Directed Technical Changeand Renewable Energies:Policy Incentives to Promote Solar Innovations

This paper examines determinants of directed technical change at the firm level in the electricity generation industry. We investigate the combined effect of different policy incentives to promote solar innovations. We study the impact of electricity prices, R&D subsidies, public direct investments, feed-in tariffs, and other financial support, as well as possible offsetting effects of public support to wind and fossilfuel energy technologies for firms in 12 European countries. In total, we consider about 33,000 patents for 2,306 firms over the period 1980–2015. The empirical analysis is conducted on both firms specialized in only solar energy technology and firms innovating in two or more technologies. The results provide robust evidence on induced technical change. The effects of public policy are technologically significant. JEL: C23; O31; O33; Q42; Q55