Catalyzing solar and wind technology exports: the «Flywheel Effect» of demand-side factors

The paper aims to emphasize the importance of demand-side factors in strengthening countries’ efforts to address the climate challenge through the export of solar and wind technologies. While the existing literature has predominantly focused on the supply side, we argue that the demand side has a direct effect and exerts an indirect influence (via the supply side) on the export of these technologies and their widespread adoption. This has implications for the current policy debate. To test our hypotheses, we use a Panel Vector Autoregressive model in first differences for a panel of 20 industrialized countries over a twenty-five-year period. The results reveal mixed support to the hypothesis that demand exerts a positive effect on the export of solar and wind technologies. While the evidence on the role energy intensity is robust across specifications, we observe that other measures of demand - such as the level economic activity and oil prices - positively impacts solar and wind technology exports primarily in the most advanced countries. Additionally, the findings broadly support the hypothesis that all demand factors indirectly influence the export of these technologies by bolstering supply-side effects.