Clean sweep: Electricity liberalization and the direction of technological change in the electricity sector

This paper examines the impact of liberalization on the direction of technological change in the electricity sector. To this end, I use data on electricity-related patents filed between 1990 and 2018 in combination with a set of patent-level quality indicators and an instrumental variable approach. The results show that electricity liberalization leads to less dirty innovations and more clean energy patents. The increase in clean energy patenting is driven by innovations in electricity storage, renewable energy and combustion technologies with mitigation potential. New entrants play a key role in the increase in clean energy patents, while incumbents are responsible for the decline in dirty innovations. The reform also affects the knowledge inputs used in the development of clean energy technologies and encourages the use of knowledge spillovers from other technological fields.