Technological change of the energy innovation system:From oil-based to bio-based energy

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Applied Energy 87 (2010) 749–755

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Technological change of the energy innovation system: From oil-based to bio-based energy
Jarunee Wonglimpiyarat *
College of Innovation, Thammasat University, Anekprasong Building 7th Fl., Prachan Rd., Bangkok 10200, Thailand

a r t i c l e

i n f o

a b s t r a c t
This paper concerns the structural developments and the direction of technological change of the energy innovation system, based on the studies of Kuhn's model of scientic change and Schumpeter's model of technological change. The paper uses the case study of Thai government agencies for understanding the way governments can facilitate technological innovation. The analyses are based on a pre-foresight exercise to examine the potential of the bio-based energy and investigate a set of development policies necessary for the direction of energy system development. The results have shown that bio-based energy is seen as the next new wave for future businesses and one of the solutions to the problem of high oil prices to improve the world's economic security and sustainable development. 2009 Elsevier Ltd. All rights reserved.

Article history: Received 12 January 2009 Received in revised form 10 August 2009 Accepted 25 August 2009 Available online 25 September 2009 Keywords: Oil-based energy Bio-based energy Biofuel Renewable energy Technological change Peak oil

1. Introduction Given the impending oil crisis, the alternative/renewable energy like biofuel is seen as a possible solution to high energy costs and concerns [4,5]. This paper is concerned with the structural developments and technological change of the energy innovation system. The study analyses and discusses the challenge of biobased energy and the diffusion model of the energy industry with potential transition from oil-based to bio-based energy system. The study of the technological change of the energy innovation system is based on Kuhn's model of scientic change [1] and Schumpeter's model of technological change [2,3]. The study uses the National Innovation Agency (NIA), a government organisation under the Ministry of Science and Technology, Thailand, as a case study. National Innovation Agency (NIA) is the national agency for innovation development and one of the major organisations supporting innovation development in Thailand. NIA was established in 2003 with the strategic vision towards enhancing the entire innovation system of Thailand in support of national economic and social development. NIA's main mission is to conduct activities that accelerate innovation in industry, business, government and society in systematic and sustainable ways. The paper is organised as follows: Section 1 presents an introductory section. Section 2 reviews the literature on innova* Tel.: +662 623 5055 8; fax: +662 623 5060. E-mail address: 0306-2619/$ - see front matter 2009 Elsevier Ltd. All rights reserved. doi:10.1016/j.apenergy.2009.08.043

tion system and diffusion models, Kuhnian model of scientic change and Schumpeterian model of technological change as well as foresight of the innovation system. Section 3 provides the details on the methodology and discusses the role of the National Innovation Agency (NIA), Ministry of Science and Technology in national system development. Section 4 analyses the process of technological change and the direction of the energy innovation system. Section 5 concludes the study by drawing useful implications for policy makers to improve energy supply for sustainability and self-sufcient economy. 2. Theoretical framework 2.1. Innovation system and diffusion models A close review of the studies on the innovation systems over the last 20 years (since the work of Lundvall at Aalborg University and Chris Freeman in the mid 1980s) [6,9] reveals that innovation and technology development are results of a complex set of interaction between various actors and institutions in the system, which includes enterprises, universities and government research institutes. The review of various scholars' studies on the innovation system is shown in Table 1. The concept of the innovation system helps explain the technological development and industrial innovation. The innovation system models are generally used as analytical tools to review the long-term technological and structural development. Based on the studies on the innovation system (Table 1), the concept for


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Table 1 Major studies on the innovation system. Source: The author's design. Scholars 1. 2. Freeman [52] Niosi and Bellon [53,54] Principal concepts on the innovation system A national system of innovation is the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies. A national system of innovation is the system of interacting private and public rms (either large or small), universities and government agencies, aiming at the production of science and technology within national borders. Interaction among these units may be technical, commercial, legal, social and nancial in as much as the goal of the interaction is the development, protection, nancing or regulation of new science and technology. A national system of innovation is the elements and relationships which interact in the production, diffusion and use of new, and economically useful, knowledge and are either located within or rooted inside the borders of a nation state. A national system of innovation is a set of institutions whose interactions determine the innovative performance of national rms. A national system of innovation is the national institutions, their incentive structures and their competencies, that determine the rate and direction of technological learning (or the volume and composition of change generating activities) in a country. A national system of innovation is a set of distinct institutions which jointly and individually contributes to the development and diffusion of new technologies and which provides the framework within which governments form and implement policies to inuence the innovation process. As such it is a system of interconnected institutions to create, store and transfer the knowledge, skills and artefacts which dene new technologies.

