Econonomics of Energy and Environmental Policy

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Do auctions promote innovation in renewable energy technologies? An empirical analysis of solar PV

Innovation in low-carbon technologies and, particularly, renewable electricity technologies (RETs) will be a critical component of the decarbonised energy transition. RET innovation requires a wise combination of supply-push (R&D support) and demand-pull policies (support for deployment). Renewable energy auctions are currently the main instrument to support the deployment of renewable electricity capacity worldwide. Thus, auctions indirectly contribute to the energy transition (supporting RET innovation) in addition to supporting their deployment. However, the innovation effects of auctions have received scarce attention in the literature. This paper analyses whether auctions generate an incentive to innovate in solar PV, and whether this incentive is greater or smaller than with other deployment instruments. We use an unbalanced panel dataset of 20 OECD countries with patent data and renewable energy auctions for the period 2000-2016 and perform an econometric analysis with an estimation of a negative binomial model. Our results show that auctions have not had a statistically significant effect on PV innovation. In contrast, administratively-set feed-in tariffs and renewable certificates have had a positive and significant impact on PV innovation. The potential negative innovation effects of auctions can be mitigated by combining them with other instruments and including appropriate design elements which encourage innovation.
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Keywords: Innovation, auctions, solar PV, patents

DOI: 10.5547/2160-5890.12.2.lgar

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Published in Volume 12, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


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