November 30, 2017 Remarks on the global landscape on energy R&I Bratislava, CEEC-10 th Anniversary of SET Plan University of Cambridge Laura Diaz Anadon Professor of Climate Change Policy University of Cambridge Bye-fellow, Peterhouse Belfer Center for Science & International Affairs, Harvard Kennedy School
Questions for policy to advance innovation in energy Increased investments in energy RD&D over the past 15 years globally due to increased realization of importance of multiple missions in the energy space - The questions are how much, on what, and how? [On the how much, analysis suggests much more is granted] On the on what, competition and the history of new energy industries suggests that a technology black box approach will not work On the how, there has been a lot of experimentation around the world, opportunities for collaboration 2
International landscape Changing inputs: e.g. R&D intensity EU28 average at just under 2%, surpassed by China around 2011 USA: 2.8% Germany: 2.9% UK just announced (Monday) goal to raise number to 2.4% by 2027 (now 1.7%) OECD Science, Technology & Innovation Indicators (2017) 3
International landscape Changing outputs: e.g., publications Share of global publications 1981 1991 2001 2011 China 0.3% 1.3% 3.5% 10.3% USA 40.6% 35.2% 26.1% 20.4% Most deployment is also not in OECD countries any more Siddiqi, Stoppani, Anadon, Narayanamurti (2016), PLoSONE 4
Global landscape on energy R&I is part of this trend OECD countries investing more in public ERD&D than 10 years ago USD 16.6 billion $2016 PPP, compared to about 10 billion in 2000 (down from the peak of around 19 billion in 2012) (IEA, 2017) UK announced in October its clean growth plan to invest 2.5 billion GBP in low carbon innovation China improving the management of its National Labs, State Labs and Institutes (over 1000, about 16% on energy) - also creating much larger Labs 5
Just a bit more on the plans for Labs (October 2016) One of them in Beijing to cost 1.5 bn USD 6
International landscape Mission Innovation In late 2015 22 countries pledged to double energy RD&D investments from 15 billion to 30 in 2022 US contribution in question Anadon, Gallagher, Holdren (2017). Nature Energy 7
International competition Emergence of industries in second mover countries has different histories China is now the largest manufacturer and market for wind power and solar PV But this happened very differently And at very different paces 8
Cumulative wind capacity additions (GW) Wind power development in China Specific central government policies since mid 1980s Formative stage Growth stage 80 CHINA Pre-commercialization Early commercialization GW Commercialization Widespread diffusion 60 40 20 0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Resource & Technology Availability Financing Availability Project Implementation Risk Grid & Transmission Risk Counterparty Risk Power Market Risk Fiscal-based Returns Price-based Returns Quantity-based Returns Risks Returns 1985.5 1986 1987.5 1988 1989.5 1990 1991.5 1992 1993.5 1994 1995.5 19961997.5 19981999.5 20002001.5 20022003.5 20042005.5 2006 2007.5 20082009.5 20102011.5 2012 First demonstration project Double Increase, Ride the Wind, National Debt Wind Power Program Concession Projects CDM Renewable Energy Law Surana & Anadon (2015) Global Environmental Change 9
% of global manufactruing capacity Was the solar PV story similar to that of wind? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% China Other Asia ROW United States Germany Japan China China s share of global PV manufacturing went from negligible to 50% in 5 years Binz & Anadon (2017). Forthcoming 10
Central policies for solar did not play a role in the emergence of domestic manufacturing Transnational entrepreneurs mobilized the global resources to build a manufacturing industry in China Central policies only emerged after, local generic policies and capabilities central Binz & Anadon (2017). Forthcoming 11
China is moving fast on Li-ion batteries All else being equal, the upside for industrialized countries may be bigger for technologies that are more likely to be like wind turbines than solar PV panels Bloomberg (July 2017) 12
