The Economics of Transitioning to Renewable Energy Sources

MRS Energy & Sustainability, 2014

ABSTRACTThe paper argues that solar photovoltaic or wind systems would need to be implemented at a rate of hundreds of gigawatts each year to obviate the continuing worldwide growth of fossil-fueled electricity generation. It suggests that an electricity consumption tax could constitute a sustainable mechanism for funding such an endeavor.It is observed that the atmospheric content of carbon dioxide rose by approximately 16 Gt in 2012. A non-negligible contribution to this increase must surely have come from the 35 Gt of CO2emitted by fossil fuel consumption that year, of which 11 Gt came from fossil-fueled electricity generation (FFEG). Yet, new FFEG plants continue to be built. Although it is questionable whether economic forces would permit a halt to the construction of such plants, it is argued that, from the perspectives of technology, manufacturing capability, land availability, and cost, it could be feasible to use solar photovoltaic and wind plants to provide for the annual ...

Greater use of renewable energy is seen as a key component of any move to combat climate change, and is being aggressively promoted as such by the new U.S. administration and by other governments. Yet there is little economic analysis of renewable energy. This paper surveys what is written and adds to it. The conclusion is that the main renewables face a major problem because of their intermittency (the wind doesn’t always blow nor the sun always shine) and that this has not been adequately factored into discussions of their potential. Without new storage technologies that can overcome this intermittency,much of the decarbonization of the economy will have to come from nuclear, carbon capture and storage(CCS) and energy efficiency (geothermal and biofuels can make small contributions). Nuclear andCCS are not without their problems. New energy storage technologies could greatly increase the roleof renewables, but none are currently in sight.

Berkeley Scientific Journal

Although the cost of renewable energy has dramatically decreased in the United States over the past 10 years, many energy experts raise concerns regarding the efficiency of production and capacity to meet demand. This paper evaluates how demand for renewable energy in various sectors has changed over time in relation to cost, and if renewable energy has the capacity to meet growing demand in the future. Despite substantial efforts to maximize the generation of renewable energy, form government contracts with renewable energy companies, and incite investments in research and development for producing clean energy faster, production of renewables will likely not meet its exponentially growing demand. Furthermore, renewable energy is harder to implement in industrial and commercial sectors than traditional energy sources, due to infrastructure constraints. Although demand for energy will continue to increase, the use of natural gas is expected to remain constant, and it is essential that the United States continues expanding its capacity for renewable energy.

The Royal Society of Chemistry eBooks, 2011

I am grateful to Columbia Business School students in my course "Current Developments in Energy Markets" for discussions of the material in this paper. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Energy Policy, 2011

Facing global climate change and scarce petroleum supplies, the world must switch to sustainable energy systems. While historical transitions between major energy sources have occurred, most of these shifts lasted over a century or longer and were stimulated by resource scarcity, high labor costs, and technological innovations. The energy transition of the 21st century will need to be more rapid. Unfortunately, little is known about how to accelerate energy transitions. This article reviews past transitions and factors behind them, along with their time frames. Three modern case studies are discussed: Brazil, which shifted from an oil-based transportation system to one based on sugarcane-ethanol (success); France, which shifted from oil-fired electric power to nuclear power (success); and the United States, which attempted to shift from foreign oil to a mix of domestic energy resources (failure). Lessons from these attempts to govern energy transitions are discussed. Several policy instruments to accelerate a transition are identified, though even under ideal circumstances a global energy supply transition will be very slow. Given the need to simultaneously implement programs in countries with different political economies, a greater focus on energy efficiency, promotion of Smart Grids, and possibly a new treaty should yield more timely results.► We review the historical evidence on major energy transitions worldwide. ► Case studies are presented of successful energy transitions in Brazil and France. ► The United States provides an example of an unsuccessful energy transition. ► We argue that a transition focused on energy efficiency can occur much more rapidly.

Review of Environmental Economics and Policy, 2010

I am grateful to Columbia Business School students in my course "Current Developments in Energy Markets" for discussions of the material in this paper. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Energy Policy, 2018

