This is my guess as well, although to really address his point you have to answer the question "why would it."
He seems to assume that energy doesn't have any mass. It does. "Converting" energy to mass is a misnomer--you're really just converting one form of energy to another, one of which may be stable enough last as "matter" but both of which obey the same laws of gravitation. Transferring the energy up the tower requires energy because the energy has (is) mass.
Note that the E=MC^2 equation is for rest-mass rather than total mass, while a mass in motion has something more like E^2=M^2*sqrt(C^4+V^4). In a different inertial frame of reference objects will appear to have different mass, although I forget if it's rest-mass or total mass. But the point is, in order to get up to the top of the tower, some of the rest-mass will have to be kinetic energy, which gets converted to potential energy as it climbs and back to kinetic energy as it falls.
If you try to beam the energy up as light, this manifests as a Doppler shift in the light frequency (I think this has been observed experimentally). If you send it up with electricity, I think you have gravitational drag on the electrons. In the case of a drive shaft whose axis is parallel with gravity... well, that one actually stumps me. I guess you'll have to work through the relativistic effects. It's probably something really subtle, like that the (slightly) different gravity at the different elevations slows time by different amounts, resulting in a different rate of rotation and therefore less energy out of the top than was put in at the bottom.
He seems to assume that energy doesn't have any mass. It does. "Converting" energy to mass is a misnomer--you're really just converting one form of energy to another, one of which may be stable enough last as "matter" but both of which obey the same laws of gravitation. Transferring the energy up the tower requires energy because the energy has (is) mass.
Note that the E=MC^2 equation is for rest-mass rather than total mass, while a mass in motion has something more like E^2=M^2*sqrt(C^4+V^4). In a different inertial frame of reference objects will appear to have different mass, although I forget if it's rest-mass or total mass. But the point is, in order to get up to the top of the tower, some of the rest-mass will have to be kinetic energy, which gets converted to potential energy as it climbs and back to kinetic energy as it falls.
If you try to beam the energy up as light, this manifests as a Doppler shift in the light frequency (I think this has been observed experimentally). If you send it up with electricity, I think you have gravitational drag on the electrons. In the case of a drive shaft whose axis is parallel with gravity... well, that one actually stumps me. I guess you'll have to work through the relativistic effects. It's probably something really subtle, like that the (slightly) different gravity at the different elevations slows time by different amounts, resulting in a different rate of rotation and therefore less energy out of the top than was put in at the bottom.