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The Economics of Renewable Energy
This major reference work brings together for the first time key articles on the economics of renewable energy. From a modest role as a backstop technology in the 1970s to a central role in low carbon transitions today, this collection reveals the emergence and growing importance of this sub-field of economics. Topics covered in this timely volume include the costs of renewable power (taking account of issues related to technological development, intermittency and interconnection), policies that promote renewable energy development, its public and private demand, and its impact on the environment and the economy. This indispensable collection is complemented by a comprehensive introduction that will serve as an essential source of reference for students and researchers.
More Information
Critical Acclaim
Contributors
Contents
More Information
This major reference work brings together for the first time key articles on the economics of renewable energy. From a modest role as a backstop technology in the 1970s to a central role in low carbon transitions today, this collection reveals the emergence and growing importance of this sub-field of economics. Topics covered in this timely volume include the costs of renewable power (taking account of issues related to technological development, intermittency and interconnection), policies that promote renewable energy development, its public and private demand, and its impact on the environment and the economy. This indispensable collection is complemented by a comprehensive introduction that will serve as an essential source of reference for students and researchers.
Critical Acclaim
‘Roger Fouquet has assembled an All-Star Team of energy economists whose impressive body of work extends from the beginning of the theory of optimal extraction of exhaustible natural resources, all the way through the emergence of exciting new technologies for renewable generation. Along with the honor of appearing here, however, the authors should know that I’ll use this terrific collection every time I go looking for the best possible reviewers of new research in renewable energy.’
– Don Fullerton, Editor, Journal of the Association of Environmental and Resource Economists
– Don Fullerton, Editor, Journal of the Association of Environmental and Resource Economists
Contributors
44 articles, dating from 1974 to 2016
Contributors include: P. Aghion, P. Dasgupta, E. Duflo, G. Heal, P. Joskow, C. Knittel, K. Neuhoff, R. Schmalensee, R. Solow
Contributors include: P. Aghion, P. Dasgupta, E. Duflo, G. Heal, P. Joskow, C. Knittel, K. Neuhoff, R. Schmalensee, R. Solow
Contents
Contents
Introduction Roger Fouquet
PART I RENEWABLE ENERGY AS A ‘BACKSTOP TECHNOLOGY’
1. Robert M. Solow (1974), ‘The Economics of Resources or the Resources of Economics’, American Economic Review: Papers and Proceedings, 64 (2), May, 1–14
2. Partha Dasgupta and Geoffrey Heal (1974), ’The Optimal Depletion of Exhaustible Resources’, Review of Economic Studies: Symposium on the Economics of Exhaustible Resources, 41 (5), December, 3–28
3. Ujjayant Chakravorty, James Roumasset and Kinping Tse (1997), ‘Endogenous Substitution among Energy Resources and Global Warming’, Journal of Political Economy, 105 (6), December, 1201–34
4. Olli Tahvonen and Seppo Salo (2001), ‘Economic Growth and Transitions between Renewable and Nonrenewable Energy Resources’, European Economic Review, 45 (8), August, 1379–98
5. Yacov Tsur and Amos Zemel (2003), ‘Optimal Transition to Backstop Substitutes for Nonrenewable Resources’, Journal of Economic Dynamics and Control, 27 (4), February, 551–72
6. Daron Acemoglu, Philippe Aghion, Leonardo Bursztyn and David Hemous (2012), ‘The Environment and Directed Technical Change’, American Economic Review, 102 (1), February, 131–66
PART II THE ECONOMICS OF RENEWABLE ENERGY
7. Severin Borenstein (2012), ‘The Private and Public Economics of Renewable Electricity Generation’, Journal of Economic Perspectives, 26 (1), Winter, 67–92