Case for international collaboration International cooperation can accelerate innovation beyond the capabilities (scientific and otherwise) of a single nation and can facilitate access to markets Pooling costs enables projects of greater scale, lessens duplication Types of collaboration: loosely coordinated pledges for domestic actions (e.g., MI) shared platforms for technology development, such as the International Energy Agency s (IEA) Technology Collaboration Programmes integrated cooperative RD&D, such as ITER, parts of the US-China Clean Energy Center But the third type is hard, it requires a lot of ex ante negotiation and planning (and high-level political support) 13
International landscape Changing (or novel) institutions A lot of experimentation over the past 15 years UK: - 2001, UK Carbon Trust - 2004, UK Energy Research Center - 2008/2011 International Climate Fund - 2008/2014- Technology Strategy Board/Innovate UK - 2011- Catapults USA: - 2008-, Energy Frontier Research Centers - 2009-, ARPA-E - 2009-, Energy Innovation Hubs - 2015-, Cyclotron Road 14
Summary Countries, technologies and markets are moving quickly, competition is strong Not everyone will be able to benefit from mission-oriented public investments in everything, so strategic investments are key A lot of experimentation and evaluation (new data) means we know more about how to improve effectiveness International collaboration is very hard, but it is worth doing more 15
Thank you for your attention! Questions? I would like to thank all my co-authors in various pieces of work mentioned and funders Further ongoing work in the area of what policies work funded under H2020 program, INNOPATHS lda24@cam.ac.uk This project has received funding from the European Union's Horizon 2020 research and innovation programme under grant agreement No 730403
17
18
Market share of manufacturer Market share of manufacturer Outcomes in manufacturing for China and India 100% 80% 60% 40% 20% Formative stage Pre-commercialization Early commercialization CHINA foreign manufacturers Growth stage Commercialization Widespread diffusion domestic manufacturers 0% 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 % Domestic %JV %Foreign Formative stage Growth stage 100% 80% 60% 40% 20% INDIA Early commercialization joint ventures Commercialization Widespread diffusion foreign manufacturers domestic manufacturers 0% 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 % Domestic %JV % Foreign Surana & Anadon (2015) Global Environmental Change 19
Cumulative wind capacity additions (GW) Comparative case studies Wind power policies in India Formative stage Growth stage 20 Pre-commercialization INDIA Early commercialization Commercialization Widespread diffusion 15 10 5 0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Resource & Technology Availability Financing Availability Project Implementation Risk Grid & Transmission Risk Counterparty Risk Power Market Risk Fiscal-based Returns Price-based Returns Quantity-based Returns Risks Returns 1985.5 1987.5 1989.5 1991.5 1993.5 1995.5 1997.5 1999.5 2001.5 2003.5 2005.5 2007.5 2009.5 2011.5 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 First demonstration project Guidelines for grid-connected wind power; Income tax rules MAT Technology Upgradation Front National Electricity Policy; CDM Generation Based Incentives Same sequence, more laissez faire, in commercialization phase, but addressed grid risk earlier Surana & Anadon (2015) Global Environmental Change 20
Experimentation gives us some evidence to propose guiding principles for what to do E.g., Give researchers autonomy and influence over funding decisions Anadon, Chan, Bin-Nun, Narayanamurti (2016) Nature Energy 21
Annual wind capacity additions (GW) % wind in annual electricity capacity additions Annual wind capacity additions (GW) % wind in annual electricity capacity additions Wind power deployment in China and India Formative stage Growth stage 20 Pre-commercialization Early commercialization Commercialization Widespread diffusion 20% CHINA GW % 18% 15 16% 14% 12% 10 10% 8% 5 6% 4% 2% 0 0% 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Formative stage Growth stage Pre-commercialization Early commercialization Commercialization Widespread diffusion 4 INDIA GW % 3 2 1 0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Surana & Anadon (2015) Global Environmental Change 22
Lab- (as opposed to HQ-) controlled funds are more productive at the margin in tech transfer terms Anadon, Chan, Bin-Nun, Narayanamurti (2016), Nature Energy 23
