When and How to Support Renewables?—Letting the Data Speak - Green Energy and Efficiency: An Economic Perspective - page 285

When and How to Support
Renewables? — Letting the Data Speak

Georg Zachmann, Amma Serwaah-Panin and Michele Peruzzi

Abstract Low-carbon energy technologies are pivotal for decarbonising our econ-
omies up to 2050 and being able to at the same time ensure secure and affordable
energy supplies. Consequently, innovation that reduces the cost of low-carbon energy
sources would play an important role in reducing the cost of the transition. In this
paper we want to assess the two most prominent innovation policy instruments (i)
public research, development and demonstration (RD&D) subsidies and (ii) public
deployment policies. Using a Lasso-regression we are able to select a model that is
best able to perform in-sample predictions of patenting behaviour and international
competitiveness in 28 OECD countries over 20 years. This approach allows including
two dozen variables as well as a wide range of lags of the variables and interactions
between them in total some 47,000 variables. Our results indicate that both

deployment and RD&D coincide with increasing knowledge generation and
improving competitiveness of renewable energy technologies. According to our
estimates, if Germany had invested one standard deviation more in deployment and
RD&D support for wind technology than it actually did from 2000 on, the number of
German wind patents would have been 166 % higher in 2009. If it only increased
deployment the number of patents would have been 20 % higher and if it only
increased RD&D the number of patents would have been 122 % higher. This indi-
cates two things. First, both support schemes together have a higher effect than the
two individually. And second, RD&D support is unsurprisingly more effective in
driving patents. Thereby, timing matters. Current wind deployment based on past
wind RD&D spending coincides best with wind patenting. If we look into compet-
itiveness we

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nd a similar picture. A hypothetical increase in German deployment
and RD&D support for wind technology by one standard deviation from 2000 on

Research assistance by Nicolas Sch ö ll is gratefully acknowledged.