Innovation Dynamics in the European
and US American Electricity Supply Industry

Jens Weinmann
Christoph Burger
10 Septemb...
Innovation dynamics in the European and US American electricity supply industry:
Agenda
 Research on innovation and R&D i...
Research on innovation and R&D in the electricity supply industry:
A need to reorient post-liberalization technology polic...
Industrial R&D expenditures in Europe and the USA experienced a significant decline after
liberalization
Industrial R&D ex...
In the USA, industrial research activities are bundled in the Electric Power Research
Institute, while Europe does not hav...
Our dataset covers 15 European and 17 US American electricity generating companies
Europe

USA

Annual generation in TWh (...
European electricity companies invest significantly more in R&D than their US counterparts
European companies
US American ...
Climate performance and share of new renewables as indicators of environmental innovation
European companies
US American c...
Process innovation (I): In financial productivity European incumbents outperform US utilities
European companies
US Americ...
Process innovation (II): In employee productivity, US utilities have a significant lead
European companies
US American com...
Findings and open questions

 European utilities spend significantly more money on R&D than their US American counterpart...
Thank you for your attention!
Industrial R&D expenditures in Europe and the USA are dwarfed by public money spent on
energy innovation
Industrial R&D ex...
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Innovation Dynamics in the European and US American Electricity Supply Industry

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* Research on innovation and R&D in the electricity supply industry
* Industrial and public R&D expenditures after liberalization in the USA and European countries
* Institutional setting in the USA: the Eletric Power Research Insitute (EPRI)
* Analysis of our sample of European and US American utilities

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Innovation Dynamics in the European and US American Electricity Supply Industry

  1. 1. Innovation Dynamics in the European and US American Electricity Supply Industry Jens Weinmann Christoph Burger 10 September 2012 12th IAEE Conference, Venice
  2. 2. Innovation dynamics in the European and US American electricity supply industry: Agenda  Research on innovation and R&D in the electricity supply industry  Industrial and public R&D expenditures after liberalization in the USA and European countries  Institutional setting in the USA: the Eletric Power Research Insitute (EPRI)  Analysis of our sample of European and US American utilities ► Input variable: R&D expenditures ► Output variable 1: Environmental sustainability ► Output variable 2: Financial performance ► Output variable 3: Employee productivity  Discussion of results 9/18/2012 Innovation dynamics in the European and US American electricity supply industry 1
  3. 3. Research on innovation and R&D in the electricity supply industry: A need to reorient post-liberalization technology policy?  JAMASB, T. & POLLITT, M. (2008), Liberalisation and R&D in network industries: The case of the electricity industry. Research Policy − explore the likely causes of the decline in R&D spending in the electricity sector − R&D productivity and innovative outputs in utilities and equipment suppliers appear to have improved  STERLACCHINI, A. (2010), Energy R&D in private and state-owned utilities: an analysis of the major world electric companies − specific policy interventions are needed, especially to guarantee an adequate amount of long-term R&D performed by private companies  JAMASB, T. & POLLITT, M. G. (2011), Electricity sector liberalisation and innovation: An analysis of the UK's patenting activities. Research Policy − patents in non-nuclear and renewable technologies have increased in the post-liberalization period − a lasting decline in R&D will in the longer run reduce technological progress and innovation in the sector  BURGER, C. & WEINMANN, J. (2012), ESMT Innovation Index 2010 – Electricity Supply Industry − Substantial increase in innovation activities among major European utilities since 2007 9/18/2012 Innovation dynamics in the European and US American electricity supply industry 2
  4. 4. Industrial R&D expenditures in Europe and the USA experienced a significant decline after liberalization Industrial R&D expenditures: Electricity, gas and water supply 9/18/2012 Innovation dynamics in the European and US American electricity supply industry Source: OECD ANBERD (2012) 3
  5. 5. In the USA, industrial research activities are bundled in the Electric Power Research Institute, while Europe does not have a comparable institution Chauncey Starr, 1st president of EPRI Source: Starr (1973)  EPRI’s members represent more than 90% of the electricity generated and delivered in the USA, participation of non-US utilities and companies extends to 40 countries  Research budget is around US-$ 300m per year 9/18/2012 Innovation dynamics in the European and US American electricity supply industry 4
  6. 6. Our dataset covers 15 European and 17 US American electricity generating companies Europe USA Annual generation in TWh (2010) μEurope=165 TWh/a 9/18/2012 Innovation dynamics in the European and US American electricity supply industry Annual generation in TWh (2010) μUSA=109 TWh/a 5
  7. 7. European electricity companies invest significantly more in R&D than their US counterparts European companies US American companies Notes: • x-values on a logarithmic scale • US estimates based on FERC Form 1 reports μUSA=€8m μEurope=€105m Source: Own investigations (2012) 9/18/2012 Innovation dynamics in the European and US American electricity supply industry 6
  8. 8. Climate performance and share of new renewables as indicators of environmental innovation European companies US American companies Note: x-values on a logarithmic scale μEurope=5,9% μUSA=1,6% ≈ Source: Own investigations (2012) 9/18/2012 Innovation dynamics in the European and US American electricity supply industry 7
  9. 9. Process innovation (I): In financial productivity European incumbents outperform US utilities European companies US American companies Note: x-values on a logarithmic scale Source: Own investigations (2012) 9/18/2012 Innovation dynamics in the European and US American electricity supply industry 8
  10. 10. Process innovation (II): In employee productivity, US utilities have a significant lead European companies US American companies Note: x-values on a logarithmic scale μUSA=108 TWh μEurope=165 TWh Source: Own investigations (2012) 9/18/2012 Innovation dynamics in the European and US American electricity supply industry 9
  11. 11. Findings and open questions  European utilities spend significantly more money on R&D than their US American counterparts  Mixed results in terms of output: • Environmental performance Europe – Stricter regulation? – Renewables in-house? • Financial performance Europe – Natural gas business? – Consumer stickiness? • Employee productivity USA – Less SOE-legacy? – Less diversified? – Optimal size?  Given the substantially lower aggregate research expenses of US investor-owned utilities, they perform astonishingly well within the analyzed set of indicators Role of public R&D expenditures?  Unclear whether the EPRI’s central budget allocation is and will be efficient, esp. when decentralized research gains importance (at the expense of e.g. nuclear) 9/18/2012 Innovation dynamics in the European and US American electricity supply industry 10
  12. 12. Thank you for your attention!
  13. 13. Industrial R&D expenditures in Europe and the USA are dwarfed by public money spent on energy innovation Industrial R&D expenditures: Electricity, gas and water supply Public R&D expenditures: Energy* 9.000 1.400 1.200 1.000 800 600 400 200 8.000 7.000 6.000 5.000 4.000 3.000 2.000 1.000 FRANCE GERMANY ITALY SPAIN UNITED KINGDOM 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 0 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Public R&D Expenditure (EUR million) 10.000 1.600 Industrial R&D Expenditure (EUR million) 1.800 UNITED STATES *including ENERGY EFFICIENCY, FOSSIL FUELS, RENEWABLE ENERGY SOURCES, NUCLEAR, HYDROGEN AND FUEL CELLS, OTHER POWER AND STORAGE TECHNOLOGIES, and OTHER CROSS-CUTTING TECHS/RESEARCH 9/18/2012 esmt-Vorlage 12

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