8. Geoffrey Heal (2010), ‘Reflections – The Economics of Renewable Energy in the United States’, Review of Environmental Economics and Policy, 4 (1), Winter, 139–54
9. Paul L. Joskow (2011), ‘Comparing the Costs of Intermittent and Dispatchable Electricity Generating Technologies’, American Economic Review: Papers and Proceedings, 101 (3), May, 238–41
10. Gautam Gowrisankaran, Stanley S. Reynolds and Mario Samano (2016), ‘Intermittency and the Value of Renewable Energy’, Journal of Political Economy, 124 (4), August, 1187–234
11. Richard Green, Danny Pudjianto, Iain Staffell and Goran Strbac (2016), ‘Market Design for Long-Distance Trade in Renewable Electricity’, Energy Journal: Bollino-Madlener Special Issue, 37 (SI2), 5–22
12. Erin Baker, Meredith Fowlie, Derek Lemoine and Stanley S. Reynolds (2013), ‘The Economics of Solar Electricity’, Annual Review of Resource Economics, 5, 387–426
PART III POLICIES TO PROMOTE RENEWABLE ENERGY: CONCEPTS, THEORY AND SIMULATIONS
13. Ryan Wiser, Steven Pickle and Charles Goldman (1998), ‘Renewable Energy Policy and Electricity Restructuring: A California Case Study’, Energy Policy, 26 (6), May, 465–75
14. Eirik S. Amundsen and Jørgen Birk Mortensen (2001), ‘The Danish Green Certificate System: Some Simple Analytical Results’, Energy Economics, 23 (5), September, 489–509
15. Stefan Boeters and Joris Koornneef (2011), ‘Supply of Renewable Energy Sources and the Cost of EU Climate Policy’, Energy Economics, 33 (5), September, 1024–34
16. Harrison Fell and Joshua Linn (2013), ‘Renewable Electricity Policies, Heterogeneity, and Cost Effectiveness’, Journal of Environmental Economics and Management, 66 (3), November, 688–707
PART IV POLICIES TO PROMOTE RENEWABLE ENERGY: EMPIRICAL EVIDENCE
17. Catherine Mitchell (1995), ‘The Renewables NFFO: A Review’, Energy Policy, 23 (12), December, 1077–91
18. Richard Schmalensee (2012), ‘Evaluating Policies to Increase Electricity Generation from Renewable Energy’, Review of Environmental Economics and Policy, 6 (1), Winter, 45–64
19. Steffen Jenner, Gabriel Chan, Rolf Frankenberger and Mathias Gabel (2012), ‘What Drives States to Support Renewable Energy?’, Energy Journal, 33 (2), 1–12
20. Thilo Grau (2014), ‘Responsive Feed-In Tariff Adjustment to Dynamic Technology Development’, Energy Economics, 44, July, 36–46
21. Jonathan E. Hughes and Molly Podolefsky (2015), ‘Getting Green with Solar Subsidies: Evidence from the California Solar Initiative’, Journal of the Association of Environmental and Resource Economists, 2 (2), June, 235–75
PART V INNOVATION AND DIFFUSION OF RENEWABLE ENERGY TECHNOLOGY
22. Michael J. Grubb (1988), ‘The Potential for Wind Energy in Britain’, Energy Policy, 16 (6), December, 594–607
23. Gregory F. Nemet (2006), ‘Beyond the Learning Curve: Factors Influencing Cost Reductions in Photovoltaics’, Energy Policy, 34 (17), November, 3218–32
24. David Popp, Ivan Hascic and Neelakshi Medhi (2011), ‘Technology and the Diffusion of Renewable Energy’, Energy Economics: Special Issue on The Economics of Technologies to Combat Global Warming, 33 (4), July, 648–62
25. Kenneth Gillingham, Hao Deng, Ryan Wiser, Naïm Richard Darghouth, Gregory Nemet, Galen Barbose, Varun Rai and Changgui Dong (2016), ‘Deconstructing Solar Photovoltaic Pricing: The Role of Market Structure, Technology, and Policy’, Energy Journal, 37 (3), 231–50
26. Birte Pfeiffer and Peter Mulder (2013), ‘Explaining the Diffusion of Renewable Energy Technology in Developing Countries’, Energy Economics, 40, November, 285–96
PART VI THE DEMAND FOR RENEWABLE ENERGY
27. Roger Fouquet (1998), ‘The United Kingdom Demand for Renewable Electricity in a Liberalised Market’, Energy Policy, 26 (4), March, 281–93
28. Ryan H. Wiser (2007), ‘Using Contingent Valuation to Explore Willingness to Pay for Renewable Energy: A Comparison of Collective and Voluntary Payment Vehicles’, Ecological Economics, 62 (3–4), May, 419–32
