The present study, carried out by TECHNOFI, ICON and ZABALA, aims at providing answers to four closely related questions asked by the managers of the European Commission's Directorate-General (DG) Research in the field of Non-Nuclear Energy (NNE) research.
These questions relate to knowledge transfer and innovation processes which make use of outputs of publicly funded research projects in order to reach market applications, as described below.
- How can the design of energy research and technological development (RTD) programmes (including their rules of participation) be improved?
- How can the structure, monitoring and support of the selected RTD projects be improved?
- How can public funds at Community, Member States and regional level work better together?
- How can present funding resources at Community, Member States and regional level be more optimally utilised?
Knowledge (or technology) transfer is the process of detecting, developing and validating the potential for practical and profitable applications of the results of scientific and technological research.
Innovation is the process of developing, industrialising and profitably selling those products or services, which may have benefited from scientific and technology research. Generally speaking, knowledge (or technology) transfer processes are embedded in innovation processes.
Recent findings in several economic sectors, including energy 1, have shown that there is a poor correlation between levels of private companies' RTD funding and the resulting effectiveness of their innovation process 2. Innovation processes are indeed very often inhibited by interfacial barriers 3 that impede new knowledge gained in RTD projects from reaching market applications: these barriers either exist naturally, as is the case with people's resistance to change, or are artificially created, as seen in the national technological standards inherited from a century of industrial growth in the European energy sector.
The present study and the resulting answers to the above questions are, therefore, based on three critical assumptions.
Improvements concerning the questions studied must give priority to the removal of interfacial barriers, seeking a collective agreement about those most relevant to the innovation processes in the energy sector
The present work aims mainly at pinpointing a list of the most prominent barriers based on a desk analysis of RTD public support measures at EC level and within several Member States, namely Austria, Belgium, Denmark, France, Germany, Italy, the Netherlands, Spain, Sweden, and the UK. The desk analysis searched for public support measures that have identified and addressed the removal of one or several interfacial barriers with demonstrable results.
Those applications which are capable of reaching the market will combine a portfolio of technologies 4 and a portfolio of business models 5. It is assumed that the selected business models have addressed the removal of critical interfacial barriers adequately
Numerous energy and industrial policy scenario studies 6, both at Member State and EU level, pinpoint the need for energy players to validate robust technology portfolios in order to shape the future European energy landscape. The present study focuses on a few technologies to which EC funding has contributed, to build meaningful technology portfolios, above and beyond what is funded within Member States:
- fuel cells and hydrogen technologies;
- photovoltaic and solar-thermal concentrating
- biomass-based technologies (utilisation of
biofuels and biomass);
- clean use of fossil fuels for heat and power
(including technologies for carbon-dioxide capture
and sequestration technologies);
- distributed energy resources (DER);
- generic cross-cutting and horizontal technologies
relevant to energy (e.g. materials sciences,
nanotechnologies, innovative biotechnologies,
information and communication technologies).
These technologies, once developed successfully, are embedded in the portfolios of technology manufacturers and energy companies, most likely in line with industrial and energy policies of Member States.
Not only the liberalisation of energy markets, the response to the EU directives and to the Kyoto protocol, but also tensions in the fossil fuel markets simultaneously require the development and validation of robust business models. Here, a business model is a validated technology exploitation plan at manufacturer or energy company level, which enables the most successful technologies to add commercial value to existing businesses. New business models must therefore address the removal of critical interfacial barriers, in order to guarantee effective sales of the new knowledge. Because of the future uncertainty of energy markets worldwide, manufacturers and/or energy companies combine their portfolios of technologies and business models to augment the number of value options they can sell to their clients.
The first proposal arising out of the present study is that the construction of such portfolios needs a shift in the balance of public intervention at EU level. Technology push approaches (typical of the last twenty years of the 20th century) should migrate towards more market-oriented, integrated approaches, where the players are offered ways and means to circumvent existing (and possibly new) interfacial barriers. Thus, technology manufacturers as well as energy and network companies will identify opportunities to add value to their businesses and create technology pull approaches.
The above shift in approaches will impact both technology development cycles (emerging versus growing/mature technology) and the types of RTD projects (technology problem-solving versus market-driven integration). EU RTD funding is then left with the four major options shown below.
- Emerging technologies are developed and validated to prepare for major changes in the overall European energy system. Europe concentrates on key issues, such as materials for fuel cells using nanotechnologies, or technologies for CO2 removal.
- Interface technologies are developed to make growing or mature technologies more easily adaptable to the still fragmented European markets. This leads, for instance, to the extensive use of power electronics in inverters that can couple photovoltaic (PV) panels with electric grids.
- Emerging technologies are tested with the participation of the energy market players, in order to understand the shape of the learning curve which will prevail in the design of large scale demonstration projects (such as the validation of new electric network management tools).
- Validation and demonstration projects are designed both to understand the effectiveness of several business models and to propose to regulatory bodies adapted market incentives that support innovative energy production and utilisation schemes under legally binding contracts.
Care must be taken in extrapolating good innovation practices from past business models, since a whole new set of players will appear in the coming years across Europe; this will encourage new and market-based approaches to innovation in energy technologies
Future business models will inevitably involve new sets of energy players, resulting from the policy goals of market liberalisation, unbundling of energy companies and the full application of the 1996 IEM (Integrated Energy Market) Directive (Directive 96/92/EC) by Member States. The advent of new players will most probably mean new interfacial barriers. One must therefore take care when translating past good innovation practices into future promising approaches. Only recent results obtained since the IEM Directive implementation and dealing with effective technology transfer (TT) or innovation processes should be considered: most of them rely on open innovation approaches, i.e. approaches in which networking among players allows the removal of interfacial barriers as early as possible in the innovation process, and of course, within the early RTD stages.
