Unlocking the potential of clean tech innovation

Boosting the development of promising clean technologies is not only critical for achieving net-zero emissions but also to drive our future economic and industrial growth.

Yet, many of these technologies remain at an early stage of development. According to the IEA’s Sustainable Development Scenario, more than a third (35%) of cumulative emissions reductions by 2070 compared to the current trajectory rely on technologies that are currently at the prototype or demonstration stage. This is particularly the case for sectors that are hard to decarbonise such as heavy industry (steel, cement, chemicals) and long-distance transport (trucks, shipping, aviation, etc.).

Since current technologies will not be sufficient to transition to climate neutrality, the situation calls for urgent efforts to unlock the full potential value of emerging technologies.

More than the pure ability to innovate, this requires an holistic approach that fosters a well-functioning and comprehensive eco-system in which innovation can strive and where all relevant stakeholders (engineers, researchers, entrepreneurs, policy-makers, investors, etc.) can collaborate efficiently to meet the most pressing needs of the climate transition.

However, doing so will not be an easy road: empirical evidence shows that innovation is a non-linear and time-consuming process. Each stages of development (usually divided into four: prototype, demonstration, early adoption and maturity) has funding, technical and market risks, with eventually only a minority of products making it to mass-market deployment in practice. Moreover, the time from the first to last phase can take between 20 to 70 years. For instance, the journey for solar photovoltaic and lithium-ion batteries (two recent successful clean energy technologies) took around 30 years.

What is certain is that the time to act is now: the pace of innovation in the upcoming decades will depend on the policies and decisions put in place today. For some energy sectors, 2050 represents just one investment cycle away.

Reducing global greenhouse gas emissions will not depend on one magic silver bullet innovation, but on a broad combination of technologies working across all sectors of the economy.

In this context, how to unlock the full potential of clean tech innovation? The post-pandemic era, fuelled by stimulus packages, offer some unique opportunity for action. Three important aspects should be strengthened:

First, de-risking investments to enhance mass-market deployment and private capital. Today’s relative policy instability, technological uncertainty and entrenched dependence on fossil-fuel-intensive technologies means that the climate transition remains a high-risk for many private investors. In addition, high up-front capital requirements, a lack of experience in new clean sectors, and a short-term vision on profits, have led to significant finance gap for the needed investments.

By contrast, the public sector can invest more patiently than a majority of investors.

The overarching goal of the EU and national governments is to help position our economy for long-term success.

As a result, they have the ability to take initial investment risk in demonstration projects (the stage before mass-market commercialisation) via public financing instruments, thereby “de-risking” (and thus enhancing) private capital. While the process of innovation involves a wide range of participants, governments have a pivotal role that go far beyond simply funding research and development.

Second, to foster cross-sector & international collaboration and value “spillovers”. To work more efficiently and avoid duplication of effort, we should also ensure that new knowledge, experiences and best practices flows to other users, notably between researchers, academia, companies, policy makers and international partners.

In particular, support networks in overlapping fields and cross-fertilisation between sectors can be very useful to encourage “spillovers”. Spillovers are knowledge accumulated in one technology area that can be a powerful driver for innovation in other related technologies, thereby increasing the overall rate of innovation. Often overlooked, spillovers are crucial because they can be harness at a much lower cost and are an optimal use of already existing resources.

Third, to address the shortage of skilled workforce in the sector. Clean tech companies are sometimes faced with a lack of skilled workers, as needs are not always perfectly matched with proper education and training. As such, enhancing the education system by training relevant personnel (technicians, researchers, engineers, etc.) and dedicating adequate funding to research infrastructures (laboratories, research institutes, universities) are necessary to better adapt to the needs of a constantly evolving sector.

To conclude, by de-risking investments, strengthening cross-sector collaboration and spillovers, and fostering the development of a skilled workforce, the potential of clean technology can be maximised.