what causes innovation?

here's an interesting question.
recently I have been working with a firm in Beloit where we are developing a new product that would cut the heating bill for a building. It is a purely structural adaption that would work into a roof system and passively preheat the air, using solar energy, before it gets to the heater. In the course of patent research we have taken it has come to my attention that the number of patents related to this product was significantly greater during the late 70's and decreased steadily through the 80's and 90's. I can think of two likely causes for the spike of environmental innovation in the 70's and the steady decline through the 80's and 90. One being the price of energy during the oil crisis created and demand for a more fuel efficient lifestyle, and the other being that there was heavy governmental funding during those time periods.
Which of these causes greater environmental innovation? If governmental funding for innovation causes a rapid response, what effect does it have on longer term innovation? Determining how money is allocated is important but at the same time it must be stressed that it may not always be optimal to provide funding at all. Allowing for a competitive free market, as Hayek would say, provides a situation where the optimal allocation of resources achieved based on a price value which is determined by the market.