Abstract
AbstractInnovation is an important part of energy policy, and encouraging clean energy innovation is often an explicit goal of policy makers. For local governments, promoting clean energy innovation is seen not only as a pathway to a cleaner economy but also as a tool for promoting the local economy. But is such optimism warranted? There is a substantial literature examining the relationships between innovation and environmental policy, but few studies focus explicitly on innovation at the state and local level. In this paper, I provide key lessons from research on clean energy innovation, focusing on lessons relevant for state and local governments. I then summarize the results of a recent working paper by Fu et al. (2018) that studied wind energy innovation across individual states in the United States. While state-level policies can promote clean energy innovation, it is overall market size that matters most. Thus, innovation need not occur in those states most actively promoting clean energy. I conclude with lessons for state and local governments drawn from both this work and the broader literature on energy innovation.
Highlights
Innovation is an important part of energy policy, and encouraging clean energy innovation is often an explicit goal of policy makers
Meeting today’s most ambitious climate policy goals, such as California’s target of relying solely on zero-emission energy sources by 2045 or the Green New Deal’s goal of achieving 100 percent zero emission power sources in 10 years’ time, requires transitioning from an energy system dominated by fossil energy sources to cleaner, carbon-free, technologies
Recent innovations have lowered the costs of electricity from solar photovoltaic (PV) and onshore wind turbines to levels competitive with electricity generated from fossil fuels
Summary
Many of the benefits from technology policy will spill over to other states. Some states require that a minimum share of renewable energy come from solar technology (e.g., a carve-out for solar) These requirements promote the development of solar energy and increase the short-run costs of generating electricity. Feed-in tariffs for solar energy raised electricity prices in Germany Innovation induced by these feed-in tariffs increase the external benefits of those subsidies by 22 percent. Most of those benefits are generated by future solar panel adoption that occurs outside Germany due to the lower solar panel prices that result (Gerarden 2018). Because building codes are set at the state and local level in the United States, coordination among local governments is more likely to create the market scope necessary to spur innovation in response to building code changes
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