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(Mis)allocation of Renewable Energy Sources

Author

Listed:
  • Stefan Lamp

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Mario Samano

    (HEC Montréal - HEC Montréal)

Abstract

Policies to incentivize the adoption of renewable energy sources usually offer little flexibility to adapt to heterogeneous benefits across locations. We evaluate the geographical misallocation of solar photovoltaic installations and their relation with the uniform nature of subsidies. We estimate the dispersion of marginal benefits from solar production in Germany and compute the social and private benefits from optimal reallocations of residential solar installations keeping total capacity fixed. Our findings suggest that the value of solar would increase by 5.2% relative to the current allocation using conservative values for the rates of solar installations. Reallocating all solar capacity and taking into account transmission would yield gains that range from about 16% to 30%. A benefit-cost analysis shows that additional transmission can be beneficial if there is sufficient solar capacity reallocated across regions. This puts in perspective the social costs of nationwide policies that do not offer heterogeneous incentives.

Suggested Citation

  • Stefan Lamp & Mario Samano, 2023. "(Mis)allocation of Renewable Energy Sources," Post-Print hal-04409144, HAL.
    • Handle: RePEc:hal:journl:hal-04409144
    DOI: 10.1086/720722
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    Cited by:

    1. Abajian, Alexander & Pretnar, Nick, 2024. "Subsidies for close substitutes: Aggregate demand for residential solar electricity," European Economic Review, Elsevier, vol. 170(C).
    2. Neerunjun, Nandeeta & Stahn, Hubert, 2025. "Renewable energy support: Pre-announced policies and efficiency," Energy Economics, Elsevier, vol. 150(C).
    3. Jan Abrell & Mirjam Kosch, 2022. "The Impact of Carbon Prices on Renewable Energy Support," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 9(3), pages 531-563.
    4. Renaud Coulomb & Fanny Henriet & Léo Reitzmann, 2025. "“Bad” Oil, “Worse” Oil, and Carbon Misallocation," Post-Print hal-05057328, HAL.
    5. Newbery, David, 2023. "Wind, water and wires: Evaluating joint wind and interconnector capacity expansions in hydro-rich regions," Energy Economics, Elsevier, vol. 117(C).
    6. repec:hal:psewpa:halshs-03244647 is not listed on IDEAS
    7. Abajian, Alexander & Pretnar, Nick, 2023. "Subsidies for Close Substitutes: Evidence from Residential Solar Systems," MPRA Paper 118171, University Library of Munich, Germany.
    8. Melita Van Steenberghe & Marten Ovaere, 2025. "Market Inefficiencies in Renewable Support Policies: Evidence from Offshore Wind Contracts for Difference in Great Britain," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 25/1124, Ghent University, Faculty of Economics and Business Administration.

    More about this item

    Keywords

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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