Wisconsin energy prices have gone up almost every year since 2000, they are now above the United States’ national average for electricity costs and the second highest in the Midwest—behind only Michigan. A 2013 report by the Wisconsin Energy Institute suggests that, without diversifying where our energy comes from that trend will not be reversed. And to diversify where our energy comes from we need to explore new policy supports.
In the report, “How to Keep Wisconsin and the U.S. Competitive in a Changing Energy World,” Gary Radloff, Wisconsin Energy Institute director of Midwest policy analysis, says that although energy prices are rising we may actually see them drop in the short-term with more natural gas entering the mix. However, as natural gas is increasingly traded as a global commodity resource the price will rise to meet international demand. Therefore, we can’t rely solely on its consumption to mitigate rising state energy costs.
But with rapidly changing global demand for energy and increasing clean energy investments, there is an opportunity for state and national policymakers to support ‘energy technology innovation systems’ that can help Wisconsin and the U.S. expand its energy portfolio. That support, the report suggests, could keep Wisconsin and the U.S. from falling behind on the economic benefits of this sector’s growth.
“We need energy technology innovation and a better system to support it, because this innovation will be essential in developing a clean energy economy in Wisconsin and transitioning to more sustainable solutions,” Radloff says. “But, currently energy companies are just not investing in innovation and, maybe, that’s a policy problem.”
A technology innovation system is a process of knowledge transfer between people who use, create and deploy new technologies. Researchers have identified five key steps for innovation: basic laboratory research, gathering market ideas from companies, learning and information exchange, governmental support and the commercialization of a new technology. These steps also provide a systems framework for exploring and predicting the effects of policy decisions.
“There is a lot of research that exists saying that in order for innovation to occur, certain steps have to take place in society. One of them being policy and government support,” Radloff says. “The other critical steps include knowledge diffusion through networks, fostering entrepreneurial activities, and support for commercialization and getting market push and pull aligned. An organization such as the Midwest Energy Research Consortium (M-WERC) is a great example of knowledge diffusion through networks.”
“There’s just no question that collaborative efforts from university research and the private sector will lead to innovation and success.”
Radloff warns that it is easy for this collaborative technology system to be criticized, because, often times, innovation is occurring in incremental steps that make it hard to visualize, especially at first. Most of the time what people see is whether research leads us to a noticeable, immediate advancement or a dead end, but in reality, more often than not, important developments happen somewhere in between.
“Both successes and failures are valuable for innovation systems. The National Renewable Energy Laboratory has looked at this with solar photovoltaics,” Radloff says. “And they have shown that if you encourage innovation, innovation brings down the price and you begin to encourage deployment. That’s when things really start to take off. But for some of the other clean energy technologies, the U.S. is currently stuck in the middle of that development process.”
On February 10, Eaton, a Wisconsin-based power systems business and member of (M-WERC), announced an investment of $54 million to expand operations in the state. The investment was backed by up to $1.36 million in state tax credits from the Wisconsin Economic Development Corporation—an agency that seeks to foster cooperation and develop sustainable business growth in the state of Wisconsin.
“Here we have a Wisconsin-based company doing leading edge research in the energy, power and control space,” Radloff says. “Now, the government has invested in them to expand, hire more people, create jobs and economic growth. That’s the energy technology innovation system working.”