 Financial stability at risk due to investing rapidly in renewable energyKarolina Safarzyńska and Jeroen van den Bergh Energy Policy, 2017, vol. 108, issue C, 12-20 Abstract: We present novel insights about effective energy policies using an agent-based model. The model describes relevant feedback mechanisms between technological evolution, the interbank market and the electricity sector. Analysis with it shows that energy policies affect interbank connectivity and hence the likelihood of cascades of bank failures. This effect has not been studied before in the literature. In particular, we find that investments in renewable energy reduce interbank connectivity, increasing the probability of bank failures, while raising taxes on energy has an opposite effect. Increasing the share of renewable energy in electricity production initially increases the price of electricity, and thus improves profits and the ability to