RENEWABLE PORTFOLIO STANDARD AND STATE-LEVEL RENEWABLES
INNOVATION IN THE UNITED STATES
Yuxi Meng, John and Willie Leone Family Department of Energy and Mineral Engineering, The Pennsylvania State University, 216
Hosler building, University Park, PA, USA, 1-814-777-4520, yxm5040@psu.edu
Overview
Renewable Portfolio Standards (RPSs) require the electricity suppliers to provide a certain quantity (percentage or
megawatts) of their power generated from the renewable energy sources. They were initially applied by the United
States at state level in late 1990s (G. Buckman, 2011). By 2011, RPSs have been implemented in 36 states of the
United States (including Washington D.C.) as well as a number of countries including United Kingdom, Japan, and
Australia(C. Fischer, 2006, R. Wiser et al., 2008). Since late 1990s, the impact of RPSs on renewable power
generation has been widely discussed in the existing literature. However, RPSs’ potential influence on renewable
technology diffusion and innovation through guaranteed renewable energy market is always overlooked and rarely
touched.
Innovating-by-doing (IBD) is a process that product and process innovation are introduced as accumulated work
experience, which is an extension of learning-by-doing (LBD) (Nilsson 1995). Study on in-state renewables
innovation derived from increased renewable power generation under RPS would be a decent case for empirical IBD
process investigation. Under RPS requirements, electricity generation from renewable sources will tend to increase,
therefore promoting innovation in renewable technology. Although innovation is critical and indispensable for
renewables in cost reduction and grid parity, the learning-by-doing process for renewables is not extensively studied.
In this paper, the impact of RPS on renewables innovation at state level across the United States is explored, and
with this case, IBD in wind power and solar photovoltaic (PV) under RPS are also studied empirically.
Methodology
To test the hypothesis that RPSs have promoted state-level renewables innovation in the United States, econometric
empirical models are developed. Throughout this study, two approaches are followed (Figure1). The first approach is
a two-step analysis, where the impact of RPSs on generation from renewable sources is tested followed by testing the
influence of increased renewable power generation on state level renewables innovation (IBD mechanism). The
second approach directly investigates the effect of RPSs on renewables innovation within the states.
RPSs
Stage A
Direct test
Approach (2)
Approach (1)
Renewable generation
Renewable innovation
Stage B
Figure 1. Roadmap of the two approaches
Two renewable technology groups, wind power and solar PV, were selected for this case study. Patent application
data for each state and for each technology group in the United States are used as a measure for innovation
performance and were compiled into panel data format. The relevant patent data are collected from Thomson
Innovation patent database1 based on the “Green Inventory” published by World Intellectual Property Organization
1
A patent data base developed by Thomson Reuters. Website: http://info.thomsoninnovation.com/.
(WIPO)2. The RPSs’ impact on innovation were explored by a comparison among RPS states and non-RPS states
and comparing RPS states themselves for wind power and solar PV technology groups. This analysis was done
through the two approaches discussed earlier controlling for RPS design, electricity market and other policy
interactions.
Results
In the first approach, the results varies with the technology groups. A significant influence of RPSs on power
generation is found in wind power technology group, but this did not result in a substantial improvement in wind
power innovation at state level. On the other hand, solar PV generation were not significantly encouraged by RPSs,
but the IBD in this industry is prominent. In the second approach, no significant impact of RPSs on innovation was
found directly in both technology groups.
Conclusions
Through the analysis of the two approaches, the impact of RPS on renewable technology innovation is tested. In this
process, IBD in renewables technologies and RPS’s influence on renewable power generation are also empirically
studied. Several conclusions are reached as following. First, the design of RPS would significantly influence the
renewable industry development. Second, current RPS policies encouraged the power generation of wind power
more than solar PV. Also, the IBD effects are different among technologies and industries, which could be attributed
to their development stage and maturity. At last, the results of this study have shown a dilemma in short term
renewable power generation development and long-term technology cultivation. In this circumstance, the states with
RPS or planning to adopt RPS policies may add some additional requirements to RPS to overcome this drawback,
such as carve-out requirement on solar PV.
References
Arrow, K.J. 1962. "The Economic Implications of Learning by Doing." The review of economic studies, 155-73.
Buckman, G. 2011. "The Effectiveness of Renewable Portfolio Standard Banding and Carve-Outs in Supporting
High-Cost Types of Renewable Electricity." Energy Policy, 39(7), 4105-14.
Fischer, C. 2006. "How Can Renewable Portfolio Standards Lower Electricity Prices." Resources for the Future
Discussion Paper, Resources for the Future, Washington, DC.
Nilsson, Eric A. 1995. "Innovating-by-Doing: Skill Innovation as a Source of Technological Advance." Journal of
Economic Issues, 33-46.
Stokey, Nancy L. 1988. "Learning by Doing and the Introduction of New Goods." The Journal of Political Economy,
701-17.
Wiser, R.; C. Namovicz; M. Gielecki and R. Smith. 2008. "Renewables Portfolio Standards: A Factual Introduction
to Experience from the United States."
2
The relevant patent data are extracted according to the IPC code listed by WIPO in Green Inventory. Website:
http://www.wipo.int/classifications/ipc/en/est/