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Unctad Technology and Innovation Report 2011: Powering Development with Renewable Energy Technologies - Overview

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The TIR11 focuses on the role of renewable energy technologies in responding to the dual challenge of reducing energy poverty while mitigating climate change. The Report identifies key capacity issues for developing countries and proposes concrete recommendations for the wider use of renewable energy technologies to promote sustainable development and poverty reduction.

Powering Development
with Renewable


Energy Technologies


OVERVIEW


U N I T E D N AT I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T


New York and Geneva, 2011


TECHNOLOGY
AND INNOVATION


REPORT 2011




ii TECHNOLOGY AND INNOVATION REPORT 2011


Copyright © United Nations, 2011
All rights reserved.


UNCTAD/TIR/2011 (Overview)


UNITED NATIONS PUBLICATION
Sales No.


ISBN 978-92-1-112795-9
ISSN 1990–5114


NOTE


Symbols of United Nations documents are composed of capital letters with figures.
Mention of such a symbol indicates a reference to a United Nations document.


The designations employed and the presentation of the material in this publication
do not imply the expression of any opinion whatsoever on the part of the Secretariat
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All references to dollars ($) are to United States dollars. A «billion» means one
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Material in this publication may be freely quoted or reprinted, but acknowledgement
is requested, together with a reference to the document number. A copy of the
publication containing the quotation or reprint should be sent to the UNCTAD
secretariat.


The Overview contained herein is also issued as part of The Technology and
Innovation Report 2011 (UNCTAD/TIR/2011), sales no. XXXXX


This Overview can also be found on the Internet,


in all six official languages of the United Nations at www.unctad.org/dtl/tir




iiiPreface


PREFACE


As the evidence and impact of climate change increase, so does the urgency to
develop new, clean ways of generating and using energy. And as global demand for
energy increases, this quest will become even more urgent. This year the population
of the planet reached 7 billion. By 2050 it may top 9 billion. All will need access to
modern and affordable energy services.


The UNCTAD Technology and Innovation Report 2011 focuses on the important
role of renewable energy technologies in responding to the dual challenge of
reducing energy poverty while mitigating climate change. This is particularly timely
as the global community prepares for the Rio+20 Conference next year. The Report
identifies key capacity issues for developing countries and proposes concrete
recommendations for the wider use of renewable energy technologies to promote
sustainable development and poverty reduction.


My high-level Advisory Group on Energy and Climate Change stressed that there
is an urgent need to mobilize resources and accelerate efforts to ensure universal
access to energy. Creating an enabling environment for the promotion and use of
renewable energy technologies is a critical part of this effort, as recognized by the
United Nations General Assembly when it declared next year as the “International
Year for Sustainable Energy for All”.


It is also at the heart of my recent launch of the Sustainable Energy for All initiative
to help ensure universal access to modern energy services; double the rate of
improvement in energy efficiency; and double the share of renewable energy in the
global energy mix, all by the year 2030.


We can tackle both energy poverty and climate change by facilitating investment,
enhancing access to technologies, and doing more to help developing countries
make a transition to a greener path of economic growth. The Technology and
Innovation Report 2011 helps point the way forward.


BAN Ki-moon
Secretary-General


United Nations




iv TECHNOLOGY AND INNOVATION REPORT 2011


ACKNOWLEDGEMENTS


The Technology and Innovation Report 2011 was prepared under the overall
direction of Anne Miroux, Director of UNCTAD’s Division on Technology and
Logistics, and the direct supervision of Mongi Hamdi, Head, Science, Technology
and ICT Branch.


The report was written by a team comprising Padmashree Gehl Sampath
(team leader), Michael Lim and Carlos Razo. Inputs were provided
by Dolf Gielen (Executive Director, IRENA Technology and Innovation
Center, Bonn), Professor Mark Jaccard, Simon Fraser University, Professor Robert
Ayres (INSEAD), Aaron Cosbey (IISD), Mathew Savage (IISD), Angel Gonzalez-Sanz
(UNCTAD), Oliver Johnson (UNCTAD) and Kiyoshi Adachi (UNCTAD).


An ad hoc expert group meeting was organized in Geneva to peer review the
report in its draft form. UNCTAD wishes to acknowledge the comments and
suggestions provided by the following experts at the meeting: Amit Kumar (The
Energy and Resources Institute), Elisa Lanzi (OECD), Pedro Roffe (ICTSD), Ahmed
Abdel Latif (ICTSD), Vincent Yu (South Centre), Taffere Tesfachew (UNCTAD),
Torbjorn Fredriksson (UNCTAD) and Zeljka Kozul-Wright (UNCTAD). UNCTAD also
acknowledges comments by the following experts: Manuel Montes (UN/DESA),
Francis Yamba (Centre for Energy Environment and Engineering, Zambia),
Aiming Zhou (Asian Development Bank), Youssef Arfaoui (African Development
Bank), Mahesh Sugathan (ICTSD), Jean Acquatella (ECLAC) and Alfredo Saad-
Filho (UNCTAD).


The report was edited by Praveen Bhalla and research assistance was provided
by Fernanda Vilela Ferreira and Hector Dip. Nathalie Loriot was responsible for
formatting and Sophie Combette designed the layout.




vKey messages


KEY MESSAGES


On technology and innovation capacity for RETs:


1. A mutually compatible response to the dual challenge of reducing energy pov-
erty and mitigating climate change requires a new energy paradigm. Such a
paradigm would have RETs complementing (and eventually substituting) con-
ventional energy sources in promoting universal access to energy.


2. Established RETs, such as solar PV technologies and onshore wind, are experi-
encing rapid ongoing technological progress and reductions in energy genera-
tion costs.


3. RETs are already being deployed on a significant scale in some countries,
though this varies by region.


4. Much progress can be achieved in alleviating energy poverty by focusing on
rural, off grid applications alongside efforts to establish more technologically
and financially intensive grid-based RET applications.


5. In the absence of technological capabilities, national strategies for sustainable
economic development are likely to be constantly undermined.


6. Strengthening technological absorptive capacities is essential not only to build
R&D capabilities for RETs in the short and mid term, but also to promote adap-
tation and dissemination of RETs.


7. RETs use should be integrated within broader goals for poverty reduction and
job creation for the more economically vulnerable groups in developing country
economies.


On the international policy challenges for RETs:


1. There is an urgent need to reposition the debate within the international agenda
on climate change so that obligations of countries to mitigate climate change is
framed in terms of creating development opportunities for all in an environmen-
tally sustainable manner.


2. Such a repositioning also implies focusing on issues of finance, technology
transfer and technology dissemination for developing countries in the context
of RETs.




vi TECHNOLOGY AND INNOVATION REPORT 2011


3. The current international finance and technology transfer architecture is frag-
mented. It needs to be strengthened with the aim of reducing energy poverty
while mitigating climate change.


4. International support needs to work hand in hand with national frameworks
on RETs, complementing efforts in three critical areas: increasing financial re-
sources for RETs, promoting greater access to technology and enabling great-
er technological learning within the green economy and the Rio-plus-twenty
framework.


5. The diffusion of RETs in developing countries involves much more than trans-
ferring technology hardware from one location to another. This Report, noting
the complexity of technological change in different contexts, calls for tar-
geted international support to foster RETs-related learning. Such support
could include the following elements:


(i) an international innovation network for LDCs, with a RET focus, that seeks
to facilitate knowledge accumulation and innovation in LDCs.


(ii) global and regional research funds for RETs deployment and demonstra-
tion, that focus attention on making resources available to adaptation and
incremental innovations in RETs for use in a wide variety of contexts.


