Podcast: Norway’s Innovation Ecosystem and the Pivot to Renewable Energy, With Hege Barnes

When it comes to national innovation ecosystems, Norway has been a standout performer. After discovering oil, it vaulted from being one of Europe’s poorest countries in the 1950s to become a high-wage, high-cost nation with strengths in B2B products, heavy industry, shipping, and shipbuilding. Now it is pivoting toward renewable energy—including offshore wind and electric vehicle technologies—while broadening and deepening its national innovation ecosystem to encourage new firms in a range of industries to scale up and compete globally. Rob and Jackie discuss the secrets of Norway’s success with Hege Barnes, regionsal director for the Americas at Innovation Norway.

Mentioned

World Commission on Environment and Development, Our Common Future (New York: Oxford University Press, 1987), also known as the Brundtland Report.

Colin Cunliff, “Omission Innovation: The Missing Element in Most Countries’ Response to Climate Change” (ITIF, December 2018).

Stephen Ezell, Frank Spring, and Katarzyna Bitka, “The Global Flourishing of National Innovation Foundations” (ITIF, April 2015).

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Rob Atkinson: Welcome to Innovation Files. I’m Rob Atkinson, founder and president of Information Technology and Innovation Foundation. We’re a D.C. based think tank that focuses on science and technology policy.

Jackie Whisman: And I’m Jackie Whisman. I handle outreach at ITIF, which I’m proud to say is the world’s top ranked think tank for science and technology policy.

Rob Atkinson: This podcast is about the kinds of issues we cover at ITIF with the broad economics of innovation to specific regulatory and policy questions about new technologies. And today we’re going to talk about sustainability and what we can learn from other countries who seem to be getting it right.

Jackie Whisman: Our guest is Hege Barnes who is responsible for the overall management of operations in Canada, U.S., and Brazil for Innovation Norway, which is a government entity that assists Norwegian companies and entrepreneurs in entering, scaling, and growing successfully in the Americas. Thank you so much for being here.

Hege Barnes: Thank you for having me. I’m glad to be here.

Jackie Whisman: We’re really excited to have you here because in a lot of our research and the reports that we’ve published in the last few years, Norway has been ITIF’s teacher’s pet. We point to its policies a lot when we provide examples of what U.S. policy makers can do to create an attractive framework for innovative technologies. And what do you think it is about Norway that makes this seem to come so easy?

Hege Barnes: I think there’s a lot of reasons, there’s also some historical reasons from being one of the poorest countries in Europe in the 50’s and in the earlier 19th centuries, and then discovering oil and seeing how we could develop this from really harsh conditions and going through that whole process of building up a whole new industry and sector from the ground and learning as we go. And now, as we have been in a good position and a good economic grip position over the last couple of decades, we’ve seen now that the interest and the will from all levels to society to shift and to looking at other industries and to look at how can we secure the earth for our children, for the futures and what does it take, what does it need and what does it need for us?

Hege Barnes: And what are we doing to help drive that? And being a small country definitely helps. We have five million people and it’s very see-through, you know who the players are. There’s a high level of trust in government. There’s a high level of collaboration between public and private. There is a good foundation of highly educated workforce driven by this whole off shore energy, oil and gas developments. We have a long tradition in shipping and shipbuilding, in maritime industry. So there’s a foundation of tech knowledge and entrepreneurial spirit to actually start from something based on need. To build on something, then tries and succeeds and seeing how can that transition to new industries or solution areas.

Rob Atkinson: When I look at Norway, one of the things that seems clear is you’re a small country, as you said, but also you’re a relatively high-wage country, and you’re really dependent on your company’s success in global markets. Your own market is so small. And it seems to me that combination drives you towards establishing institutions like Innovation Norway, where you have to compete on innovation, on higher value added, on really adding something of value to the global economy. That’s certainly a lot different in the U.S. where we just think of ourselves as here we are a big country, we do whatever we want. You think that explains it as well?

Hege Barnes: Yeah, absolutely. It does. And as you say, it’s a high-cost country. So we need to have solutions that can be profitable. And it helps the society as a whole. And the oil and gas industry has been so profitable here, so they built this high-cost society, but it also developed our skillset to a sense, and to a level that we can actually expand and look at all the opportunities and scale and grow globally. But with all that comes also this thing that things are good in society. We are doing well. So there’s not that urgency to survive or to create something urgent and you need to just think of yourself first. So with also this whole will and shift to sustainable industries, we’ve seen through the last decade that we have what we call an export gap.

