OCEANTRANS KEY FINDINGS AND POLICY IMPLICATIONS
One central question of the OceanTrans project was:
How to increase the transformative potential of sustainable technologies?
This is an important question as the co-benefits of sustainable transition are increasingly researched for the potential gains in terms of activity and jobs they procure to countries, as well as for their contribution to the social acceptance of low carbon transition. The research conducted by OceanTrans provided new insights into how developing and experimenting new energy technologies can create localized learning effects that improve their costs and performance, while at the same time allowing actors to create capacity and diversify to new activities needed by the emerging value chain. The results obtained permitted to advance some recommendations regarding the way technology policies and industrial strategy can synergistically work together to create collective resources for accelerating the development of emerging technologies, gaining competitive advantage, and transforming established sectors.
An organizational approach to sectoral transformation
How does a country like Portugal, that traditionally adopts new technologies developed elsewhere, become a frontrunner in highly complex and knowledge-intensive technology innovations like marine renewable energy technologies (MRETs)? Technologies such as wave energy or floating offshore wind energy have a high potential for decarbonization (Bento & Fontes, 2019). For example, 135% of the final electricity demand in Portugal in 2019 could be satisfied by the theoretical potential of wave energy alone. Portugal has been researching and experimenting with these technologies for over two decades, since their early years (Figures 1 & 2). These activities of research, development, and demonstration (R&DD) have involved hundreds of public and private organizations. They contributed to develop local resources and capabilities through the involvement of a great variety of sectors, including traditional industries related to the sea such as shipbuilding and metalwork. What can we learn from this natural experiment of 20 years in Portugal? How can sustainable technologies such as MRETs contribute to transform traditional activities that are more or less distant from the energy sector?
Geographical distribution of firms that have been active in MRET in Portugal
Place configurations of actors and networks, formed around wave energy technology over time, based on the participation in R&DD projects.
Source: Fontes, Santos & Sá Marques. (N.D.)
To study this question, we introduce the concept of transformative potential of new sustainable technologies (Fontes et al., 2021). It defines the capacity of a technology innovation to induce change in firms from different sectors that provide competences and resources for the emerging value chain, contributing in turn to innovation and diversification in their sectors of origin.
We conducted empirical research to look for early evidence of transformative effects, as well to identify key transformative processes. The research identified the firms involved in MRETs and characterized their activities and relationships. This required intensive data collection through secondary sources (e.g., scientific publications, research projects, news), but also primary sources using surveys and interviews. We identified more than 150 firms that have been active in MRET over time. These firms include both technology developers and suppliers of products and services, particularly from manufacturing and engineering services sectors (Figure 3). The firms are located across the country, mainly in the littoral. However, we observe some agglomerations that can become an embryo of regional development hubs (Figure 1 and Table 1). The database built is publicly available and can be accessed through the online Directory of Marine Energy Firms The methodology and key insights are explained in: Fontes, Aguiar & Bento (2022).
Sectoral distribution of firms that have been active in MRET in Portugal
Source: Online Directory and Fontes, Aguiar & Bento (2022).
We have created measures to assess and anticipate the transformative effects of new technologies in early stages. To identify technologies with greater transformative potential, we have developed an indicator based on the projected sectoral impacts. The Transformative Capacity Indicator (TCI) compares technologies according to the number of sectors that they are expected to involve as well as the distribution of actors that are active from the different sectors involved (i.e., as opposed to the concentration in a few activities) (Fontes et al., 2021). By comparing, in real time, the industrial transformative capacity of technologies, this indicator can provide crucial information to policymakers.
In addition, we are developing the Green Structural Change indicator, a complexity-based index to compare more general decarbonization strategies among countries. We have validated the results of these two measures in workshops with stakeholders. Particularly, we have confirmed the findings about the preparation of the domestic industry to grasp the theoretical potential of MRETs in the short and medium terms.
The case of the Northwest
The Northwest of Portugal - between Viana do Castelo and Aveiro - has emerged as a region with strong dynamics in the development of marine renewable energy technologies. There is a high concentration of organizations active in these technologies: the territory encompasses 30% of technology developers and 36% of suppliers. It is also distinguished by the location of test platforms and the local involvement in R&D and experimental production in wave energy and offshore wind energy. Here are equally installed some emblematic projects such as Windfloat (in floating offshore wind) and Corpower (in wave energy).
The interaction with local actors allowed identifying a set of conditions that have facilitated the development of these technologies, namely:
Natural – resource quality (wind and waves).
Infrastructural – ports and test facilities with a connection point to the terrestrial electrical grid.
Industrial - existence of industrial knowledge and skills in shipbuilding and related activities, in metalworking and onshore wind energy.
Market – concentration of final energy consumers, given the urban-industrial density of this region.
Institutional – committed involvement of local authorities in assuming TERM as a development axis strategy (specifically Viana do Castelo), playing a proactive role in unlocking the processes at regional and national scales, and in the agency of actors, namely business and social actors at sea-related sites (e.g., shipbuilding and fishing).
Local social context – construction of a favorable context, mitigating constraints associated with different uses, interests, and forms of exploitation of maritime resources and promoting the reconversion of competences of the human capital for new activities.
Among the main problems, the actors identified the need for public co-financing, the obstacles of bureaucratic procedures and the absence of legislation that adequately responds to the specific needs of these innovative processes.
