Tuesday, November 29, 2011

Can policy keep cleantech innovation out of the valley of death?


The Breakthrough Institute recently published a series of reports on policy solutions to keeping cleantech innovation out of the valley of death:
"The energy sector as a whole is a roughly $5 trillion market, and it is expected to grow by more than 50 percent by 2035. Supplying this market with clean and affordable advanced energy technologies thus represents an enormous economic opportunity for American entrepreneurs and firms and the US economy as a whole."
"In the past, the United States has driven immense and far-reaching technological transformations. As the pioneering global innovator of the 20th century, the United States built the world’s largest economy because of the ingenuity and creative enterprise of its entrepreneurs and citizens. 
"Each step of the way, proactive public policy has played a crucial role in driving American innovations, from railroads and jet engines to microchips, biotechnology, and the Internet, unleashing long waves of economic growth and shared prosperity. New and advanced clean energy technologies afford the same opportunities to the United States today—if public policy is shaped in a way that allows American innovators to thrive once again."
In recognition of the fact that it takes more time, money and investor patience (see box) to bring innovations in the energy industry than say, internet startups, the Breakthrough Institute advocates:
The creation of the Clean Energy Deployment Administration (CEDA) "a flexible, independent government investment agency—effectively a bank—that aims to unlock the capital necessary to move innovative energy technologies across the Commercialization Valley of Death."
A National Clean Energy Testbeds (N-CET) programme to offer "a second response to the Commercialization Valley of Death".

Some of these ideas are already taking form in the UK, with the Green Investment Bank, and to some extent the Carbon Trust already fulfills some of the areas of weakness identified by the Breakthrough Institute.

But there is one Achilles heal in the UK which has yet to be addressed. As the world's second largest centre for VC funding — at $184m a distant second behind the US according to the Cleantech Group's Q3 2011 report — much of that investment ends up overseas, even if the innovation began in UK universities.

In the UK, there are some really good examples of spinouts from university labs, such as Cavendish Labs at the University of Cambridge and Imperial Innovations at Imperial College. 
This is progress, but the UK tech spinouts seem to face an additional valley of death — the gravitational pull of Silicon Valley and its vast amounts of capital. Enecsys, a successful cleantech spinout from the University of Cambridge backed by Wellington Partners in London, has now got the stage where it feels more comfortable with offices in California. But is this brain/economic drain? Or is it healthy cross-pollination of business opportunities that straddle technology development and policy and renewable energy targets?
Policy in the US has been a key driver in developing the entrepreneurial culture, with tech transfer legislation at the heart.
Paul Kedrosky, senior fellow at the Kauffmann Foundation warns that although Bayh-Dole has driven universities to think more seriously about what they’re doing with their research, its perverse affects have been "considerable and detrimental to innovation".
"By creating this incentive by universities to obtain title to inventions they could profit directly from the inventions even though the inventions were developed with government support.
"Economics 101 tells us that that’s going to create more incentives for them and do more things that have more of a profit incentive. So they’ll do more of those things. And that’s mostly true and universities have become much more aggressive patenters and aggressive exploiters of their own invention portfolio to the point that we’ve seen a large expansion of licensing revenues for larger US HE institutions.
"But it’s had a lot of perversity attached to it. For example, it’s one of the reasons why we’ve seen the emergence patent hold organizations because they are now perfectly happy to buy university portfolios of patents and send revenue back to the university and they stand there as ticker takers or toll takers for people who want to use that piece of technology. But increasingly rather than driving people to commercialise the technology, the universities are becoming gatekeepers and licensers of the technologies and licensing it to organisations that have no intent to commercialise the IP."

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