Alternative Energy/Paper

The Political Economy of Intellectual Property in the Emerging Alternative Energy Market

Introduction

The alternative energy field represents a unique case for studying the trends regarding the political economy of intellectual property (IP) in an emerging market. Some of the technology can be considered mature; however many are the barriers - technical, political or related to funding - that justify a young market in many countries. These issues are at the center of our research under the Industrial Cooperation Project at the Berkman Center for Internet and Society at Harvard University (ICP) . This research is part of a broader project being led by Prof. Yochai Benkler. Within the ICP, we are seeking to understand the approaches to innovation in the alternative energy sector looking specifically at wind, solar and tidal/wave technologies. The intention is to map the degree to which open and commons-based practices are being used compared to proprietary approaches.

In this sense, our research is guided by the definition of the “commons” molded by Yochai Benkler, who asserts: commons are a particular type of institutional arrangement for governing the use and disposition of resources. Their salient characteristic, which defines them in contradistinction to property, is that no single person has exclusive control over the use and disposition of any particular resource. Instead, resources governed by commons may be used or disposed of by anyone among some (more or less well defined) number of persons, under rules that may range from ‘anything goes’ to quite crisply articulated formal rules that are effectively enforced. Commons can be divided into four types based on two parameters: The first parameter is whether they are open to anyone or only to a defined group. The second parameter is whether a commons system is regulated or unregulated. Practically all well studied limited common property regimes are regulated by more or less elaborate rules - some formal, some social-conventional - governing the use of the resources. Open commons, on the other hand, vary widely. (Bankler, Yochai. 2003. The Political Economy of Commons, The European Journal for the Informatics Professional, Vol IV, no 3) (BENKLER, 2003, 6)

We began our research with the intention of limiting our scope to the US only, but given the global scope of the alternative energy market, and the fact that almost all the market leading companies have grown in foreign countries where the markets for this technology have been biggest, we chose to include Germany, Denmark, Spain, and China in our long-term research. The European countries represent three of the biggest markets for wind and solar technology, and are home to some of the biggest companies producing the technology. China is the newest and biggest market entrant into the solar market, and could become the biggest producer of this technology over the next few years .

We also decided to spicy the research by inserting it within the context of the international debate around Climate Change, specifically in relation to the links of these debates with the development of technology and innovation policies focused on alternative energy.

Thus, our goal is to follow the alternative energy market and identify the levels of openness and closedness in the areas where innovations are happening, dialoguing with a bibliography that covers the political economy of intellectual property and how intellectual property impacts innovation. We will also be looking for the presence of commons-based arrangements of knowledge production within the alternative energy innovation process to determine if they appear, and if so, where and how they appear.

We chose these three technologies with the expectation that we would find variations among their approaches to openness and closedness, since the technologies represent different levels of maturity and patenting activity. The maturity can be measured both by the stage of development of the technology and the stage of development of the market. For instance, wind is considered a mature technology because it is fairly well understood, and the cost of generating electricity with wind turbines is closer to the cost of conventional sources of fossil fuel generated electricity (see Figure 10) - though it is still more expensive . Solar photovoltaic (PV) technology is less mature and can be quite expensive, therefore the research and innovation around solar PV technologies is sure to play a critical role in bringing its costs down and generating more efficient technology . Tidal/wave technology is relatively immature compared to wind and solar, and is mostly in the demonstration phase at this time. Only a few small projects around the world - such as a tidal barrage, which was constructed at La Rance in Brittany, France in the 1960s (citation to Bryden 2004, 139) - are generating consumer electricity.

These technologies are a subset of the many alternative energy technologies that exist, and they are all representative of energy supply technologies, meaning they are focused on bringing energy to a point of final use. There is another set of technologies called energy end-use technologies that are part of our discussions of the cleantech industry as a whole. These technologies are concerned with the most efficient use of the supplied energy. Examples are home appliances, automobiles, and light bulbs.

