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Innovation policy for directing technical change in the power sector

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Listed author(s):
  • Aalbers, Rob
  • Shestalova, Victoria
  • Kocsis, Viktória

Abstract

This paper discusses policy instruments for redirecting technical change within the electricity sector to mitigate climate change. First, we unravel the mechanism behind directed technical change, explaining why markets may underprovide innovations in expensive renewable technologies in comparison to innovations in energy-efficient fossil-fuel generators. Subsequently, we characterize technical change in electricity generation technologies, stressing the heterogeneity of knowledge spillovers both within and between clean electricity generation technologies. We argue that there exists a rationale for a portfolio approach to innovation in the electricity sector, i.e., optimal innovation policies are neither fully generic nor fully specific; and they need to be adapted, in response to new information learned by the government. The existing innovation literature does not, however, provide a clear-cut answer for designing such a policy. We compare policy instruments and argue that public R&D support to clean technologies, either in the form of subsidies or prizes, seems to be the prime candidate for implementing non-generic innovation policy.

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Article provided by Elsevier in its journal Energy Policy.

Volume (Year): 63 (2013)
Issue (Month): C ()
Pages: 1240-1250

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Handle: RePEc:eee:enepol:v:63:y:2013:i:c:p:1240-1250
DOI: 10.1016/j.enpol.2013.09.013
Contact details of provider: Web page: http://www.elsevier.com/locate/enpol

Keywords: Electricity sector; Directed technical change; Policy instruments;

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Find related papers by JEL classification:
  • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
  • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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Cited by:

  1. Burger, Christoph & Weinmann, Jens, 2015. "Innovation performance of the US American and European electricity supply industry," Energy Policy, Elsevier, vol. 86(C), pages 351-359.
  2. Victoria Shestalova & Chiara Criscuolo & Nick Johnstone & Carlo Menon, 2014. "Renewable energy policies and cross-border investment: evidence from M&A in solar and wind energy," CPB Discussion Paper 288, CPB Netherlands Bureau for Economic Policy Analysis.
  3. Yu, Feifei & Guo, Yue & Le-Nguyen, Khuong & Barnes, Stuart J. & Zhang, Weiting, 2016. "The impact of government subsidies and enterprises’ R&D investment: A panel data study from renewable energy in China," Energy Policy, Elsevier, vol. 89(C), pages 106-113.
  4. Joëlle Noailly & Victoria Shestalova, 2013. "Knowledge spillovers from renewable energy technologies, Lessons from patent citations," CPB Discussion Paper 262, CPB Netherlands Bureau for Economic Policy Analysis.
  5. Gawel, Erik & Lehmann, Paul & Purkus, Alexandra & Söderholm, Patrik & Witte, Katherina, 2016. "The rationales for technology-specific renewable energy support: Conceptual arguments and their relevance for Germany," UFZ Discussion Papers 4/2016, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
  6. Newbery, David M., 2016. "Towards a green energy economy? The EU Energy Union’s transition to a low-carbon zero subsidy electricity system – Lessons from the UK’s Electricity Market Reform," Applied Energy, Elsevier, vol. 179(C), pages 1321-1330.
  7. Resende, Marcelo & Strube, Eduardo & Zeidan, Rodrigo, 2014. "Complementarity of innovation policies in Brazilian industry: An econometric study," International Journal of Production Economics, Elsevier, vol. 158(C), pages 9-17.
  8. Joelle Noailly & Victoria Shestalova, 2013. "Knowledge Spillovers from Renewable energy Technologies, Lessons from patent citations," CIES Research Paper series 22-2013, Centre for International Environmental Studies, The Graduate Institute.
  9. Duch-Brown, Néstor & Costa-Campi, María Teresa, 2015. "The diffusion of patented oil and gas technology with environmental uses: A forward patent citation analysis," Energy Policy, Elsevier, vol. 83(C), pages 267-276.
  10. Viktória Kocsis & Bert Hof, 2016. "Energy policy evaluation in practice: the case of production subsidies and DEN-B in the Netherlands," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 18(5), pages 1433-1455, October.
  11. Lehmann, Paul & Söderholm, Patrik, 2016. "Can technology-specific deployment policies be cost-effective? The case of renewable energy support schemes," UFZ Discussion Papers 1/2016, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
  12. Kung, Chih-Chun & Zhang, Ning, 2015. "Renewable energy from pyrolysis using crops and agricultural residuals: An economic and environmental evaluation," Energy, Elsevier, vol. 90(P2), pages 1532-1544.

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