Chapter 24: Policies for the Energy Technology Innovation System (ETIS)

Innovation and technological change are integral to the energy system transformations described in the Global Energy Assessment (GEA) pathways. Energy technology innovations range from incremental improvements to radical breakthroughs and from technologies and infrastructure to social institutions and individual behaviors. This Executive Summary synthesizes the main policy-relevant findings of Chapter 24 . The innovation process involves many stages – from research through to incubation, demonstration, (niche) market creation, and ultimately, widespread diffusion. Feedbacks between these stages influence progress and likely success, yet innovation outcomes are unavoidably uncertain. Innovations do not happen in isolation; interdependence and complexity are the rule under an increasingly globalized innovation system. Any emphasis on particular technologies or parts of the energy system, or technology policy that emphasizes only particular innovation stages or processes (e.g., an exclusive focus on energy supply from renewables, or an exclusive focus on Research and Development [R&D], or feed-in tariffs) is inadequate given the magnitude and multitude of challenges represented by the GEA objectives. A first, even if incomplete, assessment of the entire global resource mobilization (investments) in both energy supply and demand-side technologies and across different innovation stages suggests current annual Research, Development & Demonstration (RD&D) investments of some US$50 billion, market formation investments (which rely on directed public policy support) of some US$150 billion, and an estimated US$1 trillion to US$5 trillion investments in mature energy supply and end-use technologies (technology diffusion). Major developing economies like Brazil, India and above all China, have become significant players in global energy technology RD&D, with public- and private-sector investments approaching US20 billion, or almost half of global innovation investments, which is significantly above the Organisation for Economic Co-operation and Development (OECD) countries’ public-sector energy RD&D investments (US13 billion). Important data and information gaps exist for all stages of the energy technology innovation investments outside public sector R&D funding in OECD countries, particularly in the areas of recent technology-specific private sector and non-OECD R&D expenditures, and energy end-use diffusion investments. Analysis of investment flows into different stages of the innovation process reveals an apparent mismatch of resource allocation and resource needs. Early in the innovation process, public expenditure on R&D is heavily weighted toward large-scale supply-side technologies. Of an estimated US$50 billion in annual investment globally, less than US$10 billion are allocated to energy end-use technologies and energy efficiency. Later in the innovation process, annual market (diffusion) investment in supply-side plant and infrastructure total roughly US 2005 $0.8 trillion, compared with a conservative estimate of some US$1–4 trillion spent on demand-side technologies. These relative proportions are, however, insufficiently reflected in market deployment investment incentives of technologies, which almost exclusively focus on supply-side options, to the detriment of energy end use in general and energy efficiency in particular foregoing also important employment and economic growth stimuli effects from end-use investments that are critical in improving energy efficiency. The need for investment to support the widespread diffusion of efficient end-use technologies is also clearly shown in the GEA pathway analyses. The demand side generally tends to contribute more than the supply-side options to realizing the GEA goals. This apparent mismatch suggests the necessity of rebalancing public innovation expenditure and policy incentives to include smaller-scale demand-side technologies within innovation portfolios . Given persistent barriers to the adoption of energy-efficient technologies even when they are cost competitive on a life cycle basis, technology policies need to move toward a more integrated approach, simultaneously stimulating the development as well as the adoption of energy efficiency technologies and measures. R&D initiatives that fail to incentivize consumers to adopt the outcomes of innovation efforts (e.g., promoting energy-efficient building designs without strengthened building codes, or Carbon Capture and Storage [CCS] development without a price on carbon) risk not only being ineffective but also precluding the market feedback and learning that are critical for continued improvements in technologies. Little systematic data are available for private-sector innovation inputs (including investments), particularly in developing countries. Information is patchy on innovation spillovers or transfers between technologies, between sectors, and between countries. It is also not clearly understood how fast knowledge generated by innovation investments may depreciate, although policy and investment volatility are recognized as critical factors. Technical performance and economic characteristics for technologies in the lab, in testing, and in the field are not routinely available. Innovation successes are more widely documented than innovation failures. Although some of the data constraints reflect legitimate concerns to protect intellectual property, most do not. Standardized mechanisms to collect, compile, and make data on energy technology innovation publicly available are urgently needed. The benefits of coupling these information