29. Marcello Graziano and Kenneth Gillingham (2015), ‘Spatial Patterns of Solar Photovoltaic System Adoption: The Influence of Neighbors and the Built Environment’, Journal of Economic Geography, 15 (4), July, 815–39
30. Naïm R. Darghouth, Galen Barbose and Ryan Wiser (2011), ‘The Impact of Rate Design and Net Metering on the Bill Savings from Distributed PV for Residential Customers in California’, Energy Policy, 39 (9), September, 5243–53
PART VII THE ENVIRONMENTAL IMPACT OF RENEWABLE ENERGY
31. Brian C. Murray, Maureen L. Cropper, Francisco C. de la Chesnaye and John M. Reilly (2014), ‘How Effective are US Renewable Energy Subsidies in Cutting Greenhouse Gases?’, American Economic Review: Papers and Proceedings, 104 (5), May, 569–74
32. Joseph Cullen (2013), ‘Measuring the Environmental Benefits of Wind-Generated Electricity’, American Economic Journal: Economic Policy, 5 (4), November, 107–33
33. Kevin Novan (2015), ‘Valuing the Wind: Renewable Energy Policies and Air Pollution Avoided’, American Economic Journal: Economic Policy, 7 (3), August, 291–326
34. Kenneth Lee, Edward Miguel and Catherine Wolfram (2016), ‘Appliance Ownership and Aspirations among Electric Grid and Home Solar Households in Rural Kenya’, American Economic Review: Papers and Proceedings, 106 (5), May, 89–94
PART VIII THE ECONOMIC IMPACTS OF RENEWABLE ENERGY
35. Esther Duflo and Rohini Pande (2007), ‘Dams’, Quarterly Journal of Economics, 122 (2), May, 601–46
36. Carl Kitchens (2014), ‘The Role of Publicly Provided Electricity in Economic Development: The Experience of the Tennessee Valley Authority, 1929–1955’, Journal of Economic History, 74 (2), June, 389–419
37. Molly Lipscomb, A. Mushfiq Mobarak and Tania Barham (2013), ‘Development Effects of Electrification: Evidence from the Topographic Placement of Hydropower Plants in Brazil’, American Economic Journal: Applied Economics, 5 (2), April, 200–31
38. Hunt Allcott, Allan Collard-Wexler and Stephen D. O’Connell (2016), ‘How Do Electricity Shortages Affect Industry? Evidence from India’, American Economic Review, 106 (3), March, 587–624
39. Samuel R. Dastrup, Joshua Graff Zivin, Dora L. Costa and Matthew E. Kahn (2012), ‘Understanding the Solar Home Price Premium: Electricity Generation and “Green” Social Status’, European Economic Review: Green Building, the Economy, and Public Policy, 56 (5), July, 961–73
40. Christopher R. Knittel and Aaron Smith (2015), ‘Ethanol Production and Gasoline Prices: A Spurious Correlation’, Energy Journal, 36 (1), 73–113
PART IX THE TRANSITION TO A RENEWABLE ENERGY ECONOMY
41. Penny Street and Ian Miles (1996), ‘Transition to Alternative Energy Supply Technologies: The Case of Windpower’, Energy Policy, 24 (5), May, 413–25
42. Karsten Neuhoff (2005), ‘Large-Scale Deployment of Renewables for Electricity Generation’, Oxford Review of Economic Policy, 21 (1), Spring, 88–110
43. Richard Green and Nicholas Vasilakos (2010), ‘Market Behaviour with Large Amounts of Intermittent Generation’, Energy Policy, Special Section: Large-Scale Wind Power in Electricity Markets, 38 (7), July, 3211–20
44. Roger Fouquet (2011), ‘The Sustainability of “Sustainable” Energy Use: Historical Evidence on the Relationship between Economic Growth and Renewable Energy’, in Ibon Galarraga, Mikel González-Eguino and Anil Markandya (eds), Handbook of Sustainable Energy, Part I, Chapter 1, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing, 1–12
Index
Introduction Roger Fouquet
PART I RENEWABLE ENERGY AS A ‘BACKSTOP TECHNOLOGY’
1. Robert M. Solow (1974), ‘The Economics of Resources or the Resources of Economics’, American Economic Review: Papers and Proceedings, 64 (2), May, 1–14
2. Partha Dasgupta and Geoffrey Heal (1974), ’The Optimal Depletion of Exhaustible Resources’, Review of Economic Studies: Symposium on the Economics of Exhaustible Resources, 41 (5), December, 3–28
3. Ujjayant Chakravorty, James Roumasset and Kinping Tse (1997), ‘Endogenous Substitution among Energy Resources and Global Warming’, Journal of Political Economy, 105 (6), December, 1201–34
