Renewable Energy Innovation Chain Workshop Thursday 13 th March The - - PowerPoint PPT Presentation

Renewable Energy Innovation Chain Workshop

Thursday 13th March The Carbon Trust - 4th Floor, Dorset House 27-45 Stamford Street, London, SE1 9NT

Workshop agenda

13:00 – 14:00 Introduction, methodology and summary presentation Welcome and roundtable introduction Project overview Framing observations 14:00 – 15.10 Innovation support along the innovation chain 15:10 – 15:25 Coffee break 15:25 – 16:45 Optimising stakeholder perspectives along the innovation chain 16:45 – 17:00 Roundup

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Chatham house rules: participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.

Renewable energy RD&D spend in 2011 by IEA-RETD members1

This project is with IEA Renewable Energy Technology Deployment (IEA-RETD)

›

IEA-RETD is an intergovernmental platform with a mandate to:

i.

Address cross-cutting issues that influence the deployment of renewable energy

ii.

To act as a vehicle to accelerate the market introduction and deployment of renewable energy technologies

›

Its members are eight major governments:

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£1.2bn

Canada, Denmark, France, Germany, Ireland, Japan, Norway, and the United Kingdom

Carbon Trust has 10+ years delivering low carbon innovation

›

Mission to accelerate the move to a sustainable, low carbon economy

Mission Strategy, three focus areas

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Advice: We advise businesses, governments and the public sector on

• pportunities in a sustainable, low carbon economy

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Technology: We help develop and deploy low carbon technologies and solutions, from energy efficiency to renewable power

›

Footprinting: We measure and certify the environmental footprint of

• rganisations, products and services

›

Produced 10 Technology Innovation Needs Assessments for the UK Government, firmly establishing agreed national support priorities

›

Assessed 3,000 ventures and incubated more than 300 of them

›

Invested nearly £50 million in 28 cutting edge companies

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Catalysed £300m+ private co-investment

Innovation examples

Element Energy has specialised in low carbon energy consulting for over 10 years and has an excellent reputation for rigorous and insightful analysis

Power Generation

• Renewables
• Micro-generation
• CCS
• Combined heat & power
• Energy storage
• Energy networks

Engineering Solutions

• Software tools
• Model development
• Prototyping and design
• CFD

We operate in three main sectors We offer three main services Market Analysis

• Technology assessments
• Market uptake & growth
• Feasibility studies
• Geographic analysis
• Financial modelling
• Commercialisation advice

The Built Environment

• Master planning
• Building design
• Smart cities
• Regional strategy
• Financial viability

Strategy and Policy

• Policy design and assessment
• Innovation & learning analysis
• Scenario planning
• Techno-economic modelling
• Business planning
• Stakeholder engagement
• Consortium development

Low Carbon Transport

• Electric vehicles
• H2 vehicles
• Infrastructure modelling
• Project delivery

Element Energy – a specialist low carbon energy consultancy

Workshop agenda

13:00 – 14:00 Introduction, methodology and summary presentation Welcome and roundtable introduction Project overview Framing observations 14:00 – 15.20 Innovation support along the innovation chain 15:20 – 15:25 Coffee break 15:25 – 16:45 Optimising stakeholder perspectives along the innovation chain 16:45 – 17:00 Roundup

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This project will provide IEA-RETD governments with actionable policy recommendations

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Recommend policies for each step of the innovation chain for the relatively emerging technologies such as wave and tidal, offshore wind, concentrating solar power (CSP) and enhanced geothermal (which can be applied in the period of time up to 5 to 10 years from now)…

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….informed by lessons learned from policies given to the currently relatively mature renewable energy technologies (onshore wind, hydropower, solar PV)…

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….given current market dynamics and reduced government budgets…

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….and the needs of the current market players such as venture capitalists and technology developers.

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We want to focus on policy recommendations that are additional, implementable, and replicable across countries (this project can’t cover everything)

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This workshop is at a later stage in this project

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Task 1 Synthesis paper, which provides a ‘quick scan’ of existing literature and identifies key questions for following tasks Task 2 Framing workshop with market representatives to sharpen project focus and objectives Task 3 Detailed research and interim report addressing key questions highlighted in tasks 1 and 2 Task 4 Midterm workshop with government and industry stakeholders to discuss task 3 findings Task 5 Final report and policy recommendations

To encourage a free and

• pen conversation we

will apply ‘Chatham House Rules’

3 work streams feed into today’s discussion

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100+ papers sourced to synthesise the following in light of project goals:

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Analytical frameworks to innovation

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Policy families and their impact

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Critical success factors

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External review by innovation research bodies, governments and academics

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14 Cross industry attendees

›

4 technology developers

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3 utilities

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6 investors

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IEA-RETD project steering group

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Desk research on the history

• f innovation success and

policy in PV and Wind

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18 in-depth interviews (including technology funders, developers, users and government enablers)

