Report

Promoting energy innovation with lessons from drug development

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Problem

Despite progress toward a cleaner energy system, current U.S. policies appear insufficient to reduce emissions enough to avoid catastrophic climate change while sustaining economic growth. Energy innovation is a crucial part of addressing this problem, but a number of inefficiencies persist in the innovation system. Efforts to commercialize new technologies encounter difficulties both in launching new firms and in scaling up production.

Proposal

Goldstein, Azoulay, Graff Zivin, and Bulović examine practices and institutions that successfully support the pharmaceutical innovation system and that hold important lessons for energy innovation. They propose multiple reforms to the energy innovation pipeline, including: (1) a robust system of contract organizations to perform specialized research, (2) uniform technical standards, and (3) better regulatory incentives for electric utilities.

Abstract

Accelerating energy innovation is both a necessary part of climate change mitigation and a spur to economic growth, but there are a number of institutional challenges that make such innovation particularly difficult in energy technology. By comparison, the system for bringing new technologies to market in pharmaceuticals is more effective. The authors propose three types of reform to the energy innovation system that build upon lessons from pharmaceutical innovation: (1) a robust system of contract organizations to perform specialized research, (2) uniform technical standards, and (3) better regulatory incentives for electric utilities.