Lab- (as opposed to HQ-) controlled funds are more productive at the margin in tech transfer terms Lab directed funds have decreased twice recently and are productive Increase LDRD at the margin, further facilitate private sector interaction, and new contracting approaches CRENEL and SEAB (2016) reports also made LDRD recommendations Anadon, Chan, Bin-Nun, Narayanamurti (2016), Nature Energy 24
Increased demands for results (less tolerance to uncertainty) can result in vicious circle From interviews and data analysis we posit that there is a vicious circle of congressional demands for short-term results, increased admin, less risk taking, less results, which leads to more demands for results Enable more fluid interaction of researchers with private sector and break down stovepipes Anadon, Chan, Bin-Nun, Narayanamurti (2016), Nature Energy 25
1. Methods Techno-economic modelling, optimization (Monte Carlo, ADP), LCA, GIS Forward-looking Nature Energy, Energy Policy, ES&T, Renewable and Sustainable Energy Reviews, Ecological Economics, Journal of Env. Management, PNAS (under rev.) Econometrics (program evaluation), network analysis Backward-looking Expert elicitations, group discussion, surveys Forward-looking ES&T, Climatic Change, Cambridge University Press book, Environmental Research Letters, Energy, Review of Environmental Economics & Policy (under review) Individual and comparative case studies Backward-looking Risk Analysis, Energy Economics, Energy Policy, PLoSONE, Technological Forecasting & Social Change, Gerlach Press book, Strategic Management Journal (under review) PNAS, Global Environmental Change, Research Policy, Nature Energy, Sustainable Production and Consumption, Organization Science (under review) 26
3A. Drivers of Chinese wind power underperformance Underperformance not accounted for in policies & plans Data source / estimate Year Installed capacity [GW] Capacity factor [%] Wind power as % [%] Actual generation 2014 114.9 15.2 2.7 (NEA, 2015) IRENA (2014) 2030 501 25.2 13.2 IEA / ERI (2011) 2050 1,000 25.2 17 NDRC ERI (2015) 2050 2,400 25.4 35.2 WWF (2014) 2050 1,374 29.2 29.4 McElroy et al. (2009) N.A. 640 30.0 N.A. If policies do not change, neither will the capacity factor Huenteler, Chan, Tang & Anadon (2017). Under review 27
3A. Drivers of Chinese wind power underperformance Mixed-methods approach Development of database for all wind farms (64,000 turbines, >1,000 wind farms) with wind quality data (hourly for 8 years), as well as grid data Development and application of a comprehensive assessment framework Semi-structured expert interviews (e.g., NDRC, ERI, CDM board, CWEA) Huenteler, Chan, Tang & Anadon (2017). Under review 28
3B. Integrating uncertainty into public energy R&D Developing and implementing analytical approach Public energy R&D is a key policy tool to meet the Paris Agreement goals and the SDGs Managing uncertainty and technological complementarity & substitutability is critical for robust and cost-effective climate policy Anadon, Baker & Bosetti (2017). Nature Energy 29
R&D as % of total investment in solar 3B. Integrating uncertainty into public energy R&D Results on robust R&D portfolios & R&D vs. deployment The greater the climate policy stringency the larger % of R&D budget to storage, CCS and vehicles (robust to different models, assumptions) The lower the R&D budget the larger the % of R&D for solar and lower for CCS Decision framework ~ 1.1% in the USA Anadon, Baker & Bosetti (2017). Nature Energy 30
3C. Evaluating public climate/energy programs We are beginning to have evidence about impacts level of risk Basic Energy Sciences EFRCs Innovation Hubs ARPA-E Applied R&D programs; National Laboratories Large Scale Demonstrations Industry grants & partnerships Loan Guarantee Program Standards, Tax credits, etc. Basic Research Development Demonstration Commercialization Diffusion development stage Anadon, Bunn, Narayanamurti (2014). Cambridge University Press. 31
3C. Evaluating public climate/energy programs More funds for admin linked with less low-carbon tech. From interviews and data analysis we found that there was a vicious circle of congressional demands for short-term results, increased admin, less risk taking, less results, leading to more demands for results Anadon, Chan, Bin-Nun, Narayanamurti (2016), Nature Energy 32
3C. Evaluating public climate/energy programs Network analysis of US cleantech startup partners Circles indicate different actors: start-ups (black); established firms, universities, research institutes, etc. (grey). Lines indicate relationships: technology (dark blue); licensing (red); market, project development (light blue) Doblinger, Surana & Anadon. (2017) Under review 33
