Without clear plans, public funds for clean energy can prove a waste

The path toward more renewable energy doesn’t lie with government-backed demonstration projects and trials alone, a new report finds. Without a clear plan for moving beyond the demonstration phase and implementing low-carbon technologies on a wider commercial basis, governments risk wasting public funds on innovations that will end up benefiting overseas markets more than domestic ones.

The study from the Advanced Institute of Management Research (AIM Research) recommends that publicly-funded demonstration projects and trials (DTs) need to be managed more holistically to be effective.

“The justification for government-funded DTs is the public good,” said Chris Hendry, a researcher with City University, London, and lead author of the study. “But if the innovation process is not managed as a whole, as the US experience in wind and photovoltaics has shown, the benefits from DTs and R&D will inevitably pass overseas and the public expense will have been wasted.”

The study recognises that public funding for demonstrations and trials plays a critical role in reducing the uncertainties associated with new energy technologies. For example, without government-backed tests for wind energy, much of today’s turbine technology would have been unlikely to make it to market: public resistance and local authority refusals of planning permission could have proved insurmountable obstacles, the report finds.

Today, the UK continues to see a host of new demonstration and trial programmes for developing wave and tidal energy, offshore wind energy, fuel cells and micro-combined heating and power technologies. However, the report finds, there is often little systematic, public evaluation of such projects.

“When DT programmes are not systematically evaluated, their purpose of ensuring that lessons are learned is undermined,” Hendry said. “Learning should be paramount. And this means effective reporting as well as challenging goals.”

He added, “It is critical that this learning is spread quickly to strengthen national industry and develop national markets.”

The AIM report argues that research and development, demonstrations and trials, and offline test centres need to be coordinated to provide the long-term commitment that innovation requires. Test centres dcan evelop nationally approved standards that reassure early customers and investors. Trials can also perform a legitimate subsidy role for small innovators before revenues are forthcoming. Even at the prototype stage, they can open up early markets.

“But there needs to be a coordinated, sequential approach,” Hendry said. “DTs shouldn’t promote technology before it is ready or create false markets. Technology development must be taken to the commercialisation stage in a series of smooth transitions.”

That’s because the path from early trials to commercialisation isn’t linear, but instead goes through repeated cycles of development. New markets open up as second- and third-generation technologies come online and failed technologies are revived and improved.

“Understanding the impact of DTs on innovation is vital to the design and use of DTs as instruments of public policy,” Hendry said. “Without understanding how it all works together, the government will be unable to coordinate policy incentives, regulatory measures and follow-on activities to maximise the impact of DTs on technologies designed to meet our commitments to climate change.”