(iii) an international RETs technology transfer fund that is dedicated to facilitat-
ing private-private and private-public transfer of technology for RETs.


(iv) an international RETs training platform that promotes capacity building and
skills accumulation in developing countries.


6. More support could take the form of augmenting and further strengthening the
recently proposed technology mechanism within the UNFCCC, particularly by
increasing its focus on RETs.


On national policy frameworks for RETs:


1. National governments in developing countries can play a pivotal role in com-
bining conventional sources of energy with RETs in ways that will not only help
reduce energy poverty, but also simultaneously promote climate-friendly solu-
tions to development.


2. This Report proposes that developing countries adopt a national integrated
innovation policy framework to create policy incentives in national innovation
policies and national energy policies for the greater use, diffusion, production
and innovation of RETs.




viiKey messages


3. Such a policy framework would have five key functions:


(i) Defining policy strategies and goals;


(ii) Providing policy incentives for R&D, innovation and production of RETs;


(iii) Providing policy incentives for developing greater technological
absorptive capacity, which is needed for adaptation and use
of available RETs;


(iv) Promoting domestic resource mobilization for RETs in national contexts;
and,


(v) Exploring newer means of improving innovation capacity in RETs, including
South-South collaboration.


4. Not all of the policy options proposed in the Report are available or applicable
to all developing countries and LDCs.


5. Incentives for RETs production and innovation can be entrenched into the
wider innovation policy framework and energy policies of countries through a
variety of policy measures.


6. For the poorer countries, the ability to undertake large-scale R&D or establish
significant manufacturing capacity will be constrained by the relatively small
size of their domestic markets, lack of access to finance and weak institutional
capacity. In such cases, countries should consider incentives to build greater
absorption capacity in RETs and revisit their energy subsidy policies.


7. Incentive structures can start small, on low-scale projects, designed to encour-
age private sector solutions to renewable energy technology development and
deployment challenges in rural settings.


8. Developing countries will face different problems in RETs promotion, produc-
tion and innovation, depending on their respective starting points. Neverthe-
less, for all developing countries, RETs present real opportunities for reducing
energy poverty, and the right policies could influence the extent of benefits that
could be derived from RETs use, adaptation and dissemination.






ixContents


CONTENTS


Key messages ................................................................... v


Overview .......................................................................... 1


Renewable energy technologies, energy poverty
and climate change ..................................................................................... 1


The expanding role of renewable energy technologies ................................. 5


Stimulating technical change and innovation in and through renewable
energy technologies .................................................................................... 9


International policy challenges for acquisition, use and development of
renewable energy technologies ................................................................. 14


National policy frameworks for renewable energy technologies ................. 20


References..................................................................... 27






OVERVIEW


RENEWABLE ENERGY TECHNOLOGIES,
ENERGY POVERTY AND CLIMATE CHANGE


Sustained economic growth of the kind that leads to continuous improvement in the
living standards of all people through poverty reduction rests on assuring access
to energy for all. Such a global energy access agenda requires a greater focus
on energy generation and use from existing resources while minimizing waste.
However, the use of conventional energy sources (primarily fossil fuels) are believed
to have led to a rise in greenhouse gas (GHG) emissions and to a resulting increase
in global average temperatures since the mid-twentieth century. The fundamental
conclusions of the most recent assessment report of the IPCC are that climate
change is the result of human activity, that the ongoing rate of climate change will
have devastating effects if left unchecked, and that the costs of action for mitigation
and adaptation would be significantly lower than the costs of inaction.1 Therefore
from a climate change perspective, there is a need for all countries worldwide to
embark upon low-carbon, high growth trajectories. It also requires promoting the
use of other, newer or more cost-effective energy sources in all countries, which
could complement the conventional energy supplies predominantly in use today.
Renewable energy (RE) sources offer one such distinct possibility, and established
renewable energy technologies (RETs) can complement more traditional sources of
energy, thereby providing countries with varied energy options within their national
energy matrices to suit their specific needs and conditions. Given their enormous
potential, there is growing interest in the current and future role of RETs in national
energy supply systems worldwide.


This, however, is not an easy task for all developing and least developed countries
(LDCs), since the greater use of RETs for energy supply and industrial development
is dependent on building technological capabilities. Against this broad background,
the Technology and Innovation Report (TIR) 2011 analyses the important role
of technology and innovation policies in expanding the application and wider
acceptance of RETs, particularly in the context of developing countries. Technology
and innovation policies can promote and facilitate the development, acquisition,
adaptation and deployment of RETs to support sustainable development and
poverty reduction in developing countries and LDCs.




2 TECHNOLOGY AND INNOVATION REPORT 2011


Four current trends lend a new urgency to the need to explore how far and how
easily RETs could serve energy needs worldwide. First, ensuring universal access
to conventional energy sources using grids entails high costs, which means that
developing countries are unlikely to be able to afford the costs of linking additional
households, especially those in rural areas, to existing grids. Second, the climate
change debate has injected a greater sense of urgency into searching for newer
energy options, as a result of both ongoing policy negotiations and the greater
incidence of environmental catastrophes worldwide. Third, from a development
perspective, the recent financial and environmental crises have caused major
setbacks in a large number of developing countries and LDCs, resulting in their
further marginalization from the global economy. The LDCs and many developing
countries suffer from severe structural vulnerabilities that are a result of their patterns
of integration into the global economy. The international community needs to promote
low-carbon, climate-friendly development while fostering inclusive economic growth
in these economies as a matter of urgency. Lastly, there are extreme inequalities
within developing countries themselves, and lack of access to energy affects the
poorest of the poor worldwide, impeding their ability to enjoy the basic amenities of
modern life that are available to others at the same level of development.


Within the United Nations Framework Convention on Climate Change (UNFCCC),
polarized positions on who should shoulder responsibility for the current state of
emissions and share the financial burden for mitigating climate change are based
on the erroneous belief in the incompatibility of the dual challenges of promoting
industrial development and mitigating climate change. Developing countries, in
particular, face the challenge of promoting industrial development – a fundamental
prerequisite for poverty reduction and equality in their societies – while reducing
their reliance on conventional energy sources that have played a central role in
global economic growth until recently.2 Most of these countries also remain far
more vulnerable to most of the environmental threats arising from climate change.3


However, the advantages of using RETs will not accrue automatically in developing
countries. Although many of the RETs needed for meeting a larger share of the
global energy demand already exist, or are on the verge of commercialization, the
knowledge and technological capabilities required for their transfer to developing
countries and LDCs are not easily accessible. Developing countries will need to
strengthen their innovation systems,4 policy frameworks and linkages to enable
wider RET dissemination and to promote a greener catch-up process. Promoting
greater access to RETs and support for use and adaptation of these technologies




3Overview


through all means possible will be important to enable developing countries to
sustainably integrate these processes into efforts aimed at capital formation and
transformation of their productive structures.


There is a need not only for strong domestic technology and innovation policies,
but also for greater international efforts to make the international trade and
intellectual property rights (IPRs) regime more supportive of the technological needs
of developing countries and LDCs. International support to developing countries
through various channels should also include financial support and North–South,
South–South and triangular cooperation, as well as effective technology transfer
mechanisms. All of these will be necessary complements to the development of
local capacities for RETs.