Two key processes of transformation: attraction of firms and intensification of intersectoral relations. Transformative change refers to the extent to which an energy technology innovation produces effects in the surrounding activities. We identify two main processes through which transformation takes place. One relates to the capacity of the emerging technology to attract firms to reinforce its value chain. Other refers to the capacity of the new technology to stimulate intersectoral relations, which bring resources that are needed for the formation of the new system.
Prospects of diversification, more than technological proximity and knowledge intensity of sectors, are a critical factor for firms’ attraction. Attracting competitive resources at firm-level is a key process to influence investment decisions and a vehicle for intersectoral relations. We have identified contextual, technological, and firm specific factors that influence the involvement of firms. Against conventional wisdom, we found evidence that technological proximity between sectors and high technological capacity were important factors for entry in MRET (Bento et al., 2021). Instead, firms from less proximate and less technology and knowledge intensive sectors found opportunities in these emerging energy technologies. However, to grasp opportunities in MRET, firms reported the need to establish partnerships, acquire new equipment and gain new competencies, through internal development or external sourcing (Figure 3).
Reported changes in the firms’ activity to enter in MRET (in percentage)
Sectoral variety, complementarity and recombination intensify intersectoral relations. Sectoral recomposition is a key characteristic of transformative change. We uncovered three main mechanisms that stimulate intersectoral relations. Firstly, a greater variety of sectors involved increases the opportunities for change. Secondly, the presence of complementarities and opportunities to share resources creates synergies that open occasions for new activities and innovations, in response to the new needs (Fontes et al., 2021). Finally, recombination of diverse knowledge is a source of innovation and diversification (Sousa et al., 2021).
Intensity and diversity of impacts on the economy contingent on technology characteristics. We observe that technology characteristics are a source of variation in the industrial transformative capacity of innovations. The application of the Transformative Capacity Indicator (TCI) showed that the technology with the highest score in average engages a relatively higher number of complementary activities, which also tend to be more evenly distributed across sectors. For (Fontes et al., 2021) instance, the most immature technology (wave energy) revealed a higher capacity to diversify the activities, particularly because of the variety of sectors that were reached by this technology in comparison with the more mature floating offshore wind technology. This result suggests that technologies in the development phase could offer a greater potential to reach out to wider variety of sectors than technologies that attained a dominant design and prepare for market growth, despite being further away from commercialization.
We draw some lessons from over 20 years of experimental activities of MRETs in Portugal that can inform policy formulation.
Early involvement gives capacity to influence technological direction and creates competitive advantage. Early experimentation in pre-commercial stages enables anticipative learning, industrial exposure to the new technology and development of capacity (adapted to the local economic structure) that are important to create a competitive advantage in emerging technologies. Early moves in energy technology innovations can help countries to improve their technology, industrial and energy sovereignty.
A portfolio of technologies increases spillovers (e.g., learning, co-benefits) and resilience. Supporting a set of technologies, with different characteristics and levels of maturity, has several advantages over promoting just one specific technology. A portfolio of technologies offers a wider range of opportunities to suppliers, enables synergies at different points of the value chain, amplifies learning effects, and makes the emerging system less vulnerable to setbacks in individual technologies. A portfolio approach requires, however, policies that account for the distinct needs that new technologies have at different stages of development.
Complementarities and shared resources favor innovation. Innovation is a collective act. It benefits from the development of complementarities across firms, from the same or different sectors, with different sets of resources and capabilities. These complementarities can boost resource sharing and knowledge combination that accelerate innovation. Thus, cooperation should be encouraged. Still, policies may need to address the fact that not every sector and firm is equally positioned to benefit from the results of these complementarities.
Projects that mobilize a larger number of sectors and actors can have broader and long-lasting effects. R&DD projects that mobilize a larger number of actors and a greater variety of sectors can have a higher impact on the economy. But it is important to account for the heterogeneity of the actors. Sectors and firms differ in their awareness of the emerging opportunities and their ability to establish relevant connections to exploit them. More generally, they diverge on the capacity to profit from relationships to engage in innovation and business diversification. Policies should address this heterogeneity, to guarantee that transformative effects are disseminated throughout the economy.
Consistent support (not on/off) allows to consolidate local capacity. Innovation needs time and patience. Random policies that alternate periods of acceleration of technology innovation with inactivity are not conducive to the formation of resources (knowledge, financial, etc.), actor networks and institutions that are needed for the emergence of new technological systems. They can even have long-lasting detrimental impacts in the development of a technology, as shown in the case of the unsuccessful experimentation of the "Pelamis” wave energy converter in Portugal (Fontes et al., 2016). Trial and error are also part of the learning process. Consistent policies are necessary to consolidate the early competitive advantage, local capacity, and co-benefits such as employment, innovation, and diversification.
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Fontes M., Aguiar M., & Bento N. (2022). Efeitos Sectoriais e Territoriais da Experimentação em Fases Iniciais de Inovações Energéticas: Lições de 20 Anos de Tecnologias Renováveis Marinhas em Portugal. Finisterra, 57 (121).
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Fontes, M., Santos, H. & Sá Marques, T. (N.D.). On the crest of the wave. The variety of place configurations formed around an emerging energy technology (Under Review).
Fontes, M., Sousa, C., & Ferreira, J. (2016). The spatial dynamics of niche trajectory: The case of wave energy. Environmental Innovation and Societal Transitions, 19, 66-84.
Sousa, C., Fontes, M. & Barbosa, J. (2021). Intersectoral interaction spaces and the exploitation of new business opportunities: the case of marine energy technologies, 18th conference of the International Joseph A. Schumpeter Society, 8–10 July, Rome.