Market and Non-market Policies for Renewable Energy Diffusion: A Unifying Framework and Empirical Evidence from China’s Wind Power Sector

Abstract

We provide a comprehensive framework of analyzing the diffusion process of renewable technology, incorporating epidemic and pecuniary effects. Relying on a panel dataset consisting of information from 1207 CDM wind projects in thirty provinces over the period 2004-2011, we find strong evidence on the dominant role of the epidemic effect and new evidence on pecuniary effects that generate a diminishing marginal effect of profitability in inducing technology adoption. Our numerical simulation demonstrates that the epidemic effect can play a quantitatively important role in the spread of renewable energy technology and markedly enhance the optimal social welfare. Our findings convey important policy implications for regulators when choosing policy instruments to enhance the diffusion and adoption of clean technology. Price instruments should be complemented by a wide range of non-market instruments to address non-market barriers. Policy interventions should be taken using a systemic approach.

Energy R&D Investments and Emissions Abatement Policy

“…Two approaches to model the technological progress are the 'learning-by-doing' approach and the 'learning-by-researching' approach. The 'learning-by-doing' approach (Benthem et al, 2008;Grübler and Messner, 1998;Liu and Wei, 2016;Manne and Richels, 2004) models that the energy cost is reduced by experience accumulation with a one-factor learning curve. The 'learning-by-researching' approach (Barreto and Kypreos, 2004;Miketa and Schrattenholzer, 2004) models that the energy cost is lowered by R&D investments and experience accumulation with a two-factor learning curve.…”

Impact of the Feed-in Tariff Policy on Renewable Innovation: Evidence from Wind Power Industry and Photovoltaic Power Industry in China

“…With the growing consensus of environmental protection, energy security, and emission reduction, increasing the share of renewable energy can significantly contribute to sustainable development (Liu and Wei, 2016;Wang et al, 2018). The generation of wind power and photovoltaic power in China accounts for the vast majority of renewable energy generation, so it is important to develop wind power and photovoltaic power industries.…”