Developing Countries Can Spark Wave of Innovation in Clean Energy

Looking for the innovations that can help developing countries achieve a low-carbon energy future, at an affordable cost.

At this week’s Asia Clean Energy Forum, policymakers, private sector firms, and non-governmental organizations will discuss how Asian countries can transform their power sectors while meeting development needs.

One topic on the agenda will be innovation: new approaches to bring down the cost and improve the performance of low-carbon energy technologies. Innovation is essential -- the only way to meet the dual goals of addressing climate change and increasing energy access in developing countries is to bring down the costs of low-carbon power so countries don’t have to prioritize one of these goals over the other.

Innovation happens throughout the value chain: companies can learn to ship products more efficiently, learn how to source parts better, learn how to improve manufacturing or operation of a technology. Grid operators and utilities can learn how to integrate a technology into the energy system more efficiently. And policymakers can learn which policies and regulatory frameworks most effectively support the use of the best technologies at the lowest cost.

Why is innovation in low-carbon energy so important?

While low-carbon technologies exist today, transforming the world’s energy supply could be expensive and require a lot of resources and land area. In the power sector, it can take decades for a good idea or practice to spread widely – and we simply don’t have decades to lose.

Scaling up renewable energy in the developing world needs to happen today, and it needs to happen with the best possible technology at the lowest cost. WRI has recognized that innovation is essential to making this happen, and we’re finding ways to think about innovation beyond the lab. We’re trying to find the technical, process, and policy innovations that can help achieve a low-carbon energy future.

For developing countries, what are the benefits of innovation in low-carbon power?

Developing countries have plenty of reasons to support innovation in low-carbon power. Renewable energy provides a number of benefits – less volatility in energy prices, greater energy security, health benefits due to reduced pollution – that are important for stable economic growth in emerging economies.

Moreover, developing countries have to make substantial progress on providing access to affordable energy, while seeking to transition to low carbon development. Innovation allows developing countries to capture these benefits and reconcile these competing demands at lower cost.

Furthermore, innovation in renewable energy has the direct benefit of building new industries that can drive growth. Past waves of innovation have given countries a competitive advantage. Japan kicked off a wave in innovative manufacturing processes that let them dominate the manufacturing sector for years. The United States dominated the innovation wave in IT and continues to reap huge benefits today.

The low-carbon energy innovation wave is still building and could be dominated by any number of countries. Many developing countries are already taking advantage of this opportunity. Those that focus on delivering low-cost, high-performance solutions will be the most competitive in the long run.

Why are emerging economies an important source of innovation?

Over the last century, innovations -– from the automobile to the computer -- have been created in developed economies and exported to developing countries. Innovation in low-carbon power could happen very differently.

No one country dominates this growing innovation wave yet. Even small countries can find their niche in the regional or global supply chains.

First, emerging economies will need to add a great deal of electric capacity in the coming years, and so there is a significant incentive for governments to create an enabling environment for domestic research, innovation and entrepreneurship in order to capitalize on the economic and other co-benefits from this energy build-out.

Second, no one country dominates this growing innovation wave yet. Technologies like solar panels and wind turbines require many parts, and many services to develop projects, install and run them in the most efficient way. Even small countries can find their niche in the regional or global supply chains.

Where is innovation already happening?

China’s concerted effort to bring down the cost of wind energy is one successful example. Wind energy will likely be cost-competitive with coal in China in the next few years. The country has built an innovation system to support wind power deployment, which involved investing in research and development, setting standards for quality and interconnection with the power grid, and instituting a carefully-designed feed-in-tariff. With their support of the wind industry as a whole, they are moving closer to their goal of creating high-quality, cost-effective wind farms and incubating an internationally competitive industry. They have had some false starts and challenges, that have led to widely publicized quality issues and idle turbines, but they clearly hope to lead on the technology globally in the coming years.

In another example, Indonesia is building the technical capacity of its citizens while growing the use of micro-hydropower. By making the plans for micro-hydro installations publicly available and approaching communities that live near a good flow of water, it is easier for a community to get their own micro-hydro installation up and running. Indonesia is also using an open-source model in which communities are free not just to use the designs, but to build on them and share their improvements. This improves the technology for everyone.

What role does policy play in the innovation process?

Policy is an important part of driving innovation in low-carbon power technologies. Electricity markets are heavily regulated and the rules governments set are even more important than in other sectors. Therefore, countries need a smart policy environment to foster innovation. They must include innovation goals in their policies from the earliest stages and provide incentives not just to build any clean energy technology, but to build the best ones and to improve them continuously. For example, if you provide a subsidy to solar power, you could reduce that support each year, according to a pre-announced schedule, so that this year’s projects will have to perform a bit better than last years and so on each year, until the technology is fully competitive with conventional technologies.

Governments can make innovation a policy goal by thinking through how their energy policy motivates the private sector. Are they attracting new companies to the market? Are they rewarding technologies that are performing better over time? Energy policymakers should also consider how their policies affect manufacturers, operators, and others at all stages of electricity generation and distribution, and the interactions between these groups.

Policymakers should try to attract or incubate innovative companies. A country should not just support low-cost manufacturers; when someone else has cheaper labor, the industry will move on. You want to have a workforce that has the skills to assist with innovation. It is also important for countries to consider how they interact with the World Bank and other foreign financial sources. They must be informed, demanding consumers of international technology investment.