Mallika Ishwaran & Nigel Dickens

Shell International

EXECUTIVE SUMMARY

Energy is a key enabler of economic development, and the transition to lower carbon and cleaner sources of energy is essential for green development. Green energy innovation, including in new energy sources, fuels, and technologies, is critical for decoupling economic development and prosperity from some of the negative environmental consequences.  The purpose of this paper is to provide greater insights into the innovation pathway, what determines and hinders innovation, as well as tangible steps for innovation policy.

Innovation is the first step in the successful application of technology. Innovation is the conception of a set of ideas as a solution to a perceived problem, and the process of putting these ideas into practice through design and testing. If innovation is successful, the outcome is a technology that can be demonstrated and, ultimately, widely deployed. The energy sector is currently undergoing a period of increased innovation, with new technologies entering the market, from renewable power to unconventional oil and gas to smart meters.

Further innovation is required if countries are to enjoy modern energy systems that are affordable, secure and sustainable and that support greener pathways to development. While green energy innovation may be at relatively high levels, it’s pace needs to increase further if the sector is to address the environmental impacts of energy production and use.  For example, the International Energy Agency’s 2017 Tracking Clean Energy Progress scorecard of 22 technologies finds that only 3 are on track for wide scale deployment to deliver a low carbon energy system, more innovation effort is needed for 12 technologies, and 7 are not on track. The current set of new energy technologies are built on a pipeline of innovation that was established in the 1970s, and policy-makers need to consider whether a sufficient pipeline of innovation is currently in place to support future innovation and how this can best be supported.

Successful innovation policy manages the tension in innovation: that a large pipeline of innovation is needed, even if only a few technologies are eventually successfully deployed. Supporting a pipeline of innovation requires public resources, due to the market failures and positive spill overs of innovation. This requires government to make choices about which broad areas of innovation to support. Many of the innovations that are supported will not eventually be deployed. If innovation is allowed to fail at the right time, resources spent on unsuccessful innovations are a natural consequence of the uncertainty in the innovation process. Hence, policy-makers must also make choices about when to stop supporting certain areas of innovation.

Download the full report：GREEN ENERGY INNOVATION AS A DRIVER OF GREEN DEVELOPMENT