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5 technology in transition deep dives

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Offshore Wind

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Tidal Current

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Biomethane from gasification

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External review by innovation research bodies, governments and academics

Task 2: Industry workshop Task 1: Synthesis paper Task 3: Draft report Task 4: Today’s workshop

Task 3: Organisations interviewed (1/2)

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Category Company & Organisation Rationale for interview Enabler Offshore Wind Accelerator (OWA)

• Prominent RE technology ‘accelerator’
• Novel approaches to collaboration and

development Fraunhofer

• ‘Innovation Hub’ at the forefront of offshore wind

– and multi-stakeholder engagement Gussing

• Unique approach to RE development
• Model for ‘community’ ground up development

Technology developers Marine Current Turbines (MCT)

• Innovative tech. company, owned by Siemens
• First Marine Tidal tech. to complete journey from

dashboard to corporate buyout Artemis

• Innovative tech. company
• Illuminating journey from research to corporate

buyout Mitsubishi

• Leading global energy technology developer
• Recently moving into OSW market and tech.

development Doosan

• Leading global energy technology developer
• Invests heavily in R&D activities

Task 3: Organisations interviewed… (2/2)

Category Company Rationale for interview

Funder

350 Partners

• 26 investments in ‘Greentech’

IP Group

• ‘IP commercialisation’ VC – 16 active investments in RE

sphere European Investment Bank (EIB)

• Largest institutional investor in world 25%

commitment of funds to climate change related projects

Shell

• 2007-2012 - $2.2bil on alternative energy R&D spend
• Major international corporate

Google

• Innovative non-energy company attempting to be involved

in RE arena

• Major international corporate

Technology user

E.ON

• Major Utility – invested €9bil in cleantech since 2007
• Significant OSW activity

RWE

• Major Renewable Energy Utility
• Significant wind activity

Task 3: Technology in transition case studies

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Case study Context BioSNG at Güssing

• Pioneering biomass gasification plant owned by Güssing Renewable Energy,

Austria

• Facility to test components that can turn bioSNG into methane

Marine Current Turbines

• UK-based novel technology developer of tidal current devices
• World leader in tidal energy
• Founded in 1999, acquired by Siemens in 2012

Artemis Intelligent Power

• UK-based technology developer of ‘Digital Displacement’ hydraulic systems for

wave energy applications now used for offshore wind

• Founded in 1994
• 2010: acquired by Mitsubishi Heavy Industries
• 2013: announced joint venture with Vestas

Offshore Wind Accelerator

• Joint industry consortium founded in the UK in 2008 to catalyse offshore wind
• Public-private innovation programme funded by the UK government & European

utilities Bremerhaven

• Seeded in 2001 by Bremerhaven Economic Development Agency to establish a

network of different stakeholders focussed on promoting wind power

• Fraunhofer IWES established in 2009

Workshop agenda

13:00 – 14:00 Introduction, methodology and summary presentation Welcome and roundtable introduction Project overview Framing observations 14:00 – 15.10 Innovation support along the innovation chain 15:10 – 15:25 Coffee break 15:25 – 16:45 Optimising stakeholder perspectives along the innovation chain 16:45 – 17:00 Roundup

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Innovation could support renewable energy roll

• ut in the RETD and other leading countries

14 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Coal/peat Oil Natural Gas Nuclear Hydro Biofuels/waste Wind Solar Geothermal Marine Increasing levels of renewables (inc hydropower)

368 113 562 4350 1051 4716 28 22200 609 303 291 35 637 17 128 532

Framing policy recommendations (1/3)

Recurring challenges and solutions identified for governments with stretched resources

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• 1. Most renewable energy technologies are high CAPEX

systems that develop over long timeframes (+15 years)

• 2. Innovation is a complex, non-linear, process
• 3. Government support policies have to address barriers and

evolve as technologies transition along the innovation chain

• 4. How best to support, and not distort, the innovation

ecosystem

4 recurring challenges 3 solutions for limited budgets

• 1. Optimally leveraging the private sector
• 2. Encourage collaboration – especially internationally
• 3. Goal based prioritisation, using expert enabling bodies

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Research & Development “Concept” Demonstration “Emerging” Early Deployment “Emerging” (Near) Commercial “Advanced” Hydropower

• Hydrokinetic turbines
• Run-of-river
• Reservoirs
• Pumped storage

Biofuels

• Aquatic plant-derived fuels
• Pyrolysis biofuels
• Gasification based biofuels
• r biomethane
• Fermentation of

lignocellulosic material

• Gasification-based power
• Lignocellulosic syngas-

based biofuels

• Combustion for power

and/or heat

• Anaerobic digestion
• Sugar & starch ethanol
• Plant & seed oil biodiesel

Wind

• Wind kites
• Higher-altitude wind

generator

• Offshore, large turbine
• Onshore wind
• Turbines for water

pumping

Solar

• Solar fuels
• Solar cooling
• Solar cooking
• Concentrating PV
• CSP
• PV
• Low temp solar thermal
• Passive solar architecture