Hege Barnes: If you look beyond oil and gas, we’re seeing that we are not innovating and selling and exporting products and services enough. We are importing more than we are exporting as well. So we need to look into other sectors and industry. We need to look into how we can actually develop our whole ecosystem in Norway to survive or to close that gap and survive beyond the oil and gas, because we want to transition away from that. We want to shift all that competencies, all that skillsets into renewable energy sources, because we are a nature based destination. We have an abundance of natural resources. So what we’re looking at is where are we good? What is it that makes Norway really good? Where do we have competencies that others don’t have? Our neighboring countries are really good in consumer goods, in sale, in fashion and design and other products and cell phones. We’re really good at B2B product side, the big industrial spaces, maritime, offshore wind, shipbuilding, all these different areas.

Hege Barnes: So when we look at that, how can we expand that? And how can we help our companies be better at looking at what the world needs? How can we export these competencies and grow abroad? So that’s why the government build institutions like us so that we can help our companies see this, see the opportunities and help lift them and push them along abroad. And what we work with a lot, which is very important, is also that competence level.

Hege Barnes: Part of the work we do is also getting these companies ready because we’re looking at small companies that we want to help scale and grow to become bigger, but how do they do that efficiently? And how do they actually choose to write book paths and business plans and markets. So we work a lot with them to put them on the right track and then we help them also prioritize these tracks. And then we also have to be selective of where we see the companies or the companies... And also coming back to the... We also build these clusters and networks in Norway that helps foster and grow the companies that has the highest potential to succeed.

Rob Atkinson: It’s interesting. We have an office in Brussels and I’ve spent a fair amount of time talking to commission officials. And one thing I’m always struck by when I talk to commission officials is they’re almost proud of the fact that there are so many small firms in Europe and my always response is, it’s fine to have small firms, but if they stay infants for the rest of their life, you haven’t gotten very far and you need to scale firms up. The point is to get firms to become bigger so they can go out and compete in these intense competitive markets and hire more workers. So it’s sounds like Norway embraces that. And a lot of what you’re trying to do is get firms over that hump.

Hege Barnes: Absolutely. And you’re right. And we think the exact same. It’s good for some to be small and they try and then they make [inaudible 00:07:53] themselves. But if we really are going to look at the whole country as a whole and continue what we were saying, to be a high cost, good society to live in, we need to close this gap. We need to make a thriving economy and that you get by getting smaller companies with the potential to be big. And so that we can bring the value creation back again. And that’s what we created in Norway and all, anything from research institutions, to corporates and universities and academia to come together and look at what are the industries of the future, given this natural landscape we have. We have very cheap electricity for example. We have a lot of hydro-power, waterfalls, everything.

Hege Barnes: So we can use energy in a smart way, and the world needs energy. They need smart, renewable energy resources. So how can we encourage companies and these smart engineers to look into that and work together in these communities to develop the smart solutions that is creative when you bring different people together. And then our job is then to take these solutions and help them see the commercial potential and then help them put the right tools and support system in place so that the companies can grow and scale because we need the bigger companies. We need the bigger companies also to both disrupt existing technologies, but also to pave the way for the others. And, when you have bigger companies that’s gotten a lot of support, they will often help the smaller companies. So it’s that triple down or ripple effect that you want to help build up successful industries.

Rob Atkinson: Yeah, no, it’s an ecosystem where big, small, medium, all work together. Unfortunately, the U.S. seems to be going in the opposite direction where there’s a lot of suspicion with big companies. One thing I also would say, I’ve read a lot of Norwegian economists who I really admire, who write a lot about innovation. And one of the barriers in the U.S. is you have a lot of conventional economists who say, “Oh, well, industry government partnerships, that’s crony capitalism or subsidies, or all those other frankly nonsense.” I think economists in Norway seem to be a lot more sophisticated. They’re like they understand innovation systems and how technology actually evolves. And that seems like an advantage for team Norway.

Hege Barnes: It is. And we actually work and Team Norway is the keyword because we work... We are a government entity, but we’re not diplomat, but we work very closely with the consulates and the embassies and the other industry organizations that are a part of the Team Norway network. And I think it is a part of that, being a small destination, that well-functioning [inaudible 00:10:33], we have a high pressure on our government and our government institutions. So there is a see-through, a transparency there. And then that transparency creates trust. We see what they do. They see that we see them. So it becomes this whole thing that everything works hand in hand. And when you trust in the government, you trust in the funds and you have a neutral partner that support you along the way.

