Asking which comes first, innovation or policy, is much like asking, which came first, the chicken or the egg? But, unlike answers to the age-old chicken or the egg question, answers to the innovation or policy question can cite real world examples of policy inducing innovation. But, as GE's newly launched DataViz that investigates 120 years of worth of their annual reports point out, the causal arrow can point both ways: changes in policy can spark innovation and innovative technologies can bring about changes in policy. While the evidence to support either case is obviously too substantial to list, a quick look at the area of renewable energy demonstrate the plausibility of both.
Few people disagree with the notion that increasing the proportion of renewable energy used in the world is a good thing. In most cases, renewable sources of energy such as solar, wind, hydropower, biomass and biogas can reduce air and water pollution, curb greenhouse gas emissions and limit dependence on foreign sources of oil.
As early as 1974, GE realized the strategic opportunity presented by renewable energy, contracting with NASA to develop a wind generator and partnering with the National Science Foundation on a solar thermal project for the Boston Public School system. But many of the emerging technologies that produce energy from renewable sources, including solar, had trouble competing economically with oil, coal and natural gas, especially when the environmental externalilties of generating energy from those sources are not calculated into the cost.
This cost disparity was pointed out in GE's 1977 Annual Report: "...the seriousness of the U.S. energy problem requires the active pursuit of all promising energy sources, with accelerated use of coal and nuclear power being essential for the rest of this century and until the renewable technologies become economically viable."
Soon thereafter, President Carter signed the Department of Energy Organization Act in August of 1977, consolidating more than 30 separate energy functions carried out by various government agencies, and creating what would eventually become the National Renewable Energy Laboratory in Golden, Colorado. The increase in federal investment in R&D coupled with the passage of federal incentives in the late 1970s sparked a sudden uptick in renewable energy deployment and private sector investment.
But, as is evidenced by the gap in the appearance of the word "wind" in GE annual reports, interest in renewable energy waned in the early 1980s as the federal government pulled back on investment and the policy incentives that were often driving innovation. As a result, technological advancements in renewable energy suffered considerably during this period.
The pause in innovation would not last long, however. Included in the 1992 Energy Policy Act, the Production Tax Credit (PTC) for renewable energy provided a 2.1 cent per kilowatt-hour tax credit for the first ten years of a renewable energy facility's operation. And just a few years later, GE introduced the 1.5 MW series of wind turbines, developed with the cooperation of the United States Department of Energy. Considered the workhorse of the wind energy industry, more than 15,000 GE 1.5 MW turbines have been installed around the world.
Although usually considered the most important policy driver for wind power, the PTC also covers closed loop biomass, geothermal power, and half the rate for open loop biomass, hydropower, landfill gas, and municipal solid waste. Application of the GE Jenbacher engine has allowed companies to take advantage of the PTC for landfill gas since the law's inception. GE has been converting methane from garbage into power for 25 years, installing more than 1,650 Jenbacher engines at landfills in over 30 countries, generating over 1,650 megawatts of electricity, and preventing millions of tons of greenhouse gases from entering the atmosphere.
Looking at the case of renewable energy, evidence of policy driving innovation is abundant. But innovation also drives policy in renewable energy. Sustained innovations in renewable energy have allowed individual U.S. states and countries around the world to enact mandates called renewable portfolio standards (RPS). While incentives can encourage R&D investment and deployment of renewable energy technologies, mandates like the RPS require utilities to generate a certain amount of renewable energy as part of their mix.
Without scalable innovations like the GE 1.5 MW wind turbine or the GE Jenbacher engine already generating substantial amounts of renewable energy in the late 1990s and early 2000s, there is no way states like California and Colorado would have been able to enact such aggressive renewable energy requirements. Not only that, but for governmental entities to trust that these requirements can be reached and that they are not merely setting the utilities up to fail, they have to recognize private sector companies like GE that have the manufacturing capability, supply chain stability and transportation infrastructures to reach those goals.
Looking beyond renewables, many believe that innovations in carbon capture and sequestration will likely provide the backbone of future climate policy in the U.S. and around the world. But until innovative breakthroughs are made—most likely by collaborations between the public and private sector—governments are reluctant to put strict limits on power plant emissions.
And until then, policy will be waiting for innovation.
This post was produced in collaboration with GE as part of the launch of their new DataViz App.