Geothermal

• Submarine geothermal
• Engineered geothermal

systems

• Geothermal heat pumps
• Hydrothermal binary

cycle/condensing flash

Ocean

• Currents/thermal

conversion

• Salinity gradients
• Wave
• Tidal currents
• Tidal range

Note: Innovation is a non-linear process and therefore this is a simplification of the innovation chain Source: Adapted from IPCC (2011) and UNEP (2011) with Carbon Trust Analysis reliable full demo continued cost reduction

Framing policy recommendations (2/3)

Key innovation goals for emerging renewable energy technologies

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Framing policy recommendations (3/3)

The ‘ innovation ecosystem’ is also core to our analysis

Note: Innovation is a non-linear process and therefore this is a simplification of the innovation chain

Insights and policy recommendations grouped into the following themes (iterated with interviewees):

› Along the innovation chain › Improving push support › Improving pull support › Balancing between push and pull support, in light of

national goals and global need

› The innovation ecosystem › Increased activity for technology developers and users –

leveraging motives for collaboration

› Plugging the funding gap that is not met by venture capital › Enabling bodies as a crucial element of the innovation

ecosystem

Workshop agenda

13:00 – 14:00 CT: Introduction, context & objectives 14:00 – 15.10 Innovation support along the innovation chain Introduction to policy framework Policy recommendation discussion: implementing push policies Policy recommendation discussion: implementing pull policies Policy recommendation discussion: balancing push and pull policies 15:10 – 15:25 Coffee break 15:25 – 16:45 Optimising stakeholder perspectives along the innovation chain 16:45 – 17:00 Roundup

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Introduction: our simplified categorisation of policy types

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‘Technology’ Push Direct funding of technology development ‘Market’ Pull Incentivise market to channel funds to innovation

R&D Demonstration Early Deployment (Near) Commercial

Countries have developed increasing levels

• f pull support, following a push focus

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Source: OECD (2004). AUS Australia, C Canada, FI Finland, GR Greece, ITA Italy, L Luxembourg, NO Norway, SW Sweden, UK United Kingdom, A Austria, CZ Czech Rep., F France, H Hungary, J Japan, NE Netherlands, P Portugal, CH Switzerland, US United States, B Belgium, DK Denmark, DE Germany, IR Ireland, K Korea, NZ New Zealand, E Spain, T Turkey.

Data on demo funding is less clear, countries typically run ‘ad hoc’ demonstration projects, sometimes funded by R&D budgets

Workshop agenda

13:00 – 14:00 CT: Introduction, context & objectives 14:00 – 15.10 Innovation support along the innovation chain Introduction to policy framework Policy recommendation discussion: implementing push policies Policy recommendation discussion: implementing pull policies Policy recommendation discussion: balancing push and pull policies 15:10 – 15:25 Coffee break 15:25 – 16:45 Optimising stakeholder perspectives along the innovation chain 16:45 – 17:00 Roundup

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Implementing push: policy recommendations from our analysis

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Globally IEA assesses that all RETs require billions of dollars additional RD&D support– particularly emerging RETs

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The IEA identifies no countries sufficiently funding RD&D to meet national decarbonisation goals Funding

(discussion priority)

Demonstration programmes

(discussion priority)

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Large scale demonstration programmes have been crucial to RET development, particularly wind energy

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Emerging RETS need more demonstrations - governments can play a key role enabling and de-risking these Policy design recommendations

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Push measures (especially grants) should be:

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Designed to leverage private sector funding

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Flexible to accommodate the needs of the innovator – possible hold a reserve of funding to survive setbacks

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Monitored against clear success factors (performance based funding/ ‘stage gate’ progression) – not just cost related

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Holistic - consider factors other than funding to maximise trajectory to market

Note: RETs = Renewable Energy Technology, RD&D = Research, Design and Demonstration

Increased global levels of push support are needed to meet climate change targets

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Advanced RETs are nearly on track to meet IEA 2DS deployment targets, though still have insufficient RD&D funding – the IEA identifies no countries sufficiently funding RD&D to meet national decarbonisation goals

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Emerging RETs (especially CSP, Marine and Offshore Wind) are highlighted as not on track for deployment targets (enabled by innovation) needing increased RD&D funding as they are not advancing quickly enough to meet the 2DS scenario’s needs, although specific global investment figures are not provided

0.0 $ 1.0 $ 2.0 $ 3.0 $ 4.0 $ Wind Solar Bioenergy Billions GLOBAL annual public RD&D spending gap identified in IEA Energy Technology Perspectives (2013) against the 2DS scenario 0% 25% 50% 75% 100% Brazil Sweden Spain Australia Korea France Japan Norway Canada Germany UK* IEA-RETD Countries Other Countries Note: 2DS sets the target of cutting energy-related CO2 emissions by more than half in 2050 (compared with 2009)

