Methodological and Technological Issues in Technology Transfer

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10.4.2 Programmes and Policies for Technology Transfer

Assessment of the most efficient technology to abate GHG emissions while requiring the minimum amount of investment is an important aspect of the technology transfer mechanism.

Traditionally government participation in the innovation process has occurred as a main promoter of R&D and buyer of new technologies. It is important to note that government's role is also important in the area of information, regulation, and in the definition of market-based initiatives (see Chapter 4 on the role of enabling environments for technology transfer).

Information and education programmes can be conceived as efforts for increasing public awareness regarding the availability of climate-friendly investments and also directed to reeducate experts who are trained in conventional technologies and procedures. Programmes directed to both of these purposes can be very effective. In Brazil hydroelectricity has been almost the only source of electricity generation for many decades, and most of the population were not aware of other alternatives which could bring many advantages (low initial cost, short implantation time, few social issues, etc.), as well as many difficulties (GHG emissions, electricity cost dependence on oil prices, etc.). Information and education programmes were mostly carried out with knowledge acquired abroad through non-financial technology transfer services (intelligence gathering and dissemination, technical assistance, independent validation and testing, and brokering activities performed by economic development agencies, and non-governmental organisations), and diffused later on through the same mechanism.

The fact that some ESTs are in the public domain5 provides opportunities for the countries which want to develop them locally (Korea, 1998). Hence, the priority task is to maximise the diffusion of information on these technologies. Increasing the use of computers and all their presently available associated software for communication (the Internet) can provide a very good opportunity for most countries. Better education is seen as an opportunity for developing countries to have the required trained human resources for developing and utilising these technologies, as well as to absorb and take advantage of the ones available from IC by any possible transfer mechanism (Davidson et al., 1991).
Regulation, such as setting minimum efficiency requirements for the energy supply sector, could be important for inducing use of more efficient technology.

Agreement and Implementation
Once assessment of the technology is completed it is important to examine how the technology transfer can evolve to its next step, which is the agreement between parties and project implementation.

Market availability is a very important condition for the success of a new technology (OTA, 1995a; Rothwell, 1974; Langrish et al., 1972). Market pull is important since private entrepreneurs with short-term interests will be resistant to investments in new technologies unless a market exists and uncertainties are low. Usually this market is initiated by pilot projects, government investments or acquisitions, importation of products and services from abroad (FCCC, 1998), or consumers willing to pay a premium price. As they gain acceptance rising public interest, private investors from the country or abroad will understand that a potential market is available, and through actions on maintenance services and on better prices it can be enlarged. The creation of a market has been a responsibility assumed quite often by the government through procurement of new technologies for public missions like energy production and distribution, and provision of incentives for its development, including grants, low interest loans, import duty exemption, income tax exemption, and competitively determined subsidies. Grants are a very common incentive used to stimulate adoption of a new technology in industrialised countries (e.g. The Clean Coal Program in US - see the Compendium on Clean Coal -; The Salix Consortium - Biomass for Rural Development ( and in developing countries (see Box 10-1, and Case Study 6, Chapter 16). An example of the use of income tax exemption is discussed for The Netherlands (see below). Competitively determined subsidies have been employed in industrialised countries - the Non-Fossil-Fuel Obligation (NFFO) in the UK, and the electricity feed law (EFL) in Europe (Grubb and Vigotti, 1997; Brower et al., 1997; Mitchell, 1995).

India has a history of policy driven technology promotion for emerging technologies. Prior to the economic reforms initiated early this decade, the new and renewable energy technologies were promoted in the initial stages through the target-oriented-supply-push approach. Government agencies identified the investors as well as suppliers and fixed the technology price. Financial support was limited to target capacity without any price signal since market had no role.

Policies in the post-economic reform have allowed a greater role for the market. Project promoters accessed the financial incentives in addition to their own investments. The government provides tax concession through accelerated depreciation of capital equipment. Under the market dynamics, the technology transfer occurred via the market, as companies competed to provide the technology. The success of this pathway is evident in the rising deployment of wind power in India in past five years (Ramana and Shukla, 1998).

Market-based incentives set up by the government are useful approaches that are helping renewables to be commercialised in small niches. Three examples of this approach - the Government of India's effort to promote wind power technology (see Box 10.1), fiscal support for renewables in the Netherlands and the carbon tax in Norway (see below) are presented.

