Innovations in the form of better or new technology are a prerequisite for successful decarbonization. The cost of photovoltaic and wind power plants, for example, has fallen significantly in recent years, partly as a result of subsidies under the German Renewable Energy Sources Act (EEG).
However, this is not yet the case for hydrogen production technologies. Innovations are urgently needed so that the market for this energy carrier can grow and possibly displace other climate-damaging energy sources or carriers.
From an economic perspective, innovations are significant because they generate positive externalities (“knowledge spillovers”). For example, when new technologies are scaled and commercialized, new knowledge is created that benefits not only those directly involved.
This spillover is valuable from a societal point of view. However, from the point of view of an individual company, it can mean competitive disadvantages and thus reduce investment incentives, especially in the early phases of the development of new technologies. From the national economic perspective, it is also interesting to see how the costs and economic efficiency of existing technologies develop and spread to model and evaluate future energy supply structure.
In the energy sector, innovations are particularly challenging to initiate. Plants are often capital-intensive and long-lived, which means that investments take a long time to pay off. These characteristics can also lead to long innovation processes, as iterative learning is made difficult. Therefore, special requirements for regulation are required to enable and promote technological developments for successful decarbonization.