Institutions as a Prerequisite for Clean Technology Deployment

• In Event: Energy and Environmental Policy in Comparative Perspective

Abstract

I argue that the deployment of off-grid energy requires good institutions. This is because the off-grid power sector faces two problems: unreliable governments (who may reverse policies on short notice) and unreliable customers (who may fail to pay their bills). Effective legal institutions that protect property rights and uphold the rule of law can mitigate these risks and facilitate long-term investments. Empirically, I show that countries that are democratic, operate under common law, protect property rights and the rule of law, and where doing business is easier deployed considerably more off-grid renewable energy capacity. The effect of institutions is substantially large and suggest that institutions are a prerequisite for a successful growth of the off-grid renewable energy industry. This raises concerns over the ability of off-grid technologies to penetrate the most destitute regions.

Author

• Michael Aklin, University of Pittsburgh