This TIR identifies five distinct issues that stand out in the debate on technology and
innovation of RETs, which are of particular relevance for all developing countries
and LDCs. First, structural transformation that supports the economic development
of countries relies strongly on the growth of national technological capabilities.
At present, inadequate energy supply is a constraint that applies not only to the
manufacturing sector, but also to other sectors that are potentially important to
the process of industrialization and development, such as services, tourism and
agricultural processing, which depend on reliable, high-quality power supply. It is
therefore important to recognize the virtuous relationship between energy security
and technological capabilities: energy security is a key aspect of the physical
infrastructure required for growth, and technological capabilities are a fundamental
prerequisite for greater adaptation and use of RETs within domestic economies.


Second, incoherent, and often conflicting, policy developments at the multilateral
level tend to adversely affect national aspirations for technological empowerment
in developing countries. Although climate change will affect all countries and
communities worldwide, developing countries (especially LDCs) will shoulder a
disproportionate burden from the fallout resulting from climate change, including
increasing climatic variations, extreme weather events and natural disasters. The
ongoing debates on climate change reflect the diverse positions of countries on
how the burden should be shared.


Third, the issue of greater transfer of climate-friendly technologies that has been a
key element in the global debate on climate change is intricately linked to technology
and innovation infrastructures in countries. In the RE sector, recent evidence shows
that basic approaches to solving technological problems have long been off-patent,




4 TECHNOLOGY AND INNOVATION REPORT 2011


and therefore can be adapted and disseminated in developing countries provided
that some technological prerequisites are met. This points to the need for greater
attention to strengthening the technology absorptive capacity of countries through
coordinated policy support, in addition to making existing technologies available
and assisting in their greater diffusion.


Fourth, RETs will remain a distant goal as long as they are prohibitively expensive.
Innovation in RETs is moving at a fast pace globally, but left on its own, or left to
the “market”, it is unclear to what extent this pace will continue globally and to
what extent it will lower the prices of these technologies for use at the individual
household and firm level in the medium term.


Finally, RETs form part of the wider debate on emerging patterns of investment and
technology that fall under the umbrella of the “green economy”. At a fundamental
level, the concept of the “green economy” itself has been highly contested. Some
argue that calling for large-scale investments in developing countries to facilitate
the transition to a green economy imposes uneven costs, thereby creating an
additional burden on already disadvantaged groups of people. The challenge is
to ensure that the green economy concept, which will also be the focus of the
Rio+20 framework, is structured in a way that it does not adversely affect ongoing
productive activities in developing countries while helping their transition to “green”
modes of development. Numerous issues will need to be addressed in this context,
including patterns of trade, technological upgrading and specialization.


Analysing these five issues at length, the TIR 2011 argues that RETs can bring
numerous benefits to developing countries. The potential impacts of RETs in terms
of reducing energy poverty, generating employment and creating new production
and innovative activity add to their environmental advantages. Several established
RETs have significant potential to contribute to a broad range of development
goals. It is beyond the scope of this Report to address the whole range of policy
implications of all RETs in the very different contexts of the various categories
of developing countries. It therefore focuses on those that are (i) already mature
enough to make practical contributions to policy objectives in the short term, but
are sufficiently recent in their commercialization to present challenges with which
policymakers may be less familiar; and (ii) particularly appropriate to the objective
of reducing and eventually eliminating energy poverty in developing countries as
complements (and eventually substitutes) to conventional energy sources.




5Overview


THE EXPANDING ROLE OF RENEWABLE ENERGY TECHNOLOGIES


Some RETs are well established


RETs are a diverse group of technologies that are currently at different levels of
maturity (box 1). Those based on wind, geothermal, solar thermal and hydro are
mature technologies and are already being deployed widely. Others, including


Box 1: Established and emerging renewable energy technologies


Solar energy technologies capture energy from the sun, either as heat or as electricity,
through conversion by solar PV panels. There are three main classes of solar energy tech-
nologies: concentrating solar power (CSP) systems; solar thermal systems for heating
residential and commercial buildings (which can be either active or passive in nature) and
solar photovoltaic (PV) power systems.


Wind energy technologies, mainly wind turbines, use kinetic energy from air currents aris-
ing from uneven heating of the earth’s surface to generate electricity. The variations are
mainly in terms of the size and location of the units. The two main classes are onshore
and offshore.


Biomass energy technologies use both traditional and more sophisticated methods (re-
ferred to as modern biomass power) to produce useful energy primarily from wood resi-
dues, agricultural waste, animal waste and municipal solid waste. Traditional biomass
(wood and charcoal), “modern biomass” (i.e. collecting, pre-processing and delivering
combustible cellulosic materials to electric power plants or chemical plants) and biofuels
are three categories of biomass.


Hydropower technologies use power generated by harnessing the flow of water through a
hydraulic turbine or equivalent. Small and large hydropower systems are the most mature
of the RETs, and have been a relatively important source of electric power production for
many decades in many countries (REN21, 2005).


Geothermal technologies extract energy from existing reservoirs of steam or hot water
in porous rocks beneath the earth’s surface. Heat can also be reached by drilling deep
enough at any location using an engineered geothermal system (EGS), and brought to the
surface as hot water or steam to produce heat or electric power.


Ocean energy can be defined as energy derived from technologies that utilize seawater as
their motive power, or harness the water’s chemical or heat potential. This form of renew-
able energy from the ocean comes from five distinct sources: wave energy, tidal range (or
tidal rise and fall), tidal and ocean currents, ocean thermal energy conversion (OTEC) and
salinity gradient (or osmotic power).


Source: UNCTAD, Technology and Innovation Report (2011).




6 TECHNOLOGY AND INNOVATION REPORT 2011


second-generation biofuels and ocean energy, remain at varying stages of pre-
commercial development. Although there are problems of intermittency associated
with some of them (for example, in the provision of solar energy, where the sun
is available for only a limited number of hours per day), they are very versatile
in that they can be deployed in various configurations, either alone or, often, in
combination with conventional energy technologies. Therefore they offer the
potential to contribute significantly to alleviating energy poverty in diverse situations.


The TIR 2011 focuses primarily on RETs based on wind, solar and modern biomass
sources for electricity generation, either in centralized or decentralized facilities.
These are among the most important and fastest growing RETs in developing
countries (see figure 1 for the shares of various RE sources for power generation).
There are also non-electric applications of REs, such as biofuels that are used for
transportation, space heating, hot water and cooking (e.g. by solar cookers).


The role of RETs in alleviating energy poverty is growing


On a global scale, although the various advantages of RETs are increasingly being
recognized, established fossil fuel sources still dominate energy supply at present,
providing up to 89 per cent of all global energy. In 2008, RE sources (including large


0 100 200 300 400


Geothermal power


Solar PV


Biomass power


Wind power


Total renewable
power capacity




Gigawatts


Developing countries


Developed countries




Figure 1: Renewable electric power capacity (excluding hydro), end 2010


Source: UNCTAD, based on REN21 (2011).


Note: Estimates of electric power generation by solar PV installations in developing countries
are from REN21 (2010). Other technologies not included in the chart, such as solar
thermal power and ocean (tidal) power, present low levels of generation capacity:
1.1 and 0.3 gigawatts (GW) respectively.




7Overview


hydro installations) accounted for 12.9 per cent of global primary energy supply,
whereas the bulk was supplied by fossil fuels (including oil, gas and coal). However,
a large proportion of the global population cannot afford these conventional energy
supplies. According to estimates of the International Energy Agency (IEA), over 20
per cent of the global population (1.4 billion people approximately) lacked access to
electricity in 2010. South Asia has the largest absolute numbers of people without
such access (42 per cent of the world total), in spite of recent rapid progress. Taking
the entire population of this subregion, 38 per cent have no access to electricity,
and within this figure, 49 per cent of people living in rural areas lack access. In
relative terms, sub-Saharan Africa is the most underserved region, with 69.5 per
cent of the population having no access to electricity, and only a meagre 14 per
cent of the rural population having access (table 1).


