Renewable energy can seem a peaceful landscape of sun and wind.
But to researcher Joern Hoppmann (ETH Zurich), the renewable energy market is a chess match, where different technologies duel for supremacy.
“There are so many different types of renewable energy technology,” says Hoppmann, “and tremendous variation even within the market, such as in the field of solar photovoltaics. And each technology wants to make it from the research stage, to commercialization, to consumers.”
Hoppmann and his colleagues were recently named runners-up for the Research Impact on Practice Award for their article: The two faces of market support: How deployment policies affect technological exploration and exploitation in the solar photovoltaic industry. The Research Impact on Practice Award is given annually to recognize research that provides actionable insights. It is sponsored by NBS and the Organization and the Natural Environment (ONE) Division of the Academy of Management, the professional association for management researchers.
How Government Policy Affects Technologies
In the renewable energy market, start-ups and established companies are battling: seeking to develop their technologies and bring them to market, while competing for investors and striving to meet consumer needs.
Because of the energy industry’s importance, governments are closely involved. Many renewable technologies are not yet cost competitive with fossil fuels. So governments implement “deployment policies” that aim to increase demand for these technologies: for example, feed-in tariffs or renewable portfolio standards.
It’s essential to “design deployment policies in a way that maximizes their effect on technological innovation,” says Hoppmann. The best technology is needed, so that “clean energy technologies become cost competitive with fossil fuel-based electricity generation in the longer run.” Policies must support both “exploration” — new technology development — and “exploitation,” or commercialization and marketing to consumers.
Designing Policy that Moves Technology Forward
“In recent years, governments around the world have spent billions of dollars to support the deployment of clean energy technologies,” notes Hoppmann. “We were surprised to learn that neither policy makers nor corporations had thought much about how the policies put in place affected firm-level innovation and technological diversity.”
By studying several firms in detail, the project initiated by Hoppmann and colleagues Michael Peters, Malte Schneider and Volker Hoffman sought to better understand how firms perceive and respond to policy incentives.
They found that deployment policies help firms innovate because the growing market attracts investors and lets firms generate revenues that can be invested in research and development. But government support can also lead to “technological lock-in,” where one technology controls the market and squeezes out valuable but less developed alternatives.
To keep multiple technologies competitive, policymakers can:
- Avoid encouraging excessive market growth. (However, slower uptake of renewable energy technologies is problematic given the urgency of climate change.)
- Adopt policies that support technologies that might get left behind. One such policy is direct funding of research.
The research team’s results have already been considered in political debates in Germany, Switzerland and the US.
A Changing Energy Sector
As they move closer to cost competitiveness, renewable energy technologies are already transforming the energy industry, observes Hoppmann.
More households will generate their own electricity, and utility companies will need new business models after years of being the primary energy generators for communities and businesses. This could result in a completely different energy landscape in the future, and all business will need to adapt.
Deployment policies are one of the key drivers of this ongoing transformation. Understanding their effect is critical not only for producers of renewable technology but also for firms using and producing conventional energy technology.
About the Researchers
Joern Hoppmann is senior researcher at the Group for Sustainability and Technology (SusTec) of ETH Zurich. His research centers on organizational learning and technological innovation in the energy sector, especially solar photovoltaic power.
Michael Peters is an Engagement Manager with McKinsey & Co and an expert on issues related to the energy sector. He received his PhD from ETH Zurich, doing research in the Group for Sustainability and Technology (SusTec).
Malte Schneider is a former senior researcher with the Group for Sustainability and Technology (SusTec) of ETH Zurich. He currently serves as the director of the German office of Climate-KIC, the EU’s main climate innovation initiative.
Volker H. Hoffmann is Professor for Sustainability and Technology at the Department of Management, Technology, and Economics of ETH Zurich. His research centers on corporate strategies with respect to climate change, with a focus on climate policy, energy policy, and innovation.
About the Award
Find out more about the Research Impact on Practice Award and current and past awardees.