OK – really truly everything you wanted to know about innovation (and probably some things you didn’t)…

Posted by Matthew Lockwood

Ryan from Australia has pulled us up on the last post, saying it is mistitled: “You have listed a number of interesting and promising developments, but in the end you have said very little about innovation itself. How does innovation actually work?” Our titles are supposed to be witty rather than literal, but in the spirit of following through, this post goes into some of the thinking about the innovation process, and also why we need innovation policy for mitigating climate change.

Tackling climate change needs technology policy because just correcting the externality of carbon pollution will not, on its own, induce the amount of innovation in low carbon technology that we will need. There is another set of market failures involved, to do with companies not being able to capture all of the gains of their R&D, meaning that companies will not innovate enough on their own.

Good policy for innovation needs to be base on a good understanding of how innovation works. So what does the process look like? A little like this:

Not a neat linear process of invention, testing and hitting the shelves, but lots of circularities and “valleys of death”. Policy has to help throughout the process. That means not only R&D support to “push” ideas into becoming successful products, but also the creation of markets, to “pull” innovative solutions through.

George Monbiot‘s recent attack on support for solar PV as a ridiculously expensive way of cutting carbon emissions therefore misses the point. Yes, £430 to reduce one tonne of carbon would be absurd for an abatement policy.  But this is a technology policy, as was support for solar in Japan and more recently Germany, and without such policies I doubt we’d see the development of innovative new solar PV technologies such as that I mentioned in my last post.

Take another example from offshore wind. Even though the market is still small, companies have taken a punt on it growing,  and developed a turbine without a gear box, meaning less maintenance and fewer expensive trips out to sea.

But creating markets like this isn’t always enough on its own – household scale micro-wind was part of an earlier support scheme, but the products simply weren’t good enough. We also need a lot more research, development and demonstration, and that does mean government support.

If you want more, look at the home page of the excellent Tim Foxon.