The case for a new energy research,development and promotion policy for the UK

This paper is a critical assessment of the current balance of efforts towards energy research and development (R&D) and the promotion of low-carbon electricity technologies in the UK. We review the UK's main technological options and their estimated cost ranges in the medium term. We contrast the energy R&D spending with the current and expected future cost of renewable promotion policies and point out the high cost of carbon saving through existing renewable promotion arrangements. We also note that liberalisation of the electricity sector has had significant implications for the landscape of energy R&D in the UK. We argue that there is a need for reappraisal of the soundness and balance of the energy R&D and renewable capacity deployment efforts towards new energy technologies. We suggest that the cost-effectiveness of UK deployment policies needs to be more closely analysed as associated costs are non-trivial and expected to rise. We also make a case for considering increasing the current low level of energy R&D expenditure. Much of energy R&D is a public good and we should consider whether the current organisation of R&D effort is fit for purpose. We argue that it is important to build and maintain the research capability in the UK in order to absorb spillovers of technological progress elsewhere in the world. Against this background, the recent signs that an energy R&D renaissance could be underway are therefore positive and welcome.     

Comparing push and pull measures for PV and wind in Europe

Successful technological innovation frameworks are based on synergistic packages of technology-push and demand-pull measures. As the massive deployment of premature renewable energy technologies risks becoming very expensive, the debate on the optimal trajectory of renewable technologies should explicitly consider the balance between deployment incentives and R&D efforts.This paper explores this balance regarding wind and PV technology support in Europe. Based on rather conservative estimates, we calculate future deployment costs and compare these figures to the current public investments in PV and wind R&D. We find that, today, for each Euro spent on R&D to develop future technologies, 35 to 41 Euros are spent on the deployment of existing technologies. Furthermore, private PV and wind technology companies tend to underinvest in R&D for various reasons. In an alternative scenario, we assess the optimal R&D efforts for the PV and wind sectors based on a 7% R&D-to-sales benchmark that is typical for engineering sectors. If public R&D efforts would increase according to this benchmark, and hence compensate for the private underinvestments in R&D, pull/push ratios between 6 and 8 could be achieved. This leads us to conclude that the current balance between deployment and R&D is far from optimal.     

The value of technological advance in decarbonizing the U.S. economy

This paper examines the role of technology in managing the costs of a carbon constraint on the U.S. economy. Two portfolios of technology are examined. One reflects modest investments in climate-friendly technologies, the other more aggressive development. The analysis indicates that the development of a broad range of low- to zero-carbon emitting technologies can substantially reduce (but not eliminate) the economic cost of decarbonization. By enabling large-scale emission reductions on the supply-side, costly reductions in demand are avoided. In particular, the emergence of electricity as a low-carbon fuel provides a powerful lever for achieving reductions in other sectors of the economy at lower cost. While the analysis suggests that there is no “free lunch,” the bill, which may indeed be well worth paying, can be greatly reduced through an accelerated R&D program and successful diffusion of new technology throughout the economy.     

The diffusion of renewable electricity in the presence of climate policy and technology learning: The case of Sweden

The overall objective of this paper is to analyze the impact of climate policy and technology learning on future investments in the Swedish power sector. Methodologically we assess the lifetime engineering costs of different power generation technologies in Sweden, and analyze the impact of carbon pricing on the competitive cost position of these technologies under varying rate-of-return requirements. We also argue that technological learning in the Swedish power sector – not the least in the case of wind power – is strongly related to the presence of international learning and R&D spillovers, and for this reason capacity expansions abroad have important influences of the future cost of power generation in Sweden. The results suggest that renewable power will benefit from existing EU climate policy measures, but overall additional policy instruments (e.g., green certificate schemes) are also needed to stimulate the diffusion of renewable power. Moreover, under a recent European Commission scenario and using estimated learning rates for wind power and the combined cycle gas turbine (CCGT), wind power gains considerable competitive ground due to international technology learning impacts. These latter results are, however, very sensitive to the assumed learning-by-doing rates for wind power and CCGT, respectively.     

