Energy policy for the transition: Designing policies for harnessing technological change

Abstract

The light that technological change shines on human progress casts growing shadows. The unparalleled progress in the quality of life around the World since the Industrial Revolution has been achieved through the combustion of vast amounts of fossil fuels. The accumulation of the resulting CO2 in the atmosphere is changing the climates of the Earth, threatening to halt and undo the prosperity achieved thus far. To address this challenge, the main task is as well-known as difficult to complete: the decarbonization of the World’s economies. As an initial step in this direction, priority should be given to the decarbonization of electricity generation, the single largest emitter of fossil fuel CO2. Technological change emerges, in this front, as a crucial force to recruit for this effort, and policies as an essential tool to do so. However, despite climate and energy policies slowly growing in number and stringency, the target of a consistent and substantial decline of emissions remains elusive. The rise of entirely new socio-technical systems around renewable energy technologies has demonstrated the ability of policy to steer the innovation and diffusion of technology, but also the risks from tinkering with the rate of technological change without a firm grasp on it. This state of affairs accentuates the need for new and better policies that cannot only steer the direction but also manage the rate of technological change. This thesis aims at contributing to tackling this need by addressing the question of how to design energy policies for harnessing technological change. In order to address this question, this dissertation adopts an evolutionary economics perspective that draws on the literature on technology and innovation policy to explore the design of energy policies at the levels of the policy mix and policy instrument. Focusing on the socio-technical system of solar photovoltaics (PV), as a key technology for the decarbonization of power generation, and one that can shed light on what to expect from similarly essential technologies, the research in this thesis takes a look at the recent past searching for lessons for the near future. In particular, by diving into the experiences with policies for the diffusion of PV – mainly, feed-in tariff schemes – in Germany and other European countries during the past three decades, the papers in this dissertation reveal important new insights that hold major implications for future policies. The tool for uncovering such knowledge was, in all four instances, agent-based modelling, which enabled a rigorous simulation and quantitative evaluation of alternative policy designs, and a careful representation of the complexity and uncertainty surrounding the phenomena dealt with in the research question. The results from this thesis contribute to the literature in three main ways. First, developing an understanding not only of how to accelerate the rate of technological change but how to manage its speed. Second, by suggesting a shift of the focus for adaption from policy-makers to policy designs, this dissertation provides a stimulus into a new direction to the theory on evolutionary economics. Third, by demonstrating the suitability of quantitative analyses using agent-based modelling for investigating relevant policy questions, this dissertation provides a methodological contribution. Finally, numerous implications derive for policy-makers. Two of the most prominent ones are, on the one hand, the reiteration of the necessity of adapting policy designs and mixes to the characteristics of the socio-technical system targeted by public interventions, and, on the other hand, the demonstration of the extremely non-linear and non-constant relations between policy inputs, such as public R&D expenditures and feed-in tariff levels, and policy outcomes, such as PV diffusion, and job creation, and how choices in policy design can shape these relations.