Combining the above assumptions and reviewed measures both at the EU and Member State level has led to the identification of the following interfacial barriers. It is the removal of such barriers which will help propose improvements.
Interfacial barriers to be addressed by improved
RTD support measures at EU level
- The current discontinuity of public funding in supporting validation and demonstration phases, which inhibits the building of the market learning curve.
- The shortage of non-technology-based knowledge that is often required to make an innovation process commercially successful.
- The poor packaging of knowledge created by EC RTD contracts, which inhibits the easy take-up by downstream players.
- The difficulty of dialogue between the technology specialists involved in materials, information and communications technology (ICT), biology, etc. and energy technology integrators, which inhibits the use of such generic technologies to the benefit of energy systems.
- The absence of key European technical standards, (for instance, grid connection of renewable electricity), which slows down industrialisation and commercialisation of products and services across Europe.
- The lack of managerial, business and technical skills to implement innovative technologies in liberalised energy markets, which inhibits new business relationships and new working approaches.
- The decrease of effective professional engagement among the players in the innovation chain (at most management levels), which remains critical in solving the interfacial issues that enable an innovative idea to move towards sustainable commercial use.
This overall picture of future energy innovation processes has been provided to more than 60 experts in Europe. These experts have been interviewed at length, and their responses requested, in relation to the following three issues.
- What is the extent of the agreement amongst them about the nature and complexity of these barriers?
- Are there specific measures in their respective Member States that have been implemented to address any of them?
- What recommendations can be made to significantly improve the rate of transfer of new knowledge gained in EC-funded research projects to real-life commercial applications?
All interviewed players first stressed the need to simplify the application procedures for research proposals and contract management at EU level. Any new measure must avoid increasing the apparent 'bureaucracy' of EU RTD funding, while giving energy innovators the options of applying for and using public funds at regional, Member State or EU level, in the smoothest possible way.
All the barriers described above have been confirmed as critical for those innovation processes in the energy sector supported by EU (and very often by Member States) public measures. A thorough review of such public measures at Member State level led to the identification of 15 recommendationsto improve public support measures, and in so doing, to respond to the 3 questions listed above.
It is worth noting that several of the recommendations push for the involvement of the following new players at EU level that will be able to effectively contribute towards the removal of interfacial barriers:
- regulatory bodies, which are not adequately
concerned with the impact of innovation in improving
energy market efficiency;
- energy foundations, active in several Member
States, to expand open innovation models in
the energy sector;
- the European Investment Bank, which supports
more aggressive financing schemes in favour
of innovative energy technologies and their
- National Energy Agencies, which jointly accompany
the building of the learning curves of new technologies
through early adoption schemes adapted to each
of the national backgrounds;
- the secretariats of several European Technology
Platforms, which with complementary financial
supports are capable of specifying cross-cutting
and standard research projects that meet manufacturer
and energy company needs;
- Small to Medium-sized Enterprises (SMEs),
that research, develop and market innovative
technologies and services in relation to cross-cutting
Overall, these recommendations contribute towards reinforcing the role of the three 'classical' pillars that characterise successful public support of innovation processes:
- financial incentives to develop, validate
and demonstrate technology performances;
- dedicated measures to help the early adoption
of technologies, therefore speeding up the market
- capacity building.
Nonetheless, this study recommends that any public authority within the EUdealing with energy research should rely on a fourth pillar in the years ahead, as shown in the diagram below.
This pillar addresses the design of public support measures which will demonstrably help to reduce or remove the interfacial barriers preventing knowledge gained using public funds from reaching market application. Indeed, reducing the number of interfaces, while admirable in this regard, will nevertheless run counter to the general trends of liberalisation and unbundling that are being introduced for broader reasons across the energy sector. Liberalisation and unbundling inevitably introduce new players and therefore new interfacial barriers.
Facing this paradoxical situation will require measures of research and development (R&D) public support to accompany the validation of energy technologies. The participation of the key energy market players here is a prerequisite:
- to understand the shape of the learning curve
of innovative technologies, which will prevail
in the early adoption phase by end-users;
- to understand the expected effectiveness of
new candidate business models, in such a way
that regulatory bodies develop market incentives
to speed up the expansion of innovative energy
production, under legally binding contracts;
- to understand the factors that will facilitate
the implementation of new energy production
or consumption schemes by industrial companies
in a liberalised environment: this should include
business case identification, access to specialist
expertise and response to new regulatory frameworks
1 Jaruzelski, B., Dehoff, K., Bordia R., 'The Booz Allen Hamilton Global Innovation 1000: Money Isn't Everything', Strategy and Business, No 41, Winter 2005.
2 Effectiveness of the innovation process means the capability of innovation managers to bring innovative products, services or business models on time and within budget to profitable market applications.
3 Interfacial barriers (as part of the so-called micro barriers to the diffusion of new energy technologies) may arise from behavioural, cultural, environmental, financial, human capacity, legal, political, institutional, and technological factors. These micro barriers can be identified and addressed directly through focused, committed actions from individual stakeholders.
4 A portfolio of technologies is a coherent set of technical solutions to meet customer needs.
5 A portfolio of business models is the description of business channels and investment requirements which are needed to generate a profitable stream of revenues from new knowledge.
6 It must be emphasised that this study is at the crossroads of industrial policies in the energy sector (with a few Member States very active on the world technology scene) and energy policies (with all the Member States having their own opinions and positions on the future energy landscape of Europe).