Rainer Walz, Fraunhofer Institute for Systems and Innovation Research
Mario Ragwitz, Fraunhofer Institute for Systems and Innovation Research
Joachim Schleich, Fraunhofer Institute for Systems and Innovation Research
Regulation is especially important for infrastructure systems which are characterised by a triple regulation challenge in the fields of spillovers of R&D, environmental protection, and access to monopolistic bottlenecks. The proposed paper starts from a system of innovation approach and distinguishes different innovation functions. The effect of regulation on innovation depends on how regulation influences these functions. An important role can be assigned ex ante towards regulation at the demand side of the technology markets. In the empirical part, two key innovation indicators are used for measuring innovations: Patents as an intermediate innovation indicator, and the success in international trade as an output oriented indicator. The results show an above average innovation dynamics of the renewable energy technologies. The technological capability of the countries differs, depending on the technology analysed (e.g. Germany and Denmark in wind energy, or Japan in photovoltaics). This underlines the need for a technology specific analysis. In general, countries use both traditional technology supply policies such as R&D subsidies but also demand oriented policies such as feed-intariffs or quota systems like renewable portfolio standards. However, there is a tendency towards the use feed-in tariffs, especially in the EU. Furthermore, a policy indicator of innovation friendliness of regulation is constructed, which reflects expert opinions on how the regulation in the countries affects the innovation functions. An econometric analysis which matches the results of the policy analysis with the outcome of the innovation indicator analysis shows that R&D subsidies, diffusion of the technologies as a result of demand side regulation, and the policy indicator are significant determinants for the development of the innovation activities.