Energy innovation is a key requirement to limit global warming and tackle climate change in the years to come. A better understanding of the public R&D mechanism is likely to improve allocation of resources for energy innovation. Thus, the present paper evaluates the impacts of public R&D and knowledge spillovers on the development of renewable energy sources. To achieve this goal, knowledge flow has been modeled as a function of public R&D expenditures, cumulative knowledge stocks and knowledge spillovers. To show the application of the model, the Nordic countries as one of the pioneers in renewable technologies have been chosen. Results show the cumulative knowledge stock will increase to 2.4 billion USD until 2030, by focusing on biofuels, solar and wind energy. Results also indicate that the knowledge spillovers reduce the domestic R&D investment and may strengthen the knowledge stock. These impacts of knowledge spillovers are more effective when the absorptive capacity of the country becomes greater. The model helps policy makers to design effective policies for creating a balance between domestic R&D expenditures and knowledge spillovers. Finally, some important policy insights and some recommendations for further research are concluded.

Introduction

Renewable energy sources (RES) and energy innovation play an essential role to tackle climate change and reduce GHG1 emissions in the years to come (IPCC, 2014; Mallett, 2015). Since the cost of traditional fossil fuels is significantly lower than RES, renewable energy technologies have contributed a minor share of the total electricity generation (Semieniuk, 2016). Hence, technological breakthrough and resource mobilization in renewable energy sources are necessary to develop new technologies and to mitigate climate change (Edenhofer et al., 2014; Schmidt and Marschinski, 2009). The capability of governments to provide this financial resources is limited and usually under uncertainty (Karltorp, 2016). However, governments confirmed that their public funding for technological innovation in low-carbon energy will be increased significantly (Mission Innovation, 2016). Analyzing the knowledge flows can help policy makers to forecast public funding in order to support energy innovation systems (Chan and Daim, 2012). Renewable energy knowledge creation is one of the main factors to develop new technologies, technological innovation systems (Bergek et al., 2008) and sustainability transition studies (Markard et al., 2012). Indeed, with respect to innovation policy at national level, knowledge flow plays a central role to create a relationship between socio-economic, environmental and energy dimensions (Aghion and Howitt, 1992). At the national-level, Bell and Pavitt (1993) and Suurs and Hekkert (2009) determined the relationship between knowledge accumulation and national R&D2 activities.