• Energy Research

Abstract This paper first proposes a modeling framework to study diffusion of innovations which exhibit strong interaction with the institution systems across which they diffuse. A unique character of such generic innovation is that specific applications are continually developed during its diffusion. This self-propagation in continual applications generation, which is dependent upon the cumulative installed base of the technological innovation, can be modeled to lead to a dynamic changing carrying capacity in an otherwise simple logistic diffusion curve. The cumulative installed base is dependent upon the price of technology and the cost learning dynamics. This paper utilizes a multi-factors learning function to represent such learning dynamics. Empirical estimates from our model are compared with those from other logistics curve formulations and are shown to better fit the annual PV production data during the past quarter century in the case of Japan. The very fact that the potential of this class of innovation can be leveraged only if it interacts closely with the institution highlights the importance of institutional determinants of adoption and diffusion of such innovations like PV. We therefore attempt to put forward an institutional framework, based on viewing PV as a technology platform, to consider PV diffusion beyond mathematical and empirical modeling. Some future research directions are also proposed.

Despite intensive efforts aiming at substituting oil with technology-driven new energy, i.e. primarily with renewable energy, a limited amount of renewable energy has become practically utilized. In response to increasing concerns of the global environmental consequences of CO2 discharge resulting from energy use as well as from the rapidly increasing energy consumption in developing nations, renewable energy has again become the highlight in view of global security, its cleanness and accessibility to developing nations. In order to respond to these global expectations, on the basis of 20 years experience in developing renewable energy, it is extremely important to identify the current role of renewable energy in a global context. In response to such a requirement, Japan reorganized its long-lasting Sunshine Project (R&D on New Energy Technologies) towards a more comprehensive New Sunshine Program (R&D on Energy and Environmental Technologies) in 1993. In the process of this reorganization, an intensive assessment with a view to identifying the current role of renewable energy was undertaken. This paper presents a review of such an identification on the basis of the assessment of the contribution of the Sunshine Project to its initial objectives (i.e., to induce the industry to substitute technology-driven clean energy for limited energy sources, mainly oil).

Abstract In the discussion of renewable energy deployment, one key concern is the various types of barriers that renewable energy needs to overcome before it can make its way into the mainstream. These barriers increasingly shift from the technical to the economic and institutional. The most general types of barriers are due to technological ‘lock-out’ or to carbon ‘lock-in’ [ Unruh, G., 2000 . Understanding carbon lock-in. Energy Policy 28(12), 817–830 (Elsevier)]. These barriers necessitate the development of a strategic approach to deploy or introduce renewable energy technology. Existing energy policy has mostly relied upon financial subsidies, market-based instruments such as renewable portfolio standards, and production tax credits to stimulate the installation and use of equipment to generate electricity from renewable sources. These strategies target mostly system-level decisions of end users. The purpose of this paper is to present an innovation perspective on the renewable energy deployment process by introducing the innovation value-added chain (IVC) framework. The analytical objective of IVC is to evaluate the impact of a new innovation on the various stakeholders and players in the development and deployment processes. A deployment or innovation strategy that causes minimal disruption, enhances existing competencies, or expedites new learning by the players has a higher chance to succeed. We draw upon two sets of system integration costs data for grid-connected distributed photovoltaic (PV) systems in Japan and the United States and demonstrate conspicuously different dynamic learning behaviors. These two deployment models can be understood in terms of how the IVCs are organized and how PV system integration projects are performed in the field. In addition, IVC-based findings can inform the targeted application of conventional financial subsidies for learning investment not only at the PV system level, but also at the (localized) system integration level. This would involve other stakeholders, thus suggesting new energy policy space. We highlight some future research directions using the IVC framework.

Abstract This paper examines the relative comparative advantage, focusing on energy prices, of an energy producing developing country (Indonesia) and a non-energy producing developed country (Japan). For energy producing developing countries, it is strategically important to increase the competitiveness of energy dependent industries, and encourage the development of value-added industries. Much work has been done on relative advantage analysis, but the effects of the energy price formation mechanisms on price competitiveness have not been analysed. In this paper a comprehensive approach, using production and cost functions and synchronized price formation by means of principal component analysis, is introduced.

Abstract The dramatic surge in information technology (IT) around the world, and an evolving global economy, are subjecting firms to megacompetition. This is the case, particularly in Japan's electric power industry, where the power rate is one of the highest in the world; hence it is noted that Japan's industry has lost its price competitiveness in the world market, resulting in stagnation of production, hence leading to stagnation in power demand. In addition, an increase in trends of customer's preferences and the variety of participants in the power supply race, have put electric power companies at the mercy of customers with alternative supply sources. Given that uncertainty with respect to energy security, as well as power generation and distribution systems safety increases, as strongly cautioned by the recent blackout in the US and Canada, a dramatic conversion of existing strategies would be indispensable for electric power companies. A conversion from a high-demand-elasticity dependent, supply structure to a resilient structure is required. While the former aims at constructing a high-demand-elasticity supply structure, based on the myth of high growth of demand, the latter aims at maintaining profit, while minimizing the elasticities of factors with high uncertainty, such as energy resources and costly capital investment linked to a fluctuating power demand. This paper demonstrates the significance of IT substitution for energy through consortia structure, thereby utilizing IT spillover and leading to resilience and leveraging consortia structure as Japan's electric power industry survival strategy. An empirical analysis using Japan's nine leading electric power companies over the last quarter century has been conducted.