  • In the Netherlands the government actively supports renewable energy through various financial measures. Fiscal policies allow accelerated depreciation and investment cost allowances for companies investing in renewables. The generated income of private investors in so-called Green Funds are tax-exempt. In addition, the distributing utilities are allowed to retain the standard regulatory energy tax to support renewable energy producers and may also sell Green Electricity at a premium price to environmentally conscious customers. In a pilot market scheme for Green Certificates, a trading mechanism (spot and forward market) has been established for renewably generated electricity, which makes it feasible to efficiently reach quantified targets for renewable energy introduction.
  • Natural gas industry investments in most of the industrialised countries are essentially done by the private sector. But the presence of the government is important to create an enabling environment for private-sector driven technology. CO2 extracted from natural gas wells and injected into a shallow acquifer (see 10.2.2) has turned economically feasible in Norway due the existence of a carbon tax. The factors that make this development different from the already practical injection of CO2 for improved oil recovery is the shallow depth and low injection pressure, the wet CO2, and the need for the system to dispose of available CO2 at any time. By publishing the results of this development, the technology is made available to anyone who wishes to sequester CO2 in an aquifer under similar geological and operating conditions.

A mix of policy instruments appears effective in many countries in promoting renewables. In Germany, for example, the success in promoting renewable energy in the last few years is attributed to a large extent to the Electricity Feed Law, which requires utilities to buy electricity from renewable sources at premium rate, and to direct subsidies for renewables, which amounted to DM 55 (approx. US$ 296) million in 1995/1996. The most remarkable aspect is the success of wind energy in Germany, whose capacity increased from 61 MW in 1990 to about 1,545 MW at the end of 1996. The process has been supplemented by an aggressive information campaign, which helps to disseminate information on current application and the most recent research available on renewable energy (IEA, 1997).

Technology implementation is facilitated if it fits in with country capital-labour mix. Under this vision, the GHG abatement option of increasing the use of renewable energy is welcome, because of the large number of permanent jobs created. Considering this measure, biomass-based electricity combined with heat production is the most favourable option, followed by PV. Hydro and mini-hydro plants also create a large number of jobs; yet only during the construction period (Moreira and Poole, 1993). The Brazilian Alcohol Program has survived during the first half of the 1990s with arguments based strongly on the large number of permanent jobs created, and the synergism between the low qualification requirement of the cane harvester and the large number of low-literacy workers. This particular match was an important factor for the rapid diffusion of ethanol production in Brazil (Moreira and Goldemberg, 1999). A similar situation is occurring in the United States where the creation of numerous work opportunities for corn farmers are used as an important argument for the promotion of this liquid fuel (Evans, 1997).

Another way to guarantee the implementation of technologies is the use of the legal structure. The Brazilian Alcohol Program was introduced in such way. A law was passed to strengthen the national sugar industry, thereby reducing hard currency expenditures on oil imports. Thus, the Program was motivated by potential economic benefits and not to meet GHG abatement targets. Another opportunity for energy technology transfer is the recognition by decision makers that availability of power, even in small amounts, provides a significant improvement in the quality of life (see Case Study 3, Chapter 16). This is pushing the market for small PV units. International experience has shown a positive correlation between access to energy and electricity services and educational attainment and literacy among both the rural and urban poor. Families lacking adequate energy supplies will tend to limit children's time spent on schoolwork and reading; in extreme cases, families may withdraw children from the school systems to spend time on firewood and dung collection. Worldwide, female children are disproportionately affected.

In stand-alone applications, remote from the electrical grid (for lighting, water pumping and refrigeration), PV has been competitive for several years (IPCC, 1996). In such applications, PV systems are often competitive with presently used kerosene, candles and dry-cell batteries (assuming that low cost money is available), but typically there is no infrastructures to provide people with access to this technology (see Case Study 5, Chapter 16).

Evaluation & Adjustment
Even considering that the energy industry is quite homogeneous throughout the world, several opportunities for evaluation and adjustment of technologies exist in particular countries or regions. The operation efficiency of the electricity generating equipment in developing countries - with some notable exceptions - is often substantially below that achieved in the industrialised countries, despite the fact that the basic technology is the same (Maya and Churie, 1996). Thermal efficiency and forced outage rate, which are important measures of maintenance efficiency, should improve (OTA, 1992). Over the past two decades, the cost effectiveness of generation system rehabilitation has become recognised in the United States and Europe, where a great deal of attention has been placed on what has become known as "life extension" or "life optimisation" (OTA, 1992). Efforts of this type require hard and soft technologies, since most of the technological barriers leading to such poor performance are credited to inadequate training.

