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Energy storage and the direction of technical change

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  • Mohamed Bahlali

    (Université Paris Dauphine, Climate Economics Chair)

Abstract

We study how storage technologies drive the direction of technical change in the energy sector. To that end, we extend the dynamic model of endogenous innovation from Acemoglu et al. (2012) by adding a storage factor in the production function. Clean and dirty inputs are assumed to be perfect substitutes, but clean energy is intermittent and needs to be backed up by dirty energy or storage. We show that (i) without intervention, as long as energy storage is expensive, innovation is pushed to the dirty sector - and all the more when renewable energy is cheap (ii) a policy aiming at phasing out dirty energy as quickly as possible should allocate, at each time, the research to the less advanced sector between clean energy and storage. These results suggest that governments should now prioritize funding research in storage technologies, in order to accelerate the energy transition and shift innovation away from fossil fuels.

Suggested Citation

  • Mohamed Bahlali, 2023. "Energy storage and the direction of technical change," Economics Bulletin, AccessEcon, vol. 43(1), pages 318-327.
    • Handle: RePEc:ebl:ecbull:eb-22-00844
    as

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    References listed on IDEAS

    as
    1. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
    2. Popp, David, 2019. "Environmental Policy and Innovation: A Decade of Research," International Review of Environmental and Resource Economics, now publishers, vol. 13(3-4), pages 265-337, September.
    3. David Popp, 2019. "Environmental Policy and Innovation: A Decade of Research," NBER Working Papers 25631, National Bureau of Economic Research, Inc.
    4. David Popp, 2019. "Environmental policy and innovation: a decade of research," CESifo Working Paper Series 7544, CESifo.
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    Keywords

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    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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