It was launched in partnership with Mission Innovation--a commitment by 20 nations, representing 80% of the world’s clean-energy innovation investment--to double their commitments to energy research and development. 

The case for accelerating the delivery of tomorrow’s technologies through a concerted effort on R&D has been strongly made by our sister publication, The Economist, as part of its coverage of climate change issues. 

While at COP21, Mr Gates sat down with The Economist Intelligence Unit to discuss this initiative. The interview below has been condensed and edited for clarity.

Brian Gardner: You’ve painted the current level of government cleantech R&D as paltry but you’ve linked with Mission Innovation. Is double over the next five years really enough? The International Energy Agency has recommended tripling. Should we be looking at this as a first step and then something beyond that?

Bill Gates: That’s a fair question. I think that doubling really will dramatically increase the pace of innovation. When you actually increase R&D budgets it’s kind of a magical period because then you go out and you find more of the unusual ideas. If an R&D budget stays flat, whether it’s in health or IT, any domain, there’s a tendency that you’re often funding the more conventional approaches. And that’s a great foundation. A lot of the improvement in solar prices we’ve seen came through a mix of government R&D and private investment activity.

But a doubling over five years, that’s about the most you could expect the governments to do: it’s a very substantial amount of money. In the case of the US it’s about $5bn being spent now, and so asking them to ramp up, in a very tight budget time, from 5bn up to 10bn by 2020, I think it’s pretty fantastic that they’re willing to commit to that.

Brian Gardner: That brings me to my next question then. You’ve got 28 business leaders from ten countries willing to be patient capital. What are you measuring to know whether or not this is a success?

Bill Gates: The bottom line success is whether you get the breakthrough or not. But there will be a lot of intermediate measures in terms of the investors. To be clear, a lot of them will find on their own these types of investments, but a lot of them will work through a fund that we will create. And we’ll do regular refreshes of that fund.

And we’ll have a mechanism to sit down with the governments, where they talk about what they see coming out of their labs, and therefore what would be candidates for start-up-type investment from these investors. There are a lot of high-risk ideas: high wind is very risky; solar chemical directly making liquid hydrocarbons is very risky. There’s some great research that I think is very exciting.

Brian Gardner: Get away from just using electricity to split water into hydrogen and oxygen, but actually direct to hydrocarbons?

Bill Gates: Right. Once you get liquid hydrocarbons then you basically solve the storage problem because we know how to pipe and tank gasoline and other equivalents. And that’s one of your big problems for solar PV today: storing electrons is very, very expensive. And so because you have an intermittent source, that’s where the storage problem is very challenging. Now, there’s other ways to go about that: you can have a gigantic grid where you get a diversity of sources and you can drive the percentage from the intermittent sources up there.

I think what we’ll see is the breadth of things that we’ll fund will be quite large and the early-stage nature of the investments we make, you’ll look at those and say: ‘Wow! If this group hadn’t been brought together that’s the kind of thing I don’t think would have been funded previously.’ And I’m going to make sure this is a very strong fund. I feel personally accountable that we do a good job on this.

Brian Gardner: So as the US government’s going to go from US$5 to US$10bn, what’s the scale that you expect from the private investors, both from those that are initially involved and those that may join you going forward?

Bill Gates: We’ve got ~$2bn from the group that we have today.   

But we only have one institution in, which is the University of California, and when the fund structure is more concrete, we’ll be able to go to institutions that care about climate change—university endowments, some pension funds, some foundations and endowments. I think a fair percentage of those may join.

Over this next decade, if we had US$20bn of high-risk private capital, then that would get towards the size of the problem. The investments will be different, but if you have 200 companies, that’s enough money that you’d think: ‘OK, a hundred million each, on average’ because some will be a lot more, some will be a lot less than that. That is a lot of energy innovation, but that’s what we should do to get the pace up dramatically from where it is today. There is a tendency to underinvest in energy because of the long product cycles, and it just doesn’t get nearly the investment of other sectors in the economy, despite its central role.

Brian Gardner: Is there something wrong with our investment structures that potentially profitable investments are not being sought out? Or is it just that we haven’t priced carbon effectively?

Bill Gates: No, it’s well known that capitalism in general under invests in research, because most of the benefits for research go to society, not to the inventors. That’s more true in energy than in any other space, because the amount of time to get things deployed.

There's normally 20-year patent protection for something like a piece of software that you can put on the Internet as soon as you’re done. In the energy sector, it’s often more than 20 years before you get to scale. In fact, before you get dramatic changes, historically it’s been 40 to 50 years.

Rudolf Diesel for example, who invented one of the most important prime movers of the age, committed suicide thinking he was financially ruined, and yet his invention has been critical; certainly in terms of trains, boats and large vehicles.

Brian Gardner: So how did you bring these investors together?

Bill Gates: Many said to me that my commitment to have the fund was critical because they didn’t feel like they were going to be able to out and vet these things, because a lot of them are very technical. When people start talking about perovskites, painted solar applications etc. A lot of it is down to the physics, so the majority of the money will flow through the fund.

And this fund will be particularly open about what it’s doing compared to a normal venture fund because it has an impact goal along with its economic goal.

Brian Gardner: Are you concerned that by focussing purely on innovations that won’t come for 10-20 years in the future you are discrediting the opportunity currently available to profitably produce clean energy? If you have risk capital what’s the reason for not wanting to try and deploy what we already know does work?

Bill Gates: The question is: what is the premium cost for green energy? And can you turn to a country like India and say: ‘Hey, you should slow down your development by paying that premium.’ The premium today is so large that even the rich countries are hesitating to go all the way. That’s about innovation.

There’s plenty of room for capital to be deployed with today’s technologies. The Breakthrough Energy Coalition is not about deploying today’s technologies: that’s a much lower-risk thing. Many of the solar fields in the US have guaranteed contracts out that totally recover their costs. So even if a new breakthrough comes along that doesn’t stop that from being a good investment.

If this happens quickly enough it could mean we’re turning over the hydrocarbon installed base faster than was expected. That’s a risk but in a sense that’s good news if we’re able to show they should be retired early because they aren’t green and we have a new lower-cost thing. But this space is not as dynamic as the technology space. This is still going to be, unfortunately, measured in, at best, in a decade we’ll have some of these breakthroughs.

Brian Gardner: You’ve framed this initiative as looking at broad investment but you’re leaving geoengineering completely out of the mix. What is the reasoning behind that?

Bill Gates: This is about cheap, clean, reliable energy. And there are many paths to get energy generation to be lower-cost than hydrocarbon-based generation and still be zero CO2 emissions. That’s really what you want, because bringing the price of energy down is pretty fantastic.