Without a major acceleration in clean energy innovation, net-zero emissions targets will not be achievable. The world has seen a proliferating number of pledges by numerous governments and companies to reach net-zero carbon dioxide (CO2) emissions in the coming decades as part of global efforts to meet long-term sustainability goals, such as the Paris Agreement on climate change. But there is a stark disconnect between these high-profile pledges and the current state of clean energy technology. While the technologies in use today can deliver a large amount of the emissions reductions called for by these goals, they are insufficient on their own to bring the world to net zero while ensuring energy systems remain secure – even with much stronger policies supporting them.

Energy efficiency and renewables are fundamental for achieving climate goals, but there are large portions of emissions that will require the use of other technologies. Much of these emissions come from sectors where the technology options for reducing them are limited – such as shipping, trucks, aviation and heavy industries like steel, cement and chemicals. Decarbonising these sectors will largely demand the development of new technologies not yet in use. And many of the clean energy technologies available today need more work to bring down costs and accelerate deployment.

Innovation is the key to fostering new technologies and advancing existing ones. This report assesses the ways in which clean energy innovation can be significantly accelerated with a view to achieving net zero emissions and enhancing energy security.

Innovation is not the same as invention. After a new idea makes its way from the drawing board to the laboratory and out into the world, there are four key stages in the clean energy innovation pipeline. But this pathway to maturity can be long, and success is not guaranteed:

• Prototype: A concept is developed into a design, and then into a prototype for a new device (e.g. a furnace that produces steel with pure hydrogen instead of coal).
• Demonstration: The first examples of a new technology are introduced at the size of a full-scale commercial unit (e.g. a system that captures CO2 emissions from cement plants).
• Early adoption: At this stage, there is still a cost and performance gap with established technologies, which policy attention must address (e.g. electric and hydrogen-powered cars).
• Mature: As deployment progresses, the product moves into the mainstream as a common choice for new purchases (e.g. hydropower turbines).

There are no single or simple solutions to putting the world on a sustainable path to net-zero emissions. Reducing global CO2 emissions will require a broad range of different technologies working across all sectors of the economy in various combinations and applications. These technologies are at widely varying stages of development, but we can already map out how much they are likely to need to contribute to the emissions reductions necessary to meet international energy and climate goals.

The key technologies the energy sector needs to reach net-zero emissions are known today, but not all of them are ready. Around half of the cumulative emissions reductions that would move the world onto a sustainable trajectory1 come from four main technology approaches. These are the electrification of end-use sectors such as heating and transport; the application of carbon capture, utilisation and storage; the use of low-carbon hydrogen and hydrogen-derived fuels; and the use of bioenergy. However, each of these areas faces challenges in making all parts of its value chain commercially viable in the sectors where reducing emissions is hardest. Our new ETP Clean Energy Technology Guide2 provides a framework for comparing the readiness for the market of more than 400 component technologies.

Early-stage technologies play an outsized role. Around 35% of the cumulative CO2 emissions reductions needed to shift to a sustainable path come from technologies currently at the prototype or demonstration phase. A further 40% of the reductions rely on technologies not yet commercially deployed on a mass-market scale. This calls for urgent efforts to accelerate innovation. The fastest energy-related examples in recent decades include consumer products like LEDs and lithium ion batteries, which took 10-30 years to go from the first prototype to the mass market. These examples must be the benchmarks for building the array of energy technologies to get to net-zero emissions.

If governments and companies want to move more quickly towards net-zero emissions, progress on early stage technologies needs to be accelerated. In this report, we present a Faster Innovation Case that explores how net-zero emissions could be achieved globally in 2050, partly by assuming that technologies currently only in the laboratory or at the stage of small prototypes today are quickly made available for commercial investment. There are big uncertainties around these technologies’ costs and timelines, but this theoretical case indicates what could be achieved through a global push on innovation.

