Intra Firm Diffusion of Wind Turbines Liz Hooper Centre for - - PowerPoint PPT Presentation

Intra Firm Diffusion of Wind Turbines

Liz Hooper

Centre for Competition Policy, UEA

Infraday, October 2009

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 1 / 17

Outline

1

Motivation Transition to a low carbon economy demands technological change We don’t know much about how complex process technologies diffuse within firms

2

Patterns of diffusion of wind turbines The big picture Inter firm adoption path Comparison with other technologies Intra firm diffusion of wind turbines

3

Econometric analysis of intra firm diffusion Data The model Results

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 2 / 17

Utilities plan to make large investments in generation capacity (PwC 2009)

Risk of supply gap in EU

◮ Low investment in generation capacity ◮ Rising demand ◮ Scheduled retirement (DE Nuclear Phase Out, LPD)

Which technologies will utilities invest in?

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 3 / 17

Objectives of the research

Map the characteristics of leading generating companies onto a particular intensity of use of wind turbines - explore characteristics likely to be associated with intensive use Generate a detailed picture of the diffusion of wind turbines by firm rather than by country - firms make the investments

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 4 / 17

Defining diffusion

Overall diffusion is the product of inter firm diffusion and intra firm diffusion A firm becomes an adopter the year they first report producing power from wind Inter firm diffusion is the proportion of firms that have adopted the technology Intra firm diffusion is the proportion of wind in a firm’s total capacity

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 5 / 17

The speed of inter firm diffusion varies widely, but what of intra firm diffusion?

Some firms adopt the new technology early, while others wait a considerable number of years

◮ Spread of knowledge - epidemic analogy (Mansfield 1963) ◮ Expected profitability (Davies 1979) - cost reductions, firm heterogeneity

Is technology transfer within firms influenced by the same factors?

◮ Stylised facts of intra firm diffusion (Battisti & Stoneman 2003) ⋆ Time path of adoption within firms similar to between firms ⋆ Firms follow different intensification paths ⋆ Different technologies exhibit different paths

The literature is ambiguous

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 6 / 17

Overall diffusion of wind turbines in 2005 is very low. Source: OECD

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 7 / 17

Around 50% of firms had adopted after 20 years; 70% by 26 years

20% 20% 20% 40% 40% 40% 60% 60% 60% 80% 80% 80% Adopters as a Proportion of Sample Firms Adopters as a Proportion of Sample Firms Adopters as a Proportion of Sample Firms 1980 1980 1980 1990 1990 1990 2000 2000 2000 2010 2010 2010 Year of Adoption Year of Adoption Year of Adoption Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 8 / 17

How does 50% in 20 years compare with other technologies?

Time to reach 50% (Mansfield 1989) 12 years Industrial robots 9 years Diesel locomotives 15 years By-product coke oven 22 years for Computer Numerically Controlled Tools to get to 83% (Battisti & Stoneman 2003) Inter firm adoption of wind turbines is slow relative to comparators

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 9 / 17

On average wind accounts for 5% of firm’s capacity mix 26 years after first firm adopted...

20% 20% 20% 40% 40% 40% 60% 60% 60% 80% 80% 80% 100% 100% 100% Wind turbines as a % of firm installed capacity, 2008 Wind turbines as a % of firm installed capacity, 2008 Wind turbines as a % of firm installed capacity, 2008 5 5 5 10 10 10 15 15 15 20 20 20 25 25 25 Years since firm first adopted wind turbines Years since firm first adopted wind turbines Years since firm first adopted wind turbines Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 10 / 17

Focussing on technology transfer within the firm. No clear relationship between the size of firm’s wind capacity & years experience

2000 2000 2000 4000 4000 4000 6000 6000 6000 8000 8000 8000 10000 10000 10000 Wind Installed Capacity (MW) Wind Installed Capacity (MW) Wind Installed Capacity (MW) 5 5 5 10 10 10 15 15 15 20 20 20 25 25 25 Years Since First Adoption Years Since First Adoption Years Since First Adoption Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 11 / 17

A small number of firms dominate the industry at the EU level

The sample

◮ Leading firms - among 5 largest gencos in home member state ◮ N = 40

An adopter is a sample firm that has reported producing power from wind since first firm in sample did so(2002) Cross section for 2008, collected from firm annual reports, websites and correspondence

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 12 / 17

Econometric specification

Dependent variable INTENSITY - proportion wind as % firm total capacity (low, basic, intense) Estimating equation INTENSITY = f(SIZE, CR2, MNAT, M&A, R&D, WAITYEARS) Econometric approach

◮ Ordered probit (ordinal dependent variable) ◮ General to specific variable selection based on literature, goodness

• f fit and AIC

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 13 / 17

(1) (2) (3) SIZE (GW)

• 0.516
• 0.432
• 0.346

(0.445) (0.489) (0.496) CR2

• 3.186
• 3.090
• 3.069

(0.015)* (0.014)* (0.015)* MNAT 1.748 1.815 1.840 (0.037)* (0.025)* (0.023)* WAITYEARS

• 0.0417
• 0.0398
• 0.0379

(0.330) (0.347) (0.358) R&D 0.107 0.155 (0.873) (0.812) M&A 0.110 (0.739) pseudo R2 0.321 0.319 0.318 AIC 50.22 48.33 46.39

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 14 / 17

Size doesn’t matter... but multinationality and competition do

Higher levels intra firm diffusion positively associated with Firm multinationality

◮ An effective means of technology transfer to countries that may not

adopt

◮ Overcomes technical barriers to cross border trade ◮ Multinationality affords access to superior wind resource

The absence of monopoly in home member state

◮ Second (and third) entrant has most significant competitive impact

• n competition (Bresnahan & Reiss 1991)

◮ Dynamic outcome of competition Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 15 / 17

Summary

Dynamic competition can be fostered by even low levels of competitive pressure. Firms that are not monopolists in their home country are likely to be intensive users. Multinational firms may be important in realising the wider benefits

• f the innovation process. Clean technologies typically do not flow

across borders. Measures of overall diffusion can be misleading. We need to develop the modeling of intra firm diffusion if we are to understand more about how firms make those decisions and tailor energy and merger policy accordingly.

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 16 / 17

Liz Hooper (Centre for Competition Policy, UEA) Intra Firm Diffusion of Wind Turbines Infraday, October 2009 17 / 17