FEEM working papers "Note di lavoro" series
2014 .018

Explaining the Slow Pace of Energy Technological Innovation: Why Market Conditions Matter?

Authors: Wei Jin, ZhongXiang Zhang
Series: Energy: Resources and Markets
Editor: Giuseppe Sammarco
Keywords: The Economics of Technological Innovation, Market Size Effect, Love-for-variety effect, Energy Technology, IT Technology
JEL n.: Q55, Q58, Q43, Q48, O31


As a useful complement to numerous innovation policy studies from a normative  perspective, this paper provides a positive framework to analyze the basic economic mechanism of energy technological innovation and explains its slow pace of technological progress. We find that the capital-intensiveness of energy technology is an inhibiting factor to catalyze market size effect and slows innovations and diffusions of energy technology in the market. We also show that the substantial homogeneity of energy products leads to both a monopolistic market structure on the supply side and a weak level of positive pecuniary externality on the demand side, both dampening the incentive of innovation. On the basis of our economic analysis, we recommend that a package of policy responses to accelerating energy innovation should include 1) downsizing “heavy” assets of energy technologies; 2) deregulating monopolistic energy-supplying markets; and 3) differentiating the homogenous energy products.


Suggested citation: Jin, W., Z.X. Zhang  (2014), 'Explaining the Slow Pace of Energy Technological Innovation: Why Market Conditions Matter?', Nota di Lavoro 18.2014, Milan, Italy: Fondazione Eni Enrico Mattei.

Download file
Download PDF file

FEEM Newsletter & Update

Subscribe to stay connected.

Your personal data will be processed by Fondazione Eni Enrico Mattei. – data Controller – with the aim of emailing the FEEM newsletter & Update. The use of Your email address is necessary for the implementation of the newsletter service. You are invited to read the Privacy Policy in order to obtain additional information about the protection of Your rights.

This Website uses technical cookies and cookie analytics, as well as “third party” profiling cookies.
If you close this banner or you decide to continue navigating on this Website, you express consent to the use of cookies. If you need additional information or you wish to express selective choices on the use of cookies, please refer to the   Cookie PolicyI agree