*UK data different – spend levels are only compared to ‘technologies where the UK has a leading edge’, not stated priorities

NATIONAL: IEA assessment of the gap between government RD&D spending and priorities over c.2007- 2010, from IEA Tracking Clean Energy Progress (2013)

Large technology demonstration programmes are particularly needed for emerging technologies

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Demonstration activities were critical to the transition of wind power along the innovation chain

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Programme design does not have to focus on lowest cost – high frequency demonstration projects of reliable systems & active knowledge dissemination led to Danish dominance of wind power

First price support policy for wind (in USA)

• Signals shift from small

scale to large scale usage

• Wind becomes

commercially viable

First wind turbine to generate electricity

• Built by Charles

Bush in Ohio, USA

• 12kW output

First turbine connected to grid

• Balaclava, Russia.
• 100kW turbine
• Produced 200,000kWh

in lifetime

First MW Turbine

• Vermont, USA
• 1.25MW connected to

grid

• Collaboration between

inventors, academia and business

First offshore wind farm

• Near Vindeby, Denmark
• 2-6m depth
• 5MW output
• Successful, 20% increase

power

First wind farm

• New Hampshire, USA
• Twenty 30kW turbines
• Project failed

First floating turbine

• Hywind Project by Statoil

in Norway.

• Moored in 220m of water
• Project successful – now

focus cost reduction

Wind goes deeper

• Beatrice Demonstrator,

Scotland

• Offshore ‘Jacket’

foundations feasible

• 45m depth

1888 1980 1941 2007 1931 1991 2009 1978

Large scale demonstration programmes are needed, although there are considerable challenges

Need Challenges

• Catalyse transition along the innovation

chain (supporting new technology & technology scale up)

• Government funded demonstration

programmes due to limited ability of private sector to fund them alone

• Particularly relevant to ERETs (e.g.

Marine)

• OSW problems are not so much R&D,

but lack of demonstration and design

• pportunities
• Funding
• Government – affordability
• Corporates – risk/return, absolute

amounts

• Planning
• Consenting process
• Compartmentalisation of government

responsibility

• National vs local
• Deployment vs planning

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Workshop agenda

13:00 – 14:00 CT: Introduction, context & objectives 14:00 – 15.10 Innovation support along the innovation chain Introduction to policy framework Policy recommendation discussion: implementing push policies Policy recommendation discussion: implementing pull policies Policy recommendation discussion: balancing push and pull policies 15:10 – 15:25 Coffee break 15:25 – 16:45 Optimising stakeholder perspectives along the innovation chain 16:45 – 17:00 Roundup

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Implementing pull: policy recommendations from our analysis

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Pull support is needed to support the development of emerging renewable energy technologies in the short to medium term

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Interviewees stated that the long term policy solution is a sufficient carbon price

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Policy certainty was identified as the most critical characteristic of these policies - Governments create big set backs when they don’t stick to stated plans and agree policy adjustment procedures in advance of implementation

Need

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Certainty is challenging due to

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growing costs of pull policy support

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evolving technology progress

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the political cycle and a lack of consensus on climate change

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Other challenges in designing pull policy include avoiding windfall profits – well defined price support sunset clauses need to be agreed in advance

Challenge Potential solutions?

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Governments can adopt simple low cost ‘smart’ policy measures to ensure policy success (e.g. through messaging & road mapping)

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Policy certainty support guarantee mechanisms are discussed by stakeholders (like World Bank ‘political insurance’), but are solutions with too many challenges at the moment

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International alignment of policy commitments may ensure countries ‘stay the course’ - possibly could create a ‘carrot’ through shared RD&D programmes that the country loses access to if it reneges on commitments

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Workshop agenda

13:00 – 14:00 CT: Introduction, context & objectives 14:00 – 15.10 Innovation support along the innovation chain Introduction to policy framework Policy recommendation discussion: implementing push policies Policy recommendation discussion: implementing pull policies Policy recommendation discussion: balancing push and pull policies 15:10 – 15:25 Coffee break 15:25 – 16:45 Optimising stakeholder perspectives along the innovation chain 16:45 – 17:00 Roundup

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Balancing push and pull: policy recommendations from our analysis (1/2)

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Pre-deployment ERETs can be primarily push supported, but can quickly reach higher proportions of pull support post-demonstration

• In the EU wind and solar currently average a 40:1 pull:push ratio
• Predicted to reach approximately 100:1 by 2020

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The ratio of technology-push to market-pull support varies significantly by country

• In line with different national priorities around industry development and

renewable deployment Global push-pull policy support ratios

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Push support policies are fundamental to the development of renewable industries

• Efficacy strongly dependent on existing national competencies, supply

chains and knowledge spill-over

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Pull support policies successfully drive:

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Technology deployment

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In-country system cost reductions (through installation and, operation and maintenance costs)

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Job creation (often more than those created in manufacturing) National focus should be goals based - deploy vs

develop

(discussion priority) Note: ERETs = Emerging Renewable Energy Technologies

Balancing push and pull: policy recommendations from our analysis (2/2)

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›

Technology “tradability” has important implications for national industry development:

• Highly tradable industries can be supported by foreign pull policies – though

this leaves exposure to foreign policy changes (e.g. solar PV FIT cuts)

• Less tradable technologies offer some shelter to local manufacturers from

cheaper foreign competition Technology

characteristics also effect policy choice

(discussion priority)

The implications of national goals for policy choice

(discussion priority)

›

There is a strong driver for emphasis on pull oriented policies for post demonstration technologies in countries pursuing emissions reductions, job growth, low-cost energy and energy security

• Particularly for technologies with a high fraction of downstream value

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Push policies are particularly relevant to countries seeking to develop exportable technologies

Push policies are fundamental to the development of national manufacturing capacity

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25 20 15 10 0.5 0.4 0.3 0.2 0.1 5 0.0 Installed capacity or production (GW) 1985 1980 Solar PV spending ($bn) 2010 2005 2000 1995 1990 1975 20 10 0.5 0.4 0.3 0.2 0.1 0.0 5 25 15 Installed capacity or production (GW) Solar PV spending ($bn) 2010 2005 2000 1990 1985 1980 1975 1995 0.5 20 15 5 10 25 0.4 0.3 0.2 0.1 0.0 Solar PV spending ($bn) 2010 2005 2000 1995 1990 1985 Installed capacity or production (GW) 1980 1975 Annual PV installed capacity Annual PV system production Solar PV R&D spending

USA Germany Japan

Annual PV installed capacity Annual PV system production Solar PV R&D spending Annual PV installed capacity Annual PV system production Solar PV R&D spending

Total R&D spending (1974-2011) = $3.1bn Total R&D spending (1974-2011) = $5.4bn Total R&D spending (1974-2011) = $2.0bn

0.4 0.5 10 0.1 0.0 0.2 20 0.3 5 25 15 2005 2010 Solar PV spending ($bn) 1975 1980 Installed capacity or production (GW) 1985 1990 1995 2000 Solar PV R&D spending Annual PV installed capacity Annual PV system production

Total R&D spending (2001-2012) = $0.6bn

China

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National R&D programmes are essential to the development of in- country renewable manufacturing capacity.

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However, early stage spending on R&D does not necessarily translate into a strong national technology manufacturing base (e.g. USA versus China, Japan and Germany).

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Existing national competencies, supply chains and manufacturing capabilities also play a crucial role. KEY MESSAGE: When defining national R&D priories, important consideration should be given to national competitive advantages, international tradability and resource availability.

PV R&D spending data for the USA between 2003 and 2008 are interpolated. PV R&D data for China is only available between 2001-2012. Solar PV R&D spending for China is for public sources only.

SOURCE: IEA, BP, EPI, CPI.

›

Historically solar has received large amounts of early R&D spending (1975-80) with capacity increases coming much later with deployment investment.

›

Wind has received lower levels of continuous R&D spending over the same period and achieved a higher installed capacity.

The amount of push support required is dependent

• n compatibility with existing technologies and

manufacturing capabilities

32 KEY MESSAGE: The amount of push support required is highly technology dependent. ERETs which are able to leverage existing technology, expertise, infrastructure and manufacturing capabilities will typically require reduced early stage innovation spending and be able to achieve deployment earlier in the innovation process. Total R&D spending and annual installed capacities for wind and solar PV in IEA countries

Data for solar energy includes only PV R&D spending, data for wind energy includes onshore and offshore R&D spending. SOURCE: IEA, BP, EPI

0.4 45 40 0.1 0.3 0.2 50 0.0 20 25 5 30 35 15 10 0.5 0.7 0.8 0.6 Annual installed capacity (GW) Annual R&D spending ($bn) 2000 1995 2005 1975 1980 1985 1990 2010 PV R&D Spending Annual installed capacity 30 35 45 25 20 0.6 0.5 50 0.1 0.0 0.7 0.4 15 5 0.3 0.2 40 0.8 10 1990 1995 1975 2010 Annual installed capacity (GW) Annual R&D spending ($bn) 2005 1980 2000 1985 PV R&D Spending Annual installed capacity

Once technologies pass demonstration, pull policies become crucial for early deployment and ongoing cost reduction

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3.0 2.5 2.0 1.5 1.0 0.5 0.0 8.0 6.0 5.0 4.0 3.0 2.0 1.0 7.0 0.0 Installed capacity or production (GW) Solar PV spending ($bn) 2010 2008 2006 2004 2002 2000 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Solar PV spending ($bn) Installed capacity or production (GW) 2010 2008 2006 2004 2002 2000 3.0 2.5 2.0 1.5 1.0 0.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 0.5 Installed capacity or production (GW) Solar PV spending ($bn) 2010 2008 2006 2000 2004 2002

