How many countries does it take to change a light bulb? It sounds like the opening line of a joke, but negative resource trends, climate change and rising energy demand mean that we urgently need to find a new approach to electricity supply. Global innovation alliances between low-income developing countries and the developed world may just provide the right way forward, both to gain maximum benefit from upcoming energy technologies while also creating solutions to key global energy challenges.
Innovation is not a new concept, and can be seen popping up as a ‘buzzword’ across all sectors, hailed as a strategy to lift the potential of our economies. Simultaneously, issues regarding environmental sustainability are of growing urgency to the international community, which is largely at the mercy of our natural resources.
On matters of energy generation, 18 per cent of the world’s population currently lacks access to electricity, while for the more fortunate, prices continue to rise and the repercussions for accessing scarce resources continue to worsen.
This is widely cited as one of the fundamental challenges facing the global community today and therefore logically requires innovative global, not localised solutions. The market realises the importance of innovating in this sector, with the global energy industry spending upwards of $US21 billion a year on research and development (R&D), and this expenditure growing at 4.8 per cent a year.
On a domestic level, the issue is of immense importance to both the business sector as well as the general public in Australia. The recent controversy around the privatisation of the energy industry has highlighted differing appetites through the often-conflicting demands of affordable energy solutions and profitability. Forming innovation alliances in this sector serves to address these key domestic issues, as well as the broader global challenges.
Approaches to innovation, however, differ between developed and developing countries. Although the main ingredients are similar, there are localised priorities, and access to technology and funding can vary greatly. While innovation is currently considered a large expense to most of the developed world, “frugal innovation” is becoming an increasingly prevalent term in business, questioning whether significant innovation requires equally significant funding. In India and China, the shift to a technologically advanced economy and the desire to improve citizens’ quality of life naturally sees frugal innovators drawn to the energy industry.
Numerous successful examples, such as a $70 battery-run small fridge and a water purifier that uses rice husks for the filter have demonstrated that frugal innovation can overcome low profit margins with large volumes and demand. Ignoring the lower portion of the socio-economic pyramid in such booming and transitioning economies is clearly a poor strategic decision.
In many cases frugal innovations have found surprisingly high demand in the developed world, where a natural resource crunch is coupled with the push for a more resilient and sustainable post-GFC economy. The developed world has as much to gain from the processes of frugal innovators as it has to offer in terms of technology and investment.
This blending of specialties further enhances the value proposition for all tiers of our local and international community to work together in creating a combined approach that is much more effective than any individual effort. Establishing successful global innovation alliances between developed and developing countries is the most efficient method to maximise the environmental impact of innovations while generating mutual return on investment.
There have been countless successful cases of these alliances that serve to prove that they have scope for significant mutual benefit. This has been seen at both ends of the economic spectrum, from a grass-roots Indian company such as Suzlon engaging in innovation alliances with developed nations, to well established American company SunEdision working with local companies and governments in developing countries.
Outside of the private sector, collaborations such as the Clean Development Mechanism (CDM) show the importance of recognising process as well as product innovations, and validate the role of government policies in encouraging energy innovation. The CDM revolutionised the management of carbon credits by enabling a developed country to offset its emissions by investing in emission reduction projects in developing countries, resulting in a mutually beneficial solution.
These examples show that that we must push global bodies such as the G20 to take action on two stages. Firstly, on a localised level, we should encourage the adoption of policies that support small business and research institutes in innovative energy ventures, particularly with scope for global expansion. These include ensuring youth insolvency and bankruptcy laws do not unduly penalise entrepreneurial behaviour.
This encouragement of youth participation in the economy should be a core responsibility of global forums, as it has the potential to significantly reduce youth unemployment. Governments should also incentivise innovation in this time-sensitive sector by subsidising loans for new businesses or divisions working on sustainable energy technologies.
Secondly, we must take a bigger picture view to develop innovative global solutions to large-scale energy challenges. International bodies should collaborate to implement and incentivise programs that link research institutes to industry, within and between developed and developing countries.
Further to this, young entrepreneurs should be increasingly connected to the public and private sector within the global energy industry. Innovation hubs, international summits and online platforms are examples of proven initiatives that would encourage global knowledge sharing in areas including innovative energy finance solutions and new low-emission technologies.
So how many countries does it take? Well, the more the merrier – let’s aim to illuminate all of the possible energy solutions to power a greener and more sustainable future for all.
Laura Sacks, 23, is a Bachelor of Engineering student in the UNSW Co-op Program. She has previously worked as a strategy analyst at Deloitte, and is president of the Mechanical Engineering Society at UNSW. This August, Laura will represent Australia at the 2015 Y20 Summit in Turkey on a full scholarship from Global Voices, a youth-led not-for-profit.