Within our three focus technologies - wind, solar and tidal/wave - there are a variety of subset technologies. Figure 1 provides a description of the technologies our research is focused on. These technologies are only used for electricity supply. Technologies we are not researching are solar thermal - which uses the suns energy to heat water for home and commercial use -, solar heating and cooling - which uses building design to take advantage of the sun’s direct heat and energy to efficiently heat and cool buildings at different times of the day and during different seasons -, and any wind or tidal/wave technologies - which use the energy from the source for mechanical work, rather than for conversion to electricity. We excluded these technologies because they are less common than the electricity supply technologies we are researching, and because electric supply technologies can have a bigger impact on reducing global carbon emissions by reducing the use of coal for electricity generation. Reducing the use of coal can facilitate the shift to a lower emissions electric plug-in vehicle market thereby reducing the world’s dependence on both coal and oil the biggest global climate change contributers - as shown in Figure 2.
Figure 1
Technologies for electrical generation from solar, wind and tidal/wave energy
Figure2
Global Anthropogenic GHG emissions divided by type of gas

The Focus of this Paper

In this paper, we aim to discuss the role that Intellectual Property plays in the cleantech market, specifically in its alternative energy subset, and the emerging debates around protections and knowledge governance for these technologies. We hope to achieve this goal, by mapping the innovation process of our chosen technologies and identifying the main players within the field - including governments, universities and companies. We will try to understand their influence and the role they have played in shaping this debate over time. We will devote special focus to the upcoming United Nations Framework Convention on Climate Change (UNFCCC) Copenhagen Summit, which takes place in December, due to the recent delegate debates around compulsory licensing for critical climate change mitigation technologies.

Alternative Energy Technology History

While the origins of these energy supply technologies are all based in the 1800's, the practice of using the wind, sun, and tides/waves as sources of energy for work, are much older. Wind was used to power sailboats up to 5,500 years ago, and there is evidence of windmills for mechanical work in India 2,500 years ago. (Sorenson, 1991, 8) Solar energy is the basis of most energy on earth, including the energy in plants from photosynthesis, solar thermal heating, the fossil remains of organic material in oil and coal, and wind which is created when air, heated by the sun, rises and cold air from another area moves into that space. (Carlin, year, 348) Using moving water for power can be traced back to 250 BC. (Cite??)

a. Wind technologies

Wind turbines for electrical generation were first developed simultaneously in the US and Scotland around 1887. Charles Brush, and American inventor who developed an electric arc light system, needed electricity to test his lights in his home laboratory so he built a 60 foot wind turbine with an electric generator in it and wired it to a number of batteries for energy storage. This set-up successfully powered his laboratory for 15 years. While Brush is credited with the first electrical wind turbine, during the same period in the late 1800s and early 1900s a Danish inventor named Poul La Cour was inventing commercial scale turbines. By 1906 there were 40 windmills generating electricity in Denmark, which marked the beginning of the country’s relationship, and innovation edge, in wind technology. (Pasqueletti, year, pg)

Soon afterward, both Germany and the UK started to experiment with wind electricity and install their own turbines. Meanwhile in the US, some small companies were marketing small turbines for electrical generation on rural farms, but the development and adoption of the technology did not match Europe. By the 1930’s the US had a burgeoning market for small rural off-grid wind turbines, but that changed in 1936. The Rural Electrification Act was passed that year, which was tasked with connecting rural areas to the electrical grid. It was so successful that every US electric wind turbine manufacturer had closed its doors by 1957. In Denmark during this same period, wind power was spreading throughout the rural areas providing off-grid electricity. (Pasqueletti, year, pg)

In 1950, a Danish engineer named Johannes Juul began testing a prototype wind turbine for a Danish utility. The design used some technological elements from the earlier designs of F.L. Smidth, the founder of a successful Danish wind turbine manufacturing company, which had integrated aerodynamics into La Cour’s designs. Juul ultimately built a three-bladed wind turbine that was installed at Gedser, Denmark in 1956. It was in regular service from 1959 - 1967, and became the model for the wind turbines manufactured in Denmark in the late 1970’s after the oil crisis. A wind rush began in California in the 1980s, which was also in part due to reactions to the oil crisis, and Denmark was poised to dominate the market in the US. Denmark shipped thousands of wind turbines to California between 1980 and 1985, and after the market in California crashed, Denmark started selling thousands more to Germany. All of these turbines were technologically derived from Juul’s turbine. (Pasqueletti, year,pg)

