Methodological and Technological Issues in Technology Transfer

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3.4 Energy Supply

Major objectives of the current energy supply sector are economic development and international competitiveness. Climate change objectives, particularly the reduction of CO2 emissions, do not play a significant role. Nevertheless, significant opportunities exist to reduce CO2 emissions (see Table TS5) as well as other GHG emissions.

Technology transfer in the energy sector is mainly driven by the private-sector in oil, natural gas and electricity supply. On the other hand, coal, nuclear and renewable sources are often dependent on government to preserve or increase their presence in the market. Technology transfer, as presently understood, is a relatively new process since historically it was used as an euphemism for large-scale power projects financed by multilateral banks or for limited knowledge transfer from the international oil and gas companies to national industries. The oil crises in the 1970's changed the contractual terms in the oil and gas sector when powerful national oil companies were able to negotiate technology transfer on more favourable terms. In the early 1990's, the process of market globalisation and the availability of private capital on a global scale triggered investments and hence technology transfer opportunities in the electric sector also. The private sector is now playing a bigger role in electric power generation in concert with a new set of regulations and standards.

In the energy supply sector, technology transfer comes with investment. One of the keys to the transfer of technology is to promote investment through an appropriate economic and institutional framework. For some, the high initial costs of clean energy supply technologies is a major barrier for their transfer. In general, economic and institutional barriers rather than technology availability are more apt to be the cause of failure to transfer technology. In all energy sectors, the role of government in facilitating technology transfer is critical. Annex II countries could develop more effective policies to stimulate and finance private investments in clean energy sources in developing countries and CEITs. Developing countries and CEIT governments should have policies in place for liberalising the energy supply market, fostering and ensuring conditions to allow international financing, promoting infrastructure development, eliminating unnecessary regulatory and trade barriers, educating and training local workforce, protecting intellectual property rights and strengthening local R&D and environmental management regimes

General barriers for technology transfer in the energy sector are:

  • Lack of incentive for the major utilities: electric utilities sell electricity through a regulatory review process that allows the utility to recover all operating expenses, including taxes and a fair return for its pendent investments. This means that independent of the quality of the service they will be reimbursed by the operational costs;
  • Lack of human qualifications in developing countries. Without investment in capacity building the existing electric service is of lower quality compared with industrialised countries, information gathering is not a priority and new technologies, which may be less costly or more environmentally friendly, are not even taken into account;
  • Although many countries are revising their trade policies in order to liberalise markets, substantial tariff barriers for imports of foreign technologies including energy supply equipment remain in many cases. This limits exposure to energy efficiency improvement pressures from foreign competition on domestic suppliers and prevents early introduction of sustainable energy innovations from abroad;
  • Political interference and corruption caused by powerful construction groups which prefers the installation of more generation capacity based on conventional technologies;
  • Institutional and administrative difficulties to develop technology transfer contracts, which can be a necessity to qualify regional construction companies as potential partners of the entrepreneurship. There is a need for greater regional co-operation among developing countries both in R&D work and in the international commercial contracting network;
  • Poor access to information. It is one thing to recognise that the information and technology desired are available, but it is quite another issue to gain access to them. That will require that developing countries strengthen their linkages with the rest of the world by investing in the infrastructure needed to receive and transfer information;
  • A major requirement for successful agreement in technology transfer is the guarantee of intellectual property rights ( IPR). In the energy sector, a well-developed mechanism exists for sharing IPR. It is the production-sharing contract. Under this agreement, private firms contract with local parties, usually state-owned companies or governments, to share technology with them in return for a share of the products produced. This practice has proven very successful in the international oil and gas sector and could be a model for other energy supply areas;
  • Needs of the developing countries are quite different to these of the developed countries.

It is expected that markets will respond to whatever regulatory policies are adopted to promote the reduction of GHG emissions. This will stimulate technology transfer as investments are made in response to the price signals when uncertainties on policies to secure environmental goals are settled. A number of generic strategies can promote and/or facilitate the implementation of some of the emission reduction options in the energy sector. These strategies could include (but are certainly not limited to):

  • Creating political and regulatory framework to allow full cost pricing and recognise the indirect benefits of renewables such as the creation of more local jobs, improvement of the environment, balance of trade, etc.
  • Providing information and general training to government officials -The advantages and local/international opportunities provided by the measures and technologies must be presented to top officials in a manner that is both forceful and forthright; top officials embracing the concept;
  • Providing specific information and training to local actors - Training of a very specific and practical nature must be provided to personnel at the local level;
  • Encouraging the implementation and enforcement of energy and environmental standards - Standards require the capability to enforce them by recruiting and training enforcement personnel and supplying them with the necessary tools and high-level administrative support needed for credible implementation of sanctions. Setting up these regulations and support structures is an area where international assistance may be valuable for some countries;

Governments play a special role in the creation of markets for ESTs. This can be done by governments 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, tradable permits and competitively determined subsidies. Grants are a very common incentive used to stimulate adoption of a new technology in developed countries (e.g. The Clean Coal Program in US) An example of the use of income tax exemption is the Green Funds scheme in The Netherlands. Also in the Netherlands a pilot a trading mechanism for Green Certificates (including a spot and forward market) has been established for renewably generated electricity, which makes it feasible to reach quantified targets for renewable energy introduction efficiently. Competitively determined subsidies have been employed such as the Non-Fossil-Fuel Obligation (NFFO) in UK, and the electricity feed law (EFL) in other parts of Europe.

Fossil Fuel
Technology transfer in the fossil fuel sector is mature, and well-established mechanisms are in place. Technology is readily available from a wide variety of sources, such as the oil, gas, and coal industries, engineering contractors, equipment vendors, etc. Barriers to technology transfer are primarily economic and institutional. Specific measures and policies could include:

  • Creating and/or enlarging the market for clean energy technologies like:
    • switch to lower carbon fuels such as the substitution of natural gas for coal
    • using of combined heating (cooling) and power generation where feasible
    • using sequestration of CO2 where feasible use of high efficiency in electric power generation
    • using of high efficiency in electric power generation
  • Enhancing regional co-operation in development and transportation of natural gas and electricity across national boundaries.
  • Increasing efficiency by promoting dissemination of best practices.

Technology transfer in the nuclear power sector for water-cooled and water moderated reactors is also mature and has well-established mechanisms. Because of the unique safety, ecological and proliferation risks involved, successful transfer of nuclear technology requires major government involvement and careful consideration of the costs and benefits involved. The large capital costs, lack of public acceptance, availability of cheap domestic fossil fuel and the resolution of safety and waste disposal provide significant barriers to the use of nuclear energy. In many cases, nuclear proliferation issues are also a major problem to be addressed by governments and other international institutions. Developing infrastructure and trained personnel is required to insure the highest possible level of nuclear safety.

In the renewable sector technology transfer has been constrained by the lack of investment and high costs. Investment has been generally limited to niche or protected markets, because of technical, institutional and economic barriers. Governments need to provide incentives for investment and to remove policies that hinder the application of renewable energy as described in the general policy measures above. They also need to promote the development of improved and more cost effective renewable technologies amongst others by:

  • Developing human and institutional capacities;
  • Fostering joint research and technology development;
  • Promoting assessment of the potential of renewables;
  • Involving local communities, mainly in small size energy supply projects.

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