29 November 2021
Achieving climate neutrality may depend on a few technologies: The International Energy Agency scenario for net zero by 2070 predicts that half of the emissions reductions depend on low-carbon hydrogen, carbon capture, utilisation and storage (CCUS), bioenergy, and electrification of end-use sectors such as heating and transport.
Further investment in research and development (R&D) is essential for helping commercialise these technologies. Yet energy sector R&D spending is stymied by high capital costs, long development timelines, and scarce opportunities for demonstration and de-risking. This drives away venture capital funds, which invested US$1 billion in US energy companies in 2019, compared to US$20 billion in healthcare and US$70 billion in information technology (IT) companies. Moreover, only a small share of private clean energy investment supports innovative companies, with the majority financing mature technologies like wind and solar. In fact, solar is mature today largely thanks to R&D, which was the most important driver of cost reductions from 1980 to 2012, more decisive than economies of scale or ‘learning by doing’.
As the EU and USA increasingly recognise the potential locked in breakthrough, clean-energy technologies, they are upgrading their innovation journey with a focus on market deployment.