Future costs of key low-carbon energy technologies: Harmonization and aggregation of energy technology expert elicitation data

In this paper we standardize, compare, and aggregate results from thirteen surveys of technology experts, performed over a period of five years using a range of different methodologies, but all aiming at eliciting expert judgment on the future cost of five key energy technologies and how future costs might be influenced by public R&D investments. To enable researchers and policy makers to use the wealth of collective knowledge obtained through these expert elicitations we develop and present a set of assumptions to harmonize them. We also aggregate expert estimates within each study and across studies to facilitate the comparison. The analysis showed that, as expected, technology costs are expected to go down by 2030 with increasing levels of R&D investments, but that there is not a high level of agreement between individual experts or between studies regarding the technology areas that would benefit the most from R&D investments. This indicates that further study of prospective cost data may be useful to further inform R&D investments. We also found that the contributions of additional studies to the variance of costs in one technology area differed by technology area, suggesting that (barring new information about the downsides of particular forms of elicitations) there may be value in not only including a diverse and relatively large group of experts, but also in using different methods to collect estimates.     

Econometric analysis of the R&D performance in the national hydrogen energy technology development for measuring relative efficiency: The fuzzy AHP/DEA integrated model approach

Hydrogen energy technology can be one of the best key players related to the sector of the United Nations Framework Convention on Climate Change (UNFCCC) and the hydrogen economy. Comparing to other technologies, hydrogen energy technology is more environmentally sound and friendly energy technology and has great potential as a future dominant energy carrier. Advanced nations including Korea have been focusing on the development of hydrogen energy technology R&D for the sustainable development and low carbon green society. In this paper, we applied the integrated fuzzy analytic hierarchy process (Fuzzy AHP) and the data envelopment analysis (DEA) for measuring the relative efficiency of the R&D performance in the national hydrogen energy technology development. On the first stage, the fuzzy AHP effectively reflects the vagueness of human thought. On the second stage, the DEA approach measures the relative efficiency of the national R&D performance in the sector of hydrogen energy technology development with economic viewpoints. The efficiency score can be the fundamental data for policymakers for the well focused R&D planning.     

U.S. energy research and development: Declining investment,increasing need,and the feasibility of expansion

Investment in energy research and development in the U.S. is declining despite calls for an enhancement of the nation's capacity for innovation to address environmental, geopolitical, and macroeconomic concerns. We examine investments in research and development in the energy sector, and observe broad-based declines in funding since the mid-1990s. The large reductions in investment by the private sector should be a particular area of concern for policy makers. Multiple measures of patenting activity reveal widespread declines in innovative activity that are correlated with research and development (R&D) investment—notably in the environmentally significant wind and solar areas. Trends in venture capital investment and fuel cell innovation are two promising cases that run counter to the overall trends in the sector. We draw on prior work on the optimal level of energy R&D to identify a range of values which would be adequate to address energy-related concerns. Comparing simple scenarios based on this range to past public R&D programs and industry investment data indicates that a five to ten-fold increase in energy R&D investment is both warranted and feasible.     

Going electric: Expert survey on the future of battery technologies for electric vehicles

The paper describes the results of a survey carried out with leading EU experts on the future costs of batteries for electric and plug-in hybrid vehicles and the uncertainty surrounding them. Battery costs are one of the main components in the overall costs of EVs and improvements could be brought about by increased investments in research, development and demonstration (RD&D). Experts' judgements are collected to shed light on the inherently uncertain relationship between RD&D efforts and the consequent technical progress in batteries. The analysis of the experts' data results in a number of important policy recommendations to guide future RD&D choices and target commitments both for the EU and its member states.     

Prioritizing the weights of hydrogen energy technologies in the sector of the hydrogen economy by using a fuzzy AHP approach

KIER, government supported research institute, establishes a long-term strategic energy technology development roadmap essentially with selection and specialization of energy technology R&D and for Korea's national security. In this paper, we establish a strategic hydrogen energy technology roadmap taking economic impact, commercial potential, inner capacity, and technical spin-off into account. We suggest a methodology to prioritize the relative weights of hydrogen energy technologies of hydrogen energy technology roadmap (ETRM) as we allocate R&D budget effectively using a fuzzy analytic hierarchy process (AHP), which reflects the vagueness of human thoughts instead of crisp numbers efficiently. In the sector of the hydrogen ETRM which is composed of 6 hydrogen energy technologies, PEMFC technology is the most preferred and technology (0.29), followed by DEFC tech (0.28), SOFC tech (0.24), Hydrogen separation & storage tech (0.10), and Hydrogen production tech (0.09).     

