Renewable energy policy performance and technological innovation in Africa: A Bayesian estimation

Abstract

This paper examines the effect of renewable energy policy performance on innovation activity in the renewable energy sector in a sample of thirty-three African countries during the period 2010–2021. The policy performance we use covers carbon pricing, incentives for grid-connected and distributed renewable energy generation, fiscal incentives for renewable energy, legal framework for renewable energy, off-take risk, network connection and pricing, and policy design attributes. Using patent data and renewable policy performance to fit a Bayesian negative binomial, our results generally show that renewable energy policy in the region supports technological innovation in the sector. Policy initiatives focused on market-based incentives (auctions and tariffs), renewable portfolio standards, risk mitigation, network connection and pricing are largely responsible for a strong and statistically significant relationship between renewable energy policy and innovation activity. We also find evidence that intellectual property rights, renewable energy capacity, electricity prices, affordability of renewable energy, and openness to trade proxies are important drivers of innovation activity in the renewable energy sector. Our analysis finds no evidence that research and development is a significant determinant of renewable energy innovation in African countries. Our results serve to inform policymakers on the areas in which specific policy actions are most effective at promoting innovation in the renewable energy sector.