3. 4. 5. 6.

Lundvall [6–9] Nelson [55] Patel and Pavitt [56] Metcalfe [57]

energy innovation system is dened as the system of interacting institutions (including technology developers, adopters, and other key players), aiming at producing and diffusing new energy-based innovations [10–14]. In the innovation system context, the innovation diffusion model explains the economics of technology adoption. In other words, the diffusion helps explain the changes in the transformation of the innovation system [6–9]. Rogers uses well-established theories in sociology, psychology, and communications to develop an approach to study the diffusion of innovations [15,16]. According to Rogers, the innovation development process comprises six stages of: (1) problem denition, (2) research (basic and applied), (3) development, (4) commercialisation, (5) adoption and diffusion, and (6) consequences. Rogers argues that diffusion is a process of social change in which an innovation is communicated over time through certain channels among members of a social system. The process of technological diffusion characteristically exhibits an S pattern. Utterback and Abernathy articulate the innovation process as an S curve [17]. The S-shaped diffusion models stem from two lines of conceptual approaches: Nelson and Winter's natural trajectory [18] and Dosi's technological trajectory [19]. Nelson and Winter argue the natural trajectory as a process of learning of specic problem solving activities [18]. Such conceptual model is in line with Dosi's technological trajectory being a pattern for solutions of selected techno-economic problems based on highly selected principles [19,20]. The concept of the impacts of technology in transforming the economy has been further developed by Freeman and Perez arguing the relationships between long waves and shifts in techno-economic paradigm [21]. According to Freeman and Perez, a techno-economic paradigm is a cluster of interrelated technical, organisational and managerial innovations that affects the whole economy [21].

2.2. Kuhnian model of scientic change and Schumpeterian model of technological change The diffusion model explains the process of innovation, industrial growth and economic development [2,3,22]. Schumpeter's Kondratieff cycle ts the diffusion model as it provides an understanding on the progress and degree of technological change. According to the Kuhnian model of scientic change, the progress of scientic development comes from the paradigm shift [1]. Kuhn argues that there are periods of stability (normal science) punctuated by periods of crisis, leading to a revolution and a new normal science. When there is a failure to solve the puzzles within the current paradigm, these anomalies would further produce disorder or crisis in the process of scientic development. In

other words, the development of scientic knowledge comprises a normal and a revolutionary phase. The symptoms of the crisis encourage the willingness to try anything new which would bring revolution [23]. Schumpeter's works on business cycles with successive industrial revolutions or long waves of technological change [2,3] could be compared to Kuhn's paradigmatic change (a change in paradigms that sets the stage for the possibility of scientic revolution) [1]. Schumpeter's 'long-wave theory' explains the technological revolutions underlying the 'Kondratieff' cycles or long waves of economic development. According to Schumpeter [2,3], the phenomena of ve Kondratieff long cycles engender waves of technological change (Table 2). Table 2 shows that the development cycle of industries according to the Schumpeterian view brings about economic growth [2,3]. For example, cotton is a key factor of textile innovations in the rst Kondratieff cycle; coal and iron for the industries associated with steam power and railways in the second Kondratieff; steel for the industries based on electric power, chemicals manufacture in the third Kondratieff; energy (oil) for industries such as consumer electronics, synthetic materials and pharmaceuticals in the fourth Kondratieff; and chips (integrated circuits) for innovations based on information and communication technology (ICTs) in the fth Kondratieff [24,25]. Schumpeter describes the entrepreneur as disruptor of an existing equilibrium and instigator of a process of 'creative destruction' which underpins the development cycles of industries [2,3]. To put it another way, the Schumpeterian view of creative destruction emphasises discontinuity of economic development (technological revolutions underlying the Kondratieff cycles). Interestingly, the source of economic growth and development in the fourth Kondratieff is energy especially oil. Currently, the world attempts to be less dependent on oil-based energy. Many countries see bio-based energy as a possible (but not inevitable) alternative to minimise the impact of high oil prices on their economy [4,26]. The major technological transformation would bring about structural adjustments/changes in the economic setting of the energy innovation system which would be discussed in Section 4.

