Technology policy and renewable energy: public roles in the development of new energy technologies

Abstract

Efforts to restructure the electric utility industry have led to renewed calls for increased use of renewable energy technologies for electricity generation. These technologies are, for the most part, not yet cost competitive with traditional methods of generation. While wind generation of electricity is perhaps the closest to commercial viability, it is widely believed that further advances in the technology are necessary for it to become fully practicable in the general view. Indeed, public resources continue to be spent toward this end. This paper presents a study of the technological and policy history of the development of wind power in the United States. The primary conclusion is that demand-side policies are needed to encourage not only diffusion of wind energy, but innovation in the technology itself. Weak demand-side policies for wind energy risks wasting the expenditure of public resources on research programs aimed at technological innovation. When these programs operate without the benefit of a market to test the results or provide guidance for future efforts, they are less likely to succeed. Recommendations as to specific public policies for creating a market for renewable energy are made.