Eliminating energy poverty and promoting greater access to energy for economic
development therefore requires serious consideration of how RETs could
complement and/or even substitute conventional energy sources. Will such a new
energy paradigm that envisages a greater role for RETs be able to create greater
employment? Could those RETs be deployed in remote rural areas that are hard to


Source: Reproduced from IEA (2010).


Table 1: Access to electricity, and urban and rural electrification rates, by region, 2009


Region


Number of
people without


electricity
(millions)


Electrification
rate
(%)


Urban
electrification


rate (%)


Rural
electrification


rate (%)


Africa 587 41.9 68.9 25.0


North Africa 2 99.0 99.6 98.4


Sub-Saharan Africa 585 30.5 59.9 14.3


Developing Asia 799 78.1 93.9 68.8


China and East Asia 186 90.8 96.4 86.5


South Asia 612 62.2 89.1 51.2


Latin America 31 93.4 98.8 74.0


Middle East 22 89.5 98.6 72.2


Developing countries 1 438 73.0 90.7 60.2


OECD and transition
economies 3 99.8 100.0 99.5


World total 1 441 78.9 93.6 65.1




8 TECHNOLOGY AND INNOVATION REPORT 2011


connect to the conventional energy grid? Will such RETs be applicable and easy to
use by individual users, but at the same time have the potential for scale-up within
enterprises, firms and sectors? Would they alleviate, at least partially, the difficulties
faced by vulnerable social groups affected by poverty (e.g. rural populations,
women, children and indigenous groups) so that they can devote more time and
attention to income-generating and other activities?


A significant aspect of RE use is that they offer the possibility of devising semi-grid
or off-grid rural installations that promote greater access to energy in developing
countries than that provided by conventional energy sources which rely extensively
on grid connections. Of the 1.4 billion people not connected to electricity grids
globally, approximately 85 per cent live in rural areas. Because of their possibility
of use in non-grid or semi-grid applications, RETs can be an important means of
energy supply in areas where other energy sources are not available, such as in
isolated rural communities. Such decentralized, off-grid applications of RETs are
already in relatively wide use in developing countries, where they provide cost-
effective energy solutions that bring significant benefits to local communities.


RETs such as solar pumps, solar PV installations, small wind, mini-hydro and
biomass mini-grids offer higher potential and cost advantages than traditional grid
extension. They can be a reasonable option for providing some degree of access to
energy, particularly in rural areas in developing countries and LDCs where national
energy grids are unlikely to expand in the near future. Arguably, some of these
applications are small in scale and do not make much of an impact on energy
provision at the national/global level, but they can still play an important role in
reducing energy poverty at the local/rural level. In these cases, RETs offer a realistic
option for eradication, or at least for alleviation, of energy poverty.


Technological progress and greater investments and deployment
are lowering costs of established RETs


There has been rapid ongoing technological progress in some RETs, such as
solar PV technologies and onshore wind energy, with accompanying reductions in
energy generation costs. The cost competitiveness of RETs relative to conventional
energy sources is also improving, and can be expected to improve even further
with continued technological progress and higher investment in their development,
production and deployment. The prices of solar PV systems, for instance, have
been falling extremely rapidly. During the 18 months leading to June 2010, prices
of new solar panel modules fell by an estimated 50 per cent. And in some off-grid




9Overview


and mini-grid applications some RETs were already competitive with conventional
energy in 2005, even with the relatively low oil prices prevailing at that time. It is
reported that in Africa, Asia and Latin America, the demand for modern energy
is driving the use of PV for mini-grid or off-grid solar systems, which in many
instances are already at price parity with fossil fuels. This implies that for precisely
those applications which may be most suitable for isolated communities (i.e.
decentralized applications that do not require connection to the national or regional
energy grids) RETs may be at their most cost-competitive. Rising, and increasingly
volatile, oil prices and growing investments in RETs (box 2) may also be contributing
to this trend. However, additional technological improvements that could help to
better integrate RE into the existing energy infrastructure (including through the
development of smart energy grids) and augment the storage capacities of RETs
will be valuable in promoting their cost competitiveness.


Despite the ongoing surge in the deployment of RETs, at present they account for only
a small fraction of global energy consumption. The TIR 2011 stresses that there is still
enormous technical potential for power generation from RETs, and argues that such
RETs are likely to play an increasingly important role in meeting global energy demand
as continued technological progress, additional investment and further deployment
lead to cost reductions over the medium and long term globally. The analysis in the
Report shows that RETs will continue to evolve as complements to existing energy
sources globally, with the eventual aim of replacing conventional energy in the long
term. For developing countries and LDCs, this is a positive trend. The actual speed
and extent of deployment of RETs and the role they will eventually play will depend
critically on the policy choices that are made today and in the future. The policy issues
that need to be considered within national frameworks for technology and innovation
and the ways and means of international support will be critical for harnessing the
potential of RETs for poverty reduction and sustainable development.


STIMULATING TECHNICAL CHANGE AND INNOVATION
IN AND THROUGH RENEWABLE ENERGY TECHNOLOGIES


Technology and innovation capacity and reliable
energy supply are intricately linked


Uninterrupted and reliable energy supply is an important stimulant to innovative
capacity and economic growth. Indeed, a number of studies underline a direct
causal relationship between the low supply of electricity and stunted economic




10 TECHNOLOGY AND INNOVATION REPORT 2011


Box 2: Growing investments in RETs
Global investments in RETs have increased markedly during the past decade, rising from a
total of $33 billion in 2004 to $211 billion in 2010, and they have been growing at an average
annual rate of 38 per cent over that period, according to the most recent estimates available.
Both developed and developing countries are participating in this growth, although there is
a need for expanding RETs-related investments in smaller developing countries, particularly
LDCs. The increase in investments has been closely associated with technological improve-
ments and declining costs of RETs production, and has continued despite the global financial
crisis and recession of 2008-2009 and the resulting drop in conventional energy prices. Re-
covery of investments was brisk in 2010 and prospects seem bright for their continued growth
(box table 2.1).


Source: UNCTAD, based on UNEP and Bloomberg (2011).


Note: The data are estimates provided by Bloomberg New Energy Finance. They exclude
large hydro, but include estimates for R&D investments by the private sector and
governments as well as investments in small distributed RE projects.


Box table 2.1: Global investments in renewable energy and related technologies,
2004–2010 ($ billion)


2004 2005 2006 2007 2008 2009 2010


Average
annual
growth


rate
2004–2010


(%)


Investment
in technology
development
of which:


5.3 4.7 5.7 6.7 8.2 7.6 11.0 14.6


Venture capital 0.4 0.6 1.3 1.9 2.9 1.5 2.4 46.2


Government R&D 1.1 1.2 1.3 1.5 1.6 2.4 5.3 35.1


Corporate R&D 3.8 2.9 3.1 3.3 3.7 3.7 3.3 -1.5


Investment
in equipment
manufacturing


0.7 4.8 14.1 25.2 19.4 15.6 18.5 139.0


Investment in RE
projects of which: 26.9 47.9 72.6 109.0 140.3 141.1 193.4 41.0


Small distributed
capacity 8.6 10.7 9.4 13.2 21.1 31.2 59.6 41.9


Total investment
in RETs 33 57 90 129 159 160 211 38.3




11Overview


growth. At the same time, technology and innovation capabilities are important for
promoting R&D and innovation to produce state-of-the-art RETs, and for creating
a critical base of knowledge that is essential for adapting and disseminating RETs.
A critical threshold of technological capability is also a prerequisite for making
technical improvements to RETs that enable significant cost reductions so that
they can be deployed on a larger scale in developing countries. The success of
RETs-related technology transfer initiatives also depends on the ability of actors
in developing countries to absorb and apply the technologies transferred. The
absence of, or limitations in, technological and innovation capabilities is therefore
likely to constantly undermine national strategies for sustainable development
based on the greater use of RETs. This virtuous relationship between RETs and
technology and innovation capacity needs to be recognized and fostered actively.


