Do deployment policies pick technologies by (not) picking applications?—A simulation of investment decisions in technologies with multiple applications

Abstract

The role of deployment policies that aim to foster technological change has grown considerably, especially in the fields of energy and climate. However, recent research has shown that the adoption of deployment policies carries the potential of locking in the technology that is most cost-effective at the point of policy introduction, but may be inefficient in the long term. The present paper contributes to the emerging literature on the role of deployment policies in creating path-dependency and eventually technology lock-in. While previous studies focused on the relationship between lock-in and the technology-specificity of deployment policies, this paper introduces a new factor: the existence of multiple applications for a technology. We argue that this factor is highly relevant for technological lock-in and should be considered by policy makers. To support our argument, we simulate the competition among four stationary battery technologies across energy system applications in an investment simulation model. This simulation shows that the degree of competition among technologies differs strongly across applications, which corresponds with a highly varying lock-in probability. Hence, selecting applications in deployment policies very likely corresponds to selecting technologies. We discuss the implications of these results for both policy makers and for the academic debate on deployment policies and technological lock-in as well as on technology assessment and governance more generally. Based on the notion that policies can have different technology-specificity levels, we develop the idea of the application-specificity of policies and provide examples of currently enacted deployment policies that vary in terms of their technology and application specificity.