Energy-related CO 2 emissions 1. Important role of China and India IEA (2015) With the exception of hydropower, wind is the largest source of renewable electricity China has 31% (115 GW) and India 6% (22 GW) of total 370 GW wind GWEC (2015) 34
Percentage share Average turbines per owner Percentage share Average turbines per owner 3. Different outcomes in wind farm structure and scale Formative stage Growth stage 100% Pre-commercialization CHINA Early commercialization Commercialization Widespread diffusion 1000 80% 800 60% 600 40% 400 20% 200 0% 0 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Concentration ratio - CR5 (%) Private sector (%) Turbines per owner (weighted by turbine market share) Formative stage Growth stage 100% INDIA Early commercialization Commercialization Widespread diffusion 100 80% 80 60% 60 40% 40 20% 20 0% 0 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Concentration ratio - CR5 (%) Private sector (%) Turbines per owner (weighted by turbine market share) Larger farms, higher concentration ratio, and less private sector in China Surana & Anadon (2015) Global Environmental Change 35
Cumulative wind capacity additions (GW) 2. Previous work (II): comparison of wind power policies and outcomes in China and India Formative stage Growth stage 80 CHINA Pre-commercialization Early commercialization GW Commercialization Widespread diffusion 60 40 20 0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Resource & Technology Availability Financing Availability Project Implementation Risk Grid & Transmission Risk Counterparty Risk Power Market Risk Fiscal-based Returns Price-based Returns Quantity-based Returns Risks Returns 1985.5 1986 1987.5 1988 1989.5 1990 1991.5 1992 1993.5 1994 1995.5 19961997.5 19981999.5 20002001.5 20022003.5 20042005.5 2006 2007.5 20082009.5 20102011.5 2012 First demonstration project Double Increase, Ride the Wind, National Debt Wind Power Program CDM Concession Projects Renewable Energy Law Risks addressed by policy over time: technology, financing/project, counterparty, grid transmission Surana & Anadon (2015) Global Environmental Change 36
Cumulative wind capacity additions (GW) 3.3 Focus of wind power policies in India Formative stage Growth stage 20 Pre-commercialization INDIA Early commercialization Commercialization Widespread diffusion 15 10 5 0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Resource & Technology Availability Financing Availability Project Implementation Risk Grid & Transmission Risk Counterparty Risk Power Market Risk Fiscal-based Returns Price-based Returns Quantity-based Returns Risks Returns 1985.5 1987.5 1989.5 1991.5 1993.5 1995.5 1997.5 1999.5 2001.5 2003.5 2005.5 2007.5 2009.5 2011.5 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 First demonstration project Guidelines for grid-connected wind power; Income tax rules Same sequence, more laissez faire, in commercialization phase, but addressed grid risk earlier MAT Technology Upgradation Front National Electricity Policy; CDM Generation Based Incentives Surana & Anadon (2015) Global Environmental Change 37
1. Many policies can shape the pace and direction of innovation Reducing cost of innovating: Increasing the supply of knowledge Technology-Push Policies RD&D policy: - Federal/state RD&D funding - Public-Private partnerships for demonstration projects - R&D tax credits - International cooperation in RD&D, etc. Education policy to improve and expand the labor force Technology Innovation Increasing payoff to innovators: Increasing the demand for innovation Market-Pull Policies Price incentives - Direct spending (rebates) - Government procurement - Tax-related subsidies - Loan guarantees - Intellectual property, etc. Standard-based policies - Performance standards - Interconnection standards - Portfolio standards, etc. - Market-based policies - Cap and trade - Charge systems, etc. Adapted from Mowery and Rosenberg (1979) and Anadon and Holdren (2009) 38
2. Different outcomes in wind farm structure owners CLP, 2% Longyuan, 15% Tata, 2% Datang, 12% IL&FS, 2% Green Infra, 2% Others, 90% Hindustan Zinc, 2% Others, 47% Huaneng, 12% Guodian, 7% Huadian, 7% Figure 5: Market share of the top five wind-farm owners or investors for cumulative capacity installed in China and India (cumulative through 2012). Source: Own calculations from (CECL, 2013; Huaxia Wind, 2013). 39