Splitting the water molecule

Technology is making the world a better place to live. We are living longer healthier lives due to technological progress improving our health, nutrition and safety. A case in point is the lifesaving technology of Intuitive Surgical, one of our favourite investments, whose robotic surgery technology recently saved the life of one of our clients. It’s worth taking a few moments to see just how advanced their technology is.

It is the constant process of innovation across a wide range of industries that leads us to be so optimistic about the future from both the perspective of investment returns and, more importantly, quality of life. In fact, we are so optimistic about technological progress that another of our clients tells us he uses Equitile for ‘outsourced optimism’. He invests with us to gain the benefit of the progress, which allows him to continue worrying about the dire state of the world!

To be fair, we must acknowledge all this technological progress has come at a price. Our improving quality of life is putting an increasing strain on the eco-system of the planet. If we are not careful the resultant ecological damage caused by our technology will more than undo its benefits. This is partially why we call this blog Rational Exuberance; we are exuberant about the future but, but we must keep the exuberance rational.

Global warming is clearly the biggest environmental concern today. But even here there are good reasons for optimism. The cost of electricity generated by solar power is now approaching that of fossil fuels, and by some measures it is even cheaper. The cost of solar power is expected to continue falling and bring with it a real possibility that within a few years it will become technically possible and economically viable to generate all our power from renewable resources.

Cheap solar energy is not the only practical barrier to a renewable energy economy. Solar panels may be able to generate cheap electricity, but they only do so slowly and of course only when they get sufficient sunlight. For this reason, improvements in energy storage technology will also be required to allow a full movement to renewable energy. At the moment we are reliant on battery technology for the storage of electricity and those batteries are both expensive and polluting to produce. For this reason, some see hydrogen technology as a preferable energy storage mechanism.

Solar energy can be used to split the water molecule into its constituent parts – oxygen and hydrogen – and the oxygen and hydrogen can then be recombined or burned, to give up the stored energy either as heat or directly as electricity. The beauty of this hydrogen-oxygen based energy system is that it is based entirely on abundant non-polluting renewable resources, water and sunlight. What’s more it is also based on real well-proven science, not some charlatan pseudo-scientific cold-fusion technology, reliant on breaking the laws of physics.

The technology to turn the dream of an endlessly renewable, non-polluting, hydrogen-based energy system into reality is still some way off. One of the most important missing pieces is finding an efficient, renewable and scalable, way to split the water molecule using solar electricity. Interestingly, in a recently published paper scientists working at Stanford university claim to have made an important step toward this goal. Their breakthrough is the development of a novel corrosion-resistant electrode allowing the generation of hydrogen directly from seawater. Researchers create hydrogen from seawater.

It is too early to tell whether this particular piece of research proves to be the vital breakthrough needed to kickstart a hydrogen fuel economy. Nevertheless, it is encouraging to see such exciting progress being made in this field. As investors we must always remember the economy is ultimately driven forward by innovation and, thankfully, there is still plenty of innovation around. We will be watching this area of technology closely both for potential investment opportunities and for potential threats to our existing investments.

We remain rationally exuberant.