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Learning-by-Doing and the Optimal Solar Policy in California

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  • Arthur van Benthem
  • Kenneth Gillingham
  • James Sweeney

Abstract

Much policy attention has been given to promote fledgling energy technologies that promise to reduce our reliance on fossil fuels. These policies often aim to correct market failures, such as environmental externalities and learning¥by-doing (LBD). We examine the implications of the assumption that LBD exists, quantifying the market failure due to LBD. We develop a model of technological advancement based on LBD and environmental market failures to examine the economically efficient level of subsidies in CaliforniaÕs solar photovoltaic market. Under central-case parameter estimates, including nonappropriable LBD, we find that maximizing net social benefits implies a solar subsidy schedule similar in magnitude to the recently implemented California Solar Initiative. This result holds for a wide range of LBD parameters. However, with no LBD, the subsidies cannot be justified by the environmental externality alone.

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 29 (2008)
Issue (Month): Number 3 ()
Pages: 131-152

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Handle: RePEc:aen:journl:2008v29-03-a07

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References

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  1. Löschel, Andreas, 2001. "Technological change in economic models of environmental policy: a survey," ZEW Discussion Papers 01-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Nemet, Gregory F., 2006. "Beyond the learning curve: factors influencing cost reductions in photovoltaics," Energy Policy, Elsevier, vol. 34(17), pages 3218-3232, November.
  3. Tooraj Jamasb, 2007. "Technical Change Theory and Learning Curves: Patterns of Progress in Electricity Generation Technologies," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 51-72.
  4. McDonald, Alan & Schrattenholzer, Leo, 2001. "Learning rates for energy technologies," Energy Policy, Elsevier, vol. 29(4), pages 255-261, March.
  5. Goulder Lawrence H., 1995. "Effects of Carbon Taxes in an Economy with Prior Tax Distortions: An Intertemporal General Equilibrium Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 271-297, November.
  6. Papineau, Maya, 2006. "An economic perspective on experience curves and dynamic economies in renewable energy technologies," Energy Policy, Elsevier, vol. 34(4), pages 422-432, March.
  7. Duke, Richard & Williams, Robert & Payne, Adam, 2005. "Accelerating residential PV expansion: demand analysis for competitive electricity markets," Energy Policy, Elsevier, vol. 33(15), pages 1912-1929, October.
  8. van der Zwaan, Bob & Rabl, Ari, 2004. "The learning potential of photovoltaics: implications for energy policy," Energy Policy, Elsevier, vol. 32(13), pages 1545-1554, September.
  9. Junginger, M. & Faaij, A. & Turkenburg, W. C., 2005. "Global experience curves for wind farms," Energy Policy, Elsevier, vol. 33(2), pages 133-150, January.
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Cited by:
  1. Joseph E. Aldy & Alan J. Krupnick & Richard G. Newell & Ian W.H. Parry & William A. Pizer, 2009. "Designing Climate Mitigation Policy," NBER Working Papers 15022, National Bureau of Economic Research, Inc.
  2. Gillingham, Kenneth, 2009. "Economic efficiency of solar hot water policy in New Zealand," Energy Policy, Elsevier, vol. 37(9), pages 3336-3347, September.
  3. Nemet, Gregory F., 2009. "Interim monitoring of cost dynamics for publicly supported energy technologies," Energy Policy, Elsevier, vol. 37(3), pages 825-835, March.
  4. Lehmann, Paul, 2013. "Supplementing an emissions tax by a feed-in tariff for renewable electricity to address learning spillovers," Energy Policy, Elsevier, vol. 61(C), pages 635-641.
  5. Fischer, Carolyn & Preonas, Louis, 2010. "Combining Policies for Renewable Energy: Is the Whole Less Than the Sum of Its Parts?," International Review of Environmental and Resource Economics, now publishers, vol. 4(1), pages 51-92, June.
  6. Joan Canton & �sa Johannesson Lind�n, 2010. "Support schemes for renewable electricity in the EU," European Economy - Economic Papers 408, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  7. Qiu, Yueming & Anadon, Laura D., 2012. "The price of wind power in China during its expansion: Technology adoption, learning-by-doing, economies of scale, and manufacturing localization," Energy Economics, Elsevier, vol. 34(3), pages 772-785.
  8. John Foster & Liam Wagner & Phil Wild & Junhua Zhao & Lucas Skoofa & Craig Froome, 2011. "Market and Economic Modelling of the Intelligent Grid: End of Year Report 2009," Energy Economics and Management Group Working Papers 09, School of Economics, University of Queensland, Australia.
  9. Dong, Changgui & Wiser, Ryan, 2013. "The impact of city-level permitting processes on residential photovoltaic installation prices and development times: An empirical analysis of solar systems in California cities," Energy Policy, Elsevier, vol. 63(C), pages 531-542.

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