needs to public policy support have been clearly demonstrated. A positive policy example is provided by the early US Solar Thermal Electricity Program, which required formal, non-proprietary documentation of cost improvements resulting from public R&D support for the technology. The energy technology innovation system is founded on knowledge generation and flows. These are increasingly global, but this global knowledge needs to be adapted, modified, and applied to local conditions. The generation of knowledge requires independent and stable institutions to balance the competing needs and interests of the market, policy makers, and the R&D community. The technology roadmaps and the policy regime that characterize innovation in end-use technologies in the Japanese Top Runner program are a good example of the actor coordination and knowledge exchange needed to stimulate technological innovation. Generated knowledge needs to spread through the innovation system. Knowledge flows and feedbacks create and strengthen links between different actors. This can take place formally or informally. Policies that are overly focused on the development of technological “hardware” should be rebalanced to support interactions and learning between actors. The provision of test facilities in the early years of the Danish wind industry is a good example of how policy can support knowledge flows and the strengthening of collaborative links within networks of actors in an innovation system (energy companies, turbine manufacturers, local owners). Long-term, consistent, and credible institutions underpin investments in knowledge generation, particularly from the private sector, and consistency does not preclude learning. Knowledge institutions must be responsive to experience and adaptive to changing conditions. Although knowledge flows through international cooperation and experience sharing cannot presently be analyzed in detail, the scale of the innovation challenge emphasizes their importance alongside efforts to develop the capacity to absorb and adapt knowledge to local needs and conditions. The current global cooperation in energy technology innovation is well illustrated by the International Energy Agency (IEA) technology cooperation programs reviewed in Section 4.4 ; all invariably show a sparse involvement from developing countries. Clear, stable, and consistent expectations about the direction and shape of the innovation system are necessary for innovation actors to commit time, money, and effort with only the uncertain promise of distant returns. To date, policy support for the innovation system has been characterized by volatility, changes in emphasis, and a lack of clarity. The debilitating consequences on innovation outcomes of stop-go policies are well illustrated by the wind and solar water heater programs in the United States through the 1980s, as well as the large-scale (but fickle) US efforts to develop alternative liquid fuels (Synfuels). The legacy of such innovation policy failures can be long lasting. The creation of a viable and successful Brazilian ethanol industry through consistent policy support over several decades, including agricultural R&D, guaranteed ethanol purchase prices, and fuel distribution infrastructures, as well as vehicle manufacturing (flex fuel cars), is a good example of a stable, aligned, and systemic technology policy framework. It is worth noting that even in this highly successful policy example, it has taken some three decades for domestic renewable ethanol to become directly cost competitive with imported gasoline. Policies need also to be aligned . Innovation support through early research and development is undermined by an absence of support for their demonstration to potential investors and their subsequent deployment in potential markets. Policies to support innovations in low-carbon technologies are undermined by subsidies to support carbon-intensive technologies. Fuel efficiency standards that set minimum (static) efficiency floors fail to stimulate continuous technological advances, meaning innovations in efficiency stagnate once standards are reached. As a further example of misalignment, the lack of effective policies to limit the demand for mobility mean efficiency improvements can be swamped by rising activity levels. Policies should support a wide range of technologies. However seductive they seem, “silver bullets” do not exist without the benefit of hindsight. Innovation policies should use a portfolio approach under a risk-hedging and “insurance policy” decision-making paradigm. Portfolios need to recognize also that innovation is inherently risky. Failures vastly outnumber successes. Experimentation, often for prolonged periods (decades rather than years), is critical to generate the applied knowledge necessary to support the scaling up of innovations to the mass market. The whole energy system should be represented in innovation portfolios, not only particular groups or types of technologies; the entire suite of innovation processes should be included, not just particular stages or individual mechanisms. Less capital-intensive, smaller-scale (i.e., granular ) technologies or projects are less of a drain on scarce resources, and failure has less serious consequences. Granular projects and technologies with smaller scales (MW rather than GW) therefore should figure prominently in any innovation portfolio. Finally, public technology policy should not be beholden to incumbent interests that favor support for particular technologies that either perpetuate the lock-in of currently dominant technologies or transfer all high innovation risks of novel concepts to the public sector