2.3. Foresight of the innovation system Given that innovation bears most directly on technological change and thus is a major determinant of economic growth [27–30], foresight activities could provide support to industrial development. Foresight constitutes a means for grasping the trend of technology development. The use of foresight can provide an information base to assist government in the

J. Wonglimpiyarat / Applied Energy 87 (2010) 749–755 Table 2 Taxonomy on the level of technological change – Schumpeterian theory of long waves. Source: Freeman and Soete [25]. Period First Kondratieff (1780s–1840s) Second Kondratieff (1840s–1890s) Third Kondratieff (1890s–1940s) Fourth Kondratieff (1940s–1990s) Fifth Kondratieff (late 1990s) Description Industrial revolution: factory production for textiles Age of steam power and railways Age of electricity and steel Age of mass production of automobiles and synthetic materials Age of information, communication and computer networks


Key factor of economic development Cotton Coal Steel Energy (especially oil) Chips (micro-electronics)

policy-making process [31,32]. It can also help provide the direction of scientic and technological developments. In other words, foresight is an act of looking forward and taking action in reference to the future. Foresight revolves a cycle of environmental scanning, interpretation and learning. It also aids the development of a longer time horizon for business or policy development and assists in identifying opportunities and threats. Foresight activities attempt to integrate the technology, market and social dimensions in the search for new ideas to create sustainable development [33,34]. The foresight project comprises three core steps of: (1) pre-foresight (2) foresight and (3) post-foresight (Fig. 1). The foresight exercise implies that technology can be predicted, and therefore planned for desirable outcomes in the future. The development of the national innovation system in many countries has used technology foresight as a means to get useful insights on what future development would be like and which parties should be involved to carry out that vision [35,36]. For example, in the US, the foresight exercise has taken place in the Ministry of Defense and the Ministry of Commerce. In Japan, the foresight launched by the Ministry of International Trade and Industry (MITI) enables the country's moving into the forefront of international research and development (R&D) [35,36]. Technology foresight in Japanese rms was undertaken with an aim to create a competitive advantage and a more rapid development of innovation. The development of the national innovation system in Japan utilised network structures, which facilitated the reduction of risk and uncertainty. Ayres and Axtell hold the view that technology foresight, a method heavily employed by the Japanese rms, is a signicant factor in minimising the risk and controlling uncertainty about the future [37].

3. Methodology This study uses the National Innovation Agency (NIA), a government organisation under the Ministry of Science and Technol-

ogy, Thailand, as a case study to understand the way governments can facilitate technological innovation. NIA is the major agency under the Ministry of Science and Technology to support the national innovation system in Thailand. NIA's main mission is to conduct activities that accelerate innovation in industry, business, government and society in systematic and sustainable ways. To understand how the Kuhnian/Schumpeterian framework can operate to facilitate innovation, NIA has organised the EcoInnovAsia International Conference 2008 in collaboration with the United Nations Economic and Social Commission for Asia and the Pacic (UNESCAP), Thai Bioplastics Industry Association (TBIA), German Technical Cooperation (GTZ) and Universitt Karlsruhe, Germany. The forum was held during 3–5 October 2008 at Queen Sirikit National Convention Center, Bangkok, Thailand, hosting 6625 people worldwide. The discussion forum provides insights on global energy efciency improvement plan and the direction of the world energy innovation system. In this study, the analyses can be seen as a pre-foresight exercise (core step 1 of the foresight process shown in Fig. 1) aimed to examine the potential of the bio-based energy and investigate a set of development policies necessary for the direction of energy system development. This pre-foresight exercise is oriented to priority setting of strategic direction of energy efciency. In other words, the EcoInnovAsia International Conference represents a systematic foresight process as the conference has engaged policy makers, experts and other stakeholders to help in the development of priority setting policies for bio-based energy. The formulation of key policies to achieve strategies for energy efciency is shown in Fig. 3 (please see discussions in Section 4). The analyses help explain the potential transition from an oil-based economy to a biofuel based economy using a Kuhnian/Schumpeterian framework. The analyses might be contested by some readers as they might argue that it is impossible to gain consensus on the foresight of energy innovation. However, it is noted that no effort was made at the forum to




4.Implementation evaluation

Priority setting of strategic direction of energy efficiency

Delphi Brainstorming Scenario writing

Dissemination of the results for implementing policies. Recommendations proposed to government and relevant organisations.

