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The cost of failing to install renewable energy in regional Western Australia

Author

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  • Liam Byrnes

    () (School of Economics, University of Queensland)

Abstract

Providing electricity to regional and remote communities is challenging and expensive. Uniform tariff policies result in subsidised electricity costs for consumers in high cost regional areas. Prices have a dual role of incentivising efficient use of resources and distributing income. These dual roles cause tension between efficient resource use and the provision of reliable and affordable electricity access regardless of location and economic circumstances. This study assesses the benefit resulting from deployment of solar PV across distributed networks in the case of regional Western Australia. Installing solar PV reduces the total cost to supply, particularly for diesel powered networks. The reduction reduces the required subsidy and inefficiency associated with the cross-subsidisation of electricity tariffs. However, the results also highlight that requiring technological adaptation to manage intermittent supply prior to connection acts as a disincentive to deployment. If governments and electricity utilities intend to exploit the reductions in cost of supply that solar PV can provide, careful consideration needs to be given to the requirement to pay for adaptation to existing infrastructure prior to connection. Failure to do so will likely reduce incentives for grid connected renewable energy, while simultaneously reinforcing the status quo – and consequently the inefficient allocation of resources.

Suggested Citation

  • Liam Byrnes, 2014. "The cost of failing to install renewable energy in regional Western Australia," Energy Economics and Management Group Working Papers 9-2014, School of Economics, University of Queensland, Australia.
  • Handle: RePEc:qld:uqeemg:9-2014
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    File URL: http://www.uq.edu.au/eemg/docs/workingpapers/2014-9.pdf
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    References listed on IDEAS

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    1. Hugh Sibly & Richard Tooth, 2008. "Bringing competition to urban water supply ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(3), pages 217-233, September.
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    3. Yadoo, Annabel & Cruickshank, Heather, 2012. "The role for low carbon electrification technologies in poverty reduction and climate change strategies: A focus on renewable energy mini-grids with case studies in Nepal, Peru and Kenya," Energy Policy, Elsevier, vol. 42(C), pages 591-602.
    4. Curien, Nicolas, 1991. "The theory and measure of cross-subsidies : An application to the telecommunications industry," International Journal of Industrial Organization, Elsevier, vol. 9(1), pages 73-108, March.
    5. Rupert Quentin Grafton & Qiang Jiang, 2011. "Economic effects of water recovery on irrigated agriculture in the Murray‐Darling Basin," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(4), pages 487-499, October.
    6. Liam Wagner & John Foster, 2011. "Is There an Optimal Entry Time for Carbon Capture and Storage? A Case Study for Australia's National Electricity Market," Energy Economics and Management Group Working Papers 07, School of Economics, University of Queensland, Australia.
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    Cited by:

    1. Byrnes, Liam & Brown, Colin & Wagner, Liam & Foster, John, 2016. "Reviewing the viability of renewable energy in community electrification: The case of remote Western Australian communities," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 470-481.

    More about this item

    Keywords

    Energy Economics; Electricity Markets; Energy Policy; Renewable Energy;

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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