Technology and the diffusion of renewable energy

We consider investment in wind, solar photovoltaic, geothermal, and electricity from biomass and waste across 26 OECD countries from 1991 to 2004. Using the PATSTAT database, we obtain a comprehensive list of patents for each of these technologies throughout the world, which we use to assess the impact of technological change on investment in renewable energy capacity. We consider four alternative methods for counting patents, using two possible filters: weighting patents by patent family size and including only patent applications filed in multiple countries. For each patent count, we create knowledge stocks representing the global technological frontier. We find that technological advances do lead to greater investment, but the effect is small. Investments in other carbon-free energy sources, such as hydropower and nuclear power, serve as substitutes for renewable energy. Comparing the effectiveness of our four patent counts, we find that both using only patents filed in multiple countries and weighting by family size improve the fit of the model.