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Lock-In

Amory Lovins: I am told by an historian of science that this story may not be absolutely right in every detail, but the general drift of it is right. Why is the American rail gauge four feet, eight-and-a-half inches? Because our railways were built by the British railway builders who used that gauge. They used it because before trains, trams had used that gauge. Trams used that gauge because trams were built by the wagonwrights who didn't want to have to change their jigs and tools when they switched over from making wagons to making trams. The reason wagons used that gauge is because, if the wagon wheels didn't fit the ruts in the long distance roads in Europe, they would of course tear themselves to pieces. So, where did the ruts come from? Well, the people who built the roads, namely the Romans. The moral of the story is: specs and bureaucracies live forever. The next time you're handed some spec and you ask what horse's ass designed this, you may be exactly right because the chariot wheel gauge of the Romans was designed to fit the back ends of two Imperial Roman Army war horses.

In fact, you find amazing anomalies even into modern times. Somewhere in Europe, just a few years ago, they still had a tapering section of adjustable track. The wheels would slide back-and-forth on the axle so that you had rail cars that could span two different standards. You would slowly go over this tapering stretch of rail. It would adjust your wheels to the new gauge and then you'd continue on into a new country. So the Romans may not have reached everywhere. Their lock-in was almost totally complete.

A classic example of modern technological lock-in involves things like VHS which got to markets in high volume earlier than Beta Max and therefore got such a large installed base of equipment that it beat out the technically superior Beta.

Peter Warshall: So the moral of that story is that "earlier, not necessarily the best product or device, gives the competitive advantage."

AL: That's right and that's a pretty well-known conclusion among the more modern economists who think about expanding a set of diminishing returns to scale. That's a fairly common theory.

Lock-in has this dynamic quality. The more there is of it, the more dominance it gets. It is because there is so much of it, not simply because it's so expensive to replace one product with another or one infrastructure by another. The reason the VHS took over was that, as there got to be more VHS tapes and players, it was easier to make new tapes in the format that would fit most of the players than to try to maintain multiple formats. And the more of them there were the stronger that argument became. It was self-reinforcing. The positive growth feedback aspect makes it a lock-in.

Cellular phone standards would be another good example of industrial lock-in. There are a whole slough of choices: CDMA, TDMA, GSM and others. The cellular phone type called CDMA, in principle, gives you higher spectral density or channel per unit of spectrum. That simply means that you can handle more calls in a given spectrum than TDMA or GSM, or than analog amps.

In this country, we have three or four competing standards for cellular phones. We're in this incoherent period in the US where it's hard to get investors excited about one given standard because they're betting that any one could get crowded out by factors possibly quite beyond their control and who gets crowded out may not depend on technical merit. CDMA, for instance, is expected to grow faster because of its ultimate technical advantage, but it's been slow to take off because it's a late starter, and there's already such a big analog installed base.

Now in Europe, because the European Union needed interconnectivity and roaming, to be transcurrent across many national boundaries, they went for GSM cellular phones early. Then a lot of the rest of the world adopted them because there was already such a huge installed base of GSM phones. You gained economies of scale. The more phones you made to a given standard, the cheaper they'd get. They'd out-compete the others and people would say everybody seems to be switching to that standard, so I'll use it. So GSM, which is probably not as good in principle and certainly not as fast as CDMA, is slowly coming into the US because we have so many business travelers that are willing to pay for that feature. It offers the potential of international roaming (international cellular phone calling). Of course, just to make it more complicated, the US adopted a different GSM frequency. No lock-in yet.

PW: Timing and "greenness" appear complex. If you're too early, it's too high a cost to the innovator. If you're too late, you're out of the competition. How do you start out being flexible and still keep the option of being the most materials- or energy-efficient, or the most appropriate for the future in some other environmental way? How do you do it?

AL: If you need technical standards, either formal or de facto, you start setting them early and building into them enough flexibility so that you can adopt better ideas later. But, try to avoid so much flexibility that you get incompatible multiple standards á la Java. [Java is a computer program that carries its own application instructions]. You have to get enough big players on board early that it becomes a de facto standard as Java was supposed to—might still, but it's not looking very good right now. You have to be very far-sighted and think: what are people going to use this for? Is the hardware and software environment going to be changed? How can I get as far out in front as possible and still make it realistic to implement?

