The Two Faces of Market Support – How Deployment Policies Affect Technological Exploration and Exploitation in the Solar Photovoltaic Industry

ETH Zurich, Department of Management, Technology, and Economics, Weinbergstrasse 56/58, 8092 Zurich, Switzerland
Research Policy (Impact Factor: 2.85). 02/2013; 42(4):989-1003. DOI: 10.1016/j.respol.2013.01.002

ABSTRACT The recent years have seen a strong rise in policies aiming to increase the diffusion of clean energy technologies. While there is general agreement that such deployment policies have been very effective in bringing technologies to the market, it is less understood how these policies affect technological innovation. To shed more light on this important question, we conducted comparative case studies with a global sample of 9 firms producing solar photovoltaic (PV) modules, complemented by in-depth interviews with 16 leading PV industry experts. We propose that, on the one hand, policy-induced market growth serves as an important catalyst for innovative activity as it raises the absolute level of firm investments in technological exploration. On the other hand, however, deployment policies create an incentive for firms pursuing more mature technologies to shift their balance between exploitation and exploration toward exploitation. Firms focusing on less mature technologies cannot tap the potentials of exploitative learning to the same extent as those with more mature technologies. Therefore, stimulating strong market growth may raise the barrier to market entry for less mature technologies. We conclude that, when designing deployment policies, great care should be taken to avoid adverse effects on technological diversity and a premature lock-in into more established technologies.

1 Bookmark
  • [Show abstract] [Hide abstract]
    ABSTRACT: Rooftop photovoltaic (PV) power generation stands as a promising technology for the transition towards a low-carbon power and buildings sector. However, in the past deployment has been strongly dependent on policy support. With the recent rapid decrease in module costs, rooftop PV is exhibiting a growing potential to be an attractive investment even in the absence of subsidies. While many drivers of economic performance have been investigated in isolation, a holistic analysis of how realistic combinations of influencing factors determine rooftop PV׳s economics is still missing. We identify the most important influencing factors through a comprehensive review of the literature. We then provide a model-based techno-economic analysis of a small-scale grid-connected residential building PV system, assessing how region-specific geographic, technological, and economic parameters jointly influence performance. We find that in many regions rooftop PV can already today be an attractive investment, even in the absence of subsidies. No regional influencing factor can in isolation guarantee or impede performance. Moreover, in most regions it might be possible to further improve economic performance. Self-consumption is identified as a likely driver of value in the future, while low electricity prices (and thus fossil fuel subsidies) present a powerful barrier in some regions. Based on these insights, we discuss implications for policy makers and investors with regard to recognizing and shaping attractive markets and investments.
    Renewable and Sustainable Energy Reviews 02/2015; 42:932-951. DOI:10.1016/j.rser.2014.10.077 · 5.51 Impact Factor
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: Understanding the long-term patterns of innovation in energy technologies is crucial to informing public policy planning in the context of climate change. This paper analyzes which of two common models of innovation over the technology life-cycle – the product-process innovation shift observed for mass-produced goods or the system-component shift observed for complex products and systems – best describes the pattern of innovation in energy technologies. To this end, we develop a novel, patent-based methodology to study how the focus of innovation changes over the course of the technology life-cycle. Specifically, we analyze patent-citation networks in solar PV and wind power in the period 1963-2009. The results suggest that solar PV technology followed the life-cycle pattern of mass-produced goods: early product innovations were followed by a surge of process innovations in solar cell production. Wind turbine technology, by contrast, more closely resembled the life-cycle of complex products and systems: the focus of innovative activity shifted over time through different parts of the product, rather than from product to process innovations. These findings point to very different innovation and learning processes in the two technologies and the need to tailor technology policy to technological characteristics. They also help conceptualize previously inconclusive evidence about the impact of technology policies in the past.
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: We analyze how a product's design hierarchy shapes the evolution of the underlying body of technological knowledge, building on the literature on technological evolution in complex products. This literature suggests that the design hierarchy of a product can have an ordering effect on the evolution of commercialized artifacts, in particular when product design decisions on high levels of the design hierarchy set the agenda for subsequent variation and experimentation on lower levels. We extend this literature by analyzing the design hierarchy's effect on the evolution of the industry's knowledge base, using the case of wind turbine technology over the period 1973-2009. We assess the technological focus of patents along the core trajectory of knowledge generation, identified through a patent-citation network analysis, and link it to a classification of technological problems into different levels in the design hierarchy. Our analysis suggests that the evolution of an industry's knowledge base along a technological trajectory is not a unidirectional process of gradual refinement: the focus of knowledge generation shifts over time between different subsystems in a highly sequential pattern, whose order is strongly influenced by the design hierarchy. Each of these shifts initiates a new process of integration of industry-external knowledge into the knowledge base, thus opening windows of competitive opportunity for potential entrants with strong knowledge positions in the subsystem that has moved into the focus of innovation. We discuss implications for the debate on supply-side and demand-side influences along technological trajectories and for the understanding of the competitive advantage of specific knowledge positions of firms and nations.


Available from
May 19, 2014