Technology Innovation to Accelerate Energy Transitions

IEA innovation analysis, including in this report, sheds light on key priority actions to accelerate energy technology innovation in the context of the G20. Key recommendations are as follows:

• Rigorous tracking of public- and private-sector investment on energy technology innovation is vital to better identify gaps and opportunities to enhance the efficiency of resource allocation. Measurement of progress in clean energy innovation needs to go beyond the flow of investment to also focus on performance indicators.
• Cost reduction is the priority. The main goal of innovation is to enable low-carbon technologies to become widespread and self-sustaining so that their expansion can continue without direct government financial support. In this way, innovation will contribute to accelerate the scale-up of low-carbon technology, irrespective of fossil fuel price volatility and independent of climate policy agreements.
• The active engagement of the private sector is critical. Mobilising the innovation capacity of the private sector is of prime importance. Traditionally, public-supported research provides a vital source of knowledge and discovery, and the private sector is crucial for bringing new technologies into the market. Businesses, entrepreneurs and investors are best suited to identify, evaluate and support the most promising ideas for commercialisation and to turn innovations into products and companies. Flexible, market-based policy measures that incentivise the private sector to search for the most efficient solutions among businesses and entrepreneurs are needed.
• Innovation requires a multidisciplinary, portfolio approach. The most attractive new solutions may be found at the interface of different areas, such as between the energy and digital sectors. As innovation can be an uncertain process, innovation policy frameworks need to ensure that effort is balanced between potentially competing approaches and include public investment in basic research as well as robust intellectual property rules. Flexibility in innovation policy design is also important: the portfolio of low-carbon technologies may change as technology progress and transition pathways evolve. Continuous monitoring and adjustments will be needed.
• Innovation is broader than technology research and development (R&D). Innovation should cover the complete technology life cycle. Increased R&D investments are important but, in isolation, will not bring needed results. Technology innovation focuses on pre-commercial improvements to technology performance and costs but can also include improvements to commercial technologies – all of which must be aligned with a broader market deployment strategy.
• Innovation is also broader than innovation policy. Framework conditions that include tax regimes, market designs, regulations or technology standards as well as ancillary policy measures such as climate and environmental policy or product safety, can be strong policy determinants of innovation. 
• Innovation challenges span borders. In addition to efforts at national level, international collaboration can be an essential enabler of accelerated progress. In particular, governments working together to increase cross-border and public-private collaboration can use a range of mechanisms, including Technology Collaboration Programmes (TCPs), Mission Innovation (MI), Innovation Accelerators and Regional Centers.
• A wide range of sectors and technologies need to contribute. The sectors with the least innovation progress toward decarbonisation are those where policy incentives and long-term perspectives are lacking. This includes heavy industry as well as freight transportation and aviation. It may be necessary for governments to both make some direct investments and leverage incentives of the private sector to accelerate the development of better technologies, thereby reducing the cost of pursuing long-term policy objectives.
• Some industries require global, sector-specific understandings. The aviation, shipping, iron and steel, and chemical and petrochemical sectors, and to some degree cement, cannot be solely transformed through one government’s national policies alone due to their global nature. For such sectors, global collaboration, standard-setting and and/or agreements for deployment of innovative technology solutions can be indispensable.
• The needs of both developed and emerging economies need to be considered. Historically, innovation for low-carbon technology has been driven mostly by industrialised economies. However, a large amount of future growth in energy consumption will come from emerging economies, which have different economic, technology and geographical contexts. Energy services and technology performance needs are often different in these developing economies. An enhanced focus will thus be important going forward for innovative solutions that meet the needs and contexts of developing countries. Examples include clean cooking solutions and decentralised off-grid technologies for providing electricity access.
• The interlinkages between Sustainable Development Goal 7 (SDG 7)² and other goals need to be exploited. SDG 7 is closely interlinked with other goals such as poverty eradication, food security, water, education, health, gender, environment, climate change and economic growth. Innovation can be a key enabler of all of these goals. While SDG 9 includes a specific focus on innovation (build resilient infrastructure, promote inclusive and sustainable industrialisation, and foster innovation), clean energy technology innovation can play an essential role in achieving many other goals if interlinkages among goals are fully understood.

For an overview of the vision and priorities of the G20 Japan presidency, see www.japan.go.jp/g20japan/.

This analysis draws also from a Policy Brief developed by the IEA with the United Nations Industrial Development Organization (UNIDO), the International Renewable Energy Agency (IRENA), and the United Nations Environment Programme (UN Environment) to support SDG 7 review at the United Nations (UN) High-Level Political Forum in July 2018.