Patterns of induced diffusion of renewable energy capacity: The role of regulatory design and decentralization

The paper adopts an epidemic model of innovation diffusion to investigate the influence of regulatory design on the market penetration of wind and photovoltaic energy production. In particular, we test whether the specificity of public incentives by technology and the level of decentralization of energy policy planning and of authorization procedures have influenced the pattern of diffusion of renewable energy technology. Data pertain to the Italian case between 1999 and 2010. Results confirm the existence of an S-shaped Bass diffusion process for RES technologies. We disentangle the contribution of several institutional factors to the diffusion of renewable energy innovations: liberalization of the electricity market, public subsidies, EU support to Objective 1 regions, decentralization of energy planning, complexity of authorization procedures, technology-specificity of incentive design. We also analyze the regional variability in diffusion patterns. JEL code: Q47, Q48, Q42.