Ajay Gambhir discusses the role of public funding on energy technology innovation
The Global Apollo Programme proposal aims to get renewable electricity so cheap that we may as well give up on coal- and gas-fired generation by the mid-2020s – regardless of whether we care about climate change or not. This would be achieved by the world’s governments signing up to commit 0.02% of their annual GDP on clean energy research, development and demonstration (RD&D) activities over 10 years – about $150 billion of funding in total.
The intuitive basis of Apollo is attractive and simple. Huge scientific and engineering efforts have achieved great things in the past – not least the original moon landing project from which this current proposal borrows its name. Why can’t the world’s governments pool a small fraction of their economic output towards efforts to supercharge the push towards more efficient, larger scale and ultimately cheaper renewables like wind and solar, accompanied by smart grids and adequate storage to ensure clean, reliable electricity?
The evidence shows that public RD&D funding has had a significant impact on energy technology innovation and cost reductions in the past. Robust statistical relationships have been found to exist between increased public RD&D and decreased costs of wind and solar. Added to this, specific case studies show that targeted RD&D programmes have often reaped big benefits. For example, the US Department of Energy’s $0.5 billion Flat-Plate Solar Array project of 1975-85 stimulated the development of the solar panel designs that we see on roofs today, with a 10-fold reduction in panel production costs over the lifetime of the programme.
The Grantham Institute’s own analysis, in collaboration with Frontier Economics, draws on this evidence to estimate that the net benefits of Apollo could be huge in terms of lowering the global cost of meeting the 2°C goal, with potentially trillions of dollars in cost savings. This is unsurprising considering we may well need trillions of Watts (which is thousands of Gigawatts) of wind and solar worldwide to meet the 2°C goal.
But it’s critical to note that key to the continued cost reductions and widespread adoption of new technologies has been either a strong commercial desire for them (take lithium ion batteries which have come to dominate many applications since the 1990s), and /or the creation and expansion of markets through government support. In recent decades, deployment targets, capital subsidies, feed-in-tariffs and other such programmes have been the principal driving forces behind the next 10-fold decrease in solar module costs following the Flat-Plate Solar Array project. Our analysis shows that Apollo could help to get reliable renewable power as cheap as coal power by the mid-2020s, thereby achieving its aims – but only when combined with the cost reductions that are likely to result from projected increases in production scale and learning in renewables manufacture and deployment. And these processes still need government support in many regions of the world, to nurture fledgling markets, create supply chains and achieve full commercial scale production and installation operations.
So getting renewables to the point where they can compete with coal even without government support is not a matter of either funding RD&D or funding deployment and market expansion activities. We need the right balance of both. Innovation is a complex challenge, and different technologies benefit from different combinations of public RD&D and public deployment support at different times. Governments signing up to the Apollo proposal should ensure they understand this challenge so as to achieve the programme’s goals as quickly and cheaply as possible.
Find out more
Download report: The costs and benefits of the Apollo programme [pdf]