Clean energy innovation must be accelerated, but if you cannot measure it then you cannot reliably improve it

Accelerating the innovation process is critical for achieving net-zero emissions by 2050 and policies will play a crucial role. Almost half of the emissions reductions needed in 2050 in a future with net-zero emissions from fossil fuels will come from technologies not yet past the demonstration stage today. This is especially true in sectors that remain stubbornly dependent on fossil fuels, such as long-distance transport and heavy industry. The goal of net-zero emissions by 2050 will be out of reach without major innovation efforts to improve and commercialise known technologies this decade, and quickly bring less mature ideas to market as soon as possible to minimise the costs of energy transitions.

There is considerable uncertainty about the extent to which countries’ energy transitions are on track. For innovation, there are few reliable and high-quality metrics available in most countries to support evidence-based policy decisions on energy technologies. Around the world, governments are asking more questions about technology progress, innovation gaps, national strengths and the effectiveness of energy and climate innovation policies.

For public spending on energy research, the IEA Guide to Reporting Energy RD&D Budget/Expenditure Statistics provides a reference manual for governments, including state-owned enterprises. The resulting unique dataset shows that global government energy R&D and demonstration spending was around USD 38 billion in 2021, 5% higher than the previous year and continuing a growth trend over the past five years.

No equivalent manuals or handbooks exist to guide countries efforts to understand progress in energy innovation in the business sector. The business sector is nonetheless a major player and tracking its activities is vital to any overview of the clean energy innovation landscape. The IEA estimates that companies active in energy technologies spent almost USD 120 billion on energy R&D in 2021, three time more than governments. Among sectors, the automotive sector is the highest spender on energy-related R&D, much higher than other “hard-to-decarbonise” sectors. Beyond these headline estimates, however, information on the energy innovation activities of firms – whether freely or commercially available; at technology level or highly aggregated – is frustratingly scarce.

This overview presents a summary of the options available to governments for measuring the clean energy innovation activities of the business sector. It illustrates the options with examples from around the world and lists some of the advantages, disadvantages and inherent trade-offs. While it is not intended as a comprehensive guidance document and does not reflect a process of international consensus, we hope it can serve as an inspiration for practitioners and experts to enhance their tracking of energy transitions.

There is a wealth of existing experience in tracking innovation metrics for the business sector

Experts from governments and the research community have for decades discussed innovation, its place in policy, and the importance of measuring it and its impacts. Today, a common international vocabulary and set of practices exists for measuring certain innovation indicators consistently and comparably. For example, the Frascati Manual and Oslo Manual are the basis for collecting and using R&D spending data from the public and private sectors, as well as metrics related to products and jobs. Both manuals have been adopted by governments all over the world. Other approaches exist to track innovation in the business sector, including canvassing opinions and expectations and analysing patent data.

While few of these methodologies have so far been applied to energy in a consistent manner, there are opportunities to do so. Existing methods can potentially be adapted to track the specificities of clean energy technology innovation by the business sector in ways that answer key uncertainties facing policy makers in areas including hydrogen, smart grids, energy efficiency, electrification and many more.

Surveys allow data to be tailored to policy objectives, and can be internationally standardised

Surveys are a reliable means of gathering data on corporate innovation and can overcome the lack of publicly available information. Experience over four decades shows that well-designed R&D and innovation surveys can be highly valuable and unique resources for understanding trends. They demonstrate the importance of investing upfront to determine the appropriate scope, respondents and institutional processes to ensure durability, timeliness and practical value to decision-makers over many years. For example, good survey design must account for the limitations of common sectoral classifications when it comes to mapping firms to energy technologies. The efforts of countries such as Austria, Canada and Italy to incorporate international energy technology classifications illustrate what is possible.

Surveys can be used to develop a range of indicators. Existing government innovation surveys include a mix of questions about the recent past – such as those on levels of spending or personnel – and expectations of the near future - such as perceptions on how the innovation system is changing. Governments are increasingly interested in the effectiveness of clean energy innovation policies and surveys can also ask about so-called “outputs” and “outcomes” of innovation, in addition to financial inputs. These can include metrics relating to the adoption and use of new or improved technologies in specific fields. Taken together, these indicators can help gauge the health of a relevant innovation system and identify opportunities for early policy interventions.

