Commentary

The When, Where, and Why of Energy Patents

New research conducted by Massachusetts Institute of Technology and Santa Fe Institute researchers finds that the number of energy patents is increasing faster than patents overall. However, the trend lines are strikingly different for different energy technologies.

The results, published as “Determinants of the Pace of Global Innovation in Energy Technologies,” included several surprises. The researchers examined datasets including more than 73,000 energy-related patents issued in more than 100 countries between 1970 and 2009 and found that the number of energy patents rose dramatically over those four decades, especially for solar and wind. In contrast, patents involving fossil fuels increased only slightly during the period studied, while filings in nuclear technology were flat.

Money Plus Markets

The researchers found investment in alternative energy technologies surged during the 1970s energy crises but was followed by decades of little R&D investment when oil prices fell. “The observed correlation between total (public and private) R&D and patenting in the US over the period of 1970–2003 suggested that this slowdown in innovation was the direct result of disinvestment in research,” they write.

However, more recently, something changed. The researchers note that “The empirical evidence points to a pronounced increase in patenting in energy technologies over the last decade… despite traditional investment—private and public R&D—not rising commensurately.” Clearly, money isn’t the only driver of innovation. Markets also play a role.

The team said the trends over time and across technologies can only “be accounted for by the combined effects of public investments in R&D and a fast rate of growth in markets for these technologies.” So it should come as no surprise that “Renewable energy technologies—especially solar and wind—are growing most rapidly while patenting in nuclear fission has remained low despite sustained high levels of public investment.”

So why not leave innovation up to markets alone? As the researchers found, early-stage markets for new technology are typically very small, so public R&D investments are needed to spur new approaches. As markets develop, market growth, sometimes driven by public policy, attracts investment. “Public R&D investments in innovation and those driven by market expansion have effects that are multiplicative, with each providing a base multiplier for the other. Any public R&D investment is highly leveraged by market driven investments as technologies develop towards stage B, as is presently occurring with several energy technologies such as solar and wind.”

Fossil Sector Falling Behind

Carbon capture and sequestration (CCS) for power plants is one of those early-stage markets. Although CCS has been used commercially, its success to date (for enhanced oil recovery) is highly location-dependent. CCS for power plants is effectively a new market.

As the researchers note, “It is important to emphasize that the growth of markets for low-carbon energy technologies, which improve on an aspect of performance (carbon emissions) not commonly captured by market price… has depended strongly on public policy. We also note that policies are likely needed to fund research and incentivize market growth further until these technologies become cost-competitive and can take off on their own.”

Without innovation for CCS, the outlook for fossil-fueled generation is bleak, and not just in the U.S. In late October, the U.S. Treasury Department declared the nation would no longer support multilateral development bank funding for new overseas coal projects—unless they employ CCS. Meanwhile, a report issued earlier in October by the Global CCS Institute found that progress toward large-scale CCS has stalled, particularly for projects involving power generation (see p. 10).

Even a major lobbying group, the World Coal Association, has called for the development of CCS to enable the future use of coal. So why has CCS R&D been so slow? The Global CCS Institute blames weak policy support: “Without sufficient policy incentives to attract private funding, it is difficult to create the economic or market conditions required for broad-based CCS demonstration (and deployment).”

U.S. Is Not No. 1

Why should you care what patents are filed and where? Because, as the study authors note, “Patents provide an unparalleled measure of the location and intensity of innovative activity.” And when it comes to energy-related patents, the U.S. is not in the lead. Japan issued the most patents for all energy technologies other than coal, hydroelectric, biofuels, and natural gas over the study period. China is now issuing the most coal patents, surpassing both the U.S. and Europe, and China is running a close second to Japan for total wind patents.

However, those rankings don’t tell the whole story. The researchers point out that they approached their quantitative analysis at a global level because “It is common for a technology to be, for example, developed by a US firm, patented and manufactured in China, and sold and installed in Europe.” Nevertheless, patent location is an indication of where that intellectual property is likely to be used, and the biggest market for new generation of all sorts is clearly not in North America.

Remember, the researchers looked at patent filings, not commercial technologies. But patents are often a leading indicator of market growth or revitalization. Without them, industries reinforce the status quo and can eventually die. At the very least, this study should show both industry and government leaders what it takes for any country hoping to capture market share for tomorrow’s energy technologies. As the researchers noted, a dollar invested today in R&D is likely to have ripple effects far into the future. ■

Gail Reitenbach, PhD is editor of POWER. Follow her on Twitter @GailReit and the editorial team @POWERmagazine.

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