Gregory F. Nemet                     Greg Nemet

PhD Dissertation
"Policy and Innovation in Low-Carbon Energy Technologies"
May, 2007

Ch. 1  Introduction: Innovation and Climate Policy

Ch. 2  Technology Push: U.S. Energy Research and Development

Ch. 3  Demand Pull: Policies, Diffusion, and Improvements in California Wind Power

Ch. 4  Inside the Innovation Process: Sources of Cost Reductions in PV

Ch. 5  Beyond Diffusion: Net Radiative Forcing from Widespread Deployment of PV

Ch. 6  Summary and Implications for Policy

Nemet, G. F. (2007). "Policy and innovation in low-carbon energy technologies." Energy and Resources Group. Berkeley, CA, University of California. PhD Dissertation.

Professor Daniel Kammen, Chair
Professor Severin Borenstein
Professor Margaret Taylor

Reducing greenhouse gas (GhG) emissions by several gigatons of CO2-equivalents per year, while affordably meeting the world’s growing demand for energy, will require the deployment of tens of terawatts of low-carbon energy production and end-use technologies over the next several decades.  Improvements are needed because existing technologies are expensive, limited in availability, or not sufficiently reliable for deployment at that scale. At the same time, the presence of multiple market failures implies that private actors will under-invest in climate-related innovation without government intervention. To help resolve this impasse, policy makers will need to select from a vast set of policy instruments that may stimulate innovation in, and adoption of, these technologies.

In this thesis, four studies are used to contribute to understanding the characteristics of the innovation process—and its interactions with policy—for low-carbon energy technologies. These include analyses of: (1) the trends and future prospects for U.S. energy R&D investment, (2) the effectiveness of demand-pull for wind power in California, (3) the sources of cost reductions in photovoltaics (PV), and (4) the effect of widespread deployment of PV on the earth’s albedo. When considering these studies together, the uncertainty in expectations about future policies that increases the risk for investments in innovation emerges as a central problem. As observed in multiple instances in this thesis, the lags between investments in innovation and the payoffs for private actors can last several years. These distant payoffs rely heavily on the status of future government policies because externalities are pervasive for the development of climate-relevant technologies. When expectations about the future level—or existence—of these policy instruments are uncertain, then firms discount the value of these future policies and under-invest in innovation.

The diffusion of institutional innovation is a necessary precondition for the technological innovation required to address climate change. If long-term GhG reduction targets are to be relied upon to stimulate innovation in low-carbon energy technologies, then policy makers need to address the competing goals of increasing the time-consistency of policy and retaining the ability to make adjustments that incorporate new information.

Related papers
Nemet, G.F. and D.M. Kammen “U.S. Energy Research and Development: Declining Investment, Increasing Need, and the Feasibility of ExpansionEnergy Policy 35(1): 746-755.

Nemet, G.F.Beyond the Learning Curve: Factors Influencing Cost Reductions in PhotovoltaicsEnergy Policy 34(17): 3218-3232.

Updated May 2007