The Role of Public Policies for Energy Technology Development : Their Innovation Effects and Interaction

Abstract: The overall purpose of this thesis is to analyze the role of public policies for technological development (i.e., innovation) in the renewable energy sector. The thesis consists of an introductory part and three self-contained papers.Paper I investigates the innovation effects of renewable energy support policies and their interaction in the empirical context of solar photovoltaic (PV) technology. This is achieved by using data on solar PV patent counts and policies targeting solar PV development across 13 countries over the time period 1978-2008. These policies include public R&D support to solar PV as well as two different types of production support schemes: feed-in tariffs (FIT) and renewable energy certificates (REC). The data are applied to a negative binomial model and the results indicate that: (a) both FIT and REC schemes stimulate solar PV patenting activity although the impact of the former is of a larger magnitude; (b) public R&D has been more influential than the production support schemes in inducing solar PV innovation; and (c) policy interaction exists in that the innovation effect of public R&D support is greater at the margin if it is accompanied by the use of FIT schemes for solar PV.Paper II analyzes the role of pilot and demonstration plants (PDPs) in technological development. As surprisingly little explicit attention has been devoted to this issue in prior research, the existing literature is synthesized and categorized, and an agenda is proposed for future work. Scholarly work on PDPs can be found across several research fields and the discussion in the paper is organized around three research streams: engineering and natural science research, technology and innovation management, and innovation systems. Based on searches in key bibliographic databases more than 200 publications were identified and reviewed. According to the literature synthesis, the plants bridge basic knowledge generation and technological breakthroughs on the one hand (promoted by public R&D support), and exploitation of new technology for commercial use on the other (promoted by production support schemes). Still, more research on the subject is needed. For instance, the role of PDPs for inducing innovation needs to be assessed in a rigorous empirical setting as this issue has only been researched in conceptual studies or retrospective case studies based entirely on qualitative or descriptive approaches. Paper III provides an econometric analysis of the innovation impacts of publicly funded PDP activities in the case of advanced biofuel technology. This is achieved by using data on biofuel patent counts and PDPs across eight European countries over the time period 1980-2011. It is acknowledged that PDPs have two main objectives: testing and optimization of technology (experimental PDPs), and diffusion and commercialization of technology (exemplary PDPs). The data are applied to a negative binomial model and indicate that: (a) PDP activities are overall positively correlated with biofuel patents; (b) experimental PDPs are more innovation-promoting than exemplary PDPs; and (c) experimental PDP activities encourage innovation also indirectly through knowledge spillovers.The overall conclusion is that environmental policy encourages renewable energy innovation. Public R&D support as well as production support schemes are important for inducing innovation, and there are interactions between these policy types which must be acknowledged when designing public support. As public R&D support is more innovation-promoting when accompanied by the use of certain production support schemes, these policies should be employed simultaneously. Moreover, publicly funded PDP activities foster innovation and thus, their role must also be acknowledged when designing public policy.