Various researchers and policy analysts have made empirical studies of innovation systems in order to understand their current structure and trace their dynamics. However, policy makers often experience difficulties in extracting practical guidelines from studies of this kind. In this paper, we operationalize our previous work on a functional approach to analyzing innovation system dynamics into a practical scheme of analysis for policy makers. The scheme is based on previous literature and our own experience in developing and applying functional thinking. It can be used by policy makers not only to identify the key policy issues but also to set policy goals.

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This paper analyses the development and diffusion of technologies that utilise renewable energy sources in Germany, Sweden and the Netherlands. The analysis enlarges the life cycle model of industry evolution to one where the focus is on the formation and evolution of new technological systems. Particular focus is on explaining success and failures in shifting from a formative phase into one characterised by positive feedbacks. A set of challenges is identified for policy makers attempting to influence the process of transforming the energy sector.* This paper provides a synthesis of work undertaken within the framework of the project "Shaping and exploiting technological opportunities -the case of the Swedish capital goods industry"s venture into renewable energy technology". The Swedish Energy Agency kindly financed our work, which was undertaken under the auspices of IMIT. Funding was also received from Gothenburg Energy Ltd. Research Foundation for one of our case studies. The study would have been impossible to undertake without this support and without the time generously given to us by a large number of people in Swedish, German and Dutch firms, research institutes and other organisations. We are also grateful to Jan Finn, Volkmar Lauber, Ole Jess Olsen, Adrian Smith and two anonymous referees for useful comments on an earlier draft.2

During the last two decades there has been a great deal of research on renewable energy technologies. It is commonly thought that very little has come out of this research in terms of commercially interesting technologies. The first objective of this paper is to demonstrate that this perception is no longer entirely correct; in the 1990s there has been a double digit growth rate in the market for some renewable energy technologies. The consequent alteration in the energy system, is, however, a slow, painful and highly uncertain process. This process, we argue, needs to be studied using an innovation system perspective where the focus is on networks, institutions and firms' perceptions, competencies and strategies. The second objective of the paper is therefore to present the bare bones of such an analytical framework. A third objective is to identify a set of key issues related to the speed and direction of that transformation process which needs to be studied further.3