The Case for Public-Private Partnerships to Spur Clean Energy Innovation
By Zdenka Myslikova
In the time of renewed commitment and more concrete, stringent action steps to fight climate change from various places around the globe, countries have also been reinvigorating their commitment to clean energy innovation, further acknowledging that innovative technologies will be crucial to delivering net zero targets by mid-century. Clean energy technology innovation has not reached targeted levels–in 2019, global public funding dedicated to energy technology research, development and demonstration (RD&D) reached only about US$20 billion, the US being the largest contributor with its US$ 7 billion budget. This amount is only a fraction of the scope that the US ecosystem could absorb and that is needed to deliver deep decarbonization. According to some studies, the US energy innovation ecosystem could absorb three times the current spending within just five years by 2025. Similarly underfunded is RD&D in other countries around the world, despite Mission Innovation having forged increased attention and doubling of the expenditures over the past five years. The funding gap is of a big concern considering that, according to the IEA, nearly half of technologies that we need globally to get to net zero emissions by 2050 are currently not commercial.
Some recent efforts and initiatives to advance the process of energy innovation stand out as best practice. This blog explores two programs that aim to support the clean energy ecosystem in the UK and Chile respectively. A third concept could be instructive for the US. These kinds of public-private partnerships (PPPs) are urgently needed to accelerate the innovation process. Such PPPs are key not only to assure that the stakeholders share costs, but also to innovate in a way that is relevant and valuable to industry. Information flow is key–industry needs to know what is being developed in national labs and at universities; the collaboration also helps to start the innovation process with the right price signals.
In the UK example, the UK government launched a new Clean Growth Fund in May 2020 to enhance clean energy research and development (R&D) in start-up firms. The fund was designed as a partnership combining public and private investment to spur early-stage R&D of next generation clean, low-carbon products and services developed by UK companies. It currently amounts to approximately USD 53 million (£40m), shared equally by public and private. It aims to support ‘scalable projects with significant contribution to reducing greenhouse gases.’ The idea is to provide businesses with commercialization expertise and market access to enable rapid growth and scale-up – key support for start-ups to overcome ‘valleys of death.’ The portfolio currently includes a technology for heating homes, an online platform that balances supply and demand on power grids, and smart EV charging technology.
Another interesting model of the public-private partnership for clean energy innovation has been forged in Chile. Rather than take the form of a fund as in Britain, Chile’s public-private collaboration is structured around innovation centers, which are co-funded. Chile’s development agency (CORFO) has been recruiting foreign companies and foreign universities and providing them with grants to establish operations in Chile and collaborate with Chilean national universities and firms. The most extensive project to incentivize R&D in solar energy technologies, the AtaMos-Tec, was a product of joint efforts. When launched, this project included twenty participating companies, and this is key, since the business sector has historically played a modest role in the local R&D performance. The project also aims to cultivate advanced training of human capital and enable knowledge transfer. Chile’s government efforts to strengthen local energy R&D initiated approximately a decade ago–in 2008, the government launched the International Centers of Excellence (ICEs) program that created R&D centers for private corporations and public R&D organizations to collaborate on R&D and commercialization activities. Two international partnership centers have been dedicated to clean energy technologies–one for solar and the other for renewable energy. Additionally, one more center–for research in solar energy and lithium–has been in the making since 2018. In 2010, the government co-sponsored creation of a startup accelerator StartUp Chile, which has become a vibrant hub for technological innovation, that incubates some companies in clean energy. It is noteworthy that the idea of innovation centers focused on clean energy technologies also found a home in Mexico, where the government in 2013 initiated the program to set up Mexican energy innovation centers (CEMIEs). But the current administration has neglected this program.
Finally, in a blog post, Microsoft founder Bill Gates has called on the US government to establish the National Institutes of Energy Innovation (NIEI). He argues that the attention to clean energy innovation is currently dispersed across multiple institutions in the US ecosystem, which is inefficient. Unlike the DOE’s national labs, Gates, who leads a private sector innovation fund called Breakthrough Energy, proposes that each NIEI could focus on a specific technological area. These institutes’ critical task would be to design research with specific end-use targets and milestones in mind, thereby assuring the final product would commercialize and scale. The idea has not been embedded in the US infrastructure bill, passed by Congress last week but it is similar to how the National Institute for Health has launched successful medical innovation and disease cures. A national institute for energy could also address one of the largest gaps in the US innovation ecosystem: the lack of support for large scale demonstration projects.
While exploring the idea of national innovation institutions, an additional question comes to mind–how could two-way learning among Mission Innovation countries be enhanced? While countries with nascent ecosystems often look for lessons learned from Western counterparts, Mission Innovation could be expanded to institute a sharing of innovation deco-system development among member countries from the developing world. This would allow countries to benefit from sharing knowledge within different institutional contexts that might be distinct from leading innovators like the US, Europe and China. One finding might be to explore how nascent companies succeed and adapt in vastly different cultural and economic contexts, which would benefit entrepreneurs from across the global south whose knowledge and skills will be needed to bring the level of needed energy innovation to a global scale. ∎
Zdenka Myslikova is a postdoctoral scholar at The Fletcher School, Tufts University.