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Evaluating relative benefits of different types of R&D for clean energy technologies

Soheil Shayegh, Daniel L. Sanchez and Ken Caldeira

Energy Policy, 2017, vol. 107, issue C, 532-538

Abstract: Clean energy technologies that cost more than fossil fuel technologies require support through research and development (R&D). Learning-by-doing relates historical cost decreases to accumulation of experience. A learning investment is the amount of subsidy that is required to reach cost parity between a new technology and a conventional technology. We use learning investments to compare the relative impacts of two stylized types of R&D. We define curve-following R&D to be R&D that lowers costs by producing knowledge that would have otherwise been gained through learning-by-doing. We define curve-shifting R&D to be R&D that lowers costs by producing innovations that would not have occurred through learning-by-doing. We show that if an equal investment in curve-following or curve-shifting R&D would produce the same reduction in cost, the curve-shifting R&D would be more effective at reducing the learning investment needed to make the technology competitive. The relative benefit of curve-shifting over curve-following R&D is greater with a high starting cost and low learning rate. Our analysis suggests that, other things equal, investments in curve-shifting R&D have large benefits relative to curve-following R&D. In setting research policy, governments should consider the greater benefits of cost reductions brought about by transformational rather than incremental change.

Keywords: Research and development; Clean energy technology; Curve-shifting; Curve-following; Learning investment; Learning curve (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.enpol.2017.05.029

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