Innovation policy for directing technical change in the power sector

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.

The diffusion of patented oil and gas technology with environmental uses: A forward patent citation analysis

“…Rapid development -and in particular diffusion-of clean technologies needs more active policy intervention (Veugelers, 2012). For instance, patent licensing could be a crucial ingredient in the design of innovation policies directed to spur clean technologies particularly in the energy industry (Aalbers et al, 2013). Other policy instruments well suited to deal with technological diffusion are the establishment of environmental standards, eco-taxes, tradable permits, and investment subsidies.…”

Renewable energy from pyrolysis using crops and agricultural residuals: An economic and environmental evaluation

“…New and many forms of the bioenergy production process could be considered and developed to avoid a future energy shortage [1]. Pyrolysis is an interesting alternative that involves the chemical decomposition of organic materials through heat in the absence of oxygen [3], and biomass is converted into three outputs during pyrolysis, including (1) a liquid product called bio-oil; (2) a solid charcoal product (the biochar) that can be used in various processes and (3) a non-condensable gas product containing methane (CH 4 ), hydrogen (H 2 ),carbon dioxide (CO 2 ),carbon monoxide (CO) and higher hydrocarbons, which have been called bio-gas [3,14].…”

Can Technology-Specific Deployment Policies Be Cost-Effective? The Case of Renewable Energy Support Schemes

“…These constraints will also impair private investors' decision, and cannot serve as an argument against technology differentiation. The main implication is rather that governments should avoid supporting "single winners", and instead provide support schemes for several emerging technologies (that are not perfect substitutes) to reduce uncertainties (Azar and Sandén 2011;Aalbers et al 2013). However, such a portfolio approach to RES-E support does not in any way preclude technology differentiation.…”

“…Moreover, it is often argued that technology-specific policies are more prone to regulatory capture by different political interest groups than technology-neutral ones (Lerner 2009;Aalbers et al 2013;SVR 2014). According to Helm (2010), technology differentiation opens up avenues for a "renewable pork barrel", i.e., lobbyists of different RES-E technologies may be able to simultaneously satisfy their potentially heterogeneous interests and maximize their individual rents by promoting technologyspecific subsidy rates.…”

“…However, these benefits are a priori unclear to investors for a variety of uncertainties related to (Yeh and Rubin 2012;Aalbers et al 2013;Purkus et al 2015):…”