The time needed to develop energy surveys can be reduced by “piggybacking” on existing business surveys. A common feature of the more detailed government surveys of corporate energy R&D is that they build on the statistical architecture of existing surveys. Typically, they are integrated within broader business sector R&D surveys that have already established the trust of respondents and have a legal framework in place (sometimes conferring an obligation to respond). Such an approach decreases the time and effort needed to receive the first results and maximises the chances of long-term durability. Similarly, relevant questions have been added to innovation surveys in some cases: since 2008, the EU Community Innovation Survey has included a question on new or improved products and services with environmental benefits and asks about the factors that shaped them.

Other sources of available information can be mined to provide a more complete picture of energy innovation

This Overview also presents several examples of how governments and analysts creatively use existing data sources to generate insights about business sector clean energy innovation. Some of these data sources have much shorter time lags than surveys and therefore provide information closer to real time. At times of rapid technological change and uncertainty, such as today, shorter turnaround times can be very advantageous.

Among data sources with time lags of less than a year, administrative financial data can help shed light on R&D spending in energy-related sectors or on different energy technologies. Individual financial fillings are publicly available, or can be accessed in aggregate from commercial providers. They may even be combined with patent data to yield deeper insights, as demonstrated by the European Commission. Data from tax returns, state-owned enterprises, regulated companies or recipients of public funding are not public but can be accessible to government analysts under certain conditions that vary by country. Datasets of venture capital investments are generally updated within days of each new deal and offer powerful insights into the expectations of investors, including business sector investors via corporate venture capital funds.

Some data sources have longer time lags, but yield trends about earlier-stage research efforts and breakthroughs. Publicly available data on patents and scientific articles are routinely used to reveal technology-specific trends in early-stage clean energy innovation, including insights into the status of knowledge flows between businesses and their partners in academia, research institutes and overseas.

There is considerable scope for international cooperation to build consistency and comparability

While this Overview identifies examples of effective practices from many countries, comprehensive frameworks for tracking multiple indicators are rare. It is also uncommon for individual national efforts to be comparable with their peers overseas, making it harder to measure the global status of clean energy innovation, whether for specific technologies or more generally. In part, this reflects the significant challenges and data limitations facing even the most well-resourced teams of analysts in this area, but it also arises from infrequent interactions among policy makers and experts in different countries.

Despite this, two of the most critical policy questions that governments seek to answer in this area are inherently international in nature, namely: “are businesses in our jurisdiction well positioned to create wealth as energy transitions proceed?” and “is the global portfolio of clean energy technologies getting cheap enough and performing well enough to get adopted faster?” Furthermore, the number of countries that are making impactful contributions to improving the global energy technology portfolio is expanding to include nations with less established routines for innovation data collection. As with innovation itself, progress in answering these questions will be faster if experiences are shared internationally and effective practices evolve into global standards.

Six insights for governments who wish to strengthen business sector energy innovation tracking

  1. Start soon. All governments have different levels of resources and access to data, but that should not prevent them from starting to track what is feasible now and improving the measurement framework over time.
  2. Be patient to obtain results. Few of the methodologies covered by this overview can be implemented immediately and new surveys may take several years to generate results, but today’s established processes are now reaping the benefits (in terms of time series data) of effort invested upfront.
  3. Integrate energy questions into existing surveys. Existing tools provide a solid foundation that could be adapted to more targeted purposes, such as clean energy by integrating a range of energy-specific questions and targeting the right stakeholders.
  4. Develop frameworks for tracking innovation that align with user needs. Any new approach to tracking business sector energy innovation must be carefully tailored to the needs of relevant decision makers, which will influence which suite of indicators is chosen.
  5. Be consistent with related national and international activities and reporting commitments. To maximise the value of the effort directed to tracking business sector activities, attention should be paid to consistency with comparable data on public sector spending and tracking efforts in other countries.
  6. Participate in international efforts for building consensus and sharing practices. Forums such as Mission Innovation and IEA committees and expert groups are platforms for sharing experiences and aligning the implementation of effective practices among different countries with the aim of informing better policies and faster.