Technology Adoption and Regulatory Regimes: Gas Turbine Electricity Generators from 1980 to 2001

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. during the 1990s provided strong incentive for generation firms to adopt large capacity, heavy frame turbines well suited for combined cycle, baseload applications. This suggests that recent developments in “CCGT” technology are examples of economic regulation-induced innovation. ∗309 Converse Hall, Amherst, MA 01002 E-mail: [email protected]. I would like to thank Dan Bogart, Linda Cohen, Frank Wolak, Jingming Yan, and participants at various seminars/conferences 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 (U.C. Irvine). 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.