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An evolutionary model of energy transitions with interactive innovation-selection dynamics

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  • Karolina Safarzyńska

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  • Jeroen Bergh

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Abstract

We develop a stylized application of a new evolutionary model to study an energy transition in electricity production. The framework describes a population of boundedly rational electricity producers who decide each period on the allocation of profits among different energy technologies. They tend to invest in below-average cost energy technologies, while also devoting a small fraction of profits to alternative technological options and research on recombinant innovation. Energy technologies are characterized by costs falling with cumulative investments. Without the latter, new technologies have no chance to become cost competitive. We study the conditions under which a new energy technology emerges and technologies coexist. In addition, we determine which investment heuristics are optimal in the sense of minimizing the total cost of electricity production. This is motivated by the idea that, while diversity contributes to system adaptability (innovation) and resilience to unforeseen contingencies (keeping options open), a high cost will discourage investments in it. Copyright Springer-Verlag Berlin Heidelberg 2013

Suggested Citation

  • Karolina Safarzyńska & Jeroen Bergh, 2013. "An evolutionary model of energy transitions with interactive innovation-selection dynamics," Journal of Evolutionary Economics, Springer, vol. 23(2), pages 271-293, April.
    • Handle: RePEc:spr:joevec:v:23:y:2013:i:2:p:271-293
    DOI: 10.1007/s00191-012-0298-9
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    References listed on IDEAS

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    1. Shimon Awerbuch, 2006. "Portfolio-Based Electricity Generation Planning: Policy Implications For Renewables And Energy Security," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 11(3), pages 693-710, May.
    2. Olsson, Ola & Frey, Bruno S, 2002. "Entrepreneurship as Recombinant Growth," Small Business Economics, Springer, vol. 19(2), pages 69-80, September.
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    5. Martin L. Weitzman, 1998. "Recombinant Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 331-360.
    6. van den Bergh, Jeroen C.J.M., 2008. "Optimal diversity: Increasing returns versus recombinant innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 68(3-4), pages 565-580, December.
    7. Sabine Messner, 1997. "Endogenized technological learning in an energy systems model," Journal of Evolutionary Economics, Springer, vol. 7(3), pages 291-313.
    8. Yildizoglu, Murat, 2002. "Competing R&D Strategies in an Evolutionary Industry Model," Computational Economics, Springer;Society for Computational Economics, vol. 19(1), pages 51-65, February.
    9. Bomze Immanuel M. & Burger Reinhard, 1995. "Stability by Mutation in Evolutionary Games," Games and Economic Behavior, Elsevier, vol. 11(2), pages 146-172, November.
    10. Nikolaos Kouvaritakis & Antonio Soria & Stephane Isoard, 2000. "Modelling energy technology dynamics: methodology for adaptive expectations models with learning by doing and learning by searching," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 14(1/2/3/4), pages 104-115.
    11. Jonathan Kohler, Michael Grubb, David Popp and Ottmar Edenhofer, 2006. "The Transition to Endogenous Technical Change in Climate-Economy Models: A Technical Overview to the Innovation Modeling Comparison Project," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 17-56.
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    Citations

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    Cited by:

    1. Wood, Aaron D. & Mason, Charles F. & Finnoff, David, 2016. "OPEC, the Seven Sisters, and oil market dominance: An evolutionary game theory and agent-based modeling approach," Journal of Economic Behavior & Organization, Elsevier, vol. 132(PB), pages 66-78.
    2. Herrmann, J.K. & Savin, I., 2017. "Optimal policy identification: Insights from the German electricity market," Technological Forecasting and Social Change, Elsevier, vol. 122(C), pages 71-90.
    3. Herrmann, Johannes & Savin, Ivan, 2015. "Evolution of the electricity market in Germany: Identifying policy implications by an agent-based model," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112959, Verein für Socialpolitik / German Economic Association.
    4. Jean-François Mercure, 2015. "An age structured demographic theory of technological change," Journal of Evolutionary Economics, Springer, vol. 25(4), pages 787-820, September.
    5. Max Rånge & Mikael Sandberg, 2016. "Windfall gains or eco-innovation? ‘Green’ evolution in the Swedish innovation system," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(2), pages 229-246, April.
    6. F. Knobloch & J. -F. Mercure, 2016. "The behavioural aspect of green technology investments: a general positive model in the context of heterogeneous agents," Papers 1603.06888, arXiv.org.
    7. repec:kap:compec:v:52:y:2018:i:3:d:10.1007_s10614-017-9773-6 is not listed on IDEAS
    8. Valeria Costantini & Francesco Crespi, 2013. "Public policies for a sustainable energy sector: regulation, diversity and fostering of innovation," Journal of Evolutionary Economics, Springer, vol. 23(2), pages 401-429, April.
    9. Mercure, J.-F. & Pollitt, H. & Chewpreecha, U. & Salas, P. & Foley, A.M. & Holden, P.B. & Edwards, N.R., 2014. "The dynamics of technology diffusion and the impacts of climate policy instruments in the decarbonisation of the global electricity sector," Energy Policy, Elsevier, vol. 73(C), pages 686-700.
    10. Moallemi, Enayat A. & de Haan, Fjalar J. & Webb, John M. & George, Biju A. & Aye, Lu, 2017. "Transition dynamics in state-influenced niche empowerments: Experiences from India's electricity sector," Technological Forecasting and Social Change, Elsevier, vol. 116(C), pages 129-141.
    11. Bernardo, Giovanni & D'Alessandro, Simone, 2014. "Transition to sustainability? Feasible scenarios towards a low-carbon economy," MPRA Paper 53746, University Library of Munich, Germany.

    More about this item

    Keywords

    Bounded rationality; Energy transition; Investment theory; Learning curve; B52; L94; O32; O33; Q42; Q54;

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • 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

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