Energy transition in Germany and regional spill-overs: The diffusion of renewable energy in firms

The success of transitioning energy consumption towards renewables highly depends on the willingness and ability of firms to adopt energy technologies that use renewable sources. Existing studies focus on the role of regulation and energy markets to explaining the diffusion of green energy. This paper looks at the specific role of the firms' regional environment in this process. We use a unique database combining the Community Innovation Survey 2014 for Germany and district-level data on renewable energy plants, the attitudes of a region's population towards 'green issues' and other control variables. We find that geographical proximity to electricity production based on renewable energy sources and the orientation of a region towards 'green issues' are both correlated to such innovations. Therefore, not only "hard" regulation measures such as the renewable energy law are relevant for renewable energy innovations. Our results show that subsidies for eco-innovation, high energy costs and regional knowledge spill-overs are linked to a rapid adoption of renewable energy by firms. •Regional endowment with green energy plants encourages innovations in this field.•A green orientation of a region promotes renewable energy innovations.•Regional knowledge spill-overs contribute to a rapid adoption of renewable energy.•Soft policy measures supporting firms`environmental responsibility are crucial.•Government support and high energy costs stimulate the diffusion of green energy.