Nathaniel Horner, doctoral student, Engineering and Public Policy Department, Carnegie Mellon University
In a nutshell: the significant increase in wind turbine patenting activity in the last decade has coincided with the adoption of state-level renewable portfolio standards or RPSs in the U.S. Conversely, the production tax credit – while a strong incentive for turbine construction – has not been a driver of innovation, and the federal research and development program has had little effect.
In the U.S. individual states adopting RPS policies have set a schedule for achieving renewable electricity generation targets. As these targets can extend 10 or 20 years out and are generally mandated by law, they can provide a strong positive signal to firms that investments in renewable technology innovation will pay off.
The PTC offers a tax credit on each unit of wind electricity generated during the first 10 years of service. In contrast to the RPS, the implementation of the PTC in the U.S. provides a very short time horizon in which firms can take action: since 2000, the PTC has only been extended in one to two-year increments and has actually lapsed three times. This cycle results in rapid construction of wind farms using current technology but provides no guarantee to technology developers that a market will still exist by the time new products are ready for deployment.
Federal R&D is a direct investment in innovation and should have a strong positive effect on patenting. In the case of wind power, however – except for a brief period during the 1980s – R&D spending has been at too low a level to have a significant impact.
Of course, innovation is not the primary goal of policies such as the PTC and RPS, which seek to increase wind generation capacity. However, this work shows that well-designed policies can balance growth through construction and growth through improvement in technology. A key factor in promoting the latter is a policy with a long-term time horizon commitment.
Related links suggested by the author:
- Centre for Climate and Energy Decision Making
- Effects of government incentives on wind innovation in the United States Nathaniel Horner et al 2013 Environ. Res. Lett. 8 044032
About the author: Nathaniel Horner is a doctoral student in the Engineering and Public Policy (EPP) department at Carnegie Mellon University, U.S.. Inês Azevedo is an assistant professor in the EPP and co-director of the Center for Climate and Energy Decision Making. David Hounshell is a member of the Department of Social and Decision Sciences and an affiliate member of EPP.
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