Countries’ capacities for technological absorption need to be strengthened through
coordinated policy support, but an additional priority will be to make existing
technologies available and assist in their greater diffusion. As noted earlier, while
innovation in RETs is moving at a fast pace globally, ensuring this continues will
require policies that promote the wider adaptation and deployment of RETs. In the
context of the current state of underdeveloped energy infrastructure in developing
countries and LDCs, RETs could not only help to reduce energy poverty in many
novel ways; they could also help reduce social inequalities through the creation
of new jobs associated with the application of RETs. Public policy therefore has
an important role to play in this regard, in addition to tipping the balance towards
energy mixes that give prominence to RETs development in developing countries.


Innovation policy frameworks for RETs are a fundamental requirement


Innovation systems in developing countries are fundamental to shaping the capacity
for the technological learning needed for adaptation, use, production and R&D-
based innovation of RETs. There are several features of technology and innovation
unique to RETs compared with other sectors that have been the focus of many
policy studies. First, there is already a well-established energy system globally,
and RETs are technologies that seek to provide alternative solutions to achieve the
same results using natural and renewable resources of different kinds (such as sun,
wind and water). Their unique selling point is that they offer environmentally friendly
solutions to energy needs for the same service, namely the supply of energy. This
is different from innovation in other sectors where competition is structured around
the provision of newer products and services at reasonable prices.




12 TECHNOLOGY AND INNOVATION REPORT 2011


Second, the intermittency issues related to RETs necessitate a systemic approach
to promoting innovation in the sector. Evidence shows that intermittency of different
RE supplies can be dealt with quite easily within electricity systems when solutions
are designed from a systemic perspective.5 A systemic treatment of RETs is also
important from another perspective, namely, the management of demand for energy.
The end-use dimension (i.e. how many people can access a particular supply and
how effectively it can be provided) will need to play a major role when considering
RETs as a means of alleviating energy poverty in developing countries. Thus a
systemic perspective should give due consideration to the demand dimension
when designing on-grid, off-grid or semi-grid applications using RETs.


Third, it is often assumed, incorrectly, that technological capability is required
primarily for R&D aimed at the creation or development of newer RETs. As the TIR
2011 shows, technology and innovative capability is also fundamental for other
aspects, such as:


(i) Making minor technical improvements that could enable significant cost
reductions in production techniques, adaptation and use; and


(ii) Adaptation, dissemination, maintenance and use of existing RETs within key
sectors of the economy, which depend not only on the availability of materials,
but also on diverse forms of knowledge.


Fourth, in developing countries, there is an urgent need to promote choices
in innovation and industrial development based on RETs. These choices may
be different depending on the conditions in the country and the kind of RE
resource(s) available. The specific characteristics of different RETs, varied project
sizes and the possibilities for off-grid and decentralized supply, imply many
new players, both in project development (new and existing firms, households
and communities) and in financing (existing lenders, new microcredit scheme,
government initiatives).


Therefore, strengthening national frameworks for technology and innovation in
developing countries is a necessary pre-condition for ensuring increased use
and innovation of RETs through: (i) the greater integration of RETs within socio-
economic development strategies of countries; (ii) creation of capacity for increased
technology absorption in general, and in RETs in particular; and (iii) express policy
support aimed at significantly integrating RETs into the national energy mix by
tipping the balance in favour of RETs development, production and use.




13Overview


National governments need to tip the balance in favour of RETs


There is an urgent need for government action aimed at substituting patterns of
current energy use with reliable, established RETs. While off-grid RETs (especially
modern biomass-based ones) may be relatively easy to deploy, many still remain
very expensive at the scales required to make an impact in developing countries,
despite rapid technological advances. For example, a study by the IEA (2009) came
to the conclusion that in the United States, electricity from new nuclear power
plants was 15–30 per cent more expensive than from coal-fired plants, and the
cost of offshore wind power was more than double that of coal, while solar power
cost five times as much. Changing from the current global situation of no energy, or
unreliable and often undesirable sources of alternative energy (such as traditional
biomass), to one where industrial development begins to pursue a cleaner growth
trajectory is essential for driving down the costs of RETs.


Each time investment is made in generating more energy through RETs, there is
not only a gradual shift in the energy base; it also has a significant impact on the
capacity of RETs to supply energy more economically. For example, according to
recent reports, every time the amount of wind generation capacity doubles, the
price of electricity produced by wind turbines falls by 9–17 per cent.6 This holds
true for all RETs: with each new installation, there is learning attached as to how
the technology can be made available more effectively and efficiently in different
contexts so as to lower costs over a period of time.


Government action will need to focus on two very important areas of intervention:
addressing systemic failures in RETs, and tipping the balance away from a focus
on conventional energy sources and towards RETs. Systemic failures in the RETs
sector are varied and emerge from sources other than just the market. They can be
caused by technological uncertainty, environmental failures or other systemic factors.
Therefore, it will be important for government intervention to address these failures.


Policy incentives, critical for inducing a shift towards the wider application of RETs
in the energy mix of countries, need to be designed and articulated at the national
and regional levels so that collective actions can be fostered. Most importantly,
energy production should cater to local needs and demand in countries, for
which a systemic perspective is necessary. Policy support needs to be directed
at mobilizing greater domestic resources to foster RETs development and use,
in addition to providing increased access to the most advanced, cost-cutting
technological improvements to established RETs.




14 TECHNOLOGY AND INNOVATION REPORT 2011


Governments can play a vital role in making RETs feasible at each level: use,
adaptation, production and innovation. Government agencies and the policy
framework should aim at:


(i) Promoting the general innovation environment for the development of science,
technology and innovation;


(ii) Making RETs viable; and


(iii) Enabling enterprise development of and through RETs.


This requires governments to adopt an agenda of proactively promoting access to
energy services of the kind that is conducive to development, while also focusing
on the important positive relationship between technology and innovation capacity
and increased use of RETs. Greater international support for developing countries
will be critical on both these fronts.


INTERNATIONAL POLICY CHALLENGES FOR ACQUISITION,
USE AND DEVELOPMENT OF RENEWABLE ENERGY TECHNOLOGIES


The international discourse needs to be framed more positively,
with a focus on mitigating climate change and alleviating energy poverty


Efforts at the national level aimed at harnessing the virtuous relationship between
RETs-related technology and innovation capacity for inclusive economic development
and climate change mitigation need to be strengthened through greater international
support. At the international level, discussions and negotiations on climate change
and the green economy have gained momentum in recent years. A major focus of
those discussions relates to environmentally sustainable technologies, or low-carbon,
“clean” technologies,7 as a means of contributing to climate change mitigation and
adaptation globally.8 This is a very important global goal, which will serve the needs
of developing countries in particular, given the evidence that climate change is having
disproportionately damaging impacts on those countries. However, along with
efforts to mitigate climate change, there needs to be an equally important focus on
eliminating energy poverty in developing countries, not only to improve people’s living
conditions but also to boost economic development.


