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Plotting Renewables and Fossil Fuels on the Technology S-curve
Figure 3: Research and Development Spending on
radically, to 100kWh per dollar for example, the results suggest that
Renewable Energies by Country
geothermal energy will become less expensive than the 2005
1,600
composite fossil fuel price at a cumulative investment of less than
Canada
Japan
US$9.8 billion (US$5.6 billion more than had been spent by 2005).
1,400
Netherlands
Needless to say, if fossil fuels continue to increase in price, both wind
Norway
1,200
energy and geothermal energy will become more economical than
Spain
Sweden
fossil fuels before these cumulative investment amounts are reached.
1,000
Switzerland
UK
800
US
Plotting performance against R&D investment for fossil fuels does not
600
yield anything resembling an s-curve because fossil fuel technologies
have long been mature (in the top flat portion of their s-curves). Coal’s
Constant 2005 US$ millions
400
biggest advances were achieved between 1875 and 1925; petroleum
200
and natural gas experienced their biggest improvements between
1920 and 1970. Now their costs simply vary due to the vagaries of
0
fossil fuel markets rather than due to technology improvement.
1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Figure 4: Technology S-curves – kWh per Dollar versus Cumulative
Conclusions and Implications
Government Research and Development Funding for Photovoltaics,
The analysis here offers a number of important insights. First, it
Total Solar, Wind Energy and Geothermal Energy, 1980–2005
2
suggests that R&D investment in fossil fuel technologies by
30 governments is probably excessive: fossil fuel technologies do not
Geothermal energy
appear to be reaping performance improvements from R&D
Wind energy
25
Concentrating solar
investment. On the other hand, because fossil fuel technologies still
Photovoltaics
yield energy at a lower cost than the renewable alternatives, it is not
20
surprising that they still account for the bulk of current commercial
energy production and consumption.
15
kWh per dollar
Second, the results suggest that renewable energy sources –
10
particularly wind and geothermal – have been significantly under-
5
funded relative to their potential pay-offs. Wind energy and
geothermal energy are improving very rapidly with R&D investment.
0
Both appear poised to become economically comparable, if not
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000
superior, to fossil fuels with modest investment. Government R&D
Cumulative R&D spend, constant 2005 US$ millions
investment in these technologies, however, has been diminutive. The
deterministic and there may be reasons to expect another upturn in collective government R&D investment in wind energy and
the performance improvement rate given the rather minimal geothermal energy by the nine countries considered here totalled
investment that has thus far gone into wind energy.
1
If 50kWh per approximately US$2.6 billion and US$4.2 billion, respectively, over
dollar is an appropriate limit for wind energy, the regression the 1974–2005 period. Over that same period, those governments
coefficients suggest that this limit should be reached by the time spent almost US$38 billion on fossil fuel technologies. Of the
cumulative investment reaches US$6 billion. countries examined here, the US, Norway, Japan and Canada still
invest more government dollars yearly on R&D for fossil fuel
For the geothermal energy data, a very good fit was achieved with a technologies than for all of the renewable energies combined. Only
limit of 276kWh per dollar (about 10 times the highest observed value Spain, Sweden, Switzerland and the  UK spend more on  R&D  into
and far cheaper than fossil fuels), an intercept of 2.00 and a slope of renewable energies than fossil fuel technologies.
0.00024. For these data, the sum of squared errors decreases as the
limit increases, suggesting that geothermal may still be in a very early Third, while investment in fossil fuel technologies by incumbent
stage of development. If 276kWh per dollar is an appropriate limit for firms may still be rational due to their asset positions and strategic
geothermal energy, the regression coefficients suggest that this limit commitments, the data suggest that new entrants into the energy
should be reached by the time cumulative investment reaches US$16 industry are likely to benefit more by investing in wind or geothermal
billion. More importantly, the regression coefficients suggest that energy alternatives than fossil fuel or solar technologies.
geothermal energy should become less expensive than the 2005 Furthermore, data suggest that incumbent firms should begin, if
composite fossil fuel price at a cumulative R&D investment of less than they have not done so already, to develop strategies for the
US$7.5 billion (only US$3.3 billion more than had already been spent transition to renewable energy options lest they become victims of
by 2005). Even if we lower the expected limit for geothermal energy disruptive technological change. n
1. It is also important to note that the appearance of a slowing include more estimated data points for very recent years than when the earliest cost data are available from the National
performance improvement in wind for the last couple of years in the older data. Renewable Energy Laboratory.
may be due to data inaccuracies in figures available from the 2. Investment dollars are cumulative over the period 1974–2005
National Renewable Energy Laboratory as their aggregations but performance is shown only from 1980 forward as this is
MODERN ENERGY REVIEW VOLUME 1
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