Competition: Is it good for innovation in renewable sector technologies? Evidence based on patent counts
This paper examines the impact of the electricity sector's market structure on innovation in five renewable energy technologies (Wind, Solar, Hydro, Ocean and Geothermal) in order to determine if innovations are associated with competitive markets. The analysis builds on the model of Johnstone et al. (2010), using a proxy (a scaled electricity deregulation index) for market structure and data on patent counts for 20 OECD countries from 1980 to 2005 obtained from the European Patent Office. The main finding suggests that after controlling for innovation inducing policies, market forces and individual country characteristics, higher innovation levels are associated with deregulated markets for wind, solar and renewable sectors overall. Interaction effects also imply that the association between innovation and policies differ by market structure. For renewable sectors overall, investment and tax incentive policies are correlated with higher patent activity under deregulated market conditions whereas voluntary programs and quantitative obligations are associated with greater innovation in less liberalized markets.
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