions (2008-2035) by ICT Enabled Innovations

• The projected annual average percent change (reduction) in the revised C/Y Kaya factor (through 2035) is computed to be ~-3.5% for the most optimistic ICT benefit (i.e., Smart 2020 Report).

• Using an equivalent 3-factor form of the differential Kaya relation and the current EIA projections (2008-2035) for annual average Per Capita Economic Activity (Y/P) growth (+2.6%) and Population (P) growth (+0.9%), yields a revised prediction of CO2 emission growth through 2035...

Baseline/Current EIA Projection


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Predicted Annual Average Growth (2008-2035) in World CO2

Emissions Including Beneficial "Enabling Effect" of ICT

• Assuming the most optimistic predicted benefits due to the “enabling effect” of the ICT industry is realized, the differential form of the Kaya identity indicates essentially no (~0%) growth or increase in world CO2 emissions (relative to 2008 levels) through 2035.

• This no growth/increase result is in contrast to the current EIA projection of a 49% growth/increase in world CO2 emission levels by 2035 (relative to 2008).

Change in CO2

Emissions

= Change in CO2 Intensity of

Economy

+ Change in Per Capita

GDP + Change in

Population

~0% = -3.5% + +2.6% + +0.9%

Opportunity for Technology

Change in CO2 Emissions = Change

in CO2 Intensit

y

+ Change in Energy Intensity

+ Change in Per Capita

GDP + Change in

Population4-factor Kaya

Identity

Equivalent 3-factor Kaya

Identity


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• Maximizing benefits and speed of market adoption of “Dematerialization & Smart Solutions”, enabled by the ICT industry, should be a focus of global technology development & innovation to mitigate CO2 emission levels.

• ICT is central to Energy Internet/Smart Grid that:

• Enable higher renewable energy market penetration (developed countries)

• Build demand for distributed generation based on ICT applications – telemedicine, entertainment, education, e-banking, …. (developing world)

• All scenarios predicting significant beneficial ICT “enabling effects” assume a 10X-50X increase in solar/PV electrical generating by 2035.

• Realizing the full potential of the ICT “enabling effect” depends, in part, on a rapidly accelerated development of the solar/PV industry.

• Need to explore, in collaboration with all stakeholders, how best to nurture and develop supportive & collaborative Solar Industry.

• Decisions made today will impact the efficiency, sustainability, & profitability of a Global Solar Industry over the next 10, 20, 50 years — as well as determine which countries will be its leaders, e.g. China, Japan, USA, Germany, Spain….

The Role of Renewables in the ICT “Enabling Effect”


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A Tool to Understand, Integrate and Evaluate

Think of the portfolio of project activities at the system level as an interconnected set of functions that reinforce each other. Examine and understand the linkages and interactions between elements that comprise the entirety of the Solar Industry development system.

• Systems thinking shows how events that are separated in distance and time can interact and how the rules of the system drive system behavior.

• Small catalytic events, especially ones that change the rules, can cause large changes in complex systems.

A goal of Systems Thinking is identifying “leverage” -- seeing where actions and changes lead to sustainable improvement.


2020


Compliance Process

Innovation

Compliance Activity

delay

Gov’t & customer requirements

Investment Strategy

Operational Efficiency

ALU Value Growt

h

New Products

ALU Business Design

delay

ALU Supply Line

Design

Shareholder Value Competitive Advantage

delay

Product Development Interval

Value creation by management of centralized Global Compliance

assets and achievement of best-in-class value creates sustainable

superior shareholder value.

References:TheFifthDiscipline–SengeClockspeed–FineTheoryofConstraints–GoldrattTechnologyIntegration–LansitiTheInnovator’sSolution–ChristensenSixDegrees-Watts

Systems Thinking (Senge Diagram) Representation of the Compliance Activity and its effect on Alcatel-Lucent Value Growth


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Global Solar Industry Value

Creation

MarketSupply-Chain

Transformation

“Smart Grid” Infrastructure Development

InnovationNational Labs

Industry &Universities

National andInternational

Policy

SEIAEPVIA

RE Portfolio StandardsInvestment Tax CreditsFeed-In TariffsCarbon TaxesIndustrial Policy

Public & PrivateInvestments

AccelerateCompetitiveAdvantage

Break-Through Technology TransferGlobal Supply-Chain DesignInnovative R&D Portfolio MgtEnergy Policy Analysis

Bottlenecks: Meters & SensorsGrid InterconnectionInflexible T&DTransmission SitingTransmission AccessLack of StorageSunk Costs

Bottlenecks:Performance-Cost ImprovementManufacturing Capacity/Deployment VelocitySupply-Chain DesignMarket Conditioning Analysis:

IPCCIEADOECECEPRIECOther

TechnologyInnovation

Manufacturing Scale-up

SustainableProfit

delay

delay

MarketGrowth Solar Industry

Supply-ChainConsortium

EnergyInternet

SustainableDevelopment

Unanticipated &ExpandingApplications

delay

delay

Senge Diagram —Representation of System-Focused Solar Industry Development

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SEPASEMIISESISGANetc.


