Efficient diffusion of renewable energies: A roller-coaster ride

Konferenzbeitrag

When the supply of intermittent renewable energies like wind and solar is high, the electricity price is low. Conversely, prices are high when their supply is low. This reduces the profit potential in renewable energies and, therefore, incentives to invest in renewable capacities. Nevertheless, we show that perfect competition and dynamic pricing lead to efficient choices of renewable and fossil capacities, provided that external costs of fossils are internalized by an appropriate tax. We also investigate some properties of electricity markets with intermittent renewables and examine the market diffusion of renewables as their capacity costs fall. We show that the intermittency of renewables causes an S-shaped diffusion pattern, implying that a rapid build-up of capacities is followed by a stage of substantially slowerdevelopment. While this pattern is well known from the innovation literature, the mechanism is new. We also find that technology improvements such as better battery storage capacities have substantial effects not only on the speed of market penetration, but also on its pattern. Finally, fluctuations of energy prices rise with the share of renewables. If regulators respond with a price cap, this leads to a faster market diffusion of renewables.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2016: Demographischer Wandel - Session: Renewable Energies and Biodiversity ; No. E15-V2

Classification and Topics

• Classification: Wirtschaft ; Renewable Resources and Conservation: Demand and Supply; Prices ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity ; Renewable Resources and Conservation: Government Policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Helm, Carsten ; Mier, Mathias
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/145893
• Last update: 10.03.2025, 11:43 AM CET