Innovation in energy technology has widespread implications for OECD economies. Although the energy sector accounts for a small share of GDP, the pervasive use of energy throughout modern economies makes uninterrupted supplies and stable prices critical to sustaining growth. Rapid growth in energy demand coupled with growing concerns about energy security and the environment, however, raise questions about the sustainability of the current energy system and call for renewed efforts to develop and deploy new and improved energy technologies that can support a sustainable energy system. Understanding how to stimulate innovation in energy technology is therefore of growing importance.

This report summarises the conclusions of a project on innovation in energy technology organised by the OECD Working Party on Innovation and Technology Policy. It forms part of a larger effort to compare innovation processes in different industry sectors to both provide guidance to policy makers on development of innovation policy and to more fully elaborate the national innovation systems approach to policy making. The report focuses primarily on innovation in hydrogen fuel cell technology, which was the subject of country studies prepared by experts from nine countries: Canada, France, Germany, Italy, Japan, Korea, Norway, the United Kingdom and the United States. It also addresses innovation in oil and gas technologies, drawing on work done in France, Norway and the United States, which allows some ability for comparative analysis across national innovation systems and among innovation systems for different energy technologies.

Early technology breakthroughs by Canadian hydrogen and fuel cell companies have demonstrated the viability of this technology as an enabler of clean and efficient energy, and have established a global reputation for Canada as a leader within this emerging industry. Despite years of substantial and escalating research and development (R&D) investments, Canadian companies and the industry at large have yet to reap the benefits of significant innovation through the full-scale commercialization of technology.

This report provides a short discussion on the contents and limits of the concept of hydrogen and fuel cell innovation system in general and within France, and offers some hard facts on the current status of development of hydrogen energy and fuel cells in France. In particular it focuses on PACo, the public/private partnership that has been established for this technological field.2 The report uses a sectoral approach to describe and assess the French fuel cell and hydrogen energy innovation system. This approach combines two components: the national innovation system and the specific technical regime of the given sector/industry (Malerba, 2002). It is difficult to decide which one of these components is more important; however, it was assumed that the French hydrogen and fuel cells sector is mainly influenced by institutions and policies relating to the French national innovation system, and that technical characteristics of the sector are of lesser importance.

Fuel cells are of major importance for Germany because of their potentially broad application in the automotive sector, which forms a core element of Germany’s economy and global competitiveness). The opportunities for a generally cleaner and more secure supply of energy they offer are of similar importance. Fuel cells and the prospects of a hydrogen society correspond to the concern for the environment in the German society. These two aspects together with the scarcity of primary energy resources in Germany and the perceived risks of nuclear power have led to giving the use of renewable energy and energy efficiency high priority on the political agenda.

Italy has been active in the area of fuel cells for many years. It pursues efforts to develop both stationary fuel cells for power supply and mobile fuel cells for transportation uses. This chapter reviews innovation activities related to fuel cells in Italy. It identifies the main factors that motivate government interest in fuel cell technology, outlines the role of the main institutional actors in the innovation system and describes several important activities that link the public and private sectors in the processes of research, development, demonstration and deployment of fuel cells.

Of the various types of fuel cells, polymer electrolyte (PEFC) fuel cells offer a highly promising option for Japan’s energy and environmental policies. Because the development efforts by Japanese government and businesses had centered upon other types of fuel cells rather than PEFCs until the mid-1990s, Japan was not in a leading position in the global race for PEFCs. Japan’s latest efforts in PEFC development are, however, confident and highly distinctive in the fact that they are being implemented through close collaboration between industry and the government. A study group of the Director General at one ministry promotes information sharing by the government, industry and academia, and makes recommendations, based on which the government creates research projects while industry establishes forums for exchange between businesses. The process is different from that of traditional government-led innovation in Japan.

With the rapid growth of the Korean economy, the nation’s energy consumption has increased significantly. Most of the nation’s energy needs continue to be supplied by foreign sources. To remedy this situation and to reduce the environmental impact of increased energy use, the Korean government has long supported the development of new and renewable energy technologies that promise to generate economic value along with energy savings in the near term. Central among these technologies have been fuel cells and photovoltaics. Fuel cells, in particular, were selected by the government in 2005 as one of the key enabling technologies for driving future growth of the Korean economy. This chapter reviews Korean efforts to promote innovation in fuel cells and photovoltaics, describing the main factors motivating innovation in these fields, the main elements of the innovation system for pursuing them, government policies to stimulate innovation in fuel cells and photovoltaics, and the outcome of these efforts to date.

Norway has potential to increase its energy production by developing innovations, both in fossil fuels and in new, renewable energy sources. Innovation activities in fuel cells, and in related hydrogen technologies in particular, are therefore important and the topic of this report, which reviews the main components of Norway’s innovation system for fuel cell and hydrogen technologies, including those in industry, the scientific community and government. It shows that while Norway possesses unique strengths in fuel cell and related hydrogen technology, its innovation system remains weak. Efforts of industry, the scientific community and government are decoupled and lack strong political and strategic leadership. Recent efforts to develop a strategy and plan for escalating Norway’s R&D and innovation activities in hydrogen and fuel cells may provide opportunities for greater leadership, but to date have not resulted in concrete policy developments.

Energy innovation systems operate in a complex world where both private and public actors must consider variables of great uncertainty in their decision taking. This aspect is of vital importance when analysing different issues concerning innovation. In the following we provide a brief overview of some core points influencing stakeholders in the oil and gas sector.

The U.S. transportation sector remains heavily dependent on petroleum for more than 96% of its fuel, consuming 13.4 million barrels per day (MBPD) in 2003. Highway vehicles account for three-quarters of all transportation energy use, with automobiles and light trucks alone using nearly 60% of all transportation energy (Figure 11.1). By the year 2025, petroleum consumption in the sector (including on-and off-highway, air, rail, and marine) is projected to increase by 49% to 20 MBPD. Currently, over half (55%) of the petroleum used in the United States is imported, and the imported share is expected to grow to 68% by 2025.

This report synthesizes the main results of a case study on stationary fuel cells in the Unites States. It examines the history of the proton exchange membrane (PEM) fuel cell and its drivers of innovation. The first section below includes the findings as they relate to the OECD objectives for the larger multi-country case study. Section two includes summaries of the various government agencies initiatives in fuel cell research. Section three discusses the factors impeding the commercialization of fuel cells. Section four includes the conclusions drawn from our more comprehensive study

In the 1990s, General Electric Power Systems and Siemens Westinghouse Power Corporation, spurred by the U.S. Department of Energy’s Advanced Turbine System Program, undertook the development of an advanced gas turbine systems (ATS), an energy technology that significantly outperformed the state-of-the-art technology at the time, achieving high thermal efficiencies with low nitrogen oxides emissions. The story of how these two turbines manufacturers went about the development of these advanced turbine systems is the subject of this paper. Advanced turbine systems reflect a major advance in the efficiency, moving from around 53% efficiency in the early 1990s to 60% efficiency in 2001. Such an improved efficiency represents a significant change in that a single percent point thermal efficiency can reduce operating costs by as much as USD 20 million over the life of a typical gas fired combined cycle power plant of 400 to 500 megawatts (MW) (Green, 1999)