The TIR 2011 stresses upon the need for repositioning issues within the
international agenda, whereby the obligations of countries to mitigate climate
change are framed in terms of creating development opportunities for all in an
environmentally sustainable manner. Central to this repositioning is the triangular




15Overview


relationship between equity, development and environment. From this perspective,
recognition of the right of all people worldwide to access energy services is long
overdue and needs to be addressed. Developing countries, especially the least
developed, have experienced a particularly large share of natural disasters, such
as hurricanes, tornados, droughts and flooding, as a result of changing climatic
conditions. According to recent estimates, 98 per cent of those seriously affected
by natural disasters between 2000 and 2004 and 99 per cent of all casualties of
natural disasters in 2008 lived in developing countries, particularly in Africa and
South Asia where the world’s poorest people live.


Such a repositioning also implies a greater focus on three key challenges, namely
international resource mobilization for RETs financing; greater access to technology
through technology transfer and the creation of flexibilities in the IPRs regime; and
promoting wider use of RETs and technological learning in the push for a green
economy and within the Rio+20 framework. These issues have been and remain
central to all debates and decisions of the UNFCCC and the Kyoto Protocol that
focus mainly on environmentally sustainable – or clean – technologies, of which
RETs form a subset. In highlighting the need for a greater focus on RETs in
international discussions, the Report also identifies the main hurdles in all these
three policy areas.


International financial support for RETs needs to be strengthened and targeted


A number of estimates have been produced that try to quantify the challenge of
adaptation and climate change mitigation. All of them consider slightly different
categories of investments that will be needed in the immediate or medium term.
The International Energy Agency estimate covers only electricity generation
technologies, and therefore excludes investment in transport fuels and heating
technologies. While all the estimates are indicative, the definitions of technology
and the broad goals assumed in the IEA (2000) are probably the most relevant to
the issues under consideration in this TIR.9 The proposal to halve energy-related
emissions by 2050 corresponds roughly to the minimum mitigation levels deemed
necessary by the IPCC, and the definition of low-carbon energy technologies
covers RETs. The IEA’s estimates for the level of investments needed are lower
than the other estimates in the medium term, at $300–$400 billion per annum up
to 2020, but rise thereafter to reach $750 billion by 2030.


This raises questions about the capacity of public finance to support the rapid
and widespread deployment of RETs as part of adaptation efforts and the role




16 TECHNOLOGY AND INNOVATION REPORT 2011


of international support. There are a number of known sources of finance at the
multilateral and regional levels such as the World Bank’s Climate Investment
Funds, the Clean Technology Fund and the newly announced UNFCCC Green
Climate Fund. However, several caveats apply when calculating the amount of
finances available under all the funding figures. Some of the funds are multiyear
commitments and often cover mitigation and adaptation. Also, some of the funds
are not yet available. Taking all these caveats together, the total amount of annual
funding for RETs from public sources is likely to be about $5 billion from the known
sources. This figure is far from sufficient when compared to the global needs. The
International Renewable Energy Agency estimates that just the African continent
would need an investment of $40.6 billion per year to make energy access a
reality in a sustainable way.


It is therefore that in the area of finance, support for greater investment in RETs
and their use in developing countries is critical today. In response to the global
financial and economic crisis, many countries initiated stimulus packages
that included funding for efforts to build capacity in those areas of the green
economy that display the greatest growth potential. No doubt, the general trend
is towards policies that simultaneously aim at securing environmental benefits
through increased use of RETs, development benefits through increased energy
provision, and economic benefits by increasing domestic capacity in areas that
show growth potential.


However, such ongoing efforts in developing countries would be better served
if outstanding issues relating to international financial support for RETs could be
urgently resolved with the aim of promoting greater innovation, production and use
of such technologies. At present, international financing of clean technologies, which
is largely multilateral, is highly fragmented, uncoordinated and lacks transparency.
It is also woefully inadequate to meet total funding requirements for climate change
mitigation and adaptation. While such financing may partly be targeted at RETs,
additional international funding for RETs is required as a priority. Coordination of
funding sources with the aim of mainstreaming RETs into national energy systems
globally should be an important aspect of climate change mitigation efforts. This
would not only lead to the development of more efficient energy systems globally; it
would also ensure that the financing contributes to greater technological progress
towards newer and/or more cost-effective RETs.




17Overview


Access to RETs and related technology transfer need to be more clearly articulated


Currently, most of the clean technologies needed for developing countries and
LDCs are off-patent. Despite this general finding, recent trends show that patenting
activity in RETs is on the rise. Following an analysis of these trends against the
backdrop of the ongoing negotiations on the draft UNFCCC,10 the TIR 2011
suggests that discussions on technology transfer of RETs within the climate change
framework should move beyond a narrow focus on the issue of technology transfer
to a broader focus on enabling technology assimilation of RETs. Indeed, the recent
Climate Change Conference at Cancun in 2010 proposed to strengthen the focus
on technology transfer, including the creation of a new technology mechanism to
help enhance the technological capacity of countries to absorb and utilize RETs.


Accumulation of technological know-how and learning capabilities is not an
automatic process. Learning accompanies the acquisition of production and
industrial equipment, including learning how to use and adapt it to local conditions.
In order to foster broader technology assimilation, the technology transfer exercise
will need to take into account the specific technological dimensions of RETs as
well as the nature of actors and organizations in developing countries. The quality
of technology transfer should be assessed by the extent to which the recipient’s
know-how of a product, process or routine activity is enhanced, and not just by
the number of technology transfer projects undertaken. A greater articulation of
flexibilities under the global IPRs regime in the specific context of RETs is also
required.


The green economy and the Rio+20 framework should promote wider
use and learning of RETs


In addition to providing critical infrastructure to support the emergence and shift
in production structures in developing countries, RETs can serve the goals of their
industrial policy by helping those countries’ exporters become more competitive in
the face of increasingly stringent international environmental standards. However,
simply forcing developing countries to use RETs through measures such as carbon
labelling and border carbon adjustments may not be sufficient to enable the
transition. Indeed, such measures may even have adverse effects on industries
in developing countries by acting as barriers to imports, since enterprises and
organizations may not have the means (financial and technological) to conform
to the new requirements. To ensure that “green” requirements do not place an
additional burden on industries in developing countries and LDCs, global efforts




18 TECHNOLOGY AND INNOVATION REPORT 2011


Box 3: Mechanisms to foster RETs-related technology and innovation capabilities


An international innovation network for LDCs, with a RETs focus. To address some of the short-
comings of existing initiatives on technology transfer, a science, technology and innovation cen-
tre (an International Innovation Network) was proposed and approved at the UN LDC IV Confer-
ence in Istanbul in May 2011. This TIR suggests that a specific focus on enhancing RETs-based
learning in LDCs with the purpose of promoting greater access to energy would fit in directly with
the currently identified key areas. It could aim at: (a) promoting a network-based model of learn-
ing and sharing of experiences of countries on how to use RETs for increasing energy access in
rural, mini-grid areas; (b) promoting access to financing opportunities and technology licences
needed for upgrading the RE technological base in the private sector in LDCs, by establishing
partnerships with both international firms and donor agencies; and (c) establishing an informa-
tion-sharing mechanism where different kinds of stakeholders could network and work together
to enhance the knowledge base in LDCs on RETs use, adaptation, production and innovation.