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Key Takeaways

The world has not yet reached an equilibrium point in terms of population, economic growth, or environmental impact that can be called “Sustainable”, i.e., The balancing of human activity with the earth’s Carrying Capacity and living in harmony with each other and our planet by experiencing freedom and prosperity on a global level.

We have the paradox of a unified global economy but divided global society which pose the single greatest threat to the planet because it makes difficult the cooperation needed to address the remaining challenges.

The developed world has reached a critical point at which its future economic, environmental, and social health depends upon increasing

the rest of the world’s access to clean, cost-effective energy, Information and Communications Digital Technologies (ICT).

Electrification is the foundation for a global sustainable development strategy.

Sustainable development is in itself a “killer application” and a major driver of the transition to the sustainable energy/information intensity

economic era and the stabilization of GHG emissions.

Sustainability is defined as living in harmony with each other and our planet by experiencing freedom and prosperity on a global level.


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Global Solar Industry Value

Creation

MarketSupply-Chain

Transformation

“Smart Grid” Infrastructure Development

InnovationNational Labs

Industry &Universities

National andInternational

Policy

SEIAEPVIA

RE Portfolio StandardsInvestment Tax CreditsFeed-In TariffsCarbon TaxesIndustrial Policy

Public & PrivateInvestments

AccelerateCompetitiveAdvantage

Break-Through Technology TransferGlobal Supply-Chain DesignInnovative R&D Portfolio MgtEnergy Policy Analysis

Bottlenecks: Meters & SensorsGrid InterconnectionInflexible T&DTransmission SitingTransmission AccessLack of StorageSunk Costs

Bottlenecks:Performance-Cost ImprovementManufacturing Capacity/Deployment VelocitySupply-Chain DesignMarket Conditioning

TechnologyInnovation

Manufacturing Scale-up

SustainableProfit

delay

delay

MarketGrowth

Solar IndustrySupply-ChainConsortium

EnergyInternet

SustainableDevelopment

Unanticipated &ExpandingApplications delay

delay

Senge Diagram —Representation of System-Focused Solar Industry Development

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SEPASEMIISESISGANetc.

Analysis:IPCCIEADOECECEPRIECOther


24


Technology Life Cycle Factors, Another View

Time

Low

HighFuture Wide-ApplicationEmerging Legacy

Availability

Value

Cost

Risk

Competition basedon ProductInnovation

Competition basedon Value-Chain (Supply Chain)

Innovation

$1,785/W, 1955

1990Early Emerging Phase

2008Wide Application?


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• PVisbeingpulledintosupplychaincompetition

Players,particularlyinAsia,knowsupplychainandmanufacturingcompetitionwellandseeitasacompetitiveadvantage

Canmanufacturinginvestmentsadaptquicklyandcheaplytoinnovationsstillinthepipeline,particularlyinoptics–ARcoatings,lighttrapping,andconcentrators?Isthetransitionpremature?

• Competitionincreasinglyaboutcost,volume,scale

• AddressesPVasbulkcommodity–cellsandmodulesatlowestcostbasedoncombinationsofperformanceandlife

• Facilitateshighvalueapplications,butdoesnotcreatethem

• Absolutelynecessary,butnotsufficient,forPVtobecomeamajorenergysource

Supply Chains


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• SmartGridisKey,butEnergyInternetGoesBeyondElectricity

• DevelopmentWillBenefitfromNetworkEffects:

Eachadditionalparticipantincreasesvaluetoallparticipants

First-to-marketwithcompellingapplicationsforutilities,consumers,businesseshasadvantageinsettingstandardsandexpectations

• WillBeDifferentWhereThereisNoGridorWeakGrid

Opportunitytoleapfrogpastcentralizedsystemstodistributedsystems

Closelytiedtosuitabilityforpoweringhighvalueend-useapplications

PVhaspotentialtoridenetworkeffectsofapplicationsitcansupport,justasRAMandICsingeneralridenetworkeffectsofInternet,cellphoneapplications,andexpansionofcomputingpower

Everynewconnectiontoanantiquegridisalostopportunity

• InDevelopedWorldSunkCostsandCurrentInfrastructureCreateDifferentChallenges

Energy Internet


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• PVwillremaininterestingwhereandifitcanparticipateinnetworkeffects,basedonitsattributesaloneorincombinationwithothertechnologies.

• MostofthenetworkbenefitsareindirectforPV,butthemorecentralPVistothepackage,thegreaterthepotential.

Flexible,adaptivegridsremovingthe20%penetrationbarrier,wherenetworkparticipationmakesmoreintermittentresourcespossible.

