Technology breakthroughs in sustainable renewable energy and energy conservation technologies require that there be a strong institutional ecosystem in place that supports innovation. The Nobel Prize winning economist Doug North has established that major economic leaps forward do not rest on technology alone. They require a sound institutional foundation, but the nature of this institutional foundation and how it works particularly in the area of sustainable renewable energy technology and energy conservation is not well known.
The academic literature on industrial clusters such as California’s Silicon Valley bears witness to the importance of these ecosystems, the formation of which are affected by both policy measures, the emergence of new institutional logics, and cultural change. If movement toward a strong sustainable institutional ecosystem is firmly in place, then the chances of breakthroughs occurring in such areas as renewable energy production, storage, and utilization and/or next generation feed stocks like algae systems or biological or chemical catalysis are likely to be greater.
Jacobsson and Bergek propose that an underlying wave of market and technological opportunities by itself is insufficient for cluster success, because blocking factors in the commercialization of sustainable renewable energy and energy conservation technologies are so strong. Thus, long time spans may exist before alternatives to conventional energy production take off.
Factors that prevent progress and keep momentum from building include market uncertainty, lack of legitimacy, opposition from incumbents, and inconsistent government support. To overcome these factors, protected market niches must come into being (see below).
The protected market niches are spaces where critical exploratory work can be done, successful experiments are possible, and experience is accumulated. Within the protected market spaces, different specialties and sub-specialties within ‘clean tech’ areas such as renewable energy production, storage, and utilization and/or next generation feed stocks can flourish. Niches of excellence develop. Coalitions spring up that support these niches, creating positive impressions so that citizens come on board and government assistance is made available. A chain reaction occurs in which the start-ups in these niches of excellence enjoy success, which stimulates more start-ups in the niches, funding grows, and customer acceptance sets in. The pool of labor expands, and additional labor becomes more qualified and easier to attract.
Dr. Alfred Marcus is the Honeywell/Edson W. Spencer Chair in Strategic Management at the Technological Leadership Institute. In addition to teaching classes in TLI’s Management of Technology program, Dr. Marcus is a professor in Strategic Management and Organization at the Carlson School of Management.
[image credit: SBC Technologies]