Global and regional research funds for RETs deployment and demonstration. RETs constitute a
key area of particular interest to developing countries, but funding for technology development and
demonstration has been lacking. Dedicated funds, whatever their designated organizational struc-
tures, could act as the focal point for the coordination of ongoing research, both at the national
and regional levels, and among private, public and non-profit organizations. Scaled up technical
cooperation and training programmes could complement those funds, and could involve skilled
workers from both developed and emerging economies (engineers, teachers and technicians,
among others) working on a temporary basis in developing countries and LDCs to help develop
local capacity.


An international technology transfer fund for RETs. Firms in developing countries face three criti-
cal constraints in finding and accessing appropriate technologies. First, search and information
costs on the appropriate RETs for acquisition are high. Second, generally, they sometimes lack the
capacities required to negotiate licences for the technologies in question. Finally, firms also lack
information on the kinds of similar technologies available, and their relative costs and merits, which
limits their ability to make informed choices. A technology transfer fund for RETs could address
all three of these issues by acting as a licensing pool for technologies. Such a pool would offer
the RETs at a subsidized rate to firms from LDCs and from developing countries with low techno-
logical capabilities. Funds generated by these countries’ governments themselves, or by donor
agencies, or by both jointly, could be used to subsidize the licensing costs to the recipient firms.
The organization responsible for the Fund could also provide a database of similar technologies
and their relative merits and licensing costs, thereby creating a much-needed service for firms and
organizations in developing countries and LDCs. By acting as a clearing house for the licensed
technologies, it would also reduce bargaining asymmetries between firms in developed countries
on the one hand, and those in developing countries and LDCs on the other.


An international training platform for RETs. Establishing an international training platform spe-
cifically for RETs would serve the important goal of creating a skilled staff base across devel-
oping countries for the wider use and promotion of RETs in domestic and industrial contexts.
The proposed international RETs training platform could operate at two levels: a physical




19Overview


aimed at climate change mitigation need to be accompanied by international
support in finance and technology to help these countries transition to RETs in a
strategic and sustainable manner.


Targeted international mechanisms for RETs-related innovation
and technological leapfrogging are required


The obvious question for all developing countries and for the global community
is whether the BRICS countries (Brazil, the Russian Federation, India, China and
South Africa) are special cases. To some extent they are: they have the prerequisites
for competitive production of many RETs, such as a workforce with advanced
technical training, supporting industries and services in high-tech areas, access to
finance, ample government assistance and a large domestic market, all of which
seem to favour these larger emerging developing countries over smaller, poorer
developing countries and LDCs.


Historically, promoting technological learning and innovation has remained a
challenge for all developing countries. The experiences of China, India and other
emerging economies show that public support, political will and concerted policy
coordination are key to promoting technological capabilities over time. Greater
support for education (especially at the tertiary level) and for the development
of small and medium-sized enterprises, as well as financial support for larger
firms and public science are important. But in addition to such domestic policy
support, greater support from the international community is also needed. The
TIR 2011 proposes four mechanisms of international support (box 3). The first
of these, the STI Network, was approved at the LDC IV Conference in Istanbul
in May 2011.


institute based in one or several places throughout the world, which would offer training on
various aspects of RETs use, adaptation and production; and a virtual training platform offer-
ing online, computerized courses of various kinds. Both forms of training (through the physical
centres and the virtual training platform), could provide RETs-related learning in different fields,
such as material sciences, marketing, legal issues, energy combinations and RET applications
in various industrial fields.


Source: UNCTAD, Technology and Innovation Report (2011).


Box 3: Mechanisms to foster RETs-related technology and innovation capabilities (contd.)




20 TECHNOLOGY AND INNOVATION REPORT 2011


NATIONAL POLICY FRAMEWORKS FOR RENEWABLE
ENERGY TECHNOLOGIES


Integrated innovation policy frameworks at the national level are critical


The TIR 2011 calls on national governments to adopt a new energy paradigm
involving the greater use of RETs in collaboration with the private sector. Such
an effort should be supported by a variety of stakeholders, including public
research institutions, the private sector, users and consumers on an economy-
wide basis. A policy framework that can strike an appropriate balance between
economic considerations of energy efficiency and the technological imperatives
of deployment of RETs in developing countries and LDCs will be the cornerstone
of such an agenda for change. This will necessitate two separate but related
agendas. The first should ensure the integration of RETs into national policies for
climate change mitigation. The second should be the steady promotion of national
innovation capabilities in the area of RETs. The latter entails addressing issues that
are not only generic to the innovation policy framework, but also new issues, such
as creating standards for RETs, promoting grid creation, and creating a more stable
legal and political environment to encourage investments in RETs as an energy
option within countries.


The TIR 2011 proposes an integrated innovation policy framework for RETs use,
adaptation, innovation and production in developing countries and LDCs. The
concept of such a framework envisages linkages between two important and
complementary policy regimes: national innovation systems that provide the
necessary conditions for RETs development, on the one hand, and energy policies
that promote the gradual integration of RETs into industrial development strategies
on the other. The Report suggests that such a framework is essential for creating a
virtuous cycle of interaction between RETs and science, technology and innovation.


Such a policy framework would perform five important functions, namely:


(i) Defining policy strategies and goals;


(ii) Enacting policy incentives for R&D, innovation and production of RETs;


(iii) Enacting policy incentives for developing greater technology absorptive capacity,
which is needed for adaptation and use of available RETs;


(iv) Promoting domestic resource mobilization for RETs in national contexts; and


(v) Exploring newer means of improving innovation capacity in RETs, including
South-South collaboration.




21Overview


Policy strategies and goals are important signals of political commitment


The use and adaptation of RETs in countries requires the establishment of long-
term pathways and national RE targets. These targets, although not necessarily
legally binding in nature, would have to be supported by a range of policy incentives
and regulatory frameworks. Defining targets is an important signal of political
commitment and support, and the policy and regulatory frameworks aimed at
enforcing the targets would provide legal and economic certainty for investments
in RETs.


Different policy incentives for RETs innovation, production,
adaptation and use are important


The successful development and deployment of any technologies, especially
relatively new ones such as RETs, needs the support of several dedicated institutions
responsible for their different technical, economic and commercialization aspects.
Such support can be organizational (through dedicated RET organizations) or
it can take the form of incentives to induce the kinds of behaviour required to
meet the targets set for RETs. The TIR 2011 lists various policy incentives for
R&D, innovation and production of RETs and those that are aimed specifically at
promoting technology absorptive capacity and learning related to RETs, which will
be important for their wider use in national contexts (table 2). Many RETs-related
policy incentives proposed have already been used by most of the industrialized
countries, although developing countries are also increasingly using them or
experimenting with their use. Clearly, developing countries and LDCs will need to
select policy incentives that are geared to their specific situations and requirements
as much as possible.


The policy incentives presented in table 2 and discussed at length in the Report
pertain to two policy spheres: the innovation policy frameworks of countries and
their energy policies. This is because energy policies often contain measures that
have an impact on particular kinds of technologies. Ongoing reforms in the energy
sectors of most developing countries offer a good opportunity to establish regulatory
instruments and production obligations geared towards promoting investment in
RETs and energy production based on these technologies. Policy incentives of both
kinds (i.e. innovation-related and energy-related) are important to induce risk-taking
by the private sector, to improve enterprise capacity to engage in learning activities,
and to promote basic and secondary research in the public sector. Some of the
policy incentives could be aimed specifically at the private sector, such as green




22 TECHNOLOGY AND INNOVATION REPORT 2011
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23Overview


economic clusters and special economic zones to boost enterprise activity, whereas
others could be hybrid instruments granted to promote both public and private sector
activity, such as collaborative public-private partnerships (PPPs). Yet others, such as
public research grants, would be offered primarily to the public sector.