USA Australia Japan

Data was interpolated for the USA between 2003-08 (for R&D spending), 2004-6 & 2006-8 (for demo spending), 2004-6 & 2010-11 (for market stimulation). All spending data was interpolated for Korea between 2003-2006, for Australia between 2004-2006, for Italy between 2003-2006 and 2009-2011. Solar PV R&D spending for Korea is for public sources only. SOURCE: IEA, BP, EPI. Annual PV installed capacity Annual PV system production Solar PV market stimulation Solar PV demonstration spending Solar PV R&D spending

1.0 0.0 3.0 2.5 2.0 1.5 1.0 0.5 0.0 9.5 8.0 7.0 6.0 5.0 4.0 3.0 2.0 Solar PV spending ($bn) 2010 2008 2006 2004 2002 Installed capacity or production (GW) 2012 2000

Italy

2.5 0.5 2 2.0 6 3 1 5 4 7 3.0 1.0 8 1.5 0.0 Solar PV spending ($bn) 2012 Installed capacity or production (GW) 2010 2008 2006 2004 2002 2000

Korea KEY MESSAGE: For countries interested only in deploying emerging renewable technologies, demand-pull measures can, in many cases, be effective on their own.

›

These solar PV case studies illustrate that while national R&D programs (technology- push) are a fundamental element of developing production capacity, installed capacity can be effectively achieved with demand-pull policies alone.

Total R&D spending (1974-2011) = $5.4bn Total demo spending (2002-2012) = $0.4bn Total market stimulation (2002-2012) = $13bn Total R&D spending (1974-2011) = $3.1bn Total demo spending (2000-2012) = $1.0bn Total market stimulation (2000-2012) = $4.4bn Total R&D spending (1977-2012) = $0.9bn Total demo spending (2002-2012) = $0.003bn Total market stimulation (2000-2012) = $14bn Total R&D spending (1979-2012) = $0.3bn Total demo spending (2002-2011) = $0.01bn Total market stimulation (2002-2011) = $1.2bn Total R&D spending (2002-2012) = $0.5bn Total demo spending (2002-2012) = $0.1bn Total market stimulation (2002-2012) = $2.0bn

Pull policy support of local deployment is an important element of system cost reductions

›

Technology “soft costs” such as installation, transaction and other balance-of-system costs are significantly reduced as domestic deployment levels increase.

›

This trend is related to domestic learning behaviour linked with the development of local expertise, supply chains and economies of scale as well as labour and commercial efficiencies.

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SOURCE: IEA PVPS, BP

Historical residential PV system prices in Japan, Germany, China and USA

2010 4,000 2009 4 10,000 2006 2008 5 8,000 2012 2011 2,000 2 6,000 1 6 11,000 2007 7 8 3 2004 2003 2002 2001 2005 2000 9,000 3,000 1,000 7,000 5,000 System price ($/kW) Annual installed capacity (GW)

Japan residential PV system price China residential PV system price China annual installed capacity German annual installed capacity German residential PV system price USA annual installed capacity USA residential PV system price Japan annual installed capacity

KEY MESSAGE: Deployment is a crucial driver for achieving significant reductions in regional installation costs, as seen by comparing installed capacity increase with declining costs.

“Push vs Pull” aligns with “Develop vs Deploy”

› Essential › R&D doesn’t always translate into

manufacturing capacity

• e.g. USA PV

› Demo plays an important role

• e.g. Denmark wind, Japan PV

› If national innovation can reduce

national costs:

• Installation and O&M
• Nation-specific needs

› National pull policies not necessary for

tradable technologies, e.g. PV:

• Can rely on foreign countries’ FITs
• But a risky strategy (e.g. foreign

countries could cut their FITs)

› Essential (if technology is not yet cost

competitive)

Develop Deploy Push

e.g. R&D & demos

Pull

e.g. FITs R&D Design & Eng. Manuf. Install. O&M

Exports Costs Jobs

Downstream employment opportunities for both wind and solar have been highest Technology “soft costs” are significantly reduced as domestic deployment levels increase Tradability -> greater exports but less “protection” from foreign competition

Workshop agenda

13:00 – 14:00 CT: Introduction, context & objectives 14:00 – 15.10 Innovation support along the innovation chain 15:10 – 15:25 Coffee break 15:25 – 16:45 Optimising stakeholder perspectives along the innovation chain Stakeholder motives and Collaboration vs Competition Enabling bodies Funders: Marine finance example Offshore wind programme example 16:45 – 17:00 Roundup

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37

Framing policy recommendations (3/3)

