Explaining the Slow Pace of Energy Technological Innovation Why Market Conditions Matter?

As a useful complement to numerous innovation policy studies from a normative perspective, this paper provides a positive framework to analyze the basic economic mechanism of energy technological innovation and explains its slow pace of technological progress. We find that the capital-intensiveness of energy technology is an inhibiting factor to catalyze market size effect and slows innovations and diffusions of energy technology in the market. We also show that the substantial homogeneity of energy products leads to both a monopolistic market structure on the supply side and a weak level of positive pecuniary externality on the demand side, both dampening the incentive of innovation. On the basis of our economic analysis, we recommend that a package of policy responses to accelerating energy innovation should include 1) downsizing “heavy” assets of energy technologies; 2) deregulating monopolistic energy-supplying markets; and 3) differentiating the homogenous energy products.


Issue Date:
2014-02
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/165758
Total Pages:
27
JEL Codes:
Q55; Q58; Q43; Q48; O31
Series Statement:
ERM
18.2014




 Record created 2017-04-01, last modified 2017-04-26

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