The Wind Energy Industry: R&D Funding and International Technological Diffusion

By Simons, Gerald P. W.; Isely, Paul N. | International Advances in Economic Research, February 2013 | Go to article overview

The Wind Energy Industry: R&D Funding and International Technological Diffusion


Simons, Gerald P. W., Isely, Paul N., International Advances in Economic Research


We analyze how technological diffusion from wind turbine manufacturers in Germany and Denmark to the U.S. have been impacted by changes in U.S. federal funding for wind energy research and development (R&D). We find that government energy R&D funding results in greater technological spillovers from Europe to the U.S., but that this impact is dwarfed by the effect on spillovers from real changes in oil prices.

Our analysis of how federal funding for wind energy R&D affects the extent to which manufacturers in the U.S. wind power industry learn from inventors and competitors in other countries has relevance to the manufacturers themselves (in terms of their own R&D efforts) and to policy makers (in terms of the optimal level and form of government incentives). Bosetti et al. (Bosetti, V., C. Carraro, E. Massetti, and M. Tavoni, Energy Economics, 2008), for example, investigated the effect of international knowledge flows on the development of innovations that deal with reducing or stabilizing greenhouse gas emissions. They found that including international technological spillovers resulted in lower levels of optimal R&D investments, particularly in high income countries. Meanwhile, Wiser et al. (Wiser, R., M. Bolinger, and G. Barbose, The Electricity Journal, 2007) found that the major piece of national legislation dealing with wind energy incentives in the U.S.--the Federal Renewable Electricity Production Tax Credit (PTC)--was a significant stimulus to wind power capacity.

Our decision to look at technological diffusion in the wind energy industry is based on the extensive R&D investments, the sizeable amount of patenting conducted by manufacturers, and the substantial changes that the industry has undergone in recent decades. We look at technological diffusion from Denmark and Germany because they are home to major wind turbine manufacturers that have been consistently active in patenting. We use a Poisson fixed-effects regression model with international technological diffusion as a function of changes in U.S. federal spending on wind energy R&D, real oil prices, and the wind capacity in the U.S., Germany, and Denmark (as a percentage of global wind energy capacity). This last variable gives a measure of the relative importance of wind power for each country. We control for drift by including a trend variable in the model.

We measure the technological diffusion or spillovers from Germany or Denmark to the U.S. wind energy industry by counting the number of granted U. …

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