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Perfect So Far? Substitutability Between Wind & Solar and Dirty Electricity Generation

Author

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  • Anthony Wiskich

Abstract

Wind and solar are driving the clean transition in electricity: this paper uses panel data to investigate how these technologies substitute with dirty (fossil fuel) electricity generation. Production functions with a constant and a variable elasticity of substitution are estimated. Results suggest a higher elasticity of substitution than previous estimates, aligning with long-run analysis from electricity dispatch models and assumptions often made in economic models. Little evidence is found of the elasticity decreasing so far. However, the uptake of wind and solar decreases the utilisation rates of dirty capital.

Suggested Citation

  • Anthony Wiskich, 2023. "Perfect So Far? Substitutability Between Wind & Solar and Dirty Electricity Generation," CAMA Working Papers 2023-27, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2023-27
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2023-06/27_2023_wiskich.pdf
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    More about this item

    Keywords

    elasticity of substitution; climate change; energy; electricity; production function;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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