People, process and catalysts. | KPMG | GLOBAL
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People, process and catalysts.

The energy innovation system

Through expert interviews, dialogue events and research, the World Economic Forum has identified the components of a healthy energy innovation system. By understanding these components, we can begin to recognize steps that stakeholders can take.

People form the core of innovation

The human element makes the system work, creating feedback loops and applying lessons learned from experience - all crucial for innovation. As members of society and as customers, people make the ultimate decision to adopt new technologies, shifting attitudes and behaviors that can support further sustainable energy innovation.

Inventors and researchers explore, combine and test new and existing technologies to create breakthrough ideas. Politicians act as influencers, affecting the enabling frameworks by enacting regulatory policies or dedicating public money to innovation programs, while scientists and academics fill the sustainable energy pipeline through basic and applied research, development and demonstration.

Within the innovation ecosystem, entrepreneurs often bear great risk in bringing innovation to market through start-ups, which are often spin-offs of projects by universities, research institutes or national labs. They work hand-in-hand with private and institutional investors to raise capital to fund progress. Company-led projects are increasingly financed by institutional investors, requiring financial expertise to develop business plans and conduct complex risk assessments. Finally, salespeople and developers at the supply end play an important role, particularly in the later stages of the innovation process.

The innovation process

The innovation process encompasses basic research, applied research, development, demonstration, deployment and upscaling.

While it might appear simple, the path from research to market maturity is lengthy and complicated, particularly for entrepreneurial innovators facing the “valley of death” to reach market and scale. Efforts to increase quality, introduce standardization, reduce cost and improve manufacturability are not only time and cost-intensive but also require specialist knowledge that start-ups often lack.

Once innovations reach market maturity and early market deployment, the ability to create economy of scale is critical; it is the tipping point for investments and market uptake. With scale, unit costs typically decrease with increased production and higher order quantities, as standardization, experience-based learning and automation begin to pay off. The cost of financing also typically decreases with scale and maturity of technologies, as shown by the examples of solar and onshore wind.

Across the innovation process, the market factor acts as a pull for new solutions, while investments and efforts in R&D provide a technology push towards making solutions market-ready and scalable.

Energy innovation system

Catalysts for acceleration

The main catalysts that can accelerate innovation include the following: 

  • social and industrial trends influencing consumer demands 
  • a positive climate for overall innovation 
  • regulatory policies 
  • public funding programs
  • multi-stakeholder collaboration.

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