RE Policy across the Technological lifestyle

Question 1

Describe three types of technological learning

Answer 1

• Learning by searching – learning through research processes
• Learning by doing – learning by experience and observation of policy impacts
• Learning by interaction – learning by the interaction of policy with other sectors

Question 2

Give examples of market failure that might occur at different stages across the technology lifecycle

Answer 2

1. High cost R&D phase
   - New, unproven, high-upfront cost technologies cannot enter market as they have no proven success
   - Public good spillover
   address with R&D support and capital cost support
2. Stable, technology specific incentives
   - Market barriers to tech. due to high-upfront costs, lack of information, lack of supportive market framework address with feed-in tariffs, tax credits, loan guarantees
3. Technology-neutral but declining support
   - Market barriers due to higher than average market costs and lack of market inertia
   - Lack of experience, first mover disadvantage, capital market barriers
   address with green certificates, GHG trading
4. Accelerate adoption by addressing market barriers
   - Externalities, regulatory / market distortions, information barriers
   address with building codes, efficiency standards, information campaigns

Question 3

Describe the phenomenon of institutional inertia, explain how it applies to Australian electricity supply and give examples of policy responses to overcome the institutional barriers to renewable/distributed energy.

Answer 3

• Systems or institutions that are resistive to change
• Incumbent generation & network infrastructure
• Institutional barriers include a lack of access to finance, rules, regulations and standards that favour these incumbents and do not help RE & DE deployment
• Barrier - Incorrect incentives in place to reward value of RE & DE
• Overcome - tax incentives, PPP, R&D - Grants, ARENA, improving regulatory environment for networks, updating standards, regulations etc. RPS, FiT’s
• NEL needs to accommodated DE
• Business support e.g. incubators

Question 4

a) Apart from cost, give two reasons why renewable energy technologies find it difficult to compete with incumbent energy technologies.

Answer 4

RE generators have variable, non-dispatchable output and relatively low capacity factors, making them difficult to integrate into a traditional grid
Policy uncertainty – unstable gov. policy framework around climate and energy limits the ability of RE investors to predict future revenue streams.

Question 5

a) Describe two barriers to private sector investment in R&D and/or commercialisation for RE technologies.

Answer 5

Policy uncertainty – unstable gov. policy framework around climate and energy limits the ability of RE investors to predict future revenue streams.
Mistrust/uncertainty around technology promise due to lack of information/standards/testing

Question 6

a) Discuss the rationale for government policy across the R&D, commercialisation and market deployment phases.

Answer 6

R&D phase support is important as it can remove significant capital cost barriers associated with R&D for new technology development (or for technology improvement). Market barriers including public good spill-over from R&D can also be addressed by providing financing /support at this stage.
Commercialisation can be limited without government policy due to first mover disadvantage, capital cost of uptake, lack of market integration frameworks, and lack of access to information surrounding a new technology. Support during commercialisation stages is important to prove that technologies are effective and can operate within the industry, and also to build trust within an industry around the new technology. By providing technology-specific policy support (e.g. feed-in tariffs and tax credits), rate of technology uptake can be increased.
Market deployment support can help to overcome lack of access to information and market inertia which may hold back a technology from fully integrating into the market. At this point capital cost barriers have been largely overcome as prices decline due to economies of scale with increased technology uptake. Policy support can be found in the style of building codes, efficiency standards and information campaigns, to encourage or even mandate application of a technology or method to an industry.

Question 7

Why is private financing often difficult to obtain for renewable energy projects

Answer 7

Risk – untested technologies, high capital costs (low running costs)