The ‘ innovation ecosystem’ is also core to our analysis

Note: Innovation is a non-linear process and therefore this is a simplification of the innovation chain

Insights and policy recommendations grouped into the following themes (iterated with interviewees):

› Along the innovation chain › Improving push support › Improving pull support › Balancing between push and pull support, in light of

national goals and global need

› The innovation ecosystem › Increased activity for technology developers and users –

leveraging motives for collaboration

› Plugging the funding gap that is not met by venture capital › Enabling bodies as a crucial element of the innovation

ecosystem

The stakeholders in the innovation ecosystem

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• Tech. Developers
• Universities
• Small, novel tech. companies
• Major technology corporates

Technology Users

• Primarily utilities
• Also household consumers

External Private Funders

• High net worth individuals
• Angel capital
• Venturing corporates (developers and utilities)
• Venture capital
• Private equity
• Public markets/asset finance

£ Sales Design specification £

Enabling Bodies

• Innovation programme designers
• Test centres and innovation managers
• Networks and communication platforms

Government policy framework

Technology developers & users: Collaboration vs Competition

Collaboration Competition Benefits

› Pools resources, funding and capabilities › Catalyses innovation through free flowing of ideas and

insights

› Collaboration often benefits national competitive

advantage

›

Rewards investment

›

Rewards successful ideas

›

Is the basis of a competitive market economy!

For what type/stage of innovation

› Commonly needed innovations (e.g. offshore

transmission cables, installation vessels or other infrastructure) that are not inherently areas for competition

› Earlier stage innovation ›

In general competition may be more natural/likely as products get closer to market/near commercial

Between whom

› Technology users (primarily utilities) because they are

mainly motivated to see products reach the market

› Natural competitors also collectively benefit from the

establishment of a successful technology market – though need to weigh this against their relative success within it

›

Technology developers struggle to collaborate due to IP concerns and a need to compete for future market share

Approaches to foster it

› Policy frameworks and enabling bodies that create

areas of non-competition (e.g. UK round 3 offshore wind site allocation)

› Locating innovators in close proximity further enables

greater collaboration, e.g. through clusters

›

Do not enforce collaboration

39

Workshop agenda

13:00 – 14:00 CT: Introduction, context & objectives 14:00 – 15.10 Innovation support along the innovation chain 15:10 – 15:25 Coffee break 15:25 – 16:45 Optimising stakeholder perspectives along the innovation chain Stakeholder motives and Collaboration vs Competition Enabling bodies Offshore programme example Funders: Marine finance example 16:45 – 17:00 Roundup

40

Enabling bodies: key issues for discussion

41

›

Facilitate interactions between industry and government to enable efficient allocation of public resources – overcome issue of government picking winners

›

Provide project design and delivery services to reduce costs resulting from interactions between industry and government

›

Broker relationships between industry actors

›

Provide incubation services and give credibility to support novel technology companies entering the market

›

Identify barriers and interventions (other than financial) to move a technology to market Role Best practice (discussion priority)

›

Should be well-resourced with technologically & commercially competent staff

›

Have long term mandates (>10 yrs) to provide continuity

›

Should not hold IP - to enable confidence and participation

›

Rewarded by outcomes – i.e. paid proportionally to innovation success

›

How to increase coordination in individual countries and between different countries - a best practice study, which could look to initiate institutional action to promote coordination across enabling bodies Outstanding challenges (discussion priority)

Workshop agenda

13:00 – 14:00 CT: Introduction, context & objectives 14:00 – 15.10 Innovation support along the innovation chain 15:10 – 15:25 Coffee break 15:25 – 16:45 Optimising stakeholder perspectives along the innovation chain Stakeholder motives and Collaboration vs Competition Enabling bodies Funders: Marine finance example Offshore programme example 16:45 – 17:00 Roundup

42

Funders: benefits to increasing corporate activity – but try to retain VC value add

43

Investment perspective Goals Timescale Investment Scale Typical RET needs

 Technology

commercialisation and deployment

 10+ years

(MCT, Artemis both 20+)

 High tens of

millions to go from concept to early deployment

Venture Capital needs

 Desire for high financial

return from investment (300-400%)

 Typically 2/10 investments

make 300-400% return remainder make small returns, with some failures

 c. 3-5 years

from investment to exit

 Low millions per

round to invest

Corporate needs

 Desire to develop better

products to earn increased revenue/gain improved strategic position

 10+ years

possible

• nce

technology has been acquired

 Tens of millions

if aligned with strategic aims VC Pros:

 Enable growth, provide

management guidance and have access to valuable networks

 Compatible with other investors

VC Cons:

 Limited ability to provide

technical assistance Corporate Pros:

 Significant internal resources and

engineering ability Corporate Cons:

 Once owned, corporate may exert

restrictive control

 Changes to strategic aims can lead

to technology ‘mothballing’

MCT: Marine Current Turbines

Funders: Hypothetical marine funding support programme for workshop discussion

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CONCEPT: Government/corporate co-funding platform that would collect funds to co- invest in developing marine energy companies and technologies. This funding model could evolve to pull in venture capital (VC) funding.

