Renewable Portfolio Standards Drive Wind Energy Innovation
A Carnegie Mellon University study has found that Renewable Portfolio Standards (RPS)—regulatory mandates for an increase in renewable energy production—are most likely the strongest policy drivers for the recent increase in wind-related technology patents.
In addition, the researchers determined that tax credits, such as the Production Tax Credit (PTC), and federal research and development investments have not been particularly successful incentives for innovation.
A Renewable Portfolio Standard is a regulation that requires the increased production of energy from renewable energy sources, such as wind, solar, biomass, and geothermal. Other common names for the same concept include Renewable Electricity Standard (RES) at the United States federal level and Renewables Obligation in the UK.
The Renewable Portfolio Standard mechanism generally places an obligation on electricity supply companies to produce a specified fraction of their electricity from renewable energy sources. RPS-type mechanisms have been adopted in several countries, including Britain, Italy, Poland, Sweden, Belgium, and Chile, as well as in 33 of 50 U.S. states, and the District of Columbia.
The growth in patents has been substantial over the past decade, with U.S. wind electricity generation capacity 18 times higher in 2011 than it was in 2001, and the number of patents filed per year 10 times greater. Determining what caused this increase will influence future policy aimed at renewable energy innovation.
“These results make intuitive sense,” said Nathaniel Horner, a Ph.D candidate in the Department of Engineering and Public Policy (EPP). “Programs that provide a steady, long-term signal to investors, like the RPS, are more efficient at encouraging innovation than are policies like tax credits with near-term deadlines.”
The researchers report that PTC, a tax credit that aided those who sold electricity generated by qualified energy sources, may not have been as effective as an RPS due to the fact that, in the U.S., the PTC undergoes annual or biannual cycles of near-expiration and renewal.
“A more stable PTC could potentially create a more balanced mix of construction and technology development,” said Inês Azevedo, an assistant professor in EPP and co-director of the Center for Climate and Energy Decision Making. “The PTC just expired in January 2014, and there is uncertainty on when or whether it will even be re-started.”
When it comes to federally funded research and development, researchers found these programs have been too small to have a large impact on patents.
The study, published in Environmental Research Letters, (see footnote) was conducted by Carnegie Mellon’s Center for Climate and Energy Decision Making (CEDM). The team included Horner, Azevedo and David Hounshell, a professor of social and decision sciences and EPP. Research funding was provided by CMU’s CEDM and EPP.