From laggard to leader: explaining offshore wind developments in the UK

Offshore wind technology has recently undergone rapid deployment in the UK. And yet, up until recently, the UK was considered a laggard in terms of deploying renewable energy. How can this burst of offshore wind activity be explained? An economic analysis would seek signs for newfound competitiveness for offshore wind in energy markets. A policy analysis would highlight renewable energy policy developments and assess their contribution to economic prospects of offshore wind. However, neither perspective sheds sufficient light on the advocacy of the actors involved in the development and deployment of the technology. Without an account of technology politics it is hard to explain continuing policy support despite rising costs. By analysing the actor networks and narratives underpinning policy support for offshore wind, we explain how a fairly effective protective space was constructed through the enroling of key political and economic interests

Exploring the Green Premium: A Hedonic Pricing Study on House Prices in Municipalities Adjacent to Färnebofjärden and Tyresta National Parks

MSc in EconomicsThis thesis conducts a hedonic pricing model with multiple regression analysis to examine the relationship between proximity to Färnebofjärden and Tyresta National Parks and house prices in adjacent municipalities between 2019 and 2020. The literature reviewed indicates a positive correlation, but it has various gaps which our thesis addresses. By utilising a theoretical framework on hedonic theory, walkability and total economic valuation we find a statistically significant relationship between proximity to national parks and house prices, which is homogenous between the parks. Specifically, we find a non-linear relationship and that willingness to pay for proximity to national parks is significantly dependent on the housing type. Furthermore, this thesis contributes to the field by providing evidence of a significant correlation and showing that environmental and urban attributes have implicit prices for housing. The identification of a non-linear relationship and housing type specifics adds depth to the understanding of this complex dynamics. In addition, to our knowledge this is the first study exploring how proximity to national parks impact house prices in Sweden. These findings have practical implications for homeowners, policymakers, and real estate developers in guiding decisions related to housing development, urban planning, and conservation efforts, ensuring sustainable and desirable living environments. Overall, this study enhances our understanding of the interplay between proximity to national parks, house prices, and housing type

Development and demonstration of 2D-LIF for studies of mixture preparation in SI engines

Laser-induced fluorescence (LIF) has been developed for visualization of fuel distribution fields in an operating spark-ignition (SI) engine. Since the standard research fuel iso-octane, does not yield a useful LIF signal a fluorescent additive was used. None of the commonly used seeds were found adequate. A seed not commonly used in this context, 3-pentanone, C2H5COC2H5, was chosen due to favorable vaporization characteristics and fluorescent properties. Results from preparatory investigations in the actual engine environment are presented and related laboratory data are discussed. The two-dimensional LIF technique was applied to a spark-ignition engine and the fuel distribution at the ignition time was recorded. The resulting images were processed and converted into fuel/air equivalence ratio using an in situ calibration technique. The processed fuel distribution maps presented a noise level of 10% and a systematic error not exceeding 0.03 fuel/air equivalence units. An increased combustion variability was observed when changing from a homogeneous to an inhomogeneous fuel/air mixture. Correlations of image data to the combustion development indicated that the increased cyclic variability could be largely explained by variations in the mean fuel concentration around the spark gap. The initial flame development therefore seems to be controlled by the average amount of fuel near the spark gap, whereas the actual distribution of the fuel within this volume is of less importance

Policy Instruments for Energy Efficiency in Buildings: Experiences and Lessons from the Nordic Countries

The Nordic countries have often been seen as “fore-runners” of energy efficiency in buildings – in both the implementation of policy instruments and the evaluation of effects. Since the 1970s, the Nordic countries have introduced a range of policy instruments for energy conservation in buildings. The choice of instruments and experiences, however differs between countries. The aim of this study is to review policy instruments for energy efficiency in buildings in the Nordic countries as well as to analyse how to advance related learning processes. The study discusses traditional and innovative policy instruments, organisational matters, and policy evaluations. An overall observation from this study is that Sweden is “slowing down” its energy efficiency activities in the building sector, while Denmark, Finland and Norway are all “speeding up”. Denmark is leading the way on implementing policy instruments, which are long-term, strategic, innovative and well-supported by the organisational structure. This study also concludes that energy efficiency often lacks influential organisations to “drive” efforts forwards – in terms of information, networking, research and innovation. Finally, there is often no strategic approach to evaluations in the Nordic countries with a focus on how to improve learning

Apples, oranges, and consistent comparisons of the temporal dynamics of energy transitions

Benjamin Sovacool (2016) has provided interesting food for thought in asking “how long will it take?” for the unfolding of energy transitions. Historical evidence of “grand” or global energy system transitions taking decades to centuries to unfold contrasted with highly selective recent and rapid examples of mostly incremental technological change make for an engaging argument. But the observed contrasts are due to the apples-and-oranges comparison between transitions that are measured differently, defined differently, characterized by different processes, and explained differently