U.S. state clean energy policy and impacts on innovative technology adoption and employment: Analyzing impacts of energy-based economic development

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Kim, Gyung Won
Brown, Marilyn A.
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Nations, states, cities, and towns are increasingly concerned about resilient and sustainable development against climate change. Energy-based economic development (EBED) has become a growing field of practice and research in the United States as well as across the world. EBED, a term recently coined by Carley et al. (2011; 2014), reflects the emerging convergence of two disciplines: energy planning and economic development. EBED captures the integration of policy-driven transformations of energy systems for low-emission and efficient energy generation and regional concerns for economic competitiveness and resilience. Meanwhile, Hurricanes Sandy and Maria, and other catastrophic blackouts have strengthened the demand to secure energy systems during weather-related or human-induced disruptions. Distributed generation (DG) systems have received renewed interests because of the growing demand for resilient power supplies, low- or zero-carbon energy generation, economic and regulatory environment changes, and advances in DG technology efficiency with declining life-cycle costs (U.S. Department of Energy, 2017). From amidst various technology options for DG, this research focuses on a combined heat and power (CHP) system that is a mature and innovative DG technology promising efficient production of energy on site. However, the CHP deployment is challenged by financial, regulatory, and workforce barriers. To fill the gap between private and public interests, federal, state, and local policymakers have implemented incentive-based and/or regulatory policies, which aim to promote EBED. This research began from recognizing the lack of theoretical approaches and empirical analyses in current EBED strategies and thus raised the question: How do clean energy policies affect clean energy use and related job creation? I assume that consumers are more likely to adopt CHP technologies when the state government provides a number of clean energy policy instruments. To test this hypothesis, this research examines two relationships—1) state governments’ activities on clean energy policy entrepreneurship and firms’ adoption of CHP technology, and 2) state governments’ activities on clean energy policy entrepreneurship and the growth of relevant employment opportunities. I developed an empirical method to address the influence of state clean energy policies on technology adoption. I first identified types of state policy instruments, and then scored states by the intensity of policy implementations. Using a framework of types of environmental policy instruments defined by Goulder and Parry (2008), I characterized the intensity of state clean energy policies by selective criteria, including the first year of policy enactment and the range of eligible CHP technologies. Second, I investigated regional differentiations of CHP generation by state and by year. The data of new CHP installations were collected in two forms: number of new CHP units and new installed capacity per GDP (kilowatt/million dollars). Third, I found correlationships in two relationships; the first group examined the aggregated impacts of state clean energy policy on CHP technology adoption, while the second group examined the policy impacts on CHP technology adoption by nine different types of policy tools. Random-effects (RE) regression models were employed to analyze panel data by controlling for all time-invariant differences, such as geographic location, political system, etc. To control for non-policy conditions, time-varying variables were added to the models to explain energy market conditions (electricity generation by fuel and fuel prices) and economic characteristics (personal income per capita and CO2 emission per capita). A panel data set for the 50 states and Washington, D.C. within a time period from 1980 to 2014 was created for the RE regression analyses. Last, to strengthen the findings from the RE models, I employed multiple-case studies by selecting four sample states—California as a state having high intensity of clean energy policy entrepreneurship and a high number of new CHP projects, Texas as a state having low policy entrepreneurship but a high number of new CHP projects, Ohio as a state having high policy entrepreneurship but a low number of new CHP projects, and Wyoming as a state having low policy entrepreneurship and a low number of CHP projects. The multiple-case study is conducted by four areas—(1) economic base study by using socio-economic archival and statistical data, (2) industry cluster analysis by using location quotient (LQ) and employment data, (3) energy market analysis by using EIA’s state profiles and energy estimates, and (4) CHP supportive policies and legislations by exploring media, formal policy reports, state governments’ documentations, and other website resources created by interest groups and associated stakeholders. The multi-case study of four selected states confirms distinct approaches to CHP policy development and implementation, resulting in different degrees of CHP technology adoption. I extend the existing literature by developing a theoretical framework to converge two fields—economic development planning and energy planning. Within this framework, I demonstrate how EBED is embedded in reality, how firms act along with clean energy policies, and how energy efficiency and clean energy could be a source of economic development.
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