In the US during the 1970s, NASA funded research at the Lewis Research Center in Cleveland, Ohio, to refine the design and function of electrical wind turbines. Soon after the oil crisis, the US government started to fund the Federal Wind Energy Program, and research and development (R&D) funds were devoted to the cause. Research was also conducted at Sandia National Laboratories in California. In the 1980’s the government drastically reduced their R&D funding for wind and other alternative energy technologies (for reason that are explained later in this paper) and shifted the focus of alternative energy developments over to tax credits. (DODGE, year, pg)

b. Solar photovoltaic (PV) technology

The solar photovoltaic (PV) effect was discovered in 1839 by Alexandre-Edmond Becquerel. He observed that when selenium was exposed to sun a small electrical current was created. Solar PV panels remained undeveloped until 1953 when the first commercial panels were manufactured at Bell Laboratories after one of the lab’s scientists discovered that silicon could be used in place of selenium as a more efficient material for creating electricity. The US government took a keen interest in the technology for use in the space program, and funded PV developments for that purpose. (Cite Sorenson and Perlin) Throughout the 1960s solar research was funded by governments and in research labs, mostly for applications in the space industry for satellites and space-based vehicles. When the oil crisis of the 1970s occurred the US government founded the Solar Energies Research Institute - later renamed the National Renewable Energy Laboratory (NREL) - to develop new, lower cost solar energy technologies. US President Jimmy Carter further supported the R&D efforts of the solar industry by allocating $3 billion for solar energy research, and installing a test solar water heater in the White House as well as a solar PV array on the roof. (Is there any information on the IP policy in force by then? Or all the results were patented? If patented do we have numbers or examples?) These developments came to a halt in the 1980’s when President Ronald Reagan took office and drastically cut the R&D funding for solar energy, while also removing the solar PV array from the roof of the White House (are there any pictures of this panel in the roof?).

The US represented 80% of the global solar energy market at the time, and soon, the other industrialized countries followed the United States’ lead (source? All these type of specific data needs source). Throughout the 1980’s and 1990’s solar research was limited to research universities, inventors and state energy agencies, and the assets and patents of the original solar energy technology companies were purchased by large oil companies like Mobil, Shell, and BP. (Cite Bradford 2006, 98)

A research conducted at the Belfer Center for Science and International Affairs at Harvard’s Kennedy School of Government (footnote with link) could identify the source of funding of 14 from 20 key innovations in PV technology developed over the past three decades (1970s, 1980s, 1990s). It was discovered that only one of the fourteen was fully funded by the private sector, and nine of the remaining thirteen were financed with public funding, while the other three were developed in public-private partnerships. The researchers assumed that the innovations for which they could not identify funding sources were developed in the private sector. (Cite Norbeg-Bohm 2000, 134)

Over the last twenty years, the market for solar technology has grown in foreign countries while still moving slowly in the US, other countries - especially Japan and Germany - have taken the lead in technology development and installation of solar technology. Solar is still a very immature and expensive technology with a small but growing global market share. Countries such as Spain and Germany have used generous renewable energy subsidy programs - referred to in this paper as demand-pull policies - to rapidly install massive amounts of solar PV technology. Figure 3 shows a comparison of the countries with the top production share and the countries with the most installed PV capacity.

