Learning and Technological Change

Technological change has always been recognised as a major contributor to economic growth, a decrease in the cost of producing a product and increasing productivity. A key phenomenon associated with the reduction in the cost of production is “learning-by-doing”. Cost reductions in studies of this nature has been attributed to a number of variables including but not limited to expenditure on research and development, learning-by-doing and economies of scale. In the case of coal fired power, technical changes in terms of improvements in the technology to produce electricity is compared to the “cumulative installed capacity” which in turn is compared to the savings achieved due to economies of scale. 238

There is agreement that the major source for the production of energy until 2030 is the use of fossil fuels, with the cheapest fossil fuel being coal. Demand for energy in 2030 is expected to be 40% more than the current energy requirements with the majority of the increase

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expected from China and India. In the scenarios developed to forecast the demand for electricity, renewable energy sources was included, and despite the inclusion of these technologies, it is still estimated that fossil fuel will be used to produce 80% of the global demand. The graph below is a depiction of the Global energy demand239.

Figure 5 – Global Energy Demand

Source - http://www.co2crc.com.au/aboutccs/needccs - 05/2012

Globally, the use of fossil fuel for power generation increases the experience base as well as the investment in technology to improve efficiency. With a larger installed based, codification, abstraction and diffusion rates for the target population will increase. The experiential learning component will also increase, i.e. learning-by-doing.

The graph demonstrates the growth expected in the energy sector and the requirement for continued use of coal based technologies. Yeh and Rubin state that the Energy Information Administration anticipates that the total installed capacity globally for pulverised coal will be approximately 2000GW in 2030 in comparison to the total installed capacity of 1119GW in 2003. As a technology that has been in use for over a century, the pulverised coal boiler has undergone a number of technological improvements with the aim of improving reliability , efficiency and performance of the technology from an ecological perspective. Due to an

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http://www.co2crc.com.au/aboutccs/needccs - 05/2012 Graph description - “World energy demand expands by 40% between now and 2030 –an average rate of increase of 1.5% per year – with coal accounting for more than a third of the overall rise (Data for graph obtained from World Energy Outlook - OECD/IEA 2009)”. The exact detail of this kind of graph will be contentious as long as the issue at hand is as significant as it is.

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increase in the installed capacity of the pulverised coal technology, economies of scale have also been achieved, reducing the overall cost of the plant technology240.

In the research presented, ecological modernisation and organisational learning theorists agree that experience improves the resident knowledge in an organisation and will influence the innovation process. In support of the argument raised by Jamison in Chapter 3, development of technology in favour of reducing ecological impacts as opposed to prevention is view of ecological modernisation theorists. Innovation strategies adopted by organisations prefer an incremental approach which will yield greater economic benefit, as well as retain the existing organisation structure. This method is favoured above a discontinuous radical innovation.

The coal industry is an established industry. In the debate on ecological modernisation, an organisation will implement an innovation strategy more easily if it is based on existing knowledge as it is deemed to be less of an economic risk. Innovation in the coal industry follows the same rationale as argued in ecological modernisation which is using existing technology and evolving it as opposed to investing in development of prevention technologies. A history of the use of coal and the available knowledge in the industry follows.

4.2.3.1 Pulverised Coal Plant Development Cycle

In the years leading to 1970, the United States played a critical role in the development of pulverised coal technologies due to the fact that approximately 50% of the global installed capacity was in the United States. During this time, the global industry for equipment was dominated by two American companies, General Electric and Westinghouse. They were followed by the Japanese Groups Hitachi, Mitsubishi and Toshiba as well as the European Group ABB241.

4.2.3.2 Thermal Efficiency

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In 1900, the thermal efficiency of the pulverised coal power plant was 8% and over the period up to 1960 improved to 40%. The increase in the efficiency is attributed to the advances made in boiler technology. Subsequent to this improvement, the efficiency dropped between 2% and 3% due to the fact that the improved technology, supercritical boilers, was abandoned. This was due to the fact that the demand for new power plants reduced and that the supercritical boiler technology was not as reliable as the older technology. The technology deployment strategy is dependent on the total cost of producing electricity. With coal prices higher in Europe and Asia, the technology development of the supercritical boiler technology continued as it was economic feasible. Plant efficiency increased to between 42% and 44%, and a number of other design changes have been effected to improve the technology. It is expected that improvement over the next few years will improve the technology that will yield even higher efficiencies. The installed base of technologies brings the discussion back to the experience or learning curve242.

The drop in demand of the new technology was associated with reliability. The experience associated with this technology was limited and the learning and development process was prematurely stopped for economic reasons. Therefore the process of codification, abstraction and diffusion was limited, i.e. it was not at the level of the older technology. There were also no regulatory guidelines to promote the technology with the aim of achieving ecological benefits.

4.2.3.3 Technology Learning Curve

A measure of the global experience based on the world wide cumulative installed capacity was undertaken by Yeh and Rubin with the aim of determining the learning rate in terms of technological innovation between 1920 and 2002. The analysis of the data collected suggests that for every period that the installed capacity doubles, the efficiency of the technology improves by 3.3%.

At the rate that technology development takes place, it is anticipated that thermal efficiency will improve to 43.9% when the installed capacity reaches 2000GW globally. The scenario developed suggests that this capacity will be reached in 2030. As with any model, there are variances that must be factored in. Therefore on a best case scenario taking the plateau effect

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out of the equation, i.e. take the rate of improvement of the best technology only that is commercially viable, the efficiency achieved will be 46.4% when reaching a cumulative capacity of 2000GW globally. One must however exercise caution as the outcome of each of the scenarios that is modelled is dependent on the input data and as highlighted by Yeh and Rubin, studies have shown that efficiencies in excess of 50% can be achieved by 2020 due to progress in materials and other plant equipment.

It is evident that the technology improvement in the pulverised coal boiler technology is also influenced by external environmental conditions, such as the introduction of regulations to improve the emissions. Due to regulations new technology components were introduced into the pulverised coal plants resulting in further learning to reach previously achieved efficiencies243.

The development of the carbon emission technologies demonstrates that as the installed capacity increased, efficiencies were achieved. The investment in knowledge creation to achieve improved efficiency can initially be attributed to achieving an improved yield. The natural environment was not the primary consideration. The shift on the learning and development boundary to include the natural environment occurred as a result of policy and regulation. In Chapter 3, Booth argument is presented that organisations will externalise the cost of its waste and will continue to do or seek the least cost option to ensure maximum gain, irrespective of the cost to society and the ecology. Regulations are a method of forcing a shift in the organisation boundary and initiate a path of knowledge creation. Organisations that are able to respond quickly can achieve market advantage through their new resident knowledge. It now also becomes a barrier to entry for organisations that do not invest in the creation of new knowledge.

Organisational learning is influenced by the external environment. The external environment boundaries are established through policy in the case of carbon mitigation strategies. Policy is influenced by the viewpoints of society and environmental bodies, which promotes the implementation of carbon mitigation strategies in the industry. Learning and development is directed to meet the objectives of the organisations and natural environment. As pointed out

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by Kim244, a crisis can be very effective in effecting transformation. Kim also states that authors such as Nonaka, Weick, Shon and Pitt views a crisis as an opportunity to learn. Carbon mitigation and the natural environment is one such crisis.