Innovation and Entrepreneurship in Renewable Energy

We document three facts related to innovation and entrepreneurship in renewable energy. Using data from the US Patent and Trademark Office, we first show that patenting in renewable energy remains highly concentrated in a few large energy firms. In 2009, the top 20% firms accounted for over 40 percent of renewable energy patents in our data. Second, we compare patenting by venture capital-backed startups and incumbent firms. Using a variety of measures, we find that VC-backed startups are engaged in more novel and more highly cited innovations, compared to incumbent firms. Incumbent firms also have a higher share of patents that are completely un-cited or self-cited, suggesting that incumbents are more likely to engage in incremental innovation compared to VC-backed startups. Third, we document a rising share of patenting by startups that coincided with the surge in venture capital finance for renewable energy technologies in the early 2000s. We also point to structural factors about renewable energy that have led the availability of venture capital finance for renewable energy to fall dramatically in recent years, with potential implications for the rate and trajectory of innovation in this sector.