Monday, November 21, 2011

Post # 57: Energy Technology: The Innovation Challenge

I've been doing a lot of thinking during the past several months about innovation (or the lack thereof) in the energy sector.  By innovation, I mean the entire process from basic discovery though technology implementation and impact.  (I'm all about impact these days...)

This seems to be a timely topic.  Time Magazine's current issue carries the title, "The Invention Issue."  Of course, invention is but one step in the chain between discovery and impact.  I thought I might offer some snippets from my current stream of consciousness about innovation in the energy sector.  We'll focus on patents as one indicator of innovation.  (Again, patents are only one indicator reflective of one milepost in the road between discover and impact.)

Why all the focus on innovation?  Michael Mandel, the Chief Economic Strategist at the Progressive Policy Institute, recently posted on the Atlantic website a pointed article about the importance of innovation to our economy.  The article, entitle "There Are Only Two Ways to Save the Economy:  Innovation or Inflation" is good reading.  His core message is that if our economy is to recover, we must either grow (through technical innovation that leads to job growth and overall economic growth), or we must purposefully inflate our way out of the mess we're in.  He states, "...we have to shift from a consumer economy to a production economy. This is partly about a change in spending patterns, but also about a change in attitude. For example, we need to boost R&D and other investment in knowledge capital, but we also need federal regulatory agencies to encourage rather than discourage innovation. We need more infrastructure spending and other investment in physical capital, but it should be directed towards supporting exports and production in the U.S., rather than clearing up bottlenecks of imported consumer goods. This profound shift in policy and behavior is essential over the long run, but it won't be easy or quick."

I'm obviously sympathetic to Michael's argument.  I recently had an extended discussion with Charles Barton of The Nuclear Green Revolution blog.  Innovation was one of the many subjects we discussed.  (Charles has posted most of the content of our discussion on his blog.)    My comment to Charles was,

"The environment in today’s nuclear energy enterprise is hostile to innovation.  Not by intent, but in reality nevertheless.  The industry is highly regulated.  It is very costly to do research, development, and demonstration.   It’s a very capital-intensive business.  The barriers to entry are incredibly high.  The down-side risks of innovation are more easily rendered in practical terms than the upside gains.  Often it seems everyone in the enterprise (federal and private sectors) are so risk-averse that innovation is the last thing on anyone’s mind.  In this environment, “good-enough” is the enemy of “better”.  Humans learn by failing.  It’s the way we learn to walk, talk, and ride a bicycle.  Our environment today has little tolerance for failures at any level.  There’s no room for Thomas Edison’s approach to innovation in today’s world.  On top of all of this, or perhaps because of it, the nuclear industry invests less on R&D, as a percentage of gross revenues, than practically every other major industry you might name."

So this got me to wondering about innovation in other energy sectors.  One of the sources of information I turned to was the World Intellectual Property Organization (WIPO).  WIPO's document, Patent-based Technology Analysis Report – Alternative Energy  summarizes almost 78,000 recent alternative energy patent applications from the U.S., Europe, Japan, Korea, the People's Republic of China, and WIPO's patent office.  The data roughly covered the period between 1976 and 2008.  (In case you're wondering, only 15,326 of those patent applications came from the U.S. Patent Office.  An amazing 42,842 of them came from the Japanese Patent Office.  That's more than everyone else combined!) The analysis focuses on solar energy, wind energy, bio energy, hydro energy, geothermal energy, wave/tidal power, hydrogen, fuel cells, carbon capture and storage, and waste-to-energy (using stuff otherwise destined for landfills for direct burning or liquid fuels production).  There are several interesting analyses in the report.  One insight (their Figure 2) is that the global rate of patent filings peaked around 2003 and has since decreased (caveat:  no data for 2009 and later years).

Total alternative energy patent applications and application growth rates (Ref: Figure 2 from "Patent-based Technology Analysis Report – Alternative Energy," WIPO.

A second insight is that the rate of alternative energy patent applications in the U.S. peaked in 2002 at just a bit more than 1500, dropped by 20% to around 1300 in 2004, and was headed downward at a pretty fast clip at that time.

One of the most interesting observations is WIPO's analysis of the global pattern of patent activity.  I quote from their report,

"A general model for patterns in patenting activity can be established to understand the stages of development of a particular technology. On the introduction of a new technology, only a small number of applicants are involved in patenting in the field and only few applications are filed. Following this growth period, the technology enters a development period, during which the technology develops rapidly as a result of active competition between numerous applicants, who together file many applications. As research and development continues, the growth in the number of applications stagnates or declines as does the number of applicants. This period can be termed a “maturity period”. As new technologies or even entirely new technology paradigms emerge, a period of decline begins for the original technology, at which point the number of applications and applicants in that field declines strongly. It is possible for a revival of interest to occur in the original technology, if a new application can be found for it, leading to resurgence in the number of applications and applicants (KIPI 2005)."

Figure 4 from their report is a graphic depiction of this pattern (I apologize for the poor quality of the clip):

A general model for patent filing activity (Ref: Figure 4 from "Patent-based Technology Analysis Report – Alternative Energy," WIPO.

One has to wonder how the superposition of the nuclear energy innovation challenges I mentioned above impacts this model.  I believe most of these challenges lead to "technology lock-in" and "loitering" in Stage III of the process.

A number of other organizations, including the International Energy Agency (IEA) 2009 are engaged in the business of spurring and coordinating energy R&D.  See, for instance, IEA's reports on global energy R&D portfolios.

Margolis and Kammen argued in the 30 July 1999 issue of Science (Vol 285 no. 5428 pp. 690-692) that R&D intensity in the U.S energy sector was extremely low and was reducing the capability of the sector to innovate.  Looks like little has changed...

So, I will continue to bombard the energy technology innovation issue with simple questions. "What is the innovation process, and how does the process work (or alternatively, why doesn't it work?" "Who's doing the innovating?"  "Where is innovation happening?"  "How can the innovative cycle be accelerated?" These are not simply intellectual sandbox exercises.  The quality of life of billions of our fellow human beings around the world depend on the answers...  Here's to success!

Just thinking...


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