In our Faster Innovation Case, almost half of all the additional emissions reductions in 2050 relative to current policy plans would be from technologies that have not yet reached the market today. Relative to a case in which there is no improvement to technologies already in use today, early-stage technologies provide about one-third of the emissions reductions in the Faster Innovation Case. In practice, this case would require, for example, an average of two new hydrogen-based steel plants to begin operating every month between now and 2050. Currently, technology for these plants is only at the prototype stage. At the same time, 90 new bioenergy plants that capture and store their own CO2 emissions would need to be built every year. Today, there is only one large-scale facility in operation.

Failure to accelerate progress now risks pushing the transition to net-zero emissions further into the future. The pace of innovation in coming decades will depend on the policies governments put in place today. A delay in demonstration projects and a slowdown in deployment of early adoption technologies following the Covid-19 crisis would require greater government efforts down the line, such as supporting new technologies for longer until they are competitive. For example, capital costs of key technologies like hydrogen electrolysers could increase by up to 10% by 2030, making it harder to scale up production.

Aligning investment cycles with net-zero targets can create large markets for new technologies and avoid huge amounts of “locked in” emissions. For some energy sectors, 2050 is just one investment cycle away, making the timing of investments and the availability of new technologies critical. Boosting spending on low-carbon research and development and increasing investments in key demonstration projects for the most challenging sectors can be particularly effective. If the right technologies in the steel, cement and chemical sectors can reach the market in time for the next 25-year refurbishment cycle – due to start around 2030 – they can prevent nearly 60 gigatonnes of CO2 emissions (GtCO2).

At a time when faster innovation is sorely needed, the Covid-19 pandemic has delivered a major setback. In the immediate future, the world’s capacity to bring new technologies to market will be weaker as a result of the disruptions caused by the pandemic. Market and policy uncertainties threaten to reduce the funds available to entrepreneurs.

Innovation involves a wide range of participants, but governments have a pivotal role that goes far beyond simply funding research and development. They set overall national objectives and priorities, and are vital in determining market expectations, ensuring the flow of knowledge, investing in essential infrastructure, and enabling major demonstration projects to go ahead.

If governments rise to the challenge created by the Covid-19 crisis, they have an opportunity to accelerate clean energy innovation. This can help protect the approximately 750 000 jobs in energy research and development. And it can be a strategic opportunity for governments to ensure that their industries come out of the Covid-19 crisis stronger and ready to supply future domestic and international growth markets. On a path towards meeting sustainable energy and climate goals, we project that investments in technologies that are today at the stage of large prototype and demonstration would average around USD 350 billion a year over the next two decades.

Some areas deserve immediate attention from governments looking to revitalise economic activity. In particular, it is important to maintain research and development funding at planned levels through 2025 and to consider raising it in strategic areas. Market-based policies and funding can help scale up value chains for small, modular technologies – as they did for solar panels – significantly advancing technology progress. Synergies with other technologies across sectors is a relatively low-cost way to innovate. Electrochemistry, which underpins batteries, electrolysers and fuel cells is a clear example.

For governments aiming to achieve net-zero emissions goals while maintaining energy security, these principles primarily address national policy challenges in the context of global needs, but are relevant to all policy makers and strategists concerned with energy technologies and transitions:

1. Prioritise, track and adjust. Review the processes for selecting technology portfolios for public support to ensure that they are rigorous, collective, flexible and aligned with local advantages.
2. Raise public R&D and market-led private innovation. Use a range of tools – from public research and development to market incentives – to expand funding according to the different technologies.
3. Address all links in the value chain. Look at the bigger picture to ensure that all components of key value chains are advancing evenly towards the next market application and exploiting spillovers.
4. Build enabling infrastructure. Mobilise private finance to help bridge the “valley of death” by sharing the investment risks of network enhancements and commercial-scale demonstrators.
5. Work globally for regional success. Co-operate to share best practices, experiences and resources to tackle urgent and global technology challenges, including via existing multilateral platforms.

As countries around the world pursue a more secure and sustainable energy future, the IEA will continue to support governments, industry, investors and other stakeholders in advancing energy innovation with the aim of accelerating transitions to cleaner and more resilient energy systems.