The Impact of Government Policies on Technological Innovation in China’s Solar Photovoltaic Industry: A Cross-Regional Analysis
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Journal Title
Journal ISSN
Volume Title
Perustieteiden korkeakoulu |
Master's thesis
Author
Date
2014-12-03
Department
Major/Subject
Strategic Management
Mcode
IL3006
Degree programme
Master’s Degree Programme in Strategy
Language
en
Pages
66+8
Series
Abstract
Solar power is one of the most promising alternatives to fossil fuels. By encouraging the transformation from fossil fuels to solar power, countries can improve their national energy security while realizing global environmental objectives. In China, government policies drive the acceleration of solar energy penetration. Previous studies have focused on this phenomenon in developed countries but they have ignored the impact of public policies on innovation in the context of China. This thesis assumes that public policies will stimulate innovation in the Chinese solar photovoltaic (PV) industry. To fill this gap, this thesis aims to examine the effectiveness of various policy instruments for innovation in the Chinese solar PV industry. This study hypothesizes that technological innovation in the Chinese solar industry is positively influenced by feed-in tariffs, investment incentives, R&D incentives, tax incentives, guaranteed price, REC targets and obligations. It also assumes that feed-in tariffs and investment incentives encourage innovation in upstream silicon materials and silicon wafer fields, whereas regulatory obligations and tradable certificates encourage innovation in midstream PV cell and PV module fields. In addition, it hypothesizes that innovation is positively influenced by such explanatory variables as electricity price, electricity consumption growth rate and scientific capacity. The regression analysis employed in this study is based on panel data from 1998 to 2012 of all 31 provincial regions in mainland China. The data are collected from the State Intellectual Property Office of P.R.C. (SIPO) patent database, databases of China’s statistical yearbooks, and other public resources. As hypothesized, the results indicate that feed-in tariffs, R&D incentives and tax incentives have a significant positive effect on innovation in the solar PV industry, in general. So have other explanatory factors like electricity price and scientific capability. However, no evidence is found for the significance of investment incentives or guaranteed price. There is no evidence showing that electricity consumption growth rate positively influences innovation in solar PV industry in general. Surprisingly, results show that REC targets have a significant negative effect on innovation in the solar PV industry in general. More specifically, policies have mixed effects on particular sectors of technologies. This study investigates the relationship between renewable energy policies and technological innovation. First, it contributes to the understanding of the impact of policies on technological innovation in the Chinese solar PV industry. The results have strategic implications for policy makers to estimate the effects that a single policy instrument may have on innovation in a certain technological area. Second, this thesis provides recommendations for policy selection to encourage innovation in certain regions, based on the strategic advantages that each region has for solar PV industry. Third, the comparison between China and developed countries reveals the potential risks the Chinese solar PV industry may face in the future, thus helping policy makers and investors mitigate the risks.Description
Supervisor
Schildt, HenriThesis advisor
Nyberg, TimoPeltonen, Juhana
Keywords
solar PV industry, innovation, policies, patents