Evaluation of innovation strategies to adjust the role of the National Innovation Agency, Ministry of Science and Technology.

Fig. 1. The foresight process. Source: Loveridge [50], Wonglimpiyarat [51].


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Oil-based energy

Bio-based energy – biofuels, bioethanol, cellulosic ethanol, bio-diesel, crop-based ethanol

Nuclear energy Renewable energy

Technical parameter






Source: The author's design, based on Utterback and Abernathy [17] and EcoInnovAsia International Conference 2008
Fig. 2. The process of technological change in the energy industry.

Strategies for energy efficiency

Policy 1: Build national security of energy supplies.

Policy 2: Build the security and stability of energy production by increasing production efficiency.

Policy 3: Increase energy efficiency, reduce manufacturing costs of equipment and reduce energy consumption of equipment to establish biofuel economy. The policy aims to increase share of renewable energy to 8% by 2011 with 2% from biofuels.

Policy 4: Promote energy services and widespread use of modern labour-saving equipment, improve occupational standards and the well-being of the people.

Policy 5: Promote development of new and energy efficiency technologies for use within the country and reduce dependency on foreign energy technologies. The policy also includes an aim to reduce crude oil imports by 20% in 10 years and put forth efforts to develop alternative energy sources. Policy 6: Define the strategy and formulate this strategic energy operation plan in three aspects (short-term, medium-term and long-term). The plan aims to improve energy technologies, reduce the production costs and develop renewable energy sources. Policy 7: Establish the Advanced Energy Initiatives Institute to undertake international collaborative research programmes and translate research breakthrough and laboratory research results into commercially viable innovations. Policy 8: Define strategies and plan to deal with the potential of peak oil crisis.

Source: The author's design
Fig. 3. Strategies for energy efciency – national plan for bio-based energy.

arrive at a single consensus view. The foresight of the direction of the energy innovation system seems most effective if they comprise the major players in the industry to offer opinions

on policy issues [38,39]. The organisation of the forum has a practical purpose to gain insights into reneweable energy solutions.

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4. Technological change and the direction of the energy innovation system Under the circumstances of oil crisis, bio-based energy has emerged as a focus of the international attention as it can be used as a substitute for high priced petroleum. There are competing views if the world has now reached the peak oil production (controversial studies on the prediction of a decline in global oil supply) [5,40]. According to the International Energy Agency, the global oil supply will peak in 2020, as a result of oil companies from Saudi Arabia to Canada cutting their capital expenditure on new projects in response to a fall in oil prices. However, whether or not the world has actually reached peak oil, there are concerns that the problem of peak oil would affect all the countries and would be the national problem. Given that the peak oil crisis might affect all the economies and the national security, the preventive methods should therefore be implemented to lessen the problems. According to the United Nations Millennium Development Goals, governments around the world should develop policies focussed on key sources of economic growth, including those associated with the use of new and established scientic and technological knowledge and related institutional adjustments. Regarding the peak oil crisis, the goals of creating the successful bio-based industry are backed by a political mandate and should be achieved in all countries by 2015.1 At the macro level (industry level), the global economy is under potential transition from an oil-based economy to a bio-based economy to solve the energy crisis. The technological change can be seen as the consequences of adopting technology which would affect the whole economy. Fig. 2 presents the evolution of technological change in the energy industry. The diffusion process, based on the theory of technological diffusion models, represents the generations of energy technology. It is argued that a succession of S-curves represents the development cycle (Kondratieff' cycle) of alternative energy and bio-based energy. One might argue that oil replaced coal as a transport fuel because it was a superior product, not because the world was running out of coal [41,42]. Nevertheless, in view of technological change, the possible transition from oil to bio-fuels does not imply that the current technology is mature but the world is trying to nd solutions to the problem of high oil prices in order to improve the world's economic security and sustainable development [33]. In other words, with a time of high oil prices, the technological change can be seen as being driven by problem solving activities according to Kuhnian and Schumpeterian perspectives [1–3] in order to solve the energy crisis by reducing dependence on fossil energy sources. NIA organised the EcoInnovAsia conference examining the latest in the biofuel businesses both in the aspects of technological trends and investment perspectives. The forum discussion is divided into four sessions of: (1) challenges in biomass business and investment, (2) rst generation biofuel experiences, (3) breakthroughs in second generation biofuel, and (4) panel discussion: biomass market and investment perspectives. The views of the forum on the discussions of national energy policies and activities are the focussed subject presented in Table 3. The participants from various countries provide experiences and give overall suggestions and on what policies should be implemented to bring biofuel technologies to the market and how research and development should respond to the needs of the marketplace as the renewable energy in European and Asian countries is not much supported by the legislation yet and thus needs a more
Dr. Supachai Panitchpakdi's honorary speech on ''Global challenges and Opportunities in Eco-Industry", Secretary-General of UNCTAD, EcoInnovAsia International Conference, 3 October 2008, Bangkok, Thailand and UN Millennium Project – Task Force on Science, Technology and Innovation [43].