Greater domestic resources need to be mobilized for RETs


Financial incentives of various kinds can promote investment in RETs, and facilitate
their quicker adaptation and utilization at the national level. These incentives need
to be developed with an eye on the co-benefits of using RETs not only for electricity
generation, but also more broadly as a tool for industrial development in countries.
All stages of the RETs innovation and adaptation process require financing, and
will depend on each country’s ability to provide a mix of different kinds of financing,
including venture capital, equity financing and debt financing. Particularly in
developing countries that face several financial constraints on the introduction and
uptake of new technologies, governments need to support the private sector in its
financing of innovation activities, such as by offering loan guarantees, establishing
business development banks and/or mandating supportive lending by State banks.
Governments may also directly fund innovation activities through, for example,
grants, low-interest loans, export credit and preferential taxation policies (e.g. R&D
tax credits, capital consumption allowances).


South-South collaboration needs to be fostered


South-South collaboration presents new opportunities not only for increasing the
use and deployment of RETs through trade and investment channels, but also
through technology cooperation, and this can be facilitated by governments,
intergovernmental organizations and/or regional development banks. Such
cooperation can also be mediated by private sector owners of RETs, although this is
less frequent. Technology cooperation can take several forms, ranging from training
foreign nationals in the use and maintenance of RETs to supporting research in
partner countries to adapt existing technologies to local needs. It can also include
outright grants of RET-related IPRs or licensing on concessionary terms. The TIR
2011 shows that in several cases developed-country institutions have been involved
in bringing developing-country partners together for this sort of cooperation. The
benefits of such collaboration are straightforward: it hastens the wide dissemination
of RETs among developing countries along with all the commensurate benefits
associated with it.




24 TECHNOLOGY AND INNOVATION REPORT 2011


RETs can power development and a greener catch-up process


Developing countries will face different problems in RETs promotion, production
and innovation, depending on their respective starting points. Nevertheless, for all
developing countries, RETs present real opportunities for reducing energy poverty,
and the right policies could influence the extent of benefits that could be derived
from RETs use, adaptation and dissemination. This TIR presents five relevant
findings from ongoing national and regional experiences with technology and
innovation capacity-building of relevance to RETs.


First, the success of a number of emerging economies in developing technological
capabilities over time is largely attributable to the role of national governments
in providing strategic, concerted support for the use of RETs. However, the
experiences of industrialized countries or the larger developing countries such
as China and India may not be replicable in other developing countries due to
their less favourable circumstances. The Report also highlights some of the
policy incentives that need to be approached with caution. Of special note are
those related to carbon taxes, but these may not be relevant or useful for many
developing countries.


Second, developing countries should consider different kinds of energy regimes
that give priority to the deployment of REs most suited to their specific contexts,
while ensuring that conventional energy sources are not subsidized extensively.


Third, success in eliminating, or at least reducing, energy poverty through the use
of RETs does not necessarily require large-scale projects with huge investments.
Smaller initiatives have been highly successful as off-grid solutions to rural electricity,
and offer considerable potential for replication.


Fourth, creating an integrated innovation policy framework of the kind outlined in
this Report should not be viewed as a daunting exercise. In the developing-country
context, a few incentives can go a long way towards achieving significant results.
Further, many countries may already be providing several of the policy incentives
discussed in the Report. The emphasis in such cases needs to be on enhanced
coordination to reach targets in RETs use, promotion and innovation.




25Overview


Fifth, countries will need to experiment with different policy combinations, and this
learning process could have positive impacts on the co-evolution of institutional
frameworks for RETs.


*******


National governments in developing countries have a pivotal role to play in combining
conventional sources of energy with RETs. Proactive government interventions will
need the support of the international community to benefit from the full potential
that RETs offer for alleviating (and eventually eliminating) energy poverty, but also
simultaneously promote climate-friendly solutions on a global scale. Forging strong
partnerships with the international community could also lead to the widespread
dissemination of environmentally sustainable technologies worldwide, resulting in
enhanced economic development and greater opportunities for large segments of
populations that have been left behind in the process of globalization.


Geneva, October 2011
Supachai Panitchpakdi


Secretary-General of the UNCTAD




26 TECHNOLOGY AND INNOVATION REPORT 2011


NOTES


1 See: http://unfccc.int/press/fact_sheets/items/4987.php.
2 Since the beginning of the eighteenth century, production and consumption patterns in


the now developed countries have been dependent on energy provided successively
by coal, oil and gas, and to a lesser extent by nuclear fission. The dramatic increases
in the use of fossil energy (which, at current levels of annual consumption, is estimated
to represent between one and two million years of accumulation) have enabled massive
increases in productivity in both farming and manufacturing (Girardet and Mendoça,
2009). Such productivity growth has made possible a roughly tenfold increase in the
global population over the past three centuries, accompanied by significant, if unevenly
distributed, improvements in living standards.


3 Recent estimates suggest that developing countries will continue to suffer 75–80 per
cent of all environmental damages caused by climate change (World Bank, 2010).


4 An innovation system is defined as a network of economic and non-economic actors and
their interactions, which are critical for interactive learning and application of knowledge
to the creation of new products, processes and organizational forms, among others.


5 It is estimated that electricity supply systems can easily handle up to 20 per cent of RE,
and even more if systems are designed with some adjustments in intermittency.


6 Krohn, Morthorst and Awerbuch (2009) and UN/DESA (2009).
7 “Clean technologies” or “clean energies” cover a much broader range than RETs, and


include clean coal, for example.
8 Broadly, the processes that fall under adaptation are those that seek to reduce/prevent


the adverse impacts of ongoing and future climate change. These include actions,
allocation of capital, processes and changes in the formal policy environment, as well
as the establishment of informal structures, social practices and codes of conduct.
Mitigation of climate change, on the other hand, seeks to prevent further global warming
by reducing the sources of climate change, such as greenhouse gas (GHG) emissions.


9 The UNFCCC estimates cover only power generation, which includes carbon capture
and storage (CCS), nuclear and large-scale hydro.


10 Access to environmentally sound technologies (which includes RETs) and related
technology transfer has become a cornerstone of the draft UNFCCC (see Articles 4.5
and 4.7 of the draft Convention).




27References


REFERENCES


Girardet H and Mendoça M (2009). A Renewable World: Energy, Ecology, Equality.
A report for the World Future Council. Totnes, Devon, Green Books.


IEA (2000). Energy Technology Perspectives 2000. Paris, OECD/IEA.


IEA (2009). World Energy Outlook 2009. Paris, OECD/IEA.


IEA (2010). World Energy Outlook 2010. Paris, OECD/IEA.


Krohn S, Morthorst P-E and Awerbuch S (2009). The Economics of Wind Energy,
European Wind Energy Association.


REN21 (2010). Renewables 2010: Global Status Report. Paris, REN21 Secretariat.


REN21 (2011). Renewables 2011: Global Status Report. Paris, REN21 Secretariat.


UN/DESA (2009). A Global Green New Deal for Climate, Energy, and Development.
New York, United Nations.


UNEP and Bloomberg (2011). Global Trends in Renewable Energy Investment
2011. Analysis of Trends and Issues in the Financing of Renewable Energy.
United Nations Environment Programme. Available at: www.fs-unep-centre.org/
publications/global-trends-renewable-energy-investment-2011.


UNCTAD (2011). Technology and Innovation Report 2011: Powering Development
with Renewable Energy Technologies. United Nations publication. New York and
Geneva, United Nations.


World Bank (2010). Africa’s Infrastructure: A Time for Transformation. Washington,
DC, World Bank.




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