Besides building an industry through subsidization, another way to promote domestic growth in renewable energy is through R&D. Up to this point, leading R&D has not been a part of the Brazilian growth story. Even with domestic production requirements on the growing wind industry, much of the highest value components and technologies have been conceived overseas or imported from Europe and North America. Brazil has been working diligently to attract more R&D to the country, by for example providing incentives for companies like General Electric to establish R&D centers in country, but its R&D capabilities pale in comparison to the U.S. or Europe.
Government sponsored R&D will likely play an essential role in any clean energy revolution, but throwing money and resources at R&D solves only half the problem. Funds must flow to the researchers capable of designing to scale. Many studies have been performed on factors for R&D competitiveness but the role of talent attraction and retention, the strength of research institutions, and the strength of collaboration between the public and private sectors will be particular importance to Brazil.
If Brazil is to become a leader in alternative energy, the answer will almost certainly not come from pointing the finger at business or academics for the lack of renewable energy development. Regardless of what decision Brazil makes on the solar energy gamble, those interested in promoting sustainable energy development must focus on the politics, and how business and government can help each other achieve common goals. Brazil, with its strong recent history of industrial policy, provides an excellent example of a country where upfront costs and investments could pay large dividends in a medium term horizon with the right policies and regulations. Designing this environment with business interests in mind, however, will be pivotal to its success. The growing wind industry emerged in large part because the private sector was brought to the table and willing to bear part of the risk – and the same lesson will be true of any success in growing solar and the domestic supply chain.
Eric and Todd are MPP/MBA candidates in the Class of 2014, in the joint-degree program between Harvard Kennedy School and Harvard Business School. Their joint-degree cohort traveled to Brazil in January to study the clean energy industry.