(And China?)
Figure 3
Comparison of Solar PV production market share by country and total installed capacity by country

The researchers at the Harvard Belfer Center came to the following conclusions on solar PV innovation in the US:

In sum, the strengths of the U.S. Solar R&D program have been: (1) a parallel path strategy, (2) collaborations between industry, universities, and national labs including public-private partnerships with cost sharing, (3) attention to the full range of RD&D needed, from basic scientific work through to manufacturing, including attention to all components, materials, cells, and modules. Critiques of the solar PV R&D program include: (1) a lack of consistency in funding that created fits and starts in technological progress, and (2) concern that manufacturing R&D was not begun soon enough. Overall, the trend has been to increase attention to manufacturing issues and to increase public-private partnerships, including growth in the level of private sector cost sharing. (Norberg-Bohm, 2000, 135)

c. Concentrating Solar Power (CSP) Technology

Solar PV’s lesser know and less common relative is Concentrating Solar Power (CSP). Solar thermal furnaces that generated sufficient heat to produce steam - the basis of a Concentrating Solar Power (CSP) plant - were first developed in the eighteenth century and used in small scale applications in the US and France during the 1860’s. Today, the US is seeing renewed interest in CSP plants, while the current supply of CSP generated electricity comes from a number of 80MW (megawatt) plants in Southern California, which were built in the late 1980’s.

Nevada, a state with very strong renewable energy support policies (what type? Maybe something in a footnote), initiated the first long term power purchase agreement of concentrating solar electricity signed between two public utility companies and the US solar developer Solargenix (which is now owned by a Spanish solar company named Acciona). The developer built the second largest CSP plant in the world with 75 MWe trough plant that was completed in 2007. It uses 760 parabolic troughs and has over 300,000 m2 mirrors and storage of less than one hour to guarantee the capacity. (PHILIBERT, 2004, 14; WIKI SOLAR ONE, 2009)

In June 2004, the Governors of New Mexico, Arizona, Nevada, California, Utah, Texas and Colorado voted a resolution calling for the development of 30 GW of clean energy in the West by 2015. Of this alternative energy development, 1 GW would be of solar concentrating power technologies. The US Department of Energy decided to back this plan and to contribute to its financing in June of 2004. (PHILIBERT, 2004, 14).

Cite (LUZZI & LOVEGROVE, 2004, 669) CSP is a mature and very well understood technology with growing adoption in the US. (any information on patents?)

d. Tidal/wave technologies

Tidal and wave technology are a subgroup of Ocean Technologies . There are many different established tidal and wave technology designs in use or in various phases of testing. Tidal energy generators are mainly divided into two categories: underwater turbines and hydrokinetic generators. Underwater turbines are simply freestanding turbines/propellors that can be grounded to the bottom of the ocean or the bottom of a tidal inlet. Hydrokinetic generators are more similar to existing hydroelectric power generation systems that are used in rivers throughout the world. However, rather than using a dam system or tidal barrage, which would create a structural barrier across a tidal inlet, hydrokinetic generators can be freestanding like the underwater turbines, and thereby are proven to have far fewer deleterious environmental impacts on marine ecosystems. (Perez, 2009, 2) The first bona-fide tidal energy plant was constructed in France, at La Rance in Brittany between 1961 and 1967. It consisted of a barrage across a tidal estuary that utilized the rise and fall in sea level induced by the tides to generate electricity from hydro turbines. (BRYDEN, year, pg)

Wave power generators can be divided into four main technologies: Point absorbers, attenuators, terminator devices and overtopping devices. It is estimated that in the United States, wave power generators have the potential to produce up to 2,100 Terawatt-hours of power, which is equivalent to almost 20% of the power consumed in the country. The most ideal conditions for wave power plants are in the Pacific Northwest. To date several international and domestic companies have filed applications with the Federal Energy Regulation Commission (FERC) for test projects off the coasts of California, Oregon and Washington. (PEREZ, 2009, 3)