Hege Barnes: It becomes a freedom of experimenting and you can pilot a little bit more freely. You don’t have the pressure of always delivery to stakeholders that might have a commercial goal versus the... Not welfare goal, but the whole value creation goal of the ecosystem. But Norway is very different than the U.S. in that matter and it helps again being small. But I think it’s also built on years of trying and failing and having a transparency in the system. And, we have very, very strict rules that we follow because of that transparency. You can see all the information that is given because we need to deliver to higher standards. And then again...

Rob Atkinson: That’s really great. And yeah, I’m envious. That’s a really good point about transparency.

Jackie Whisman: I think it really says a lot about the priorities of the government that something like Innovation Norway even exists. And it’s not even a new idea. You said you’ve been with the agency for over 20 years. And I just think that’s incredible.

Hege Barnes: So I think the organization used to be at the Norwegian Trade Council was here in ‘36 maybe, when the office in New York started, so I’d say probably a hundred year old organization, at least 89 years old.

Jackie Whisman: Wow, 1936?

Hege Barnes: Nineteen thirty-six, yes.

Jackie Whisman: Wow.

Hege Barnes: That was an office in New York. And I don’t even know if that was the first foreign office. So it’s been for a long, long, long time. But that is also how these systems work. And also our country, remember Norway, it’s a tiny little country, but we have very big, it’s spread out. There’s a lot of land mass and we have tiny little towns. And one of the things that is very important for Norway is that we want people to live and thrive throughout the whole country. We want to build up industries and businesses to succeed in tiny little villages, all over the country. And to get that to work, you need to have a system in effect where you can both trust, but also that can deliver this both funding and services and education through out the whole country. And with that, you have to rely on a system and you have to have a well-functioning system to that.

Rob Atkinson: Met a guy once when I was in Europe who lived in, I think it was Nordkapp, which is like a...

Hege Barnes: At the top.

Rob Atkinson: Very top, very top. Yeah. He actually may have been in the oil and gas industry. I don’t remember, but I was like, “Oh, that’s a neat place.”

Jackie Whisman: My five-year-old plans to live in Arendal when she gets a job. So I hope that there are tech jobs available.

Hege Barnes: But that’s in the south and a beautiful south coast on Norway where all Norwegians go for a vacation. So, yeah.

Rob Atkinson: So I want to segue over to sustainability because that’s something, maybe another way to frame it is addressing climate change challenge. That’s something clearly the Biden administration now is seriously focused on, we’ve got a democratic Congress who’s also seriously focused on that issue. And while I have to say the innovation, our whole push on climate is all around innovation, better technologies, firms that can scale up and that’s happening more and more in the U.S. but I’d just be curious, how do you see that going on in Norway? And, I saw that we came after you with Will Ferrell and the Super Bowl, to challenge you and your electric vehicles, which I thought was a pretty hilarious commercial. I know Norway, there was a lot of response to it, but can you say a little more, what are you doing in some of those spaces, including EVs?

Hege Barnes: Well, we work with sustainability since 1987, the Brundtland Report, Gro Harlem Brundtland was very, very focused on us putting sustainability first. And since then it’s been a mandate for all government organizations, for all industries to have sustainability and key pillar in that has just grown more and more and more. So that has also been the influencing factor as we develop new industries, as we work with companies to look at sustainable solutions. And through this whole thing, a lot of things that we do in Norway is driven by the people themselves. They see the local needs and they want it and they drive it. And then they drive it up to local policy levels, local government levels to get to corporates and industry. So a lot of this is a bottom up process, but some of it is also then adapted at the top of government level and initiated through the systems back down again.

Hege Barnes: And, a lot of that is functioning such as electrification that started many years ago when they said, “Okay, this is excellent. We got access to electric vehicles. And it’s good for the environment. We see a lot of traffic. We want to have more healthier cities.” It started with all that. So they said, “Okay, let’s give some incentives.” If you drive an electric vehicle, it’s cheaper. Cars, diesel, gas cars are very expensive to buy in Norway. They’re really expensive, but an electric car then dropped most of those high tax level, as well as you got incentives, such as you could drive the HOV lane, you can go toll free through all toll booths and you could park for free somewhere. And that whole thing started this whole way.

Hege Barnes: But yes, it’s both good for the environment and also you can save money on it. And you can drive a cool car because it was Tesla that came in first. So it started this whole positive wave of government giving incentives and becoming a cool thing to do and driven by people feeling good about what they’re doing and the incentive. And also a large provider of vehicles coming in and seeing the opportunity. As I got older, it shifted all that electric vehicle effort into Norway now, 54% of all new cars bought in Norway are electric.

