Keith Smith, Imperial College, London. Transition to Renewables – Innovation and Policy Issues Globelics, Copenhagen, 4-5 April 2013

11. april 2011Ny Powerpoint mal Adoption and sustainability There is a view that the basic problem is to encourage adoption of available renewable energy technologies. There is a range of fundamental policy problems in this that must be approached in an integrated way Background: the problem really is at least as serious as Erlich suggests.

Core RETs problems If we are going to have large-scale RETS systems, then we must address: Efficiency improvements via incremental innovation Transition costs and the fallacies of ‘green growth’ Intermittency and backup technologies Supply constraints, the long-term investment profile and industrial capacity Long-term radical innovation in energy carriers Grids and transmission systems Multilateral collaboration instruments 11. april 2011Ny Powerpoint mal 20114

Incrementaly improving RETS efficiency Cost differentials and need for post- introduction improvements via innovation policy support Technological improvements are system issues, so systems policies needed History of technology suggests this is a long- term issue 11. april 2011Ny Powerpoint mal 20115

Intermittency and backup A large-scale RETS-based system would require an on-demand backup. Short-run: nuclear and natural gas? Big short-run task – move away from coal. Costs of the ‘take or pay’ system Long-run: a new technology based either on storage or a new solar technology 11. april 2011Ny Powerpoint mal 20116

Industrial Policy The scale of production increases is very large. For renewable, roughly 10% CAGR is needed every year for 70 years. Major investment costs: with K/Y ratio of 3, we would be investing very large proportion of GDP over time This only feasible with serious cost-reducing innovation No industry has every grown at these rates for such a period 11. april 2011Ny Powerpoint mal 20117

Costs of ‘green growth’ ‘Green growth’ widely promoted in OECD, IEA etc Simultaneous solution to recession and environmental constraints But at present this would entail major GDP and welfare costs: what are political implications of this? The implication for innovation policy is that we need long-range radical innovation in energy carriers 11. april 2011Ny Powerpoint mal 20118

Radical energy innovation Tasks: Governance Define search paths Create organisations Capability building Finance Distribute benefits Implementation 11. april 2011Ny Powerpoint mal 20119

System transitions Recent theory stresses system transitions often in the presence of lock-in and path dependence. Does not deny the economic dimensions, but looks at the complex of changes that secure economic viability These include changes in infrastructure, training, complementary assets and regulatory frameworks. 11. april 2011Ny Powerpoint mal

States and system transitions State action has played significant roles in many system transitions: Rail – compulsory purchase of land, massive city reconfigurations Automobiles – highways, regulatory systems Generally – creation of networks and infrastructures, management of risk (reduction, allocation, sharing, bearing) 11. april 2011Ny Powerpoint mal

Governance Why are states so often involved? States are unique in governance systems because they can compel compliance. Within system transitions there are domains of state action that need more detailed work – not just in development of technologies but in procurement, regulation etc. 11. april 2011Ny Powerpoint mal

Multilateral collaboration Three dimensions: Creation of major technical interdependencies – energy transmisssion across countries, with big implications for energy security -Collaborative search is necessary because of scale, risks, etc. Issues of finance, priority selection, IPRs, capability building, access. -At present, no institutional framework for this -A possible approach: Ostrom on common property resources 11. april 2011Ny Powerpoint mal