Uncertain Innovation – Guiding Public R&D Investment Decisions for the Low-Carbon Transformation

How to integrate uncertainty into public energy R&D investment decisions, and what comes out of it? 

On 9th May 2017, Prof. Erin Baker (at UMass Amherst), Prof. Valentina Bosetti (at Bocconi University) and I published an article in Nature Energy entitled ‘Integrating uncertainty into public energy research and development decisions’.

In this paper, we analyzed a range of studies and expert reports on public energy Research and Development (R&D) investments considering uncertainty to uncover common threads and trends. Figuring out where to invest dollars or euros to best spur innovation is difficult. Because of this, we outline the elements of a decision making framework, pulling together the current state of knowledge on cost-effective R&D investments across a range of energy technologies. We also identify energy technologies that appear to be “win-win bets” across a range of expectations about costs, integrated assessment models, and decision methods.

We found that public R&D investments into new ways of storing electricity and capturing carbon to store underground should increase, as both technologies provide flexibility in the energy system. Utility scale electricity storage allows for the increased integration of often-intermittent renewable energy sources into electricity grids. Carbon capture and storage (CCS), provided it is delivered in a widely-applicable commercial form within a reasonable timeframe, allows a little ‘breathing space’ in addressing climate change, as it can reduce emissions from coal power, which remains a major contributor to CO2 emissions and an important source of power in countries with growing energy demands.  When used in conjunction with biomass-fired power plants (using sources such as wood pellets or corn stover), it can produce ‘negative’ emissions, sequestering the CO2 the biomass drew from the atmosphere whilst the biomass was growing.

We also found that the proportion of R&D funding devoted to solar power as well as advanced batteries for use in low-emission vehicles should also increase if R&D budgets decrease (even though research shows that investments in low-carbon R&D should increase, decreasing R&D budgets are a real possibility given recent developments). Solar power has huge potential, and low-emission vehicle technologies – particularly better batteries for electric vehicles – will allow us to reduce emissions from transportation, which now makes up a quarter of the US greenhouse gas emissions.

These findings are relevant for the second ministerial meeting of the Mission Innovation initiative, which will be held in Beijing on 6-8th June 2017, partly to discuss the future focus of energy technology investment. Mission Innovation is a global initiative comprising of 22 countries and the European Union, which aims to “dramatically accelerate clean energy innovation”. As part of the Initiative, launched at the Paris climate change conference in 2015, participating countries committed to doubling their clean energy R&D investments over five years.

It is important to note that the studies analyzed consider the fact that public R&D investments help economies by reducing energy costs and by reducing emissions that are damaging the environment, but they do not account for additional benefits of R&D, including reducing the health costs from outdoor air pollution and in some cases creating new industries or making old ones more competitive.  We hope that this work managed to pull together research that can help Europe to continue to address climate change meeting the pledges made by many of the current EU countries, including the UK, to double public energy R&D investment while increasing competitiveness through good bets on energy technologies.

By Laura Diaz Anadon, University Lecturer (Assistant Professor) in Public Policy at the Department of Politics and international studies at the University of Cambridge