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Sensitivity of energy system investments to policy regulation changes: Application of the blue sky catastrophe

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  • Bondarev, Anton
  • Weigt, Hannes

    () (University of Basel)

Abstract

In this paper we argue, that the interaction of technology and economic policy regulations in the energy sector may be described by the so-called slow-fast class of dynamical systems. It is known that such systems may exhibit the blue sky catastrophe, a special type of bifurcation. Application of this result allows us to argue that caution is needed when updating economic policies in the energy sector to avoid the onset of catastrophic developments in the system's transformation, when energy system dynamics becomes unresponsive to policy updates.

Suggested Citation

  • Bondarev, Anton & Weigt, Hannes, 2017. "Sensitivity of energy system investments to policy regulation changes: Application of the blue sky catastrophe," Working papers 2017/08, Faculty of Business and Economics - University of Basel.
  • Handle: RePEc:bsl:wpaper:2017/08
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    File URL: https://edoc.unibas.ch/61309/1/20180306093555_5a9e52eb2f8b5.pdf
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    References listed on IDEAS

    as
    1. Paul L. Joskow, 2008. "Lessons Learned from Electricity Market Liberalization," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 9-42.
    2. Anastasios Xepapadeas, 2010. "Modeling complex systems," Agricultural Economics, International Association of Agricultural Economists, vol. 41(s1), pages 181-191, November.
    3. Hogan, William W, 2002. "Electricity Market Restructuring: Reforms of Reforms," Journal of Regulatory Economics, Springer, vol. 21(1), pages 103-132, January.
    4. Tooraj Jamasb and Michael Pollitt, 2005. "Electricity Market Reform in the European Union: Review of Progress toward Liberalization & Integration," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 11-42.
    5. Strunz, Sebastian & Gawel, Erik & Lehmann, Paul & Söderholm, Patrik, 2015. "Policy convergence: A conceptual framework based on lessons from renewable energy policies in the EU," UFZ Discussion Papers 14/2015, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    6. Manuel Frondel & Christoph M. Schmidt & Colin Vance, 2014. "Revisiting Germanyùs solar cell promotion: An unfolding disaster," Economic Analysis and Policy, Elsevier, vol. 44(1), pages 3-13.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    energy infrastructure; investments cycle; economic policy; slow-fast systems; blue sky catastrophe;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics

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