supportive framework to assist this promising energy to potential use. This conference performs as one of the research activities (preforesight exercise step – Fig. 1) to support the national plan for renewable energy – biofuel in support of policymaking for the development of the national innovation system. Table 3 shows that many countries have incorporated bio-based energy as national plans and policy initiatives. It is interesting to see that bio-based energy has been high on the global agenda and is leading the wave of economic development. Many countries foresee bio-based energy as a future advanced energy cycle and step up to this technological challenge. At the micro level (the government level), in the country like Thailand, the National Innovation Agency (NIA), the EcoInnovAsia International Conference has greatly assisted in the formulation of key policies to achieve strategies for energy efciency (Fig. 3). The key energy policies would lead to the development of national plan for bio-based energy. 5. Policy implications and conclusions The problem of peak oil crisis suggests an important role of biobased energy within the national innovation system where biofuels are seen as part of the solutions for the world's sustainable development. In this study, the empirical analyses of the structural developments and technological change of the energy innovation system are based on the studies of Kuhn's model of scientic change [1] and Schumpeter's model of technological change [2,3]. The analyses can be seen as a pre-foresight exercise to understand the direction of the energy industry. The diffusion analysis of the energy industry provides a number of interesting insights about the innovative potential and how bio-based energy could lead to technological progress and economic growth. The policy recommendations and conclusions, synthesised from the conference and according to the experience of the author in working in the eld, are as follows: (i) Bio-based energy is seen as the next new wave for future businesses and strategies for sustainable development and it is a challenging business opportunity for agricultural countries. However, feedstock availability and pricing remain issues which have not been addressed. In the near future, a competition between energy producers and food producers for the use of agricultural and forest areas might increase as the food safety issue has raised concerns among people all over the world. However, in driving the energy system forward, the questions regarding how the industry should evolve, whether the feedstock should build and whether it should be demand-driven should be addressed in order to support market development. (ii) The strategies and energy operation plans including the short-term, medium-term and long-term plans should be formulated with the aim to improve energy technologies and reduce production costs to compete with other energy sources. Bio-based energy should be one possible option (but not the inevitable solution) in the energy portfolio. Clearly, the shift towards the bio-based paradigm would help achieve a step of less dependency on the Middle East fossil fuel sources. Strategies, nevertheless, should be based on the concept of sustainable development and aimed at achieving energy security.2
2 Energy security is dened as: (1) a reliable supply and economic stabililty where the countries could reduce dependence on fossil energy sources, (2) an uninterrupted supply of energy sufcient to meet the needs of the economy at the same time, coming at a reasonable price, and (3) the availability of a regular supply of energy at an affordable price [44–49].


