Renewables and innovation: did policy induced structural change in the energy sector effect innovation in green technologies?

This study analyses the structural change in the energy system. By focusing on different green technology industries in Germany, it is of particular interest how policy-induced demand stimulates innovation. Taking the market size as well as the change in the market size as a proxy for increasing demand and patent counts as a proxy for innovation, there is support that the presence of institutions enabling diffusion of green technologies (GTs) is correlated with innovative activity. However, when the different GTs are treated separately remarkable differences can be observed. We also investigate the role of public expenditures for research and development. It is controlled for a structural break by comparing the two institutional settings incorporated into the legal system in Germany, namely the Electricity Feed Law and the Renewable Energy Sources Act. We find evidence for the role of public expenditures for research and development, and no evidence is found for the structural break.