Measuring the relative efficiency of hydrogen energy technologies for implementing the hydrogen economy: An integrated fuzzy AHP/DEA approach

To provide and improve national energy security and low-carbon green energy economy, as a government-supported research institute related to developing new and renewable energy technologies, including energy efficiency, Korea Institute of Energy Research (KIER) needs to establish a long-term strategic energy technology roadmap (ETRM) in the hydrogen economy sector for sustainable economic development. In this paper, we establish a strategic ETRM for hydrogen energy technologies in the hydrogen economy considering five criteria: economic impact (EI), commercial potential (CP), inner capacity (IC), technical spin-off (TS), and development cost (DC). As an extended research, we apply the integrated two-stage multi-criteria decision-making approach, including the hybrid fuzzy analytic hierarchy process (AHP) and data envelopment analysis (DEA) model, to assess the relative efficiency of hydrogen energy technologies in order to scientifically implement the hydrogen economy. Fuzzy AHP reflects the vagueness of human thought with interval values, and allocates the relative importance and weights of four criteria: EI, CP, IC, and TS. The DEA approach measures the relative efficiency of hydrogen energy technologies for the hydrogen economy with a ratio of outputs over inputs.The result of measuring the relative efficiency of hydrogen energy technologies focuses on 4 hydrogen technologies out of 13 hydrogen energy technologies. KIER has to focus on developing 4 strategic hydrogen energy technologies from economic view point in the first phase with limited resources. In addition, if energy policy makers consider as some candidates for strategic hydrogen technologies of the other 9 hydrogen energy technology, the performance and productivity of 9 hydrogen energy technologies should be increased and the input values of them have to be decreased.With a scientific decision-making approach, we can assess the relative efficiency of hydrogen energy technologies efficiently and allocate limited research and development (R&D) resources effectively for well-focused R&D.     

Technological innovation in the energy sector: R&D,deployment, and learning-by-doing

Technological innovation is fundamental for rendering the energy economy cleaner and more efficient with concomitant economic, developmental, and environmental benefits. This paper discusses aspects of R&D and ‘learning-by-doing,’ the main contributors to technological change that are complementary yet inter-linked. The relationship between the level of national energy R&D investments and changes in the trajectory of the country's energy system is complex; targeted efforts to promote deployment of new energy technologies play a major role in translating the results of R&D activities to changes in the energy system. Learning-by-doing is an important element of deployment, but it remains largely poorly understood. Hence this phenomenon needs to be ‘unpacked’ and its various aspects analyzed in detail, so as to allow better design of early deployment efforts to enhance learning gains. This paper highlights how public R&D and deployment efforts must work in tandem to expand the portfolio, and realize the potential, of new and improved energy technologies.     

Impact of energy technology patents in China: Evidence from a panel cointegration and error correction model

Enhancing energy technology innovation performance, which is widely measured by energy technology patents through energy technology research and development (R&D) activities, is a fundamental way to implement energy conservation and emission abatement. This study analyzes the effects of R&D investment activities, economic growth, and energy price on energy technology patents in 30 provinces of China over the period 1999–2013. Several unit root tests indicate that all the above variables are generated by panel unit root processes, and a panel cointegration model is confirmed among the variables. In order to ensure the consistency of the estimators, the Fully-Modified OLS (FMOLS) method is adopted, and the results indicate that R&D investment activities and economic growth have positive effects on energy technology patents while energy price has a negative effect. However, the panel error correction models indicate that the cointegration relationship helps to promote economic growth, but it reduces R&D investment and energy price in the short term. Therefore, market-oriented measures including financial support and technical transformation policies for the development of low-carbon energy technologies, an effective energy price mechanism, especially the targeted fossil-fuel subsidies and their die away mode are vital in promoting China's energy technology innovation.     

