CSEM WP 128 Technology Adoption and Regulatory Regimes: Gas Turbine Electricity Generators

We examine the adoption of gas turbine electricity generators by electric utilities and independent power producers from 1980 to 2001 in search of evidence of economic regulation inducing particular type of technology adoption and development. We focus on three major attributes of gas turbines capacity, heat rate, and age and two major economic regulatory regimes vertically integrated utilities operating price-regulated monopoly franchises and independent power producers competing in restructured, wholesale electricity markets. We argue and demonstrate using sales data that the decade long move toward greater “deregulation” of the electricity industry in the U.S. has led to a stronger incentive for firms to adopt large capacity, heavy frame turbines well suited for combined cycle, baseload applications. This suggests that recent and current developments of “CCGT” technology are examples of economic regulation-induced innovation. ∗3151 Social Science Plaza, Irvine, CA 92697-5100 E-mail: [email protected]. I would like to thank Dan Bogart, Linda Cohen, Frank Wolak, Jingming Yan, and participants of the 2003 Econometrics Society North America Summer Meetings for helpful comments. I gratefully acknowledge financial support from the Center for the Study of Energy Markets (U.C. Energy Institute) and the Newkirk Center for Science and Society. I thank the California Energy Commission, EPRI, and the U.S. Department of Energy for providing access to their library resources, including their capable staff. Eric Ayzenshtat provided excellent research assistance. All errors are strictly my own.