Rob Atkinson: Wow. That’s incredible. That’s probably the highest rate in the world I would think.

Hege Barnes: I would think so, but it is also interesting because we didn’t really focus on it so much. It was more what was happening in Norway. We were more focused on the electrification of our ferries or maritime vehicles because we are such a shipbuilding nation so we had several companies starting many years ago, creating these electric and hybrid ferries that runs on a beautiful fjords in Norway and to protect them, to get them to be emission free. Up in the Arctic, there’s now ferries running in pristine Arctic water and protecting all that, bringing tourists and cargo. We have big cruise ships being built that are hybrids, potentially electric and our autonomous freight vessels, big cargo or container ships that is going to move around autonomously.

Hege Barnes: So that was our focus. And we know we were really good in the maritime industry and all, and then this focus on electrification just almost came as a surprise for us, but we’ve seen that the system work and what is also important that it’s, again, the government initiating the charging stations. We built a tunnel under a castle in Norway that was a parking space and we put a lot of electric charging stations. They’re all free. Free of charge, you can charge your vehicle there for free. And then you get them off the streets and get them electric and you’re away from system. There’s 10,000 charging stations throughout the country. And as you also shifted towards saying, “Okay, so get people off the roads in an individual cars, we need to look into our subway system and buses.” A lot of people prefer the buses. So as you shift also to get the buses electric and off the diesel. So setting up the grid line systems also for charging buses around the country.

Rob Atkinson: How much of those are powered by renewables, like wind or other technologies? Hydro.

Hege Barnes: A lot is by hydro. I don’t have the numbers right in front of me, but we have a lot of hydro-power in Norway. We have excess hydro-power in Norway. So I would think most of them are powered by renewables. We are also looking into developing a hydrogen strategy through all that higher power. And that’s one of our priority areas that we now are moving into batteries and hydro-power. How can we develop the industry to be more efficient in hydrogen production?

Rob Atkinson: Wow, fantastic.

Jackie Whisman: It does seem like we’re seeing, in the last 10 years at least, a sea change on the industry side of things. Companies are really seeing the value of sustainability. They’re putting their money where their mouths are. Is this your sense, too?

Hege Barnes: Yes. And that is a lot of the issues, and we’re looking at the U.S. where we are now petitioning Norwegian technology and the offshore wind industry, for example. We are shifting because we have a lot of the competencies in there and as it develops, and it’s a relatively new industry for the U.S., we are seeing that a lot of the things that the U.S. is struggling with to get that local support is the knowledge, is the education of actually using renewable resources, actually developing a company that is beneficial. It’s sustainable. You can have sustainable processes and sustainability of so many things. One thing is the environment. The other thing is the economic and social and cultural values as well that needs the whole thing of sustainability. And people don’t really see that. They see it as either as a check mark to just qualify for something, but they don’t really see the profit potential as well.

Hege Barnes: So I think there’s a need for that education and seeing renewables is the way to go. And we’re seeing that a lot in Texas, for example. Now with the bigger, good energy companies are investing money in accelerators and startup and to get access to new smart solutions because they see that’s the future. And they see that actually if that’s the future, then there’s also profit and you need to figure out the way to actually be profitable. So if you get that education process, you get that at an early stage, you get the smaller companies that will come up with smart, sustainable solutions, and you get the bigger companies, the corporates looking for sustainable solutions to put into their value chain, then they will adopt from the smaller companies. So I think personally, it’s the education on profit potential for renewable energy sources and other sustainable solutions.

Rob Atkinson: The U.S. faces a lot of challenges in this space. One is we have a lot of climate deniers who just simply don’t believe it’s real. So, the first step is, if you’re an alcoholic, the first step to recovery is you have to admit you’re an alcoholic. The first step on climate is you have to admit it’s real and manmade, but we’re getting there. And then the second step is that there’s a role for government. Private sector’s doing more as you and Jackie just alluded to. And again, more and more of this effort will be coming from the Biden administration and Congress. I don’t think we’ll do the full blown green new deal as some have called workers, frankly, some of it had nothing to do with climate. But certainly we should and can be doing more.

Rob Atkinson: One of the things that President Biden has been talking about is a network of charging stations so that people would feel a little bit more comfortable when they’re driving like that. And I don’t want to put you on a spot, I just curious, you’ve been in the U.S. a long time. What do you think are some of our opportunities and challenges in this space of green and sustainable and clean tech?