Renewable electricity, particularly solar PV and wind, creates external benefits of learningby-doing that drive down costs and reduce CO 2 emissions. The Global Apollo Programme called for collective action to develop renewable energy. This paper sets out a method for assessing whether a trajectory of investment that involves initial subsidies is justified by the subsequent learning-by-doing spillovers and if so, computes the maximum justifiable additional subsidy to provide, taking account of the special features of renewable electricitygeographically dispersed and variable quality resource base and local saturation. Given current costs and learning rates, accelerating the current rate of investment appears globally socially beneficial for solar PV in most but not all cases, less so for onshore wind. The optimal trajectory appears to involve a gradually decreasing rate of growth of installed capacity. 1 The case for supporting renewables The Global Apollo Programme called for collective action with "one aim only-to develop renewable energy supplies that are cheaper than those from fossil fuels.. .. These price trends help to create a prima facie case in favour of focussing heavily on solar energy." (King et al., 2015, p15). The case for support is primarily to compensate for the otherwise unremunerated learning spill-overs arising from cumulative production. Each additional installation adds to the cumulative production, which figure 1 1 persuasively suggests is the prime driver of cost reductions * This paper was prompted by Neuhoff (2008), who was pessimistic about the social profitability of PV when its cost was much higher, but noted that increasing current investment might relax constraints on future investment rates, which conferred an additional and potentially large extra benefit. I am indebted to insightful comments from Rutger-Jan Lange, and very careful checking of the paper and formulae to Linden Ralph and Bowei Guo, as well as to very helpful reviewers. 1 Source: Delphi234-Own work, CC0, https://commons.wikimedia.org/w/index.php?curid=33955173. The straight green line predicts that modules decrease in price by 20% for every doubling of cumulative shipped modules. The other line (with squares) shows worldwide module shipments vs. average module price. The data 1 of solar modules (Fraunhofer, 2016; Rubin et al., 2015a). Renewable electricity technologies, particularly wind and solar PV (hereafter just PV), have been heavily subsidized for many years. Both PV and wind are finally at the point of becoming commercially viable without subsidies in some locations, but new installations continue to enjoy significant, if now much lower, support in many jurisdictions. This paper asks whether past and continued support for such technologies is justified, and, more fundamentally, how to determine the appropriate level of support now and in the future for emerging low-carbon technologies with learning spillovers. While it is easy to present qualitative arguments for such support, the practical question is to quantify the level of justified support, and relate it to observable features of the technology and the location. The strongest case is one in which all countries recognize the social value of supporting immature zero-carbon technologies and collectively fund that support. Mission Innovation is a recent example, through which "22 countries and the European Union are taking action to double their public clean energy R&D investment over five years". 2 This paper provides a method for calculating the justified subsidy to compensate for the learning spillovers. There is typically also a shortfall between the social cost of carbon and its market price to account for in the social cost-benefit analysis. To justify the learning subsidy the investment must be socially profitable-if it never becomes socially profitable there is little point in pursuing these cost reductions. The paper sets out a methodology for a social cost-benefit analysis of a global support programme for low-carbon electricity generation technologies, illustrated for PV and onshore wind. The electricity supply industry has particular characteristics that need careful modeling if the results are to carry credibility. Consumption is constrained by current available capacity as storage is costly, and transmission constraints limit the size of the market that can be supplied from local capacity. As a result the value of electricity can vary strongly over time and space in ways that make the concept of a global market inappropriate. Local saturation is an important element, while the value of any one low-carbon option depends on what others are available and when they become competitive. A key issue is whether to accelerate deployment to reap earlier learning, or delay until the technology becomes more competitive against rising fossil energy costs. 3 are from ITRPV 2015 edition and can be updated to 2015 with ITRPV (2016). later updates are available annually at http://www.itrpv.net/Reports/Downloads/. 2 See http://mission-innovation.net/ 3 Grubb et al. (2002) review the implications of induced technical change for energy modeling. They note the contrast between learning, which argues for earlier support for climate mitigation, while autonomous technical change argues for later support when more knowledge has accumulated, making action later cheaper. Our emphasis is on changing relative costs rather than autonomous technical change.

2002

In this paper we develop a cost index-based measure of the expected consumer welfare gains from innovation in electricity generation technologies. To illustrate our approach, we estimate how much better off consumers would be from 2000 to 2020 as renewable energy technologies continue to be improved and gradually adopted, compared with a counterfactual scenario that allows for continual improvement of conventional technology. We proceed from the position that the role and prospects of renewable energy are best assessed within a market setting that considers competing energy technologies and sources. We evaluate five renewable energy technologies used to generate electricity: solar photovoltaics, solar thermal, geothermal, wind, and biomass. For each, we assume an accelerated adoption rate due to technological advances, and we evaluate the benefits against a baseline technology, combined-cycle gas turbine, which experts cite as the conventional technology most likely to be installed ...

Journal of Cleaner Production, 2010

This paper focuses on growth feasibility in an era of increasing scarcity of fossil fuels. A stylised dynamic model illustrates the implications of investing in smooth technological progress in the field of renewable energy. Positive rates of GDP growth sustained by fossil fuels entail, on the one hand, more income available for R&D in renewable energy sources, and on the other, an acceleration of the exhaustible resource depletion time. Our model explores such a trade-off and highlights the danger of high growth rates. Policies should target low growth rates, stimulate investment in alternative energy sources and discourage consumption growth.

Energies

The global energy sector is in a period of transition, during which time it is expected that renewable and low-carbon energy sources, such as wind and solar, will replace traditional fossil fuels, including oil, gas, and coal. The energy transition is happening not only to limit the environmental impact of fossil fuel production and consumption but also to ensure energy security, reliability, access, affordability, and sustainability. The importance of the energy transition has been amplified by recent events, notably the Russian-Ukraine conflict. Economic, financial, and trade sanctions against Russia, and in particular its oil and gas industry, have forced countries to find new suppliers in the short term, but also to investigate new and more sustainable sources to guarantee long-term energy security. Given the importance of energy, it is perhaps not unexpected that there is a considerable body of recent academic literature, particularly over the last 4–5 years, studying what indu...