R&D investment strategy for climate change

The economic costs of stabilizing greenhouse gas concentrations over the coming century depend critically on the development of new technologies in the energy sector. Our research and development (R&D) investment strategy is the control variable for technology availability. This paper proposes an analytic framework for determining optimal R&D investment allocation and presents some numerical results to demonstrate the implementation of the methodology. The value of technological advance in three targeted areas–fossil-based generation, renewables, and carbon capture and storage–is represented by the increase in expected welfare in the presence of an emissions policy constraint of initially uncertain stringency. R&D expenditure increases the probability of advance. Optimal investment is determined by its relationship with success probability, which is assumed to exhibit decreasing returns to scale, relative to the value of success. While the numerical results are speculative, the paper offers insights into the nature of an optimal technology strategy for addressing climate change.     

Technologies and policies for the transition to a sustainable energy system in china

The paper highlights the energy dilemma in China’s modernization process. It explores the technological and policy options for the transition to a sustainable energy system in China with Tsinghua University’s Low Carbon Energy Model (LCEM). China has already taken intensive efforts to promote research, development, demonstration and commercialization of sustainable energy technologies over the past five year. The policy actions cover binding energy conservation and environmental pollution control targets, economic incentives for sustainable energy, and public R&D supports. In order to achieve the sustainable energy system transformation eventually, however, China needs to take further actions such as strengthening R&D of radically innovative sustainable energy technologies and systems such as poly-generation, enhancing the domestic manufacturing capacity of sustainable energy technologies and systems, creating stronger economic incentives for research, development, demonstration and commercialization of sustainable energy technologies, and playing a leading role in international technology collaborations.     

International energy R&D spillovers and the economics of greenhouse gas atmospheric stabilization

It is now widely recognized that technological change will play a substantial role in reducing GHG emissions without compromising economic growth; hence, any better understanding of the process of technological innovation is likely to increase our knowledge of mitigation possibilities and costs. This paper explores how international knowledge flows affect the dynamics of the domestic R&D sector and the main economic and environmental variables. The analysis is performed using WITCH, a dynamic regional model of the world economy, in which energy-related technological change is endogenous. The focus is on disembodied energy R&D international spillovers. The knowledge pool from which regions draw foreign ideas differs between High Income and Low Income countries. Absorption capacity is also endogenous in the model. The basic questions are as follows. Do knowledge spillovers enhance energy-related technological innovation in different regions of the world? Does the speed of innovation increase? Or do free-riding incentives prevail and international spillovers crowd out domestic R&D efforts? What is the role of domestic absorption capacity and of policies designed to enhance it? Do greenhouse gas stabilization costs drop in the presence of international technological spillovers? The new specification of the WITCH model presented in this paper enables us to answer these questions. Our analysis shows that international knowledge spillovers tend to increase free-riding incentives and decrease the investments in energy R&D. The strongest cuts in energy R&D investments are recorded among High Income countries, where international knowledge flows crowd out domestic R&D efforts. The overall domestic pool of knowledge, and thus total net GHG stabilization costs, remain largely unaffected. International spillovers, however, are also an important policy channel. We therefore analyze the implication of a policy-mix in which climate policy is combined with a technology policy designed to enhance absorption capacity in Low Income countries. Significant positive impacts on the costs of stabilizing GHG concentrations are singled out. Finally, a sensitivity analysis shows that High Income countries are more responsive than Low Income countries to changes in the parameters. Additional empirical research efforts should thus be focused on the former.     

The role of technological availability for the distributive impacts of climate change mitigation policy

The impacts of the availability of low-carbon technologies on the regional distribution of mitigation costs are analyzed in a global multi-regional integrated assessment model. Three effects on regional consumption losses are distinguished: domestic measures, trade of fossil energy carriers and trade of emission permits. Key results are: (i) GDP losses and a redirection of investments in the energy system towards capital-intensive technologies are major contributions to regional consumption losses. (ii) A devaluation of tradable fossil energy endowments contributes largely to the mitigation costs of fossil fuel exporters. (iii) In case of reduced availability of low-carbon technologies, the permit market volume and associated monetary redistributions increase. The results suggest that the availability of a broad portfolio of low-carbon technologies could facilitate negotiations on the permit allocation scheme in a global cap-and-trade system.     

