Page 78 - Azerbaijan State University of Economics

E.E.Gasimzade: Influence of oil prices on innovation in renewable energy sector

R&D on wood products and electronics, logically, electronics sector will encounter
more innovation. However, it is clear that R&D spendings and innovation should be
positively related. The study by Lichtenberg does analyze the energy prices‟ effect
on innovation in the same sectors, but in this study, we want to see the influence on
related/alternative sectors and whether such energy price increases also stimulate to
shift to other sectors and consequent stimulation to invest in innovation (or R&D).
Another interesting research is done by Crabb and Johnson. They gauge effects of
oil prices in innovation in energy-efficient automotive technologies. Using patenting
model, they confirm their hypothesis. They conclude that fuel prices‟ acquisition

cost is important element in determining future level of innovation [10].
We noted the emphasis of science above, but how science or knowledge is
available to inventor, to R&D people is an important element. Popp, one of the most
great researchers in innovation field, uses patent data to measure energy prices‟
effect on innovations which are energy-efficient, therefore, demand less costs. His
study shows that, prices have serious role in stimulating innovation, simulatenously,
how available the knowledge to inventors and how qualified this knowledge is
another considerable factor. However, an important finding here is that, eliminating
quality of knowledge influences the results of study can be affected adversely [11].
This discussed element also looks through science, but this time not the current
situation of knowledge and technology, but how easily company and independent
researchers can get the knowledge. Some copyrighting restrictions, institutional
difficulties might create obstacles people to get latest improvements in science.
Therefore, besides technology, science and how it is accessible can determine
innovation in renewable energy sector.
Some researches don‟t see the rate of innovation in a given sector to be related
with energy prices. For example, Newell, Jaffe, & Stavins claims that, despite rate of
innovation in total seems not to be dependent on energy prices, direction of
innovation is related with changes in energy prices. Thus, when energy prices
increase, it motivates innovation towards a direction in which capital costs are
decreased and energy efficiency is achieved. Their study shows that, since 1973 year
in more than twenty years rising prices in energy sector have resulted in
improvements in energy-efficiency of new models. They also claim that, after
labeling requirements for products came to scene, responsiveness and reaction of
such innovation to energy prices increased significantly. However, many

improvements for energy efficiency seem to be independent [12]. This argument
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