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Subsidies for Wind Power: Surfing down the Learning Curve?

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  • Bläsi, Albrecht
  • Requate, Till

Abstract

We develop a model with two types of electricity producers, fossil fuel utilities generating emissions, and suppliers of electricity from renewable resources such as wind energy. We account for the vertical structure of the wind-energy sector by considering wind-turbine producers engaged in learning by doing and selling their turbines to turbine operators. We show that in the absence of learning spillovers a first-best policy requires Pigouvian taxes only. We also study second-best optimal subsidies on electricity generated by wind power when (optimal) emission taxes are ruled out. We further investigate the impact of subsidies on prices, output, the number of firms, and environmental damage. It turns out that, in the case of purely private learning, secondbest optimal subsidies should only account for the environmental damage but are not necessary to spur learning.

Suggested Citation

  • Bläsi, Albrecht & Requate, Till, 2007. "Subsidies for Wind Power: Surfing down the Learning Curve?," Economics Working Papers 2007-28, Christian-Albrechts-University of Kiel, Department of Economics.
  • Handle: RePEc:zbw:cauewp:6797
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    References listed on IDEAS

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    1. Emmanuel Petrakis & Eric Rasmusen & Santanu Roy, 1997. "The Learning Curve in a Competitive Industry," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 248-268, Summer.
    2. Jørgen Hansen & Camilla Jensen & Erik Madsen, 2003. "The establishment of the danish windmill industry—Was it worthwhile?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(2), pages 324-347, June.
    3. Neij, Lena, 1997. "Use of experience curves to analyse the prospects for diffusion and adoption of renewable energy technology," Energy Policy, Elsevier, vol. 25(13), pages 1099-1107, November.
    4. Bläsi, Albrecht & Requate, Till, 2005. "Learning-by-Doing with Spillovers in Competitive Industries, Free Entry, and Regulatory Policy," Economics Working Papers 2005-09, Christian-Albrechts-University of Kiel, Department of Economics.
    5. Junginger, M. & Faaij, A. & Turkenburg, W. C., 2005. "Global experience curves for wind farms," Energy Policy, Elsevier, vol. 33(2), pages 133-150, January.
    6. Neij, L, 1999. "Cost dynamics of wind power," Energy, Elsevier, vol. 24(5), pages 375-389.
    7. Isoard, Stephane & Soria, Antonio, 2001. "Technical change dynamics: evidence from the emerging renewable energy technologies," Energy Economics, Elsevier, vol. 23(6), pages 619-636, November.
    8. Spulber, Daniel F., 1985. "Effluent regulation and long-run optimality," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 103-116, June.
    9. Morthorst, P. E., 1999. "Capacity development and profitability of wind turbines," Energy Policy, Elsevier, vol. 27(13), pages 779-787, November.
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    Cited by:

    1. Lehmann, Paul & Gawel, Erik, 2013. "Why should support schemes for renewable electricity complement the EU emissions trading scheme?," Energy Policy, Elsevier, vol. 52(C), pages 597-607.
    2. Eichner, Thomas & Pethig, Rüdiger, 2014. "International carbon emissions trading and strategic incentives to subsidize green energy," Resource and Energy Economics, Elsevier, vol. 36(2), pages 469-486.
    3. Eichner, Thomas & Runkel, Marco, 2014. "Subsidizing renewable energy under capital mobility," Journal of Public Economics, Elsevier, vol. 117(C), pages 50-59.
    4. Patrick Himmes & Christoph Weber, 2011. "Optimal Environmental Policy Design In The Presence Of Uncertainty And Technology Spillovers," EWL Working Papers 1102, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Mar 2011.
    5. Lehmann, Paul, 2009. "Climate Policies with Pollution Externalities and Learning Spillovers," MPRA Paper 21353, University Library of Munich, Germany.
    6. Christoph Böhringer, 2010. "1990 bis 2010: Eine Bestandsaufnahme von zwei Jahrzehnten europäischer Klimapolitik," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(s1), pages 56-74, May.

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    Keywords

    learning by doing; renewable energies; environmental policy; Pigouvian taxes; subsidies; feed-in tariffs;

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