Wind Power in Europe: A Simultaneous
Innovation–Diffusion Model |
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Authors: | Patrik Söderholm Ger Klaassen |
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Institution: | 1. Lule? University of Technology, Economics Unit, 971 87, Lule?, Sweden 2. European Commission, Directorate General for Research, B-1049, Brussels, Belgium
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Abstract: | The purpose of this paper is to provide a quantitative analysis of innovation and diffusion in the European wind power sector.
We derive a simultaneous model of wind power innovation and diffusion, which combines a rational choice model of technological
diffusion and a learning curve model of dynamic cost reductions. These models are estimated using pooled annual time series
data for four European countries (Denmark, Germany, Spain and the United Kingdom) over the time period 1986–2000. The empirical
results indicate that reductions in investment costs have been important determinants of increased diffusion of wind power,
and these cost reductions can in turn be explained by learning activities and public R&D support. Feed-in tariffs also play
an important role in the innovation and diffusion processes. The higher is the feed-in price the higher is, ceteris paribus,
the rate of diffusion, and we present some preliminary empirical support for the notion that the impact on diffusion of a
marginal increase in the feed-in tariff will differ depending on the support system used. High feed-in tariffs, though, also
have a negative effect on cost reductions as they induce wind generators to choose high-cost sites and provide fewer incentives
for cost cuts. This illustrates the importance of designing an efficient wind energy support system, which not only promotes
diffusion but also provides continuous incentives for cost-reducing innovations.
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Keywords: | Europe innovation learning curve policy technology diffusion wind power |
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