Equilibrium Transitions from Non Renewable Energy to Renewable Energy under Capacity Constraints

Amigues, Jean-Pierre, Ayong Le Kama, Alain and Moreaux, Michel (2015) Equilibrium Transitions from Non Renewable Energy to Renewable Energy under Capacity Constraints. Journal of Economic Dynamics and Control, 55. pp. 89-112.

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Official URL: http://tse-fr.eu/pub/29376

Abstract

We study the transition between non renewable and renewable energy sources with adjustment costs over the production capacity of renewable energy. Assuming constant variable marginal costs for both energy sources, convex adjustment costs and a more expensive renewable energy, we show the following. With sufficiently abundant non renewable energy endowments, the dynamic equilibrium path is composed of a first time phase of only non renewable energy use followed by a transition phase substituting progressively renewable energy to non renewable energy before a last time phase of only renewable energy use. The investment into renewable energy may either begin before actual production of renewable energy or be delayed until the energy price achieves a sufficient gap with respect to the renewable energy cost. With an initially abundant non renewable resource, the features of the transition between non renewable and renewable energy do not depend upon the initial resource stock.

Item Type: Article
Language: English
Date: 2015
Refereed: Yes
Uncontrolled Keywords: non renewable resource, renewable energy, adjustment costs, resources transition, capacity constraints
JEL codes: D92 - Intertemporal Firm Choice and Growth, Investment, or Financing
Q30 - General
Q40 - General
Q42 - Alternative Energy Sources
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 21 Sep 2015 13:08
Last Modified: 07 Mar 2018 13:23
OAI ID: oai:tse-fr.eu:29376
URI: http://publications.ut-capitole.fr/id/eprint/18370

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