Lead Markets for Clean Coal Technologies A Case Study for China, Germany, Japan and the USA

Despite the high CO2 emission intensity of fossil and especially coal fired energy production, these energy carriers will play an important role during the coming decades. In Germany, nuclear energy has to be replaced and in countries such as China or India the high and still growing energy demand requires the use of coal in addition to renewable energy sources. A further argument for coal is the fact that it is in most countries cheaper compared to the use of natural gas.

The paper identifies pulverized coal combustion as the main technological trajectory concerning more efficient coal fuel combustion and explores the potentials for lead markets for the responding technologies in China, Germany, Japan and the USA. We do this by deriving indicators for the lead market success factors as they are described in the literature, taking into account the different regulation schemes in these countries. We concentrate on technologies that have already left the demonstration phase. This is the case for supercritical (SC) and ultra- supercritical (USC) pulverized coal technologies that are already established.

The analysis shows that the typical pattern of a stable lead market only applies to a limited extent. In the 1960s and 1970s, the USA has established a lead market for SC und USC technologies. In the meanwhile, Japan has surpassed the United States, although it started as a typical lag market. Japan has caught up in terms of supply factors, China in terms of price, demand and regulation advantage. China is practicing a leapfrogging strategy, and has already become a leader in the market segment of low and middle quality boilers, whereas Japan and Germany still dominate the world turbine market.

Firm interviews confirmed that Japan and Germany have clear first mover advantages concerning the highly innovative parts of clean coal technologies and in general for 600 °C power plants whereas China has second mover advantages in manufacturing cheap boilers. The crucial question remains if the German firms are able to keep the first mover benefits against the background of the shrinking importance of coal technologies in Germany. Germany and also Japan may lose their first mover advantages because a considerable part of learning from innovation activities occurs when a power plant is constructed in close cooperation with the client. Due to the fact that nearly no new coal-fired power plants are projected in Germany, this country may lose a part of these first mover advantages.

Horbach, Jens, Qian Chen, Klaus Rennings and Stefan Vögele (2012), Lead Markets for Clean Coal Technologies A Case Study for China, Germany, Japan and the USA, ZEW Discussion Paper No. 12-063, Mannheim.