4. Olli Tahvonen and Seppo Salo (2001), ‘Economic Growth and Transitions between Renewable and Nonrenewable Energy Resources’, European Economic Review, 45 (8), August, 1379–98
5. Yacov Tsur and Amos Zemel (2003), ‘Optimal Transition to Backstop Substitutes for Nonrenewable Resources’, Journal of Economic Dynamics and Control, 27 (4), February, 551–72
6. Daron Acemoglu, Philippe Aghion, Leonardo Bursztyn and David Hemous (2012), ‘The Environment and Directed Technical Change’, American Economic Review, 102 (1), February, 131–66
PART II THE ECONOMICS OF RENEWABLE ENERGY
7. Severin Borenstein (2012), ‘The Private and Public Economics of Renewable Electricity Generation’, Journal of Economic Perspectives, 26 (1), Winter, 67–92
8. Geoffrey Heal (2010), ‘Reflections – The Economics of Renewable Energy in the United States’, Review of Environmental Economics and Policy, 4 (1), Winter, 139–54
9. Paul L. Joskow (2011), ‘Comparing the Costs of Intermittent and Dispatchable Electricity Generating Technologies’, American Economic Review: Papers and Proceedings, 101 (3), May, 238–41
10. Gautam Gowrisankaran, Stanley S. Reynolds and Mario Samano (2016), ‘Intermittency and the Value of Renewable Energy’, Journal of Political Economy, 124 (4), August, 1187–234
11. Richard Green, Danny Pudjianto, Iain Staffell and Goran Strbac (2016), ‘Market Design for Long-Distance Trade in Renewable Electricity’, Energy Journal: Bollino-Madlener Special Issue, 37 (SI2), 5–22
12. Erin Baker, Meredith Fowlie, Derek Lemoine and Stanley S. Reynolds (2013), ‘The Economics of Solar Electricity’, Annual Review of Resource Economics, 5, 387–426
PART III POLICIES TO PROMOTE RENEWABLE ENERGY: CONCEPTS, THEORY AND SIMULATIONS
13. Ryan Wiser, Steven Pickle and Charles Goldman (1998), ‘Renewable Energy Policy and Electricity Restructuring: A California Case Study’, Energy Policy, 26 (6), May, 465–75
14. Eirik S. Amundsen and Jørgen Birk Mortensen (2001), ‘The Danish Green Certificate System: Some Simple Analytical Results’, Energy Economics, 23 (5), September, 489–509
15. Stefan Boeters and Joris Koornneef (2011), ‘Supply of Renewable Energy Sources and the Cost of EU Climate Policy’, Energy Economics, 33 (5), September, 1024–34
16. Harrison Fell and Joshua Linn (2013), ‘Renewable Electricity Policies, Heterogeneity, and Cost Effectiveness’, Journal of Environmental Economics and Management, 66 (3), November, 688–707
PART IV POLICIES TO PROMOTE RENEWABLE ENERGY: EMPIRICAL EVIDENCE
17. Catherine Mitchell (1995), ‘The Renewables NFFO: A Review’, Energy Policy, 23 (12), December, 1077–91
18. Richard Schmalensee (2012), ‘Evaluating Policies to Increase Electricity Generation from Renewable Energy’, Review of Environmental Economics and Policy, 6 (1), Winter, 45–64
19. Steffen Jenner, Gabriel Chan, Rolf Frankenberger and Mathias Gabel (2012), ‘What Drives States to Support Renewable Energy?’, Energy Journal, 33 (2), 1–12
20. Thilo Grau (2014), ‘Responsive Feed-In Tariff Adjustment to Dynamic Technology Development’, Energy Economics, 44, July, 36–46
21. Jonathan E. Hughes and Molly Podolefsky (2015), ‘Getting Green with Solar Subsidies: Evidence from the California Solar Initiative’, Journal of the Association of Environmental and Resource Economists, 2 (2), June, 235–75
PART V INNOVATION AND DIFFUSION OF RENEWABLE ENERGY TECHNOLOGY
22. Michael J. Grubb (1988), ‘The Potential for Wind Energy in Britain’, Energy Policy, 16 (6), December, 594–607
23. Gregory F. Nemet (2006), ‘Beyond the Learning Curve: Factors Influencing Cost Reductions in Photovoltaics’, Energy Policy, 34 (17), November, 3218–32
24. David Popp, Ivan Hascic and Neelakshi Medhi (2011), ‘Technology and the Diffusion of Renewable Energy’, Energy Economics: Special Issue on The Economics of Technologies to Combat Global Warming, 33 (4), July, 648–62
25. Kenneth Gillingham, Hao Deng, Ryan Wiser, Naïm Richard Darghouth, Gregory Nemet, Galen Barbose, Varun Rai and Changgui Dong (2016), ‘Deconstructing Solar Photovoltaic Pricing: The Role of Market Structure, Technology, and Policy’, Energy Journal, 37 (3), 231–50
