December 23rd, 2020 by Carolyn Fortuna
Global policy discussions increasingly emphasize the critical role of innovation to meet long-term energy and climate targets. Investing in clean energy innovation programs can drive down the costs of existing essential options like solar, wind, and low carbon mobility and can also accelerate the development of high-impact breakthrough technologies.
The last few decades have seen unprecedented efforts to accelerate clean energy development. But the world needs to speed up the scale-up of low-carbon technologies for clean energy transitions, according to a recent International Energy Agence (IEA) analysis.
Many technologies are not yet ready for all the markets in which they will be needed; they require performance and cost improvements, according to the report. Additionally, many of these technologies will need adapting to local needs and specificities, particularly in emerging economies, which are expected to account for much of future energy demand growth.
“Tracking Clean Energy Innovation: A Framework for Using Indicators to Inform Policy” is a new publication from the IEA. The report aims to support public and private decision makers’ efforts to accelerate clean energy innovation by introducing a set of metrics to navigate the options for tracking and evaluating clean energy innovation.
The report’s authors recognize that strategies for tracking progress and embedding innovation policy within energy policy are long-term commitments, and data collection can be challenging. To assist in overcoming those challenges, they provide indicators relevant to 4 pillars of successful innovation systems:
- Resource push
- Knowledge management
- Market pull
- Sociopolitical support
The report unpacks how governments can adopt the provided suite of metrics to can help answer and monitor the following questions:
- Are the resources devoted to energy innovation increasing?
- Is the allocation of resources aligned with strategic priorities?
- What/where are the weaknesses in the energy innovation system?
- How does the country or region compare with international peers?
- Are inputs translated into outputs that support policy objectives?
- Which combinations of policies have the highest impact?
4 Pillars of Successful Innovation Systems
Resource push refers to the provision of inputs into the energy innovation system with the intention of raising the chance of innovation success. This pillar generally receives the most attention — it requires a sustained flow of R&D funding, a skilled workforce, research infrastructure, and clear priorities to guide the search of innovation activities.
Knowledge management refers to the processes that enable new knowledge to be created, protected, and flow among innovation actors and across stages of development. Energy innovation systems generate new ideas and products and lead to incremental technology improvements, step changes in performance, and radical new solutions to problems.
Market pull refers to the incentives for investment in R&D and product development that arise when there is growing demand for a new product or process, or perceived potential for demand growth. There are several important ways in which market forces “pull” ideas
along the innovation process:
- the expectation of future revenue raises innovators’ interest in developing new products;
- product sales provide revenue to pay debts, reward investors and reinvest in R&D, helping to bridge the “valley of death”; and,
- commercial scale-up leads to “learning by doing” and feeds innovators with new ideas for improvements and products.
Sociopolitical support refers to the processes through which actors are mobilized, and support or oppose the direction or outcomes of innovation. Energy innovation is rooted in actors, institutions, and norms. It may be accelerated or hindered by society’s readiness for change, including that of citizens, firms, politicians, and other legitimate vested interests.
Technology innovation is the process of generating ideas for new products or production processes and guiding their development from the lab to their mainstream diffusion into the market. Equipment and processes that change how or how much energy is consumed are included (e.g. in power, buildings, industry, transport).
Budgets, Data, & Trade Analysis: Necessary Elements for Successful Clean Energy Innovation
Maintaining clean energy R&D budgets in the short term and increasing them in coming years is necessary to stimulate innovation. The histories of solar and biofuels technologies show that increasing R&D budgets will be most effective if part of a broader policy strategy that primes the market, ensures flow of ideas and manages the risks of scale-up. Momentum must be kept in emerging economies, which will be crucial to clean energy deployment in the years ahead.
Throughout, rigorous data are essential to assess progress, reorient technology portfolios, provide benchmarks internationally, and enhance policy effectiveness. However, tracking progress of clean energy innovation is difficult, with time lags between inputs (e.g. R&D spending), outputs (e.g. patents) and their outcomes in markets and society (e.g. jobs, exports, environmental health, and prosperity).
Higher-level indicators can show progress against the overall objectives of innovation policy. Trade is one such metric. Trade balances can generate several insights. Strong exports of emerging energy technologies (or components) indicate that domestic innovators successfully reap benefits from earlier investments in innovation. Future innovation priorities might be identified from such areas of innovation success and comparative advantage or, conversely, from areas of growing spending on imports. Trade balance metrics can also help anticipate how and where domestic market-pull policies will stimulate innovation and investment.
Investments in clean energy innovation are an important step forward, but they are also not sufficient on their own to solve the climate crisis – many have argued that we must also act swiftly to put in place policies that set declining limits on greenhouse gas emissions and account for the real costs of that pollution. Together, these policies will lead to deeper pollution reductions, accomplished more quickly and affordably.
That’s because a limit and a price on emissions will accelerate demand for clean energy, creating powerful economic incentives to adopt new technologies and providing a market for innovators who develop better ways to decarbonize. Investment in innovation can help make new technology options available, but we also need policies that create level commerce so that clean technologies can thrive on the timeline and at the scale consistent with meeting ambitious climate goals.
President Trump recommended that the US government cut or eliminate funding for renewable energy development, building and industrial energy efficiency programs, sustainable transportation technologies, and programs that invests in high risk, high reward technologies. How wrong could a “leader” be? It’s clear that clean energy innovation should be essential elements of covid-19 sustainable recovery plans.
The indicators presented in the IEA report are those that governments and companies have proposed or implemented, as identified from a variety of sources and conversations with practitioners. These examples show insights from existing data. However, a much larger opportunity lies in building new tracking strategies and capabilities into clean energy innovation policy, which should lie at the core of energy policy making.
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