Association for Public Policy Analysis & Management

To address the emerging challenges of climate change, energy scarcity, and environmental pollution, both developed countries and less developed countries have adopted various renewable energy policies to accelerate the innovation and transition of their energy sectors. Understanding how different energy policy instruments can work effectively across different institutional settings become significant and urgent for practice and theory. Particularly, there has been a long-standing debate in existing research on whether and how less developed countries can achieve more rapid transition to clean energy.

In this paper, we build a comprehensive framework to examine how a country’s internal knowledge base, clean energy related industrial network, and policy instruments affect clean energy innovation. Using a panel data of 61 countries from 1997 to 2012, we test the impacts of these three main factors on wind power industry’s innovation across countries. We examine the effects of seven renewable energy policies on wind energy innovation and how the policy outcomes are mediated by the inter-sector network. These policy instruments include technology-push policies that directly support wind technology R&D activities (e.g. government R&D) and demand-pull policy tools that induce innovation through creating a market for wind technologies (e.g. feed-in tariff, renewable portfolio standards, and capital investment incentives). Moreover, we emphasize the inter-sector network—manufacturing sectors relevant to the wind power sector—as a key factor that shapes wind industry innovation. To make consistent cross-country comparison, wind power industry’s inter-sector network is measured in terms of its size, strength and density. We use data from the United Nations Commodity Trade Database. These multi-dimension measurements can better capture a country’s industrial network for wind power related industries.

We find that innovation in wind power industry does not only depend on a country’s internal knowledge base and policy incentives, it is also conditioned on wind power industry’s inter-sector network, particularly the size and the density of the network. Policy impacts on wind energy innovation vary across different types of energy policies and are substantially mediated by the inter-sector industrial networks. As a typical demand-side innovation policy tool, feed-in tariffs motivate more innovation when a country’s related industrial network has larger size and higher density. The RPS and government R&D on wind technology can facilitate wind industry innovation only when the inter-sector network reaches to certain size, strength and density.

This paper extends the existing research on renewable energy policies by highlighting the interaction effects between different renewable energy policy instruments and inter-sector industrial networks. Without necessary industrial network, government can hardly motivate the innovation in the wind power sector. This finding sheds light on the development of renewable energy sector in late-mover countries. The strength of inter-sector networks for clean energy vary among developed countries, emerging countries, and less-developed countries. To facilitate the clean energy transition in emerging countries and less-developed countries, it is also important to cultivate a strong industrial network related to the clean energy sector.