› Government funding of a sufficiently credible amount (£ 20-25 million/company investment)

spread across five years, with co-funding (matched?) by corporates

› Support 3-5 companies, through equity investments, reducing the exposure of a corporate to any

• ne technology

› Structure fund such that it could be managed by VC fund managers, leveraging their funding skills › Brand the fund as open to VC participation (VC’s could co-invest in specific company deals,

partnering with the fund, while corporates would collectively invest in companies through the fund)

› The wave sector is now reliant on government and corporates, with VC in retreat following

having recent losses in cleantech – especially renewables

› Deal scouting, due diligence & negotiating is time intensive for corporates (especially for

small investments), who face risks picking a technology that does not become the leader and can end up mothballing technologies

› Venture capital is uncomfortable with timelines, the capital intensity for investments and

technology risk (too much risk, too little return, too slow) Context Credible co- funding for leading designs Open to support earlier investments

› Consider ‘corporate sponsorship’ model to provide low levels of funding to very early stage

technologies – providing them with credibility, access to corporates and insights into progression

› Early co-funders could be given first refusal to gain further company ownership as it

progresses

Workshop agenda

13:00 – 14:00 CT: Introduction, context & objectives 14:00 – 15.10 Innovation support along the innovation chain 15:10 – 15:25 Coffee break 15:25 – 16:45 Optimising stakeholder perspectives along the innovation chain Stakeholder motives and Collaboration vs Competition Enabling bodies Funders: Marine finance example Offshore programme example 16:45 – 17:00 Roundup

45

Hypothetical international offshore wind programme, for discussion

1/2 – potential collaborators

› RETD members: UK, Norway, Denmark,

Germany, France, Netherlands, Ireland, Canada (?), Japan (?) (non European Countries)

› Non RETD members (?): China, USA › Deploy in the country with the easiest

planning regime, using the feed in tariff of the highest country

46

Example Countries Example private sector co- funding (utility focus) Example enabling bodies

› Offshore Wind Accelerator (UK) –

consortium of nine European utilities aiming to reduce the cost of offshore wind by 10% by 2015

› Technical University of Denmark ( DTU ) › Fraunhofer Institute for Wind Energy and

Energy System Technology (Germany) - research institute

› SINTEF (Norway) – research institution that

works with the Institute for Energy Technology (IFE) and the Norwegian University of Science and Technology (NTNU)

• n wind power R&D

› Flow (Norway) – programme enabling

companies to participate in the international marker for offshore wind farms

› Offshore Wind Accelerator utility

consortium (DONG Energy, E.ON, Mainstream Renewable Power, RWE npower, Scottish Power Renewables, SSE Renewables, Statkraft, Statoil, Vattenfall)

› Additional European Utilities: › ENECO (Netherlands) › ENBW (Germany) › EDF (France) › Other non-European utilities?

A framework for a international innovation programme to collaborate on demonstrating new large turbines, foundations and operation and maintenance systems for offshore wind

Concept

›

Duration: 12 months

›

Cost: 20 people’s time – 50% could be industry secondments Agreement (Phase 0) Technology piloting (Phase II) Technology selection & programme planning (Phase I)

›

Organisations screen and prioritise the technologies to test in Phase II – led by utilities, who have the fundamental need

›

Further design is carried out of programme structure

›

Goal: reach concrete commitment to build, selection and screening work would still progress the market in the absence of commitment

›

Test 3 different designs of technology developer’s 8MW turbines at sea

›

Do 4 demonstrations of each turbine type – 96MW total

›

Developers hold the turbine IP, under ‘use it or lose it’ clauses Large scale deployment prize (Phase III)

Hypothetical international offshore wind programme, for discussion

2/2 – goals and implementation programme

›

Programme design and negotiation – a significant challenge

›

The challenge is complexity, the programme could compromise

• n scale and funder number to reach buy in

›

Duration: 18 months

›

Cost: 20 people’s time – 50% could be industry secondments

Activity Duration and cost

›

Duration: 1 - 3 years

›

Cost: c.£350m, 40% public grant funded

›

Prize of 100 installations of the leading 8MW turbine

›

800MW total installed

›

Funding could be structured 30% equity (with some public grant funding), 70% debt financing (through EIB?) during construction – to utilities and developers

›

Duration: 2 years

›

Cost: c.£2.4bn – project financing structure tbc

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Workshop agenda

13:00 – 14:00 CT: Introduction, context & objectives 14:00 – 15.10 Innovation support along the innovation chain 15:10 – 15:25 Coffee break 15:25 – 16:45 Optimising stakeholder perspectives along the innovation chain 16:45 – 17:00 Roundup

48