Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/125685
Authors: 
Friesenbichler, Klaus
Year of Publication: 
2013
Series/Report no.: 
WWWforEurope Working Paper 31
Abstract: 
This study analyses the diffusion of renewable energy (RE) technologies. It analyses the transition dynamics as the sector broadens its energy mix and changes its capital stock. This shift is found to be desirable from an environmental, geopolitical and economic perspective. Yet, it greatly increases the technical and industrial complexity, and is not Pareto-efficient. We focus on wind and solar power, and discuss their promoted deployment against the energy policy principles of the EU. Put drastically, the promotion of ‘sustainability’ undermined ‘competitive’ mechanisms. This has potentially adverse effects on the ‘security of supply’ due to the market design that seeks to keep prices low. RE outperforms conventional facilities. Emergency capacities, however, are also exiting, especially in Germany. If markets are seen as one, there seems to be a threshold of wind and solar power that the current back-up system can incorporate without risking the security of supply. The policy relevant crux lies in conflicting mechanisms: the top-down promotion and planning policies undermine the bottom-up market selection. Then again, without interventions the market does not provide the socially desired outcomes. If tensions aggravate further, the implementation of the new technology base is likely to stall. In addition, the generous promotion resulted in the fast deployment of RE, which may have shortened the ‘formative phase’ of the diffusion process. A longer formative phase would have created more learning effects and fostered more incremental innovations. In addition, costs of subsidies are allocated differently across countries. Mechanisms that allocate costs to the public budget have greater acceptance rates than budget neutral ones that assign costs to consumers. The latter affect households asymmetrically across income classes. Also ownership structures changed; a large number of actors now constitute the energy sector. Citizens increasingly appeared as producers and investors, which stimulated the social acceptance of RE, and in some cases unlocked initially unfavourable vested interests.
Subjects: 
Cost incidence
diffusion
ecological innovation
economic strategy
electricity
European economic policy
industrial innovation
industrial policy
innovation
innovation policy
institutional reforms
multi-level governance
new technologies
ownership
policy options
renewable energy
security of supply
smart meter
social construction of technology
social innovation
sustainable growth
technology promotion
JEL: 
O31
O33
P48
Q48
Q58
Document Type: 
Working Paper
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