supply, demand and market factors are
well-facilitated in the innovation ecosystem, the
prospect of triggering an energy technology
revolution becomes likelier, and thus the marginal impact of innovation is greater.
2.1 Innovation Policy: Basic Findings
It is hard to predict which technologies will win
through, given that adoption is driven by a mix
of demand, supply and market factors, in addition to the technology’s characteristics. As a
result, there is a tension between the need to fund
a large pipeline of innovation, and the uncertainty about which technologies will be adopted.
Innovation policy is ultimately about resolving
this tension.
2.1.1 Prioritise Financial Support
Government funding of innovation should focus
on the following three aspects.
First, on the early stages of research, development and deployment, rather than on the later
stages of niche and wider market deployment. At
these early stages the scale of financing is often
relatively small, so limited government budgets
can fund a broader range of innovations. The risk
is high, but government can bear it and share
losses across society, which is fair as gains will
be shared by society if the innovation is
successful.
Second, innovations that create new classes of
technology, rather than innovations for specific
technologies.
Third, technologies with high capital intensity, longevity and requiring new networks, but
only if alternatives with lower capital intensity
and transition costs have been explored first.
Technologies with high capital intensity and
longevity are riskier and require public support
further into the deployment phase when they do
not plug and play in the current energy system.
2.1.2 Encourage and Coordinate
Diversity
Government institutional support for innovation
should focus on the following three aspects.
First, it should support an ecosystem of innovators. Innovation has several development
stages. Different skills, resources and types of
organisation are needed at each stage—from universities for basic research, to entrepreneurs for
entry into niche markets, and large companies for
wide deployment of the technology. Government
should acknowledge that this diversity is needed,
rather than trying to deliver the entire innovation
pathway through one organisation.
Second, it should create links between stages of
innovation. Government can support collaboration by distributing information and by supporting
networks of innovators. Government can also step
in if part of the ecosystem is weak; for example, by
running demonstration projects, as long as the
findings are then passed on to organisations in the
next stage of the innovation pathway.
Third, providing standards for and access to
infrastructure.
2.1.3 Continuously Evaluate and Adapt
Innovation is an uncertain and dynamic process.
So, the question of whether to fund an innovation
should be regularly evaluated to take into
account new findings and changes in circumstances. Government is not always best placed to
evaluate the success or failure of an innovation.
All decision makers have biases, but government
can be too biased as its decision-making power is
often concentrated. Also, a policymaker’s view
of a technology may differ from that of end users.
Ultimately, a technology will need to succeed in
a market. So, as innovations mature, they should
be increasingly exposed to market competition.
2.1.4 Be Able to Fail Fast
Government can often face a tension in that
while it is economically best placed to bear the
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S. Zifeng and N. Dickens
well-facilitated in the innovation ecosystem, the
prospect of triggering an energy technology
revolution becomes likelier, and thus the marginal impact of innovation is greater.
2.1 Innovation Policy: Basic Findings
It is hard to predict which technologies will win
through, given that adoption is driven by a mix
of demand, supply and market factors, in addition to the technology’s characteristics. As a
result, there is a tension between the need to fund
a large pipeline of innovation, and the uncertainty about which technologies will be adopted.
Innovation policy is ultimately about resolving
this tension.
2.1.1 Prioritise Financial Support
Government funding of innovation should focus
on the following three aspects.
First, on the early stages of research, development and deployment, rather than on the later
stages of niche and wider market deployment. At
these early stages the scale of financing is often
relatively small, so limited government budgets
can fund a broader range of innovations. The risk
is high, but government can bear it and share
losses across society, which is fair as gains will
be shared by society if the innovation is
successful.
Second, innovations that create new classes of
technology, rather than innovations for specific
technologies.
Third, technologies with high capital intensity, longevity and requiring new networks, but
only if alternatives with lower capital intensity
and transition costs have been explored first.
Technologies with high capital intensity and
longevity are riskier and require public support
further into the deployment phase when they do
not plug and play in the current energy system.
2.1.2 Encourage and Coordinate
Diversity
Government institutional support for innovation
should focus on the following three aspects.
First, it should support an ecosystem of innovators. Innovation has several development
stages. Different skills, resources and types of
organisation are needed at each stage—from universities for basic research, to entrepreneurs for
entry into niche markets, and large companies for
wide deployment of the technology. Government
should acknowledge that this diversity is needed,
rather than trying to deliver the entire innovation
pathway through one organisation.
Second, it should create links between stages of
innovation. Government can support collaboration by distributing information and by supporting
networks of innovators. Government can also step
in if part of the ecosystem is weak; for example, by
running demonstration projects, as long as the
findings are then passed on to organisations in the
next stage of the innovation pathway.
Third, providing standards for and access to
infrastructure.
2.1.3 Continuously Evaluate and Adapt
Innovation is an uncertain and dynamic process.
So, the question of whether to fund an innovation
should be regularly evaluated to take into
account new findings and changes in circumstances. Government is not always best placed to
evaluate the success or failure of an innovation.
All decision makers have biases, but government
can be too biased as its decision-making power is
often concentrated. Also, a policymaker’s view
of a technology may differ from that of end users.
Ultimately, a technology will need to succeed in
a market. So, as innovations mature, they should
be increasingly exposed to market competition.
2.1.4 Be Able to Fail Fast
Government can often face a tension in that
while it is economically best placed to bear the
290
S. Zifeng and N. Dickens