Innovation in the energy sector
This study analyses the diffusion of renewable energy (RE) technologies. It analyses the transition dynamics as the sector broadens its energy mix and changes its capital stock. This shift is found to be desirable from an environmental, geopolitical and economic perspective. Yet, it greatly increases the technical and industrial complexity, and is not Pareto-efficient. We focus on wind and solar power, and discuss their promoted deployment against the energy policy principles of the EU. Put drastically, the promotion of ‘sustainability’ undermined ‘competitive’ mechanisms. This has potentially adverse effects on the ‘security of supply’ due to the market design that seeks to keep prices low. RE outperforms conventional facilities. Emergency capacities, however, are also exiting, especially in Germany. If markets are seen as one, there seems to be a threshold of wind and solar power that the current back-up system can incorporate without risking the security of supply. The policy relevant crux lies in conflicting mechanisms: the top-down promotion and planning policies undermine the bottom-up market selection. Then again, without interventions the market does not provide the socially desired outcomes. If tensions aggravate further, the implementation of the new technology base is likely to stall. In addition, the generous promotion resulted in the fast deployment of RE, which may have shortened the ‘formative phase’ of the diffusion process. A longer formative phase would have created more learning effects and fostered more incremental innovations. In addition, costs of subsidies are allocated differently across countries. Mechanisms that allocate costs to the public budget have greater acceptance rates than budget neutral ones that assign costs to consumers. The latter affect households asymmetrically across income classes. Also ownership structures changed; a large number of actors now constitute the energy sector. Citizens increasingly appeared as producers and investors, which stimulated the social acceptance of RE, and in some cases unlocked initially unfavourable vested interests.
|Date of creation:||Jul 2013|
|Contact details of provider:|| |
|Order Information:|| Postal: WWWforEurope Project Office Austrian Institute of Economic Research Arsenal Objekt 20 A-1030 Vienna|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Malerba, Franco, 2002. "Sectoral systems of innovation and production," Research Policy, Elsevier, vol. 31(2), pages 247-264, February.
- Hattori, Toru & Tsutsui, Miki, 2004. "Economic impact of regulatory reforms in the electricity supply industry: a panel data analysis for OECD countries," Energy Policy, Elsevier, vol. 32(6), pages 823-832, April.
- 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.
- Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2009. "The Environment and Directed Technical Change," NBER Working Papers 15451, National Bureau of Economic Research, Inc.
- Acemoglu, Daron & Aghion, Philippe & Bursztyn, Leonardo & Hemous, David, 2011. "The Environment and Directed Technical Change," CEPR Discussion Papers 8660, C.E.P.R. Discussion Papers.
- Acemoglu, Daron & Aghion, Philippe & Bursztyn, Leonardo & Hemous, David, 2010. "The Environment and Directed Technical Change," Seminar Papers 762, Stockholm University, Institute for International Economic Studies.
- Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2010. "The Environment and Directed Technical Change," Working Papers 2010.93, Fondazione Eni Enrico Mattei.
- Suzi Kerr & Richard G. Newell, 2003. "Policy-Induced Technology Adoption: Evidence from the U.S. Lead Phasedown," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 317-343, 09.
- Kerr, Suzi & Newell, Richard, 2001. "Policy-Induced Technology Adoption: Evidence from the U.S. Lead Phasedown," Discussion Papers dp-01-14, Resources For the Future.
- Luc Soete, 2007. "From Industrial to Innovation Policy," Journal of Industry, Competition and Trade, Springer, vol. 7(3), pages 273-284, December.
- Arthur, W Brian, 1989. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events," Economic Journal, Royal Economic Society, vol. 99(394), pages 116-131, March.
- de Nooij, Michiel & Baarsma, Barbara & Bloemhof, Gabriël & Slootweg, Han & Dijk, Harold, 2010. "Development and application of a cost-benefit framework for energy reliability: Using probabilistic methods in network planning and regulation to enhance social welfare: The N-1 rule," Energy Economics, Elsevier, vol. 32(6), pages 1277-1282, November.