26. Birte Pfeiffer and Peter Mulder (2013), ‘Explaining the Diffusion of Renewable Energy Technology in Developing Countries’, Energy Economics, 40, November, 285–96
PART VI THE DEMAND FOR RENEWABLE ENERGY
27. Roger Fouquet (1998), ‘The United Kingdom Demand for Renewable Electricity in a Liberalised Market’, Energy Policy, 26 (4), March, 281–93
28. Ryan H. Wiser (2007), ‘Using Contingent Valuation to Explore Willingness to Pay for Renewable Energy: A Comparison of Collective and Voluntary Payment Vehicles’, Ecological Economics, 62 (3–4), May, 419–32
29. Marcello Graziano and Kenneth Gillingham (2015), ‘Spatial Patterns of Solar Photovoltaic System Adoption: The Influence of Neighbors and the Built Environment’, Journal of Economic Geography, 15 (4), July, 815–39
30. Naïm R. Darghouth, Galen Barbose and Ryan Wiser (2011), ‘The Impact of Rate Design and Net Metering on the Bill Savings from Distributed PV for Residential Customers in California’, Energy Policy, 39 (9), September, 5243–53
PART VII THE ENVIRONMENTAL IMPACT OF RENEWABLE ENERGY
31. Brian C. Murray, Maureen L. Cropper, Francisco C. de la Chesnaye and John M. Reilly (2014), ‘How Effective are US Renewable Energy Subsidies in Cutting Greenhouse Gases?’, American Economic Review: Papers and Proceedings, 104 (5), May, 569–74
32. Joseph Cullen (2013), ‘Measuring the Environmental Benefits of Wind-Generated Electricity’, American Economic Journal: Economic Policy, 5 (4), November, 107–33
33. Kevin Novan (2015), ‘Valuing the Wind: Renewable Energy Policies and Air Pollution Avoided’, American Economic Journal: Economic Policy, 7 (3), August, 291–326
34. Kenneth Lee, Edward Miguel and Catherine Wolfram (2016), ‘Appliance Ownership and Aspirations among Electric Grid and Home Solar Households in Rural Kenya’, American Economic Review: Papers and Proceedings, 106 (5), May, 89–94
PART VIII THE ECONOMIC IMPACTS OF RENEWABLE ENERGY
35. Esther Duflo and Rohini Pande (2007), ‘Dams’, Quarterly Journal of Economics, 122 (2), May, 601–46
36. Carl Kitchens (2014), ‘The Role of Publicly Provided Electricity in Economic Development: The Experience of the Tennessee Valley Authority, 1929–1955’, Journal of Economic History, 74 (2), June, 389–419
37. Molly Lipscomb, A. Mushfiq Mobarak and Tania Barham (2013), ‘Development Effects of Electrification: Evidence from the Topographic Placement of Hydropower Plants in Brazil’, American Economic Journal: Applied Economics, 5 (2), April, 200–31
38. Hunt Allcott, Allan Collard-Wexler and Stephen D. O’Connell (2016), ‘How Do Electricity Shortages Affect Industry? Evidence from India’, American Economic Review, 106 (3), March, 587–624
39. Samuel R. Dastrup, Joshua Graff Zivin, Dora L. Costa and Matthew E. Kahn (2012), ‘Understanding the Solar Home Price Premium: Electricity Generation and “Green” Social Status’, European Economic Review: Green Building, the Economy, and Public Policy, 56 (5), July, 961–73
40. Christopher R. Knittel and Aaron Smith (2015), ‘Ethanol Production and Gasoline Prices: A Spurious Correlation’, Energy Journal, 36 (1), 73–113
PART IX THE TRANSITION TO A RENEWABLE ENERGY ECONOMY
41. Penny Street and Ian Miles (1996), ‘Transition to Alternative Energy Supply Technologies: The Case of Windpower’, Energy Policy, 24 (5), May, 413–25
42. Karsten Neuhoff (2005), ‘Large-Scale Deployment of Renewables for Electricity Generation’, Oxford Review of Economic Policy, 21 (1), Spring, 88–110
43. Richard Green and Nicholas Vasilakos (2010), ‘Market Behaviour with Large Amounts of Intermittent Generation’, Energy Policy, Special Section: Large-Scale Wind Power in Electricity Markets, 38 (7), July, 3211–20
44. Roger Fouquet (2011), ‘The Sustainability of “Sustainable” Energy Use: Historical Evidence on the Relationship between Economic Growth and Renewable Energy’, in Ibon Galarraga, Mikel González-Eguino and Anil Markandya (eds), Handbook of Sustainable Energy, Part I, Chapter 1, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing, 1–12
Index