One of the adjustment processes is on-the-job training. Successful innovations require that entrepreneurs assemble a team of well trained scientists, engineers, technicians, managers and marketers who develop new technologies and incorporate them into products; manufacture them in a way that is timely, cost effective, and responsive to the market; and sell them. Training workers with these diverse skills is the responsibility of different institutions, both public and private (OTA, 1995a). In many universities, graduates often receive little training in manufacturing processes, product design and teamwork. Nevertheless, workplace education supplements formal education, as workers learn through experience and formal training programmes. For emerging technologies in particular, many of the skills needed for commercial success are not available in the formal education systems, but are developed instead by companies engaged in proprietary R&D programmes (OTA, 1995). Labour force skills are expanded through industry conferences, technical committees, and trade publications and technical journals, which provide an opportunity for industry participants to exchange ideas and share knowledge.

In the case of biomass technologies the issue of adjustment is magnified. Biomass yields are sensitive to climate and soil characteristics, and any successful project in one site has to be properly adapted to provide similar results in new sites7 . This is exemplified in the discussion of a Case Study 8, Chapter 16.

Even in the developed world R&D represent only a small fraction, 10 to 15%, of the resources required to bring to market a new product that incorporates substantially new technology. The other 85-90% is so-called downstream investment: design, manufacturing, applications engineering, and human resource development (OTA, 1995). Developing a highly qualified human infrastructure in the downstream investment sector, will facilitate in dealing with one of the two faces of technology development -- "problems in search of solutions" -- which is what industry, society, and design engineers encounter in practice. Even with poor investments in the second face of technology development -- "solutions in search of problems" -- a country can reach a high level of technological development (Greene and Hallberg, 1995).

Assuming R&D conducted at universities and research centres is sufficient, it is very important to establish linkages between networks of research laboratories and the private sector to facilitate the transfer of technologies to industry, and for the users of technology to channel their feedback to the generators of knowledge. In the USA, since the 1980s, Congress and the executive branch began to supplement this approach within a series of programmatic efforts aimed at helping specific industries. Some of these efforts encourage government and private industry to (OTA,1995a;DOE, 1999):

  1. share the cost of strengthening the supplier base of some important industries
  2. share the cost of pre-competitive research projects, and,
  3. disseminate best-practices to manufacturing firms, many of which are unfamiliar with the most advanced manufacturing technologies and practices.

The US Government is committed to ensuring the full implementation of technology transfer policies and legislation in all federal agencies. For the DOE technology transfer is a priority mission at all levels of department management. The EPA and Department of Commerce also have made significant improvements in their technology transfer programmes (National Energy Strategy, 1991). This attention on technology transfer builds in a strong base of legislative and policy mandates. In recent years, the US Congress and the Administration have cooperated on legislation specifically directed towards increasing the transfer of federally developed technology to US entities (National Energy Strategy, 1991). States have also funded RD&D. California funds certain public interest RD&D projects to "advance science or technology not adequately provided by competitive or regulated markets". A surcharge on electric rates is the source of funds. Focus areas include renewables, efficiency, advanced power generation, power system reliability, and environmental research (Tanton, 1998;

Clusters of research-production-marketing activities, such as applied research parks or university-industry parks will facilitate the connection of research to production and the marketing of the results. Rather than dispersing assets, the parks offer a synergistic concentration of knowledge, workers, and facilities (Greene and Hallberg, 1995).

Although there is a consensus among economists that over the long-run innovation is the single most important source of long-term economic growth, and that returns on investment in research and development are several time as high as the returns on other forms of investment, private firms generally tend to underinvest in research and development (Cohen and Nell, 1991). Overall, government support for energy research and development in International Energy Agency member countries fell by 1/3 in absolute terms and by half a percentage of GDP in the decade ending in 1992 (see Table 5.1; Reddy et al., 1997). Not only has overall energy research and development spending been declining, but also only a modest fraction of R&D spending has been committed to the sustainable energy technologies.

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