The innovation demand paradox

How advance market commitments can accelerate the scale out of climate tech.

Posted on: 05/03/2024

To address the global climate crisis effectively, it is crucial to bridge the gap between innovation supply and market demand. By employing Advance Market Commitments (AMCs), Innovate UK aims to drive accelerated development and scale-out of climate technologies.

Advance Market Commitments

Advance Market Commitments (AMCs) involve binding contracts to procure innovative solutions that address specific challenges. AMCs aim to create a market with sufficient scale and certainty to encourage investment in research, development, and deployment of climate solutions. By incentivising businesses to commit to purchasing innovations even before they are market-ready, AMCs have the potential to expedite the development and scale-out of climate technologies.

AMCs are effectively a bridge between innovation supply and market demand; their use could accelerate the adoption of critical new technologies by getting large organisations to commit to purchasing innovations before they are fully developed.

Recognising the gap: supply vs. demand

The climate crisis demands immediate and widespread action. While many promising innovations are emerging from start-ups and researchers around the world, they need to scale quickly to meet the urgent challenge head-on. There is a disconnect between the supply of new solutions and the demand for them.

The pipeline of climate innovations is substantial, covering various critical areas such as food production, transportation, heating, and carbon capture. However, large businesses committed to achieving net-zero targets often lack a clear route to translate their intentions into actionable strategies. Fundamental questions about future product offerings and profitability in a decarbonised world remain unanswered. The low carbon routemap from the institution of Civil Engineers provides a useful direction of travel for those committed to achieving the targets set.

The paradox lies in the fact that while innovative start-ups and small-scale initiatives are generating ground-breaking solutions, the resources and industry expertise of large corporations are required to scale-up and achieve widespread impact. Collaborative efforts between start-ups and big businesses are vital if we are to successfully address the climate crisis. The challenge lies in finding ways to integrate these two worlds to drive accelerated innovation and create a sustainable future and one potential approach is using AMCs.

Harnessing the power of AMCs

While the idea of using AMCs in the context of climate technology is relatively new and untested, important precedents exist. Notably, early applications of AMCs were seen in the development of vaccines over a decade ago. Projects like Project X and Frontier have since emerged aiming to accelerate the development and adoption of innovative solutions through AMC models. Research supports the effectiveness of AMCs in advancing the adoption curve, substantiating the impact they can have on driving innovation.

It is essential to differentiate AMCs from other demand-driven initiatives commonly associated with challenge-led innovation. Three key aspects set AMCs apart:

  1. Commitments are firm and contractually binding.
  2. AMCs focus on fostering the adoption of solutions that are innovative but not yet commercially ready.
  3. The scope of AMCs encompasses entire industries or value chains, rather than isolated business or technical challenges.

Concrete actions and building partnerships

As a public funder of innovation, Innovate UK recognises the potential of AMCs in expediting the scale-out of climate solutions. To explore this further, Innovate UK has initiated a pilot programme focused on the use of AMCs in the concrete industry. Concrete, as a widely utilised material with significant potential for decarbonisation, presents an ideal sector to trial the application of AMC models. The pilot programme, developed and executed in collaboration with Carbon Limiting Technologies, will run from late 2023 until mid-2025.

Recognising the importance of finance in facilitating the scale-out of innovations, Innovate UK is also working on building an investor cohort focused on overcoming funding barriers. By addressing insurance and investment constraints, the aim is to de-risk investments in climate technologies and ensure a supportive ecosystem for innovators and concrete industry players.

Get involved

The urgency of the climate crisis calls for collective and immediate action. We are encouraging organisations and individuals to engage with their AMC development process, apply for innovation funding opportunities, and explore investment possibilities. This concerted effort will help create a sustainable future and accelerate the adoption of climate technologies.

The pilot programme, focused on the concrete industry, exemplifies the concrete steps that we are taking to align innovation, demand, and finance. By actively involving stakeholders and encouraging collaboration between start-ups, large businesses, and investors, Innovate UK aims to create a vibrant ecosystem that unlocks the potential of climate solutions.

For more information, please contact: Christopher Pilgrim.

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