Association for Public Policy Analysis & Management

In the view of global innovation system, the majority of developing countries catch up advanced technologies by technology diffusion rather than technology innovation. Specific to energy sector, private investment has been highlighted among many other measures of accessing/diffusing renewable energy (RE) to the world population (IEA, 2011).

This study will examine what attracts the private investment in renewable energy infrastructure projects in developing countries. It is often emphasized to have more favorable policy environment for private investment. To date, scholarly literature lacks a systematic analysis on the effects of these policies specifically on the private investment in developing countries’ RE infrastructure. Instead, literature on RE policy focuses on the industrialized countries including China and/or a specific manufacturing industry (e.g. wind). Thus, this study will examine the RE policy effects on private investment in developing countries.

Borrowing from the policy transfer literature, this research will also look at the effect of the vertical policy transfer in attracting private investment in developing countries. Given the high concerns on climate change, the international community has attempted to produce innovative energy policy measures. However, the adoption of such measure specifically in developing countries is unclear. In analyzing policy effect, this study attempts to tease out the policy effect from domestic policy environment and the vertical policy transfer, which refers to the policy transfer from the international policy to national policy (Berry and Berry, 2007).

The result will be of particular interest to both domestic and international policy-makers. This study will contribute to the literature by increasing understanding of the private sector behavior specific to the RE sector in developing economies. Furthermore, it will shed some light on ways to increase private investment in the neglected technologies. The private sector’s inaction without economic incentives results in neglected technologies, which refer to technologies with high demand in the developing countries that is not met by the innovation from the developed countries due to the lack of market potential seeked by the private firms. By looking at the effect of international policy on private investment in the energy infrastructure projects, this research might be able to suggest how to solve the discrepancy in technology supply and demand in developing countries.