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Table 3 National energy policies and activities in bio-based energy. Source: The author's design, based on the discussion forums of EcoInnovAsia International Conference 2008. Countries Germany National energy policies and activities The German government allowed biofuel tax exemption in a bid to reduce CO2 emissions in 2004. The government also introduced the subsidy programmes which had helped the German bio-diesel industry to become the biggest in the world. The bio-diesel production capacity was 5 million tons in 2007. The country attempts to meet the 2015 deadline for 7% compulsory blending bio-diesel. Bio-diesel has helped Germany make the transition to the next generation of bio-fuels of which the government aims to meet the European Union's target for biofuel use of 5.75% in 2010. Currently, the Karlsruhe Institute of Technology (KIT) undertakes the development of technologies for fuel production from biomass. This innovative technology will help the country to become more independent of petroleum and reduce CO2 emissions. Japan is the world's third-largest oil consumer (after US and China). Since the oil crises of the 1970s, the Japanese government embarked on national projects in developing alternative energy resources with the purpose of raising productivity of bio-ethanol production. In 2002, the Ministry of Environment introduced the fuel ethanol to reduce CO2 emissions. Currently, the government allows oil companies to blend about 3% of ethanol, another biofuel produced from crops such as sugar or corn, into gasoline, the motor fuel for transportation sector. In other words, ethanol is allowed to be contained in gasoline up to 3%. In the future, the oil companies plan to introduce Ethyl Tertiary Butyl Ether (ETBE) mixed gasoline to meet the potential demand of approximate 1.8 million kl a year. Further, Japan plans to replace about 500,000 kl (3.14 million barrels) of transportation fuels with bioethanol a year by 2010. The US has launched the 'Twenty In Ten' plan setting the goal of reducing US gasoline usage by 20% in the next 10 years. This reduction could be translated to 35 billion gallons per year. The US Department of Energy in collaboration with the US Department of Agriculture has launched a National Bio-fuels Action Plan to encourage the development of sustainable bio-fuels. This plan is in response to President Bush's 'Twenty in Ten' plan. Since US is the largest oil user (consuming 28% of the world oil supply mainly used in the transportation sector), it currently focuses the research in plug-in and advanced hybrid vehicles, and expands the use of high efciency clean diesel vehicles and bio-diesel fuel. The US government also makes investments in new methods of producing ethanol and other bio-fuels as well as expands the use of clean coal technology, solar and wind energy, and nuclear power. The US plans to invest about USD 385 million in operating cellulosic ethanol plants which would produce more than 130 million gallons of cellulosic ethanol per year. Such production will help the US achieve the goal of making cellulosic ethanol cost-competitive with gasoline by the Year 2012. Given Thailand's high dependency on crude oil imports (currently accounting for more than 10% of GDP), the Thai government has supported power generation using renewable energy, regardless of the types of renewable fuel. Thailand is in the process of shifting gradually to alternative fuels. The development of bio-diesel for use in the transportation sector is one of Thailand's top agenda under the country's current National Energy Policy and Strategy in its efforts to strengthen the energy self-reliance. The New Energy Strategy Plan, approved by the cabinet in 2005, aims to reduce the use of oil in the transportation sector by 25% by 2009. The country plans to have ethanol contributing to 10% and bio-diesel contributing to 3% of the total fuel consumption in the transport sector by 2011. Thailand also encourages the use of natural gas, ethanol-blended gasoline and bio-diesel for industrial use. The country has successfully encouraged the use of 10–20% ethanol blends through adoption of scal incentives. The Thai government has introduced E10 & E20 gasohol and subsidised the gasohol price with the tax exemption in oil-related taxes. Thailand plans to mandate the use of bio-diesel blend (2% blend) in fossil fuel transport in 2008, based on existing production capacity. As an agricultural country with a population of 1.3 billion, China cannot sacrice food security for energy. The Chinese government has clamped down on the use of corn and other edible grains for producing biofuel. The government policy supports food self-sufciency for the sake of national security. Nevertheless, China cultivates jatropha for bio-diesel production of 1760 million gallons per year. China has encouraged the production of biofuel such as ethanol and methane from renewable resources in order to reduce the country's dependence on imported oil. Biofuel production is seen as an essential and strategic component of a secure economy and diversied energy policy. In 2005, China promoted the National Key R&D Programme for cellulosic ethanol as a step to promote technology development. The Chinese government has now set target of using biofuel to account for 15% of all transportation fuels by 2020. India is sixth in the world in energy demand accounting for 3.5% of the world commercial energy consumption. Regarding the energy sources, diesel is mainly used in the transportation sector. Currently, India has turned to bio-based energy to reduce dependence on imported oils. Biofuel is part of the solution to the energy crisis. India accounts for about two-thirds of the world's jatropha plantations (biofuel plants). The country also leads the way on planting and cultivating jatropha on an industrial scale for bio-diesel production (600 million gallons per year). The Indian national mission on jatropha bio-diesel is to replace 20% of India's diesel consumption with bio-diesel. Bio-diesel mission of the Ministries of Petroleum, Rural Development, Poverty Alleviation and the Environmental Ministry and others is to blend petro-diesel with a planned 13 million metric tons of bio-diesel by 2013. The federal government has launched the National Biofuel Policy as a main bio-diesel policy in Malaysia on 10 August 2005. The policy is aimed to reduce the country's fuel import bill, promote the demand for palm oil which will be the primary commodity for biofuel production (alongside regular diesel), as well as to shore up the price of palm oil especially during periods of low export demand. In the Southeast Asian region, Malaysia dominates the bio-diesel market in terms of production capacity. Malaysia plans to mandate the use of bio-diesel blend (2% blend) in fossil fuel transport in 2008 but has postponed bio-diesel mandates due to poor economic conditions. In views of priority setting, the current government focuses on supplying raw materials for the food sector as a priority and not for bio-diesel production. In the 1970s oil shock, the Brazilian government introduced fuel ethanol to reduce the oil consumption. The soaring oil prices have put Brazil at the forefront of a biofuel movement. Brazil has subsidised biofuel during market development until economy of scale has allowed fair competition with oil products. Currently, Brazil is the largest producer and exporter of ethanol, a biofuel used mainly in automobiles as an additive or alternative to gasoline. Ethanol has been used as gasoline additive for over 22%. Fuel ethanol production was totally 22.5 million kl in 2007. The Brazilian federal policy on biodiesel is aimed at alleviating rural poverty (stimulating rural activities to increase employment in rural areas). The Brazilian ethanol programme provided nearly 1 million jobs in 2007, and cut 1975–2002 oil imports by a cumulative undiscounted total of USD 50 billion.








