Is cheap energy enough to spur innovation?

Matt Yglesias dropped an avowedly contentious take on energy abundance, arguing that “conventional environmentalism” is overly focused on efficiency and missing the upside of truly abundant energy generation. Yglesias argues that “too cheap to meter” energy would not only make efficiency arguments irrelevant, but unlock vast new frontiers in energy-constrained areas like synthetic fuels, vertical farming, and lab-grown animal proteins. Leaving aside the political positioning of energy efficiency for the moment, I found this a helpful provocation on what we should and shouldn’t expect from more generation capacity. While more cheap energy is clearly a good idea, and we're sympathetic to many of the conclusions here (permitting reform and interregional transmission would be important wins), my read is that we still risk missing a step by focusing too closely on energy prices alone as a driver of innovation. For some sectors, the cost of energy probably is a binding constraint (synfuels, desalination, potentially some green industrial materials), so it follows that cheaper energy would lead to growth there. For others — including cultured meat and potentially vertical farms, but also next-gen aviation — there are still major materials science/biotech bottlenecks (or physical constraints) to be addressed. It’s not clear to what degree even too-cheap-to-meter energy would actually induce the innovations to make those technologies commercially viable; at least some of the literature on directed technical change implies that energy prices can shift R&D budgets within the energy sector, but we’re (to my knowledge!) missing an empirical through-line from energy prices to R&D in complementary fields. If we don’t know how strong the link between energy price and complementary innovations is, it’s worth asking whether driving energy prices as close to zero as possible is the most cost-effective way to induce those innovations. That said, there are plenty of good reasons to build more cheap energy — not least that growing demand has made ever tighter supply-side constraints an increasingly real possibility even for “conventional” growth.