The Valley of Death, the Technology Pork Barrel, and Public Support for Large Demonstration Projects

62 Pages Posted: 6 Aug 2016

See all articles by Gregory F. Nemet

Gregory F. Nemet

University of Wisconsin - Madison - La Follette School of Public Affairs

Martina Kraus

German Institute for Economic Research (DIW Berlin)

Vera Zipperer

German Institute for Economic Research (DIW Berlin)

Date Written: August 1, 2016

Abstract

Moving non-incremental innovations from the pilot scale to full commercial scale raises questions about the need and implementation of public support. Heuristics from the literature put policy makers in a dilemma between addressing a market failure and acknowledging a government failure: incentives for private investments in large scale demonstrations are weak (the valley of death) but the track record of governance in large demonstration projects is poor (the technology pork barrel). We reassess these arguments in the literature, particularly as to how they apply to supporting demonstration projects for decarbonizing industry. Conditions for the valley of death exist with: low appropriability, large chunky investments, unproven reliability, and uncertain future markets. We build a data set of 511 demonstration projects in nine technology areas and code characteristics for each project, including timing, motivations, and scale. We argue that the literature and the results from the case studies have five main implications for policy makers in making decisions about demonstration support. Policy makers should consider: 1) prioritizing learning, 2) iterative upscaling, 3) private sector engagement, 4) broad knowledge dissemination, and 5) making demand pull robust.

Keywords: Demonstrations, technology push, demand pull

JEL Classification: Q55, O31, O38

Suggested Citation

Nemet, Gregory F. and Kraus, Martina and Zipperer, Vera, The Valley of Death, the Technology Pork Barrel, and Public Support for Large Demonstration Projects (August 1, 2016). DIW Berlin Discussion Paper No. 1601. Available at SSRN: https://ssrn.com/abstract=2818837 or http://dx.doi.org/10.2139/ssrn.2818837

Gregory F. Nemet

University of Wisconsin - Madison - La Follette School of Public Affairs ( email )

1225 Observatory Drive
Madison, WI 53705
United States

Martina Kraus

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Vera Zipperer (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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