Virtualutilitiesofdispersedgenerationandstoragetiedtogetherwithsoftwareandcommunications.

Disruptingcentralizedmodels,servingtheunservedindevelopingcountrieswithmorethanelectricity

tele-medicine,tele-banking,tele-commerce,tele-education,tele-government.

moreresponsivetobandwidthextensionmarriedtoelectricitythanextensionofrawpower

Virtualenvironmentalperformance,deliveringandaccountingforcleanenergyonarealtimebasistoincreaseitsvalueandavailability.

Smart Grid and Network Effects: Some Possibilities


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• UltimatelysustainabilityistherationaleforPVandotherrenewableenergy–otherwisefossilfuelscouldpowertheworldeconomy,evenwithbillionsofnewpeople,formanydecades.

• Thereisaphysicalaspecttosustainability.Thereisapoliticalaspecttosustainability.Ifthetwodonotconnect,effectively,sustainabilitywillonlybeaweakornon-existentleveragepointforPVandotherrenewableenergy.

• Sustainabilitydoesimplylimitstoconsumption,butnotlimitstogrowth.TherearenogrowthlimitsonKnowledge.

• Unlikeother“killerapplications”sustainabilitydependsonpeopleactingasacommunitytochoosewhatisbestforthefuture,ratherthanactingalonetochoosewhatiseasiestforthemselves.

• Innovationisthebestoptionforadvancingsustainability.

Peoplewhodeniedthedeclineinwhalesforwhaleoilinthe19thcenturyandcontinuedtoinvestinwhalingshipswentbankrupt.

Peoplewhodevelopedpetroleumasasubstituteandthenfoundnewusesforitbeyondmakinglampoilbecamebillionaires.

Peoplewhodespairedoffindingmorewhalestolighttheirlampsendedupbuyingkerosenefromthenewpetroleumbarons.

Sustainability – The “Killer Application” for PV and Other Renewables…. Or Not


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• Thiscentury’smostimportantlessonwillbethevalueofHumility,Humanity,andHarmonyincreatingGlobalKnowledgeSocieties.GlobalKnowledgeSocietiesliveinHarmonywitheachotherandourplanetbyexperiencingfreedomandprosperityonagloballevel.

• WeexpressHumility,Humanity,andHarmonybyrespectingpeople(Tolerance)whoaredifferentfromusandbyrespectingtheenvironmentwhichwesocriticallydependupon.

• Themorewegaininsightintothemysteriousforces,cosmicandatomic,thataretheuniverse,themorereasonwehavetobeHumbleandseetherewillalwaysbethingsbeyondourcomprehension.Themoreweharnessthehugepoweroftheseforces,themoreHumilitybecomesanimperative;nowthatourabilitytodestroyourselvesisgreaterthanourabilitytounderstandourselves.

“Humilityisnothingmorethanamanseeinghimself

ashetrulyis…….Anymanwhocanseehimself

ashetrulyis……..mustsurelybeHumbleindeed.”

TheCloudofUnknowing,andJosephMorabito,2011


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If you want to go fast, go alone…

But if you want to go far, go together!

African Proverb

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Global Solar Industry Value Creation

International

Policy & Innovation

National and

International

Institutions

Innovation

Market Supply Chain

Transformation“Smart Grid”

Infrastructur

e Developmen

t

State and Local Policies &

Innovations


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Conclusions• Global access to reliable, affordable electricity is essential to insuring sustainable

economic growth, protecting environmental assets and improving global health and prosperity

• Global electrification will require a combination of innovative new policies, finance mechanisms, infrastructure technology, in addition to ICT.

• Technology innovation can radically increase zero-carbon electricity generation technologies such as Solar, reduce energy intensity, minimize carbon intensity, while enhancing the quality of life and insuring sustainable economic development.

• Solar needs more resource investment upstream during the concept and exploration phases to introduce system-level considerations as early as possible. This can reduce the product development interval and facilitate technology transfer.

• Solar Industry Drivers should be considered in the context of Systems Thinking --- Solar Industry Supply-Chain Consortium, Energy Internet, Sustainable Development

• Electricity from renewable energy combined with ICT in grid operation and new services to consumers, can stabilize CO2 emissions and form the infrastructure for the transition to a globally sustainable energy system

• Today, we mainly define progress by new developments in technology and economic growth rather than by the broader notion of advancing human well being and “Human Purpose.” The highest leverage will come from strategies that inherently do both. This integration has the potential to expand technology and human development as two aspects of the same process. This integration offers Hope for the creation of a Global Knowledge Society.


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J.M MorabitoSenior Director, Bell Labs

FellowChief Technology Office

(CTO) www.alcatel-lucent.com


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REFERENCE MATERIAL & DATA


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PV Learning Curve and Market Penetration Barrier

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J.M. Morabito - Sr. Director, Bell Labs Fellow, Chief Technology Office (CTO) February 2012

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