(iii) Given that fossil fuel dependency is the global problem, it is now necessary for every country to dene strategies and plans in dealing with the peak oil crisis. Alternative fuels from renewable resources, such as fuel ethanol from cellulosic biomass, provide benets in terms of environmental protection, economic development and global energy security. Researchers from the institutes around the world need to consider undertaking collaborative study on advanced energy initiatives to build up on today's breakthrough technologies which would enable more efcient energy production at lower cost with potential for environmental impact reductions. This has already happened in many Asian countries. The ASEAN Ministers on Energy Meeting (AMEM) plus 3 (China, Japan, and Korea) has agreed to jointly study how to prepare a regional oil stockpiling plan to prevent shortages and reduce impacts of oil price surges in the future.

(iv) The high price of oil at present may be seen as symptoms of the crisis that encourage the policy makers to initiate new solutions (progress to advanced energy cycle). NIA's preforesight (Fig. 3) of bio-based energy would help move towards this technological challenge to deploy sustainability and self-sufcient economy. For an efcient energy innovation system, policies and regulations are needed to expedite transition to the next generation of feedstock. The government should provide incentives to promote the bio-based energy, for example, exemption of petroleum tax; tax incentives for vehicle, plant (depreciation tax, corporation tax); subsidies on energy crop, plant and distribution facility, incentives for production of alcohol or fuel from agricultural products or wastes. It is argued that the biofuel policies should focus on market development, based on sound scal incentives and supports for investments and infrastructural

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development. Governments should create an enabling environment for renewable fuel industry in order to draw in entrepreneurial creativity, capital investment, and technical capacity which would help strengthen the industry. Bio-based energy can be seen as an alternative energy to help solve the global energy crisis in terms of decreasing the oil dependency. The case study of the National Innovation Agency (NIA), the Thai government agency under the Ministry of Science and Technology, has shown the way governments can facilitate technological innovation. NIA has assisted the Thai government in examining the potential of the bio-based energy and proposing the national policies and strategies for the energy system development in Thailand. The case study analysis has shown that biofuel is a potential solution to the problem of high oil prices. It is expected that the potential transition from an oil-based economy to a bio-based economy (based on the analysis using a Kuhnian/Schumpeterian framework) would contribute to the economic developments of Thailand. References
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