Abstract Photovoltaic (PV) is a renewable energy technology, along side with other modular energy generation technologies such as micro-turbines, fuel cells, etc., which will enable the alternative distributed generation paradigm compared to the incumbent fossil fuel based centralized generation paradigm. Distributed generation utilizing renewable energy resources offers opportunities for significant carbon dioxide and emissions reductions thus contributing solutions to broader climate change issues. Yet, renewable energy technologies like PV face various barriers for their widespread adoption. Aside from technical and cost issues, renewable technologies have to overcome the so-called carbon lock-in effects. This refers to the techno-institutional complex associated with the fossil-fuel based centralized generation regime that currently dominates energy production and use. Governmental interventions to address these issues usually can be seen as composed of research, development, demonstration and deployment or RD3 [PCAST, 1999. Panel on International Cooperation in Energy Research, Development, Demonstration, and Deployment]. This paper focused on comparing the deployment aspect of PV technology in Japan and the USA. While both governments promoted PV as part of their larger strategies to address various environmental and energy security issues, Japan has built a PV installation capacity three times that of the USA as of December 2003 with over 90% of PV installation in the grid-connected small residential system category. This is in marked contrast to the case in the USA in which the cumulative installation is spilt among different types of applications involving the grid and off the grid. We put forward two models to explain these differences in deployment strategies and their possible consequences. The first deployment model leverages upon PV as a manufactured technology with minimal customization to achieve massive deployment. The second deployment model leverages upon PV as an information technology-like technology focusing upon user oriented customization to achieve deployment. Different models have different implications to the system engineering aspect of solar PV. A focus upon the standard grid-connected distributed category in the residential setting avoids the heavy customized engineering associated with many off-grid and one-off type projects. Japanese PV deployment strategy of concentrating upon a dominant category or niche with mass market potential also well matches the institutional structure of production [Coase, 1991. The Institutional Structure of Production, in Essays on Economics and Economists. The University of Chicago Press, Chicago] within the local PV technology suppliers industry. Major vertical integrated firms can facilitate system-related learning easier than a fragmented industry within the PV value chain with minimal transaction cost. This highly suggests that deployment strategy of PV or other renewable energy technologies must address the issues of adopting a globally developed technology to local (national) conditions and has strong institutional underpinnings in addition to financial subsidies, learning investment thinking.

Abstract It is by now familiar that in the deployment of solar photovoltaic (PV) systems, the cost dynamics of major system component like solar cell/module is subjected to experience curve effects driven by production learning and research and development at the supplier side. What is less clear, however, is the economics of system integration or system deployment that takes place locally close to the user, involving other market players, in the downstream solar PV value chain. Experts have agreed that suppliers of solar PV system must customize their flexible characteristics to address local unique users’ and applications requirements and compete on price/performance basis. A lack of understanding of the drivers of the economics of system customization therefore is a deficiency in our understanding of the overall economics of this renewable energy technology option. We studied the non-module BOS cost for grid-connected small PV system using the experience curve framework. Preliminary analysis of PV statistics of the US from IEA seems to suggest that learning in one application type is taking place with respect to the cumulative installation among all types of grid-connected small PV projects . The effectiveness of this learning is also improving over time. A novel aspect is the interpretation of such experience curve effect or learning pattern. We draw upon the notion of product platform in the industrial management literature and consider different types of local small-scale grid-tied PV customization projects as adapting a standard platform to different idiosyncratic and local application requirements. Economics of system customization, which is user-oriented, involves then a refined notion of inter-projects learning, rather than volume-driven learning by doing. We formalized such inter-projects learning as a dynamic economy of scope, which can potentially be leveraged to manage the local and downstream aspect of PV deployment. This dynamic economy may serve as a focus of energy policy having implications on standardization of design and training for installation, facilitating knowledge reuse among different integration projects and enabling inter-projects learning.

In the last two decades, Japan has successfully overcome energy and environmental constraints despite a fragile energy and environmental structure, while maintaining a high rate of economic growth. Much of this success can be attributed to the substitution of an unconstrained production factor (technology) for a constrained production factor (energy) stimulated by MITI's industrial technology policy. With the recent fall of international oil prices and the succeeding ‘bubble economy’, Japan again faces the prospect of energy and environmental constraints. This paper reviews Japan's path and MITI's efforts to overcome energy and environmental constraints by substituting technology for energy. It also analyzes the sources of the current fear concerning energy and environmental constraints.

This paper studies and compares the actual historic solar photovoltaic (PV) installation data in Japan and the United States and proposes two deployment models to account for the differences. Deployment, along with research, development and demonstration, constitutes what is known as the RD3 (PCAST — President's Council of Advances in Science and Technology, United States) innovative chain of a new technology. Japan deploys PV focusing on the niche of utility grid-tied small-scale system (90 per cent of which is standardised roof-top residential PV system) using highly integrated value chain; this seems to draw upon her strong manufacturing culture and associated social technology and institutions for suppliers-dominated innovations. The United States deploys PV as a broadly defined innovation emphasising user-oriented customisation in both on and off grid, residential and industrial applications using small independent and intermediary system integrators. Empirical analysis of the diffusion patterns in the grid-tied small system category in respective contexts suggests that Japan's institutions seem to match her mass deployment strategy while the United States' combination of fragmented industry structure and diversity deployment gives rise to a complex diffusion pattern calling for continual institutional innovation or co-evolution. Our research, therefore, highlights that commercialisation of new technology or technical change, in general, is not an autonomous process and has strong institutional underpinnings. We formalise and generalise this "match" (Perez, 1983) argument in accordance with Nelson and Sampat's (2001) framework of physical technology vs social technology and their interactions. Some potential future extensions regarding utilities for this model are then highlighted.