The Important Outcomes of Mission Innovation: First Evidence
By Kelly Sims Gallagher and Zdenka Myslikova
It’s been over ten years since the 2009 financial crisis economic stimulus packages targeted clean energy companies and today’s headlines highlight the payoff. Clean energy companies outperformed the S&P 500 in 2019 and look poised to payout even more to investors in 2020. Tesla received a $465 million federal loan during the U.S. 2009 stimulus to design electric vehicles and begin manufacturing and its market capitalization surpassed that of ExxonMobil earlier this year. Tesla is not the exception to the rule. A comprehensive study of the US Department of Energy’s SBIR grant program found that the awards led to positive impacts on patenting and revenue innovative companies.
With a new round of economic stimulus soon coming from around the globe, it’s a good time to remind economic leaders about successes from past investments in energy innovation. It’s particularly important this month when ministers will gather for the Fifth Ministerial meeting of Mission Innovation (MI), a key component of the Paris climate agreement package that aimed to lower the technological costs to combat climate change. This upcoming meeting is pivotal, since the 25 member countries must decide whether to let the research and development initiative fade away or to renew it. It should be renewed, with greater ambition.
At Climate Policy Lab, we have studied governmental input to Mission Innovation. While the program fell short of its target for a doubling of public RD&D funding by member countries, it should still be considered a success. Overall, aggregated government RD&D clean tech spending by the MI countries is up almost 40% from 2015. As we lay out in a new article in Nature Energy, these gains will be accompanied by real and tangible outcomes, even if the doubling goal was not met.
Government investment in clean tech is already paying out in multiple ways. Mission Innovation was aimed to lower the costs of clean energy technologies. Since MI began in 2015, clean energy technologies targeted by the initiative have fallen dramatically through targeted investments and economies of scale. There has been a substantial drop for several clean technology costs that point to the efficacy of making a global effort. Between 2015 and 2020, for example, monocrystalline solar PV module costs are estimated to have declined by 57%. Unsubsidized levelized costs of offshore wind are estimated to have declined another 24% between 2015 and 2020. These cost declines spurred massive growth in deployment of renewable energy around the world. The U.S. east coast will be a major beneficiary with more than 19,300 megawatts of offshore wind capacity targeted to be installed through 2035. The new wind projects will not only help New England decarbonize, it will mean New Englanders will become less dependent on natural gas peaking plants that have caused some heating and electricity prices to surge in recent years. Installed capacity of solar PV installations in MI countries has risen 265% since 2015.
Mission Innovation has also promoted brisk global competition in clean tech among both industrialized and major emerging market economies. China, Brazil, Mexico, India, and Chile are now emerging as key players in global energy innovation. Oil power Saudi Arabia, which is hosting the Mission Innovation this year, is also setting an important example for countries dependent on oil revenues for its national budget. The country’s national oil company Saudi Aramco is investing in cutting edge carbon sequestration technologies, among other clean tech ventures. China’s state-owned energy giant PetroChina announced last week that it would aim for near-zero emissions by 2050 and plans to invest in wind, solar, and geothermal energy in addition to piloting hydrogen projects.
As new economic stimulus packages are considered by governments, including in the United States, the role of MI is more, not less, important. The United States needs to invest in this emerging energy future or it risks being left behind economically and geopolitically. China is poised to surpass the United States in clean tech RD&D spending in 2020, unless the US makes adjustments. The differential could leave the US on its back foot in energy technology and energy exports in the coming decades. The EU has already announced ambitious plans to become climate neutral by 2050, dedicating $575 billion in new spending to do so. South Korea announced it will spend $130 billion in green subsidies as part of its post-Covid-19 stimulus. Morocco, which just joined MI, has boldly announced its plans to be an energy technology hub for African countries, including a renewable energy research center in Quarzazate, which is also the site of the world’s largest concentrated solar power plant.
When MI leaders meet on September 23, they should revisit how to strengthen involvement of the private sector and state-owned enterprises. The Breakthrough Energy Coalition initiated a complementary private sector effort to Mission Innovation back in 2015, but it has under 50 contributors and its investment choices are mainly backing start-up businesses rather than promoting new technology innovation and cost breakthroughs.
One option that might widen private sector ambition would be to require private sector firms residing in MI countries to report aggregate spending in clean energy RD&D at least at a generalized level of categories such as solar, wind, battery storage, etc. The MI secretariat should also better define how state-owned enterprise clean tech RD&D should be computed and disclosed. Each MI country should also be asked to pledge to create at least one public-private partnership domestically. Countries should consider bilateral and multilateral public-private partnerships as well.
Our research shows when countries establish private-public ventures, they can foster domestic innovation hubs that can spread innovation culture. For countries in the developing world, this is critical because it has the power to create new jobs for a rising younger generation hungry for new economic opportunities while at the same time ensuring growth does not come at the expense of sustainability. When ministers meet to reup their pledges for clean energy RD&D, we urge them to be ambitious and forward looking.
Climate Policy Lab conducts applied, data-driven research on best practices for what makes a successful ecosystem for energy innovation and other key topics for low carbon development. This new inaugural blog “Climate Smart” will highlight this research.
To subscribe to Climate Smart, click here. We also invite you to read our fuller evaluation of Mission Innovation published today in Nature Energy. Watch Zdenka Myslikova and Kelly Sims Gallagher in the Mission Innovation is Mission Critical webinar here.