Hege Barnes: I definitely think you talk about a very important thing. It’s the climate deniers and the real sensation that is real, and it’s here and it’s now. And I was also thinking it’s the sense of urgency because the rest of the world is moving in this direction. Europe is moving this direction. A lot of other destinations are moving in this direction. And if the U.S. don’t follow, the others will take over and they will fall a little behind. So I think that there’s a sense of urgency. And then I also think it’s the education aspect, but I do think the U.S. has saw the opportunities in the world. They have the innovators, they have the innovative community. Like if Silicon Valley want it, you can make it happen. If you have the right this call and role models or companies going in the forefront and showing the way, the others will follow.

Hege Barnes: And I definitely think policy makers here, governments will follow the bigger companies. They will follow the employers. Those companies that will employ people. And if they really want to, and if they will take charge in some of these areas, I think definitely things will happen and they can happen fast, but you need to get that will and the interest in seeing the profit. And you have to have that current dangling there and they need to go for it. And I think they will. I actually think they will. I think they will follow now, not in all states and not in all areas, but in certain areas, for sure.

Rob Atkinson: We were certainly trying to be helpful and active during the Obama administration when they were pushing this. But I think one of the mistakes the Obama administration made was they were really pushing a pure demand side policy. And we ended up just importing a lot of stuff from China. And I think there’s still that debate going on now in the Biden administration. And in our view is that unless you can tie this to also creating jobs and new firms and expanding firms that you get a double win and there we’re going to help our industrial base, our economy, our communities, and we’re going to help with climate. It’s harder to make the case for the general public and elected officials to move forward. Do you try to, not use the word sell this, but promote this in Norway on that basis, that this is helping your firms and your workers, as well as the environment?

Hege Barnes: Absolutely. That’s actually how our whole society is built. I mentioned that we want people to live and thrive in smaller communities and throughout the country. So we need to listen to what is it that makes the tribe and community. How can we take advantage of this little village just by a fjord? So we have a phenomenal agriculture industry that’s moving toward more sustainable operations, et cetera. Can we help and foster that and can we put our funds and research and network into making that profitable and sustainable and profitable and have the longevity that it needs and what can we learn from operations that works really well?

Hege Barnes: So it’s also that sharing of knowledge across sectors and fields and government and industry and locals, but it’s also having... Because I also believe in the commitment of the locals with regulations about if you have some incentives. So if you do this operation locally, you can have certain incentives that can help you escalate this and grow this. So, I agree that there’s one thing is demand driven, but the government and the regulatory body needs to follow and needs to make it easier to happen. And definitely was on the innovation level, because there’s so much we can do there now. Innovation and research, it’s essential now, and that can scale fast.

Rob Atkinson: Yeah, no, absolutely. My colleague Colin Cunliff with our clean energy work, we did a study a couple of years ago on looking at what countries were actually trying to follow their commitments to the innovation accord, and actually the U.S. has a bad rep, but we actually were doing better than a lot of countries. We were putting money and are putting money into innovation. We just got to do more and get it more into these companies. I want to ask one last question, a little bit of a leading question, but do you think the U.S. should have its own Innovation USA? You have Innovation Norway, should we have Innovation USA?

Hege Barnes: Yes.

Rob Atkinson: We agree.

Hege Barnes: I think so. I agree. I agree. And I think it should be a government body that can take some risks, can contest and try and help lift those innovative solutions, those sustainable or renewable, whatever solutions that are maybe paving the way for the future and it could be specific for certain sectors, but I definitely think it helps.

Rob Atkinson: That’s been our experience. My colleague, Stephen Ezell, wrote a report a couple of years ago, where we looked at about 50 different innovation agencies around the world, including Innovation Norway, and it’s striking how many countries now are following that model. Different flavors, but all recognizing that it’s not enough just to have a science agency, that you have to have an innovation body that helps put all those pieces together. So this was great. Thank you so much for being here. We really appreciate it.

Jackie Whisman: Thank you.

Hege Barnes: Well, thank you for having me. I love this discussion, so it’s always fun. Thank you.

Jackie Whisman: That is it for this week. If you liked it, please be sure to rate us and subscribe, feel free to email show ideas or questions to [email protected]. You can find the show notes and sign up for our weekly email newsletter on our website itif.org and follow us on Twitter, Facebook and LinkedIn @ITIFdc.

Rob Atkinson: And we have more episodes and great guests lined up. New episodes drop every other Monday. So we hope you will continue to tune in.