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The role of technological learning and innovation in the energy sector

Fifth video lecture by prof. Faaij on the role of technological learning and innovation in the energy sector.
I’ve mentioned several times the importance of new energy technologies, or improvements in existing technologies, to make the type of transitions that we’ve talked about possible, but also affordable, because many of those new technologies can be feasible. But they are still expensive. And affordability is the key issue in a future sustainable energy system. That’s why I want to talk about the importance of technological progress, or technological learning. And the graphics that you see here depicts what we have seen in the past in terms of technological learning and energy technologies. On the left-hand side, that is a well-known graphic that shows what we have achieved so far in reducing the cost of solar energy. The blue curve.
So this started off a few decades ago at very high cost levels. Look, they are logarithmic scales. And even more recently, there was even a more rapid cost decline in the cost of PV panels, partly because of mass production in China. The red curve is the so-called learning curve for wind energy. And it is not a straight curve. There are hiccups, partly because of changes in material prices. But overall, those technologies become cheaper and cheaper over time while we produce more of those technologies and produce more power with those technologies. That’s a typical learning curve. And on the right-hand side you see the same for many technologies.
So we have many of those examples, both for new energy technologies– renewable energy– as well as fossil fuels. So in that sense there’s almost a race in innovation and technological progress. The old technologies improve. But the new technologies improve as well. And that is a promising trend overall. But it’s not a given. So here you see a graphic that is often called the mountain of death. At the moment you’re talking about new technologies that come out of a laboratory– out of a pilot phase– they are not yet deployed in the markets. And often they go through a very expensive piloting and demonstration phase before they can actually enter the markets.
And then you’re often looking at niche markets that are small. And before the actual learning and cost reduction can start, a lot of things need to happen. And the timeline that is linked to this can often be very long. It can often cover decades from the original innovation in the lab to pilot, to demonstration, and then commercial deployments, and eventually cost reduction. So those costs reductions are observed. But they take a long time. And they are not a given as such. There are also many technologies that fail before crossing this mountain of death. So that requires also policies and support.
And that is what you see depicted in this stylised graphic, how important that support is, because the straight line is depicting the fossil reference. So assume that that is constant. That’s not true. But assume that that’s the case. And the declining line is the declining cost of an alternative energy technology, a renewable energy technology, for example. And before reaching cost parity, or a break even point, there is a phase that is more expensive. And that needs to be covered one way or the other. In the markets, maybe by government subsidies, maybe by customers. And that is, of course, difficult to implement. And the more efficient we are in this process, the cheaper it’ll get.
So innovation is actually critical in making energy transitions affordable. But there’s a very important process. And here you see a graphic. What kind of mechanisms actually play a role? Here wind energy is depicted. And increasing the scale of wind turbines was extremely important in making them cheaper per kilowatt hour produced. And it’s partly due to scale. It’s also mass production of the wind turbines themselves. So that makes the manufacturing cheaper. It is also about how they are built, maintained in the field or offshore. That this way you see improvements, and also technological innovations. So removing all kind of parts that are subject to wear, et cetera.
So that process of cost decline and technological learning is usually a very complicated conglomerate of factors. And that is often seen in situations where research and development support industry, and where industry in turn is supported by governments, by stable policies. So those type of transitions that we are looking at at large do require those preconditions to be effective. The phenomenon of technological learning, technological progress in energy technologies, is actually observed very widely. Not only for renewable energy technologies and a number of fossil fuel energy conversion technologies, but also for energy efficiency measures like efficient lighting, or refrigerators, or efficient cars.
And in the picture you see a compilation or different learning rates as they have been observed for different technologies in the past. You also see a reference there. And part of this reference material is provided for you in the background material of this course. So you’re invited to take a look at it. And there you will find data stories about how different energy technologies developed in the past, how they also improved their performance, but also how they may continue to do that in the future. And that is very important information on what you may count on for transitions in your own national energy system.
Now we have discussed the possible scenarios, main technological options, and possibilities for your country or region. In this video, André Faaij will focus on the technologies again. He will show the importance of innovation and technological learning within the energy sector.
After watching this video, you should be able to understand why those aspects are essential for our energy future. Week 2 of this course will delve more into the technical aspect of the energy sector. However, not only is this just a technical issue, economic drivers (which will be covered in Week 4) also play a role.
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