Another kind of lock-in, an infrastructure lock-in, that's interesting has been choices of voltage and frequency on the electric grid. Once you standardize voltage, for instance, everybody makes the equipment to match it to their distribution system. But, there are interesting niche markets that avoid the locked-in infrastructure. You have 12-, 24-, and even 48-volt DC appliances and devices for marine and Rec Vehicles. That market starts to pick up when people go to photovoltaics and find it might be cheaper not to have an AC-DC inverter. Instead, they can go straight off from the photovoltaic cells to 12- or 24-volt storage (all DC). Then, of course, the whole debate gets overtaken by events. A response to photovoltaics is to make AC-DC inverters so cheap and so efficient that you can perfectly well imagine running them at cost-saving frequencies, say 40 kilohertz instead of 60 kilohertz, having much lower losses, and then even converting frequency or voltage to whatever you want at the other end.

North America changed frequencies from 25 to 60 in metro LA, Toronto, Montreal as late as the 1950s. It was a huge mass retrofit with specially equipped van fleets going door to door, neighborhood to neighborhood, changing all the unused equipment. I ran into a few places in Wisconsin and Maine in the pulp paper industry that are on an old frequency, 40-hertz standard, so it's hellishly difficult to keep themselves supplied with motors. They're practically all customized, which is expensive. There are actually historical examples where we still have, even in Manhattan, little islands of the old frequencies, the 25-hertz system.

PW: So again, in terms of the infrastructure of electricity, is there any way that one could design a kind of forgiveness or a kind of flexibility into the appliances or the configuration and composition of the power distribution that would allow the future to accomplish some of your efficiency goals?

AL: That's an interesting question be-cause, of course, Edison wanted DC and Westinghouse, who wanted AC, won. Westinghouse was a better marketer but technically Edison probably had

a better idea. Until you have the adaptive technologies that make inter-operability between AC and DC both cheap and convenient, you do get locked out—especially if you're not the standard that happens to win early.

But a lot can change. For example, think of the number of things in your house that run on low-voltage DC. Your house receives 240/120 volts AC from the grid but your doorbell and other devices can only use very low-voltage DC. So, a tiny transformer that is always sucking electricity and wastes standby power as heat does the job. It operates even when the doorbell isn't ringing. Anything electronic with a remote control, clock, timer or memory "vampires" electricity even when it's "shut off." These little power cubes typically eat three to five watts phantom load all the time whether they're in use or not (see box). That can easily be a tenth of the usage in your house. The US keeps something like five to eight gigawatts busy full time running stuff that's turned off.

So we already have an emerging dual standard of AC and DC. We just don't think of it that way. In fact, the downstepping from 240 or 120 volts to "X" volts is not even standardized. The low voltage DC power cubes may be anywhere from five to 32 volts, depending on what the gadget is.

Power cubes are different in their voltage connector and current rates. They're also generally lousy in efficiency. In effect, something on the order of ten or twenty percent of the residential use electric market is already low-voltage DC in various voltages even though we're all fed from AC. We just take it for granted that we're going to need a little power cube to adapt.

PW: So then if we put up a photovoltaic cell on the house, we could just go direct to DC?

AL: Yes, if there were a better voltage standard, if everybody would settle on 24 volts or whatever. The traditional reason for not doing it was: if you are drawing much current on a long circuit, you need a hell of a lot of copper. Otherwise, you experience a big voltage drop in low voltage. But, if you're using very efficient transmission lines the need for a big voltage may no longer matter. Second, the objection was that you would have to rectify the AC coming off the grid. But, if you're not using the stuff coming off the grid, who cares? And in general it's cheaper not to use the stuff off the grid. They're finding in Sacramento that it's cheaper to hook new alley lights to photovoltaics than to connect them to the wires that are already in the alley. It's cheaper even in first costs, let alone the energy savings later.

PW: So much for lock-in. Here's a final question. When is it good to have a product with a short lifespan so you can innovate? When do you want to have one that has a long life span so that you don't do all of the things....

AL: Good point. For example, a car or refrigerator, if it's something that can't be retrofitted and its efficiency or other qualities are inflexible because it's fixed hardware, then you may want it to be highly recyclable. In the short run, until it's really refined, it should not be all that durable. On the other hand, if you've already got the fifty-fold more efficient refrigerator, which we do in the lab, then you ought to make it very durable.

A good way to get the balance right is to lease the service rather than selling the object. I think we're moving to-ward that point. When you try to sell somebody a product, if they're smart, they'll say: "Why are you trying to sell this to me? There must be something wrong with it. If it has the operational advantages, you'd want to capture operational profits for yourself by only selling me the service. Why are you trying to palm this thing off on me and stick me with its operating and lifespan disadvantages?" There are commercial carpet dealers who already offer this service: carpets from recycled materials, replaceable worn-out carpet patches, long-term contracts. Cars of the future may follow the carpets.