Internationally, wave power generators have received strong government support in Europe and Australia. Portugal is home to one of the first grid-connected, wave-power conversion farms, which began operation in September 2008. The technology used is an attenuator generator, which resembles linked sausages that float on top of the water and generate electricity by harnessing the power in the oscillation of the waves. (Cite Perez 2009, 3)The same technology is being considered for test sites in Scotland, Hawaii, Oregon, California and Maine. A company called Energetech has been testing a full-scale, 500kW terminator device, which is “an oscillating water column (OWC) used in onshore or near-shore structures,” at Port Kembla, Australia and is developing another OWC project for Rhode Island. (Cite Perez 2009, 4) In Wales, an overtopping device called the Wave Dragon is being tested for full-scale deployment. The overtopping device works by channeling waves into a reservoir structure that sits higher than the surrounding ocean; the water in the resevoir is released through turbines that generate electricity. (Cite Perez 2009, 5)

The market for ocean technologies started to grow in 2004 and maintained healthy growth though 2007 when the total investment in the technologies including both public and private sources, was $76 million. In 2008 the investments dropped by $26 million. (Cite Perez 2009, 7) Figure 4 shows the evolution of investment in the technology from 2004 onward. The future promise of tidal/wave technology is great both in terms of total amounts of energy that can be generated, and the predicted cost-competitiveness of the technologies.

Figure 4
Total public and private investment in ocean technologies ($ millions)

A Rapidly Growing Market

According to the United Nations Environment Programme (UNEP) and New Energy Finance, the cleantech industry grew to over $155 billion in 2008, up almost forty-eight percent from 2006, worldwide. (SEFIa 2009) Figure 9 shows the gradual growth by financial quarter over the past few years. Its importance is not only environmental, but also geopolitical. The technologies that form alternative energy - and companies that explore them - vary immensely in type, innovation cycles, maturity and techno-economic readiness.

Figure 5
New global investments in clean technologies by year

In terms of constituencies, the presence and influence of actors vary among countries, imprinting different forms to the organization of alternative energy innovation For instance, in Japan, the government has traditionally taken a strong role in coordinating such activities through its Ministry of Economy, Trade, and Industry; while European countries have stressed and exemplified cross-country collaboration and coordination. In the US, the private sector exercises greater autonomy, even after the emphasis on public-private partnerships since the 1990s. In developing countries, such as Brazil, the government typically takes a very strong role in funding and coordinating innovation in energy, as in the biomass efforts of Petrobras. The various entities collaborate in a range of combinations, within countries and internationally, and impacts the availability of funding for R&D. For instance, the private sector accounts for the majority of expenditures for energy R&D in International Energy Agency (IEA) member countries, although governments account for a large fraction as well. (Cite Gallagher, et. al. 2006, ?)

The global market for clean energy technologies relies on government support, which helps these technologies attain cost competitiveness with fossil fuel energy generation. Currently, as shown in Figure 8, the cost of generating electricity with alternative energy technologies is higher than with coal, which provides 50% of the electricity generated in the US and 80% of the electricity in China. (Cite Schell 2009) Government support policies that subsidize the cost of deploying alternative energy technologies are referred to as demand-pull policies. The market leading companies, have generally developed in the areas of the world with the most generous demand-pull policies, and, predictably, under governments that have prioritized the growth of alternative energy technologies. The majority of the biggest and most successful wind and solar technology companies in the world are located outside of the US, with wind manufacturers being disproportionately grouped in Germany, Spain and Denmark, and solar companies being more widely distributed between Germany, Japan, China and the US. What distinguished these other countries from the US are their government's alternative energy policies. In Germany, Spain and Denmark a demand-pull policy called a Feed-in Tariff (FiT) has been responsible for the rapid growth of their alternative energy technology markets, and has thus encouraged the development of many of the leading technology companies. (Cite Rickerson & Grace 2007) China, on the other hand, has taken advantage of the growing market for solar energy technologies, and has funded significant R&D to create cheap and efficient solar photovoltaic cells that are being sold in foreign markets, most notably the US and Europe. Only recently has China added its own FiT for wind and solar to help encourage their home market (Cite Gipe(a) 2009). Like most FiTs, China’s includes a “buy local” provision, which gives better financial incentives to those who install clean technology produced by Chinese companies. (Cite Martinot 2008)

Figure 6
The costs for generating one kilowatt hour with various types of electricity generation technology