Optimal policy of energy innovation in developing countries: Development of solar PV in Iran

The purpose of this study is to apply managerial economics and methods of decision analysis to study the optimal pattern of innovation activities for development of new energy technologies in developing countries. For this purpose, a model of energy research and development (R&D) planning is developed and it is then linked to a bottom-up energy-systems model. The set of interlinked models provide a comprehensive analytical tool for assessment of energy technologies and innovation planning taking into account the specific conditions of developing countries. An energy-system model is used as a tool for the assessment and prioritization of new energy technologies. Based on the results of the technology assessment model, the optimal R&D resources allocation for new energy technologies is estimated with the help of the R&D planning model. The R&D planning model is based on maximization of the total net present value of resulting R&D benefits taking into account the dynamics of technological progress, knowledge and experience spillovers from advanced economies, technology adoption and R&D constraints. Application of the set of interlinked models is explained through the analysis of the development of solar PV in Iranian electricity supply system and then some important policy insights are concluded.     

A fuzzy analytic hierarchy process approach for assessing national competitiveness in the hydrogen technology sector

As it is more environmentally sound and friendly than conventional energy technologies that emit carbon dioxide, hydrogen technology can play a key role in solving the problems caused by the greenhouse gas effect and in coping with the hydrogen economy. Numerous countries around the world, including Korea, have increasingly focused on R&D where hydrogen technology development is concerned. This paper focuses on the use of the fuzzy analytic hierarchy process (fuzzy AHP), which is an extension of the AHP method and uses interval values to reflect the vagueness of human thought, to assess national competitiveness in the hydrogen technology sector. This analysis based on the AHP and fuzzy AHP methods revealed that Korea ranked 6th in terms of national competitiveness in the hydrogen technology sector.     

The economic costs of reducing greenhouse gas emissions under a U.S. national renewable electricity mandate

The electricity sector is the largest source of greenhouse gas emissions (GHGs) in the U.S. Many states have passed and Congress has considered Renewable Portfolio Standards (RPS), mandates that specific percentages of electricity be generated from renewable resources. We perform a technical and economic assessment and estimate the economic costs and net GHG reductions from a national 25 percent RPS by 2025 relative to coal-based electricity. This policy would reduce GHG emissions by about 670 million metric tons per year, 11 percent of 2008 U.S. emissions. The first 100 million metric tons could be abated for less than $36/metric ton. However, marginal costs climb to $50 for 300 million metric tons and to as much as $70/metric ton to fulfill the RPS. The total economic costs of such a policy are about $35 billion annually. We also examine the cost sensitivity to favorable and unfavorable technology development assumptions. We find that a 25 percent RPS would likely be an economically efficient method for utilities to substantially reduce GHG emissions only under the favorable scenario. These estimates can be compared with other approaches, including increased R&D funding for renewables or deployment of efficiency and/or other low-carbon generation technologies.     

Alternative energy development strategies for China towards 2030

The purposes, objectives and technology pathways for alternative energy development are discussed with the aim of reaching sustainable energy development in China. Special attention has been paid to alternative power and alternative vehicle fuels. Instead of limiting alternative energy to energy sources such as nuclear and renewable energy, the scope of discussion is extended to alternative technologies such as coal power with carbon capture and sequestration (CCS), electric and hydrogen vehicles. In order to take account of the fact that China’s sustainable energy development involves many dimensions, a six-dimensional indicator set has been established and applied with the aim of comprehensively evaluating different technology pathways in a uniform way. The analysis reaches the following conclusions: (a) in the power sector, wind power, nuclear power and hydro power should be developed as much as possible, while R&D of solar power and coal power with CCS should be strengthened continuously for future deployment. (b) in the transportation sector, there is no foreseeable silver bullet to replace oil on a large scale within the time frame of 20 to 30 years. To ease the severe energy security situation, expedient choices like coal derived fuels could be developed. However, its scale should be optimized in accordance to the trade-off of energy security benefits, production costs and environmental costs. Desirable alternative fuels (or technologies) like 2nd generation biofuels and electrical vehicles should be the subject of intensive R&D with the objective to be cost effective as early as possible.