The Implications of Policy Stability for Renewable Energy Innovation in the United States, 1974–2009

Abstract

Government support and commitment are of particular importance for renewable energy technology innovation activities, which are highly contingent on policy and market uncertainty. The research focus of this article is to examine the relationship between policy stability in public resource allocation and policy outcomes in renewable energy technologies. With time‐series cross‐sectional analyses, we test effects of both the stability and magnitude of federal R&D expenditures on patent applications in five renewable energy sectors (i.e., solar, wind, hydropower, geothermal, and bioenergy) from 1974 to 2009. The findings show that technology innovation is affected by both the magnitude and stability of government financial commitment. Nevertheless, when industries perceive government support over longer time frames, the magnitude effect loses explanatory power to the stability effect. In addition to federal R&D expenditures, policies pertaining to technology commercialization and marketization are a critical determinant of innovation activities. This study demonstrates that incremental, predictable, and credible expenditures facilitate renewable energy technology development. Conversely, a boom‐bust cycle of resource support fails to translate policy goals into intended results.