- Coase, R H, 1992. "The Institutional Structure of Production," American Economic Review, American Economic Association, vol. 82(4), pages 713-719, September.
- Coase Ronald, 1991. "The Institutional Structure of Production," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 2(4), pages 1-10, December.
- Coase, Ronald H., 1991. "The Institutional Structure of Production," Nobel Prize in Economics documents 1991-1, Nobel Prize Committee.
- Oz Shy, 2011. "A Short Survey of Network Economics," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(2), pages 119-149, March.
- Oz Shy, 2010. "A short survey of network economics," Working Papers 10-3, Federal Reserve Bank of Boston.
- Miklós Antal & Ardjan Gazheli & Jeroen van den Bergh, 2012. "Behavioral Foundations of Sustainability Transitions," WWWforEurope Working Papers series 3, WWWforEurope.
- Antal, Miklós & Hukkinen, Janne I., 2010. "The art of the cognitive war to save the planet," Ecological Economics, Elsevier, vol. 69(5), pages 937-943, March.
- Menanteau, Philippe & Lefebvre, Herve, 2000. "Competing technologies and the diffusion of innovations: the emergence of energy-efficient lamps in the residential sector," Research Policy, Elsevier, vol. 29(3), pages 375-389, March.
- Lijesen, Mark G., 2007. "The real-time price elasticity of electricity," Energy Economics, Elsevier, vol. 29(2), pages 249-258, March.
- Faye Steiner, 2003. "Regulation, industry structure and performance in the electricity supply industry," OECD Economic Studies, OECD Publishing, vol. 2001(1), pages 143-182.
- Pollitt, Michael, 2009. "Evaluating the evidence on electricity reform: Lessons for the South East Europe (SEE) market," Utilities Policy, Elsevier, vol. 17(1), pages 13-23, March.
- Pollitt, M., 2007. "Evaluating the evidence on electricity reform: Lessons for the South East Europe (SEE) market," Cambridge Working Papers in Economics 0756, Faculty of Economics, University of Cambridge.
- Munksgaard, Jesper & Morthorst, Poul Erik, 2008. "Wind power in the Danish liberalised power market--Policy measures, price impact and investor incentives," Energy Policy, Elsevier, vol. 36(10), pages 3940-3947, October.
- David I. Stern & Cutler J. Cleveland, 2004. "Energy and Economic Growth," Rensselaer Working Papers in Economics 0410, Rensselaer Polytechnic Institute, Department of Economics.
- Battaglini, Antonella & Komendantova, Nadejda & Brtnik, Patricia & Patt, Anthony, 2012. "Perception of barriers for expansion of electricity grids in the European Union," Energy Policy, Elsevier, vol. 47(C), pages 254-259.
- Espey, James A. & Espey, Molly, 2004. "Turning on the Lights: A Meta-Analysis of Residential Electricity Demand Elasticities," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(01), April.
- Espey, James A. & Espey, Molly, 2004. "Turning on the Lights: A Meta-Analysis of Residential Electricity Demand Elasticities," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 36(01), pages 65-81, April.
- Branker, K. & Pathak, M.J.M. & Pearce, J.M., 2011. "A review of solar photovoltaic levelized cost of electricity," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4470-4482.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
- Roessner, J. David, 1984. "Commercializing solar technology: The government role," Research Policy, Elsevier, vol. 13(4), pages 235-246, August.
- Angela Köppl & Karl Steininger, 2012. "The climate challenge for the energy system," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 39(2), pages 157-163, May.
- Nemet, Gregory F., 2009. "Demand-pull, technology-push, and government-led incentives for non-incremental technical change," Research Policy, Elsevier, vol. 38(5), pages 700-709, June.
- C. Wilson & A. Grubler & N. Bauer & V. Krey & K. Riahi, 2013. "Future capacity growth of energy technologies: are scenarios consistent with historical evidence?," Climatic Change, Springer, vol. 118(2), pages 381-395, May. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:feu:wfewop:y:2013:m:7:d:0:i:31. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.