The Innovation Value-added Chain for Renewable Energy Deployment a report by Kwok L Shum Staff Faculty, Hong Kong University of Science and Technology
There is no dispute over the role of renewable energy. This, along with improvements in energy efficiency and existing technologies that convert fossil fuel to energy, can contribute to a sustainability development strategy and help combat the pressing global concern of climate change.
In many ways the development of new energy technologies is very similar to that of other new technologies. There are currently various debates about the role of the government in fostering the research and development (R&D) of new energy technology.1
Should government
R&D be organised and take on the character of a crash project such as the Manhattan or Apollo projects? Other important factors concern the productivity of public R&D investment and whether such investment in energy would be a substitute for private sector investment or would complement it. These are just a few of the matters being discussed.
This article moves away from R&D matters from the technology supply side and focuses on the deployment of such energy technologies in the market side. To a certain extent, the deployment of such energy technologies is as important, if not more so, than the R&D. The adoption of renewable energy faces myriad difficulties. Two main concerns are that:
• Renewable electricity still cannot achieve grid parity compared with fossil fuel-generated electricity and provides no new functionality. A clean electron works the same way as a dirty electron from an end-user perspective.
•
The social, environmental and even security costs of fossil fuels are not taken into account unless there is a systematic (carbon) pricing or tax scheme.
Towards this end, a set of market pull policies are necessary in order to incentivise the adoption of renewable energy technology. These policies include installation subsidies that cover capital expenditure for household adoption, tax-related subsidies and other loan guarantees in different contexts. It is important to point out that this genre of policy addresses the cost aspects of renewable energy technologies and systems – decisions made at the level of end users.
Non-economic barriers to the adoption of renewable energy technology are institutional in nature and can be conceptualised as being due to carbon lock-in. These institutional barriers necessitate the development of a strategic approach to deploy or introduce
Kwok L Shum is a Staff Faculty at the Hong Kong University of Science and Technology. His research and teaching interests are in innovation management, renewable energy deployment and power systems control (load frequency controls). He is a graduate of the Tokyo Institute of Technology in Japan and Stanford University in the US.
renewable energy technology. Such an approach needs to go beyond just market pull policies.
The aim of this article is to present one strategic dimension or choice in the deployment of a renewable energy technology, such as solar photovoltaic (PV) technology, which ultimately has implications on the costs of deployment. Two sets of system integration cost data for grid-connected distributed PV systems are drawn upon: Japan and the US. These data demonstrate very different dynamic cost-learning behaviours. These two deployment models can be understood in terms of the diversity of deployed applications and how PV system integration projects are organised. The comparison will be formalised in terms of the innovation value-added chain (IVC) framework. Some ways this analytical framework could be applied to renewable energy deployment are suggested.
Photovoltaic Deployment Patterns in Japan and the US The cumulative PV installed base of Japan and the US in the four sub-markets are depicted in Figures 1 and 2, respectively (all dimensions in kWh). Japan has accumulated an overall installed base about 2.2 times of that of the US. In terms of the diversity of PV applications, approximately 95% of the Japanese cumulative installed base in 2009 was in the grid-connected distributed category. For the US, the same category accounted for about 62% of the installed base in 2008. These percentages have increased since 2003, where they were 93% in Japan and 34.7% in the US. As a result, it can be postulated that the US is now increasingly deploying PV in the grid-connected distributed category at the expense of other categories, while Japan has remained focused on this particular category of PV application.
Closed Deployment Model in Japan
It is worth noting that in Japan and within the grid-connected distributed category, 85% of the base is installed as a grid-connected residential PV system or PV appliance. PV appliance is a small-form energy system. It is relatively standardised, with minimal user-customisation features for massive deployment (see Figure 3). Therefore, PV appliance can be regarded as manufactured technology, with suppliers controlling most of the product features so there is minimal on-site customisation.
The production economy is primarily driven by factory learning by doing. This is reinforced by the fact that several major housing manufacturers vertically integrate many of the intermediary steps to combine PV installation and system integration in their newly built houses. This is creating a new and homogenous PV appliance market. The combination of focused deployment by highly vertically integrated firms can be summarised as a closed model of PV deployment.2
6 © TOUCH BRIEFINGS 2010
Industry Outlook
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