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Equilibrium Transitions from Non Renewable Energy to Renewable Energy under Capacity Constraints

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  • Amigues, Jean-Pierre
  • Ayong Le Kama, Alain
  • Moreaux, Michel

Abstract

We study the transition between non renewable and renewable energy sources with adjustment costs over the production capacity of renewable energy. Assuming constant variable marginal costs for both energy sources, convex adjustment costs and a more expensive renewable energy, we show the following. With sufficiently abundant non renewable energy endowments, the dynamic equilibrium path is composed of a first time phase of only non renewable energy use followed by a transition phase substituting progressively renewable energy to non renewable energy before a last time phase of only renewable energy use. The investment into renewable energy may either begin before actual production of renewable energy or be delayed until the energy price achieves a sufficient gap with respect to the renewable energy cost. With an initially abundant non renewable resource, the features of the transition between non renewable and renewable energy do not depend upon the initial resource stock.

Suggested Citation

  • Amigues, Jean-Pierre & Ayong Le Kama, Alain & Moreaux, Michel, 2013. "Equilibrium Transitions from Non Renewable Energy to Renewable Energy under Capacity Constraints," IDEI Working Papers 802, Institut d'Économie Industrielle (IDEI), Toulouse, revised Mar 2015.
  • Handle: RePEc:ide:wpaper:27705
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    Cited by:

    1. Amigues, Jean-Pierre & Moreaux, Michel, 2016. "The Joint Dynamics of the Energy Mix, Land Uses and Energy Efficiency Rates During the Transition Toward the Green Economy," TSE Working Papers 16-625, Toulouse School of Economics (TSE).
    2. Yacoub Bahini & Cuong Le Van, 2015. "On the transition from nonrenewable energy to renewable energy," Documents de travail du Centre d'Economie de la Sorbonne 15042, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    3. Oskar Lecuyer & Adrien Vogt-Schilb, 2013. "Assessing and ordering investments in polluting fossil-fueled and zero-carbon capital," CIRED Working Papers hal-00850680, HAL.
    4. repec:hal:journl:halshs-01167042 is not listed on IDEAS
    5. Prudence Dato, 2017. "Energy Transition Under Irreversibility: A Two-Sector Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(3), pages 797-820, November.
    6. Kollenbach, Gilbert, 2017. "On the optimal accumulation of renewable energy generation capacity," Journal of Economic Dynamics and Control, Elsevier, vol. 77(C), pages 157-179.
    7. Lecuyer, Oskar & Vogt-Schilb, Adrien, 2014. "Optimal transition from coal to gas and renewable power under capacity constraints and adjustment costs," Policy Research Working Paper Series 6985, The World Bank.
    8. Anna Creti & Alena Kotelnikova & Guy Meunier & Jean-Pierre Ponssard, 2015. "Defining The Abatement Cost In Presence Of Learning-By-Doing: Application To The Fuel Cell Electric Vehicle," Working Papers hal-01158461, HAL.
    9. Pérez-Navarro, A. & Alfonso, D. & Ariza, H.E. & Cárcel, J. & Correcher, A. & Escrivá-Escrivá, G. & Hurtado, E. & Ibáñez, F. & Peñalvo, E. & Roig, R. & Roldán, C. & Sánchez, C. & Segura, I. & Vargas, C, 2016. "Experimental verification of hybrid renewable systems as feasible energy sources," Renewable Energy, Elsevier, vol. 86(C), pages 384-391.

    More about this item

    Keywords

    non renewable resource; renewable energy; adjustment costs; resources transition; capacity constraints;

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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