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The Private and Public Economics of Renewable Electricity Generation

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  • Severin Borenstein

Abstract

Generating electricity from renewable sources is more expensive than conventional approaches but reduces pollution externalities. Analyzing the tradeoff is much more challenging than often presumed because the value of electricity is extremely dependent on the time and location at which it is produced, which is not very controllable with some renewables, such as wind and solar. Likewise, the pollution benefits from renewable generation depend on what type of generation it displaces, which also depends on time and location. Without incorporating these factors, cost-benefit analyses of alternatives are likely to be misleading. Other common arguments for subsidizing renewable power—green jobs, energy security, and driving down fossil energy prices—are unlikely to substantially alter the analysis. The role of intellectual property spillovers is a strong argument for subsidizing energy science research, but less persuasive as an enhancement to the value of installing current renewable energy technologies.

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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 26 (2012)
Issue (Month): 1 (Winter)
Pages: 67-92

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Handle: RePEc:aea:jecper:v:26:y:2012:i:1:p:67-92

Note: DOI: 10.1257/jep.26.1.67
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Cited by:
  1. Lion Hirth & Falko Ueckerdt & Ottmar Edenhofer, 2014. "Why Wind Is Not Coal: On the Economics of Electricity," Working Papers 2014.39, Fondazione Eni Enrico Mattei.
  2. Arthur HENRIOT & Jean-Michel GLACHANT, 2013. "Melting-pots and salad bowls: the current debate on electricity market design for RES integration," RSCAS Working Papers 2013/55, European University Institute.
  3. Partridge, Ian, 2013. "Renewable electricity generation in India—A learning rate analysis," Energy Policy, Elsevier, vol. 60(C), pages 906-915.
  4. Drechsler, Martin & Meyerhoff, Jürgen & Ohl, Cornelia, 2012. "The effect of feed-in tariffs on the production cost and the landscape externalities of wind power generation in West Saxony, Germany," Energy Policy, Elsevier, vol. 48(C), pages 730-736.
  5. Lion Hirth, 2012. "The Market Value of Variable Renewables," Working Papers 2012.15, Fondazione Eni Enrico Mattei.
  6. Howard Kunreuther & Elke U. Weber, 2014. "Aiding Decision-Making to Reduce the Impacts of Climate Change," NBER Working Papers 19776, National Bureau of Economic Research, Inc.
  7. Grossi, Luigi & Heim, Sven & Waterson, Michael, 2014. "A vision of the European energy future? The impact of the German response to the Fukushima earthquake," The Warwick Economics Research Paper Series (TWERPS) 1047, University of Warwick, Department of Economics.
  8. Lion Hirth, 2013. "The Market Value of Variable Renewables. The Effect of Solar and Wind Power Variability on their Relative Price," RSCAS Working Papers 2013/36, European University Institute.
  9. Juan Moreno Cruz & M. Scott Taylor, 2013. "A Spatial Approach to Energy Economics," NBER Working Papers 18908, National Bureau of Economic Research, Inc.
  10. Janda, Karel & Krska, Stepan & Prusa, Jan, 2014. "Odhad nákladů na podporu české fotovoltaické energie
    [The Estimation of the Cost of Promotion of the Czech Photovoltaic Energy]
    ," MPRA Paper 54108, University Library of Munich, Germany.
  11. Donald N. Dewees, 2013. "The Economics of Renewable Electricity Policy in Ontario," Working Papers tecipa-478, University of Toronto, Department of Economics.
  12. del Río, Pablo & Cerdá, Emilio, 2014. "The policy implications of the different interpretations of the cost-effectiveness of renewable electricity support," Energy Policy, Elsevier, vol. 64(C), pages 364-372.
  13. repec:fae:wpaper:2014.08 is not listed on IDEAS
  14. Pogany, Peter, 2013. "Thermodynamic Isolation and the New World Order," MPRA Paper 49924, University Library of Munich, Germany.
  15. Henriot, Arthur & Glachant, Jean-Michel, 2013. "Melting-pots and salad bowls: The current debate on electricity market design for integration of intermittent RES," Utilities Policy, Elsevier, vol. 27(C), pages 57-64.
  16. Edenhofer, Ottmar & Hirth, Lion & Knopf, Brigitte & Pahle, Michael & Schlömer, Steffen & Schmid, Eva & Ueckerdt, Falko, 2013. "On the economics of renewable energy sources," Energy Economics, Elsevier, vol. 40(S1), pages S12-S23.
  17. Patrice Bougette & Christophe Charlier, 2014. "Renewable Energy, Subsidies, and the WTO: Where has the 'Green' Gone?," GREDEG Working Papers 2014-20, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis, revised Jul 2014.
  18. Angeliki N. Menegaki, 2013. "An Antidote to the Resource Curse: The Blessing of Renewable Energy," International Journal of Energy Economics and Policy, Econjournals, vol. 3(4), pages 321 - 332.
  19. Saule Baurzhan & Glenn P. Jenkins, 2014. "Solar versus Combined Cycle Electricity Generation in Capital Constrained African Economies: Which is Greener?," Development Discussion Papers 2014-02, JDI Executive Programs.
  20. Manuel Frondel & Christoph M. Schmidt & Colin Vance, 2014. "„Grüner“ Strom gleich guter Strom? Warum Solarförderung ein teurer Irrtum ist," RWI Positionen, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 19, 04.

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