Clean Energy Innovation

Clean Energy Innovation Strategies

Drawing from a variety of sources, including cutting-edge innovation theory and corporate practices, Clean Energy Group works to advance the most effective public innovation policies at the national and international levels.

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Learning from Best Practices in Business

Innovation theory and practice in non-energy sectors and from the business literature provide emerging trends in how companies are accelerating innovation. Clean Energy Group advocates that the public sector should learn from these experiences to craft effective innovation strategies for clean energy technologies. Our thinking in this space is founded in emerging innovation economics theory.

From Pricing to Innovation Economics[i] and Disruptive Innovation

The economic theories that have been driving policy-making in low-carbon innovation over the past few decades come mainly out of neoclassical economic theories. Whether “supply-side neoclassical” or Keynesian “liberal neoclassical,” these theories say: just get the pricing right through raising the price of fossil fuels (usually through cap and trade) and the markets will respond accordingly to develop the needed low carbon technologies.

Innovation Economics, in contrast, suggests that these pricing only approaches will be insufficient to produce the scale and scope of technology innovation that climate recovery demands. Innovation economics calls for direct climate innovation policies like incentives and mandates — to encourage cost reductions, information sharing, technology transfer and institutional reform, all the elements needed to move low carbon technology more rapidly into the commercial marketplace.

A parallel theory helpful to clean energy commercialization is “disruptive innovation” popularized by Harvard Business School Professor Clayton Christensen in his book “The Innovator’s Dilemma” in the mid-1990s. Under his theory, innovative technologies rarely find success by entering directly into mainstream markets or by competing on price or performance. Early success usually occurs in niche markets where the fundamental characteristics of the application are “suited to the merits” of the technology. Technologies then often develop from the fringes to overtake the conventional technology. The theory is used to explain the evolution of technologies as diverse as transistor radios, motor scooters, disk drives and steel manufacturing. Clean Energy Group has learned from disruptive innovation to look for appropriate early markets for new clean energy technologies that do not depend on price competition alone- such as using solar plus storage technologies that provide resilient power and supply direct economic benefits to tenants and owners of affordable housing complexes.

Clean Energy Group has written three publications that apply these innovation strategies to clean energy, and uses these theories every day in its clean energy advocacy.

Resilience for Free shows how solar plus storage technologies can reduce electric bills and provide resilient power to vulnerable populations –a disruptive technology combination doing the job better than diesel generators that often fail during power outages.

Accelerated Climate Technology Innovation Initiative (ACT II): A New Distributed Strategy to Reform the U.S. Energy Innovation System shows how a national clean energy technology strategy could be structured to incorporate new principles of disruptive and open innovation.

Moving Climate Innovation into the 21st Century: Emerging Lessons from other Sectors and Options for a New Climate Innovation Initiative shows how an international technology innovation fund like the kind recently proposed by Bill Gates could be designed to provide for bottom up, developing country driven innovation around the globe.

[i] Much of the analysis here on economic theories of innovation is based on an excellent paper by the US based Information Technology and Innovation Foundation paper by Atkinson and Hackler, “Economic Doctrines and Approaches to Climate Change Policy,” (2010), the book Innovator’s Dilemma by Professor Clayton Christensen and a paper by Lakhani KR and Panetta JA. (Summer 2007) “The Principles of Distributed Innovation”. MIT Press: Innovations: Technology, Governance, Globalization 2 (3):2.

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