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GLOBELICS SEMINAR ON LEARNING, INNOVATION AND LOW CARBON DEVELOPMENT

Diverse and uneven pathways towards low carbon development in emerging

economies4-5 April, Copenhagen

Michiko IizukaUNU-MERIT

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Options for transition to low carbon development for emerging countries

(1) Slow down economic growth; or

(2) Reduce energy intensity;(3) Increasing use of renewable energy;(4) Introduce systemic change

For emerging countries, viable options are the combination of (2)-(4).

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Aim of this paper

To demonstrate:• Diversity –reflecting many specificities exist in

each country by looking at BRICs country• Uneven process of learning—different sequences

of learning and adapting by looking at case of solar PV in China

• System and dynamics—key to success in policy towards low carbon development from above cases

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Framework: Diffusion• Diffusion is chosen instead of – Functions of innovations system(Bergek et al, 2008,

Hekkert et al, 2007 among others);– Technological transition theory (kemp et al 1998,

Jacobsson and Bergek , 2011 among others)• Because in emerging countries:– Technology is adapted instead of created;– Driving force for transition to low carbon

development may not be strong as in industrialized countries (unless there are other incentives)

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Determining factors for diffusion process

Factors influence the decision to adapt new idea/technology/product are(Rogers, 2005):

Relative advantage Decision that new is better than existing one.

CompatibilityUnderstanding that new idea matches with existing system, context.

ComplexityIt is not too difficult to do.

TrialabilityIt can be tried, not unknown, reduced risk.

ObservabilityIt can be easily observed, demonstration effects.

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Dual/uneven learning process in emerging countries

• Capacity to manufacture renewable energy technology (and supply for the technology): export of equipment, machines, ingredients

• Capacity to use renewable energy technology: generating capacity

USE MANUFACTURE

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Case of BRICS with renewable

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RENEWABLE ELECTRICITY GENERATING CAPACITY BY SOURCE (EXCLUDING HYDROPOWER)

Source: IEA, 2009.

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Ranking of renewable energy generation capacity: use

2006 2010 2006 2010RENEWABLE ENERGY* SOLAR PV **

1 China China 1 Germany Germany2 US Germany 2 Japan Spain3 Germany US 3 US Japan4 Spain Spain 4 Spain Italy5 India India 5 Netherlands US

WIND POWER SOLAR THERMAL1 Germany China 1 China China2 Spain US 2 Turkey Turkey2 US Germany 3 Germay Germany4 India India 4 Japan Japan5 Denmark Spain 5 Israel Greece

BIOMASS ETHANOL PRODUCTION1 US US 1 US US2 Brazil Brazil 2 Brazil Brazil2 Philippines Germany 3 China China4 Sweden China 4 Germany Canada4 Finland Sweden 5 Spain France4 Germany BIO DIESEL PRODUCTION

1 Germany Germany2 US Brazil3 France Argentina4 Italy France5

Czech RepublicUS

Source: REN 21, 2007&2011. Note: *does not include hydroenergy, **on grid only.

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Composition of electricity generation in 2008

BrazilChina

IndiaRussi

a

South Afric

aSp

ain

United St

ates

Germany

JapanWorld

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

WindSolar PVBiomass HydroNuclear Conventional

Source: IEA 2009 and Energy production source, 2011

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Observed influencing factors for using renewable technology

• Availability of – Alternative (cheaper) source of energy (coal, natural

gas);– Geographical, climate conditions (Wind, Solar, Water);– Existing technological/knowledge assets (Nuclear, bio

fuel)• Strong path dependence observed. Without

coordinated efforts, increase of renewable energy sources are less than the actual increase in energy use in these emerging courtiers.

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Diffusion of Solar PV Technology in China as an example

Diffusion of renewable technology in 3 levels:• Use– Installed capacity, % of electricity generated

• Production– Market share by firms, production of equipment or

machineries• Creation of new knowledge (technological

capability) – Patenting(output)

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Composition of electricity by source in 2008

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Leading Solar PV module producers in 2010&2011: % share in the world market

Source: Iizuka et al, 2012 based on REN21 report, 2012

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Production of Solar PV technology in China by segment

Source: Based on de la Tour et al, 2011

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PV supply chain

Silicon PC Cells

WafersIngots

PV modules

System Installation

Electricity generation

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Share of patenting application by parts for Solar PV in China

Source: de la Tour et al , 2011

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Observation on diffusion of Solar PV in China: Use

Use of Solar PV is still stagnant in China despite recent increase in installment.

-Lack of infrastructure, pricing system, incentives, accessibility, type of technology may have affected the decision making

-User supposed to play major role but still absent, Policy and Market play a role in shaping the user’s demand/preferences: however, this was somehow lacking until recently

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Observation on diffusion of Solar PV in China: Production

Production of Solar PV is rapidly increased in China in the 2000s.

- Competitiveness in costs, presence of FDI, MNCs attracted by large market; however, until recently,

-Development is concentrated in in less technologically sophisticated, less investment intensive segment of production.

-Less development in input suppliers, deployment services--

-Market had been playing major role (price competitiveness) until recently

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Observation on diffusion of Solar PV in China: Technological capability

Technology capability in Solar PV technology still at the incipient stage but rapidly catching up

-High entry barrier, High initial investment costs, low technological level, lack of human resources, still low R&D investment by private sector

-Nevertheless, patent application is increasing -Policy plays an important role (incentives by

government) but not necessarily aimed at low carbon development but on export promotion

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Recent events: shifts in policy direction?

• US-EU vs China: Dumping accusation on Chinese Solar PV in 2012.

• Policy shifts observed since 2009 when several government project started to induce domestic use solar PV.

• The change in direction became clear in 2011 with introduction of Feed in tariff and intention to establish institutional and physical (grid) infrastructure( 12th 5 year plan for renewable energy development) .

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Conclusion• Diffusion process of renewable technology is diverse

across countries dependent on – Alternative source of energy;– Geographical, climate conditions ;– Existing technological/knowledge assets

• Policy plays important role in building technological assets on existing specific contexts and giving incentives to promote diffusion:– Relative advantage, – Compatibility,– Complexity– Trialability and– Observability

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Some thoughtsThe diffusion of use for renewable technology (Solar PV)did not take place solely neither by• Globalization and market forces nor• Government policyBut needed both—because it required industrial capacity as well as government assurance.What is the right balance? How can the system of innovation framework serve this purpose of providing right sequence and combinations?

• WTO dumping accusation– Is it viable for the product that is going to increase public benefit (by

distributing cheaper products)?– A bit similar argument with open source software and HIV AIDS drug.

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What is diffusion?

“ Process by which an innovation is communicated through certain channels over time among the member of a social system.”

(Rogers, 2003: 35)

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How to achieve low-carbon development?

Diffusion of renewable energy technology one way to achieve Low carbon development• INSTITUTION

– law, policy, regulation, incentives to facilitate the transition

• TECHNOLOGY – Low carbon technology use, produce and innovate

• CAPACITY – Education, diffusion of information to support and sustain

the transition

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Conclusion• Export (and domestic market) market created

an industry over the years (1990s-2000s)• Until the policy to induce both physical and

institutional infrastructure, use of solar PV was limited. Policy influenced various factors (relative advantage, compatibility, trialability and observability) to facilitate diffusion in use.

• Catching up via technology may work with right combination and sequence with policy support.