Innovation–improvement in products like batteries, processes like planning where to place wind turbines on a hillside, and business models like leasing solar panels to homeowners–is a reliable way to drive down the cost of energy and reduce its environmental impacts. WRI’s recent fact sheet The Power of Innovation illustrates how the prices of solar photovoltaic (PV) panels and onshore wind power have declined substantially since the 1980s. While trends like the rise and fall of silicon or steel prices impact these costs in the short-term, the long-term decline is driven primarily by innovation.

Innovation is more than scientists working on cutting-edge technologies in a lab. It also happens on the manufacturing floor and out in the field. Sometimes this is called ‘the learning curve’ – prices drop as we figure out the best way to do something like build and ship a turbine blade. Even achieving economies of scale involves innovation. Discovering the best batch size for a manufactured product like silicon wafers, or the optimal technician-to-wind-turbine ratio to maximize uptime and minimize cost, requires innovations in business models, supplier relationships, and maintenance procedures.

In addition to shaping cost, innovation can also catalyze substantial improvements in performance. Today solar PV modules can generate almost twice as much power for their size compared to 1982. Similarly, one wind turbine manufactured today can capture as much energy as 80 turbines made in 1985. Moreover, tremendous improvements have been made in how we site, operate, maintain, and integrate these power sources to squeeze every last drop of energy out of them. All of these performance improvements and efficiencies are driven by innovators.

Many supply and demand factors impact energy costs, sometimes increasing and other times lowering them. Innovation is one of the few ways to steadily bring down costs or improve performance – or both – over time. It may be impossible to predict exactly when an innovation will be successful, and indeed many will fail. But, as the American Energy Innovation Council (a group of seven of the top innovators and corporate leaders in America, including Bill Gates) writes, “At this point in history, securing clean, scalable, and inexpensive energy supplies is a high-stakes innovation challenge.”

This is why governments around the world are investing in energy innovation. As WRI’s working paper Two Degrees of Innovation shows, policymakers do play a critical role in supporting innovators and innovations, particularly in the highly regulated electricity marketplace. The price declines seen so far in onshore wind and solar PV were made possible through government policies like feed-in tariffs and electricity market reforms and investments like the U.S. National Renewable Energy Laboratory and the German Fraunhofer Institutes.

Costs must be reduced even further so that solar and wind power can compete with coal and natural gas in electricity. The innovators who successfully do so will find a tremendous opportunity open to them, a market the IEA estimates will be $US 5.7 trillion (2009 dollars) between 2010 and 2035. Economies all over the world are competing to make sure they host future successes. Whether Germany’s High-Tech Strategy 2020 or India’s Solar Mission, they are putting supportive innovation policies in place today.

Read the original post.

Download the WRI factsheet on the power of innovation.

Read the WRI Working Paper Two Degrees of Innovation - How to Seize the Opportunities in Low-Carbon Power.

Throughout the 20^th Century, cities facilitated or oversaw the creation of these systems, and it was only in the last 20 years of that century that district energy disappeared from our communities. Unlike Rip Van Winkle, though, district energy can quickly become part of our lives again.

In its simplest terms, district energy is a shared system for providing heating, cooling, and hot water to a cluster of buildings. Building owners participate in district energy to gain benefits from more efficient energy use, access to better energy-producing technologies, and the service of a utility business model instead of standalone systems in their own buildings.

With such obvious benefits, why did we shift away from district energy? Primarily because, by and large, building owners are not good investors when it comes to energy. They lack information about energy systems and the time to gain that information, and they won’t put money into something that doesn’t pay for itself right away.

Building owners often do not make smart choices for building energy systems because those smart choices usually have financial paybacks of more than three years. While short-term rewards might be fine for many kinds of consumer products from electronics to trendy clothing, it makes no sense at all for energy equipment.

Recently, many cities have begun taking another look and are finding that district energy offers a real opportunity to address their energy challenges. Whether they are championing strategies to secure energy supplies, insulate themselves from price instability, or reduce greenhouse gas emissions, these cities recognize district energy’s ability to do all three of these things simultaneously.

New Energy Cities has highlighted district energy as a key strategy that cities can pursue to create systems that can achieve greater efficiency, facilitate the use of more clean, renewable forms of energy, and use long-term capital to improve economic performance and reduce obligations on individual building owners.

Seattle-based Preservation Green Lab is a program of the National Trust for Historic Preservation that has become a strong champion for district energy in keeping with its role of helping existing buildings address energy use issues. The Lab has produced a primer for cities interested in pursuing district energy that highlights some key points, such as:

• Understanding the need to assemble the combined energy demand from a neighborhood of buildings
• Identifying policies that cities need to consider to improve the success of the system
• Engaging building owners early and often

District energy is part of an emerging shift toward looking at energy efficiency opportunities beyond the boundaries of individual buildings and recognizing the inherent value of providing energy for contiguous buildings to improve the energy performance of our built environment.

This work is important for those who are interested in welcoming the Rip Van Winkle of energy back home.

• The price of installed solar PV has plummeted and is approaching the point at which we no longer should even pretend that solar is a more expensive alternative than other forms of energy. Kees Van Der Leun wrote about this on Grist this week, highlighting a way to think about solar PV economics into the future.
• Our vastly inadequate federal and regional energy policies have created confusion and uncertainty to the detriment of solar industry companies and interested renewable energy investors. Interestingly, General Electric’s Vice President for Ecomagination Mark L. Vachon noted October 12, at a Green Business Innovation Forum in San Francisco, that Australia was getting close to adopting a carbon tax, which would help reduce uncertainty and reinvigorate investment. Just one day later on October 13 Australia took that very step.
• Rapid growth in global solar manufacturing capacity has changed not only what it costs to put solar panels on buildings, but also the trajectory of the clean tech sector. And the growth is not limited to China—even though U.S. solar manufacturing has experienced a pretty significant shakeout in the market, there is good news as well. General Electric announced this week that it was building a thin-film solar manufacturing facility in Denver.

If we step back from the latest developments, there are a few broad, but important characteristics of solar energy that should be top of mind:

1. Solar energy will continue to emerge as a compelling source of renewable energy. However, we would do well to embrace efforts to put solar everywhere that access to the sun is good and there are willing building owners. In the U.S., we could adapt strategies used in Germany, where they have sought to put solar on every rooftop.Rooftop solar will only become ever more cost effective and more tightly integrated into the building itself. Witness the investment Dow Solar has made to create solar power generating shingles. Such an intensive installation strategy in the U.S. could have significant benefits across large areas of the U.S., as John Farrell of the Institute of Self-Reliance notes in Grist, offering the potential to provide power to millions of homes.
2. Energy consumers like solar and we should make it much easier for them to pay for it. As energy users, we perceive solar energy differently than other forms of energy, which means that all electrons are not equal from a business perspective. This assertion, which I think has been demonstrated but not quite analyzed to death, means that we should re-think our energy pricing, policy, and incentive structures so people can have easy access to solar power. Greater market choice for consumers would further accelerate growth in solar energy installations.
3. Distributed solar installations provide new opportunities for local ownership and community economic development benefits. Locally owned enterprises for solar deployment produce three times the total economic impact in our communities. We should be helping communities create enterprises for residents and small businesses to access solar energy as energy users, and also to participate as investors. Germany has illustrated this potential and in Oregon we have a growing number of communities – from Pendleton to Portland – moving ahead with community-owned solar projects.

The weather is changing and will continue to change, but the sun will always come out.