Nurturing Innovation for a Low-Carbon Future

New paper from IRENA sheds light on the conditions needed for renewable energy innovation to flourish

Keeping the rise of global temperatures below 2 degrees Celsius means reducing energy-related carbon dioxide emissions by more than 70 per cent by 2050 (compared to 2015 levels). Analysis by IRENA for the G20 Presidency has shown that renewable energy and energy efficiency could potentially achieve 90 per cent of those reductions.

However, further technological breakthroughs and new business models are still needed to fulfil this potential. IRENA’s new working paper seeks to identify priorities for the innovation that will enable the decarbonisation of the energy sector.

Based on the current status and future needs for low-carbon technologies in thirteen distinct sectors, renewables could account for two-thirds of primary energy supply in 2050, up from just 16 per cent today. But this means the growth rate of the share of renewables in total final energy consumption needs to rise seven-fold and be sustained until 2050.

“Renewable energy innovation is starting to really change gears,” says Dolf Gielen, Director of the IRENA Innovation and Technology Centre. “As more and more technologies become cost effective, there is now a shift of attention from technology innovation, towards business-model innovation, innovation in markets and regulation, and innovation in financing. The combination of all of these innovations together is creating a great momentum, and we are going to see a lot of pleasant surprises in the coming years.”

Economical and scalable solutions based on renewables exist for around two thirds of the world’s energy supply. For these options, the focus should be on innovations to speed up deployment, such as system integration strategies and new business models. But for about one-third of the total energy supply, strengthened research, development and demonstration is needed to bring the latest technologies to market as soon as possible. A holistic innovation approach, including technology innovation along with enabling policy, financial and social measures, will be crucial to ensure a viable transition that achieves global decarbonisation goals.

Nurturing ideas and decarbonising

The paper shows that the business case for renewable power is increasingly strong. Renewable generation technologies are already economically viable, and innovation, together with economies of scale, will continue to reduce their costs and attract investment. The next step for the power sector is to focus innovation efforts on integrating high shares of variable renewable energy in power systems.

IRENA’s analysis indicates that the sectors with the least progress in decarbonisation innovation are those where proper policy incentives and long-term perspectives are lacking. This includes heavy industry, freight transportation, and aviation. Electrifying end-use sectors offers an alternative, by reducing emissions and supporting the integration of higher shares of variable renewable energy, meaning wind and solar. However, these sectors need more than electrification. Action here is urgent, as new innovations can take decades to go from the research and development stage to commercialisation and deployment.

Beyond research and development

“Integrating high shares of renewables requires innovations in all components of energy systems. That includes new system operations, innovative market designs and regulations, out-of-the-box business models, and the enabling infrastructure,” says Gielen.

Policy frameworks to stimulate innovation can ensure a balance of new technologies and in other areas.

“Governments have the ability to accelerate the transformation of the energy sector through immediate action, which can stimulate innovation and enable the private sector to effectively play its role,” Gielen adds.

For an in-depth analysis on the holistic innovation approach and its implications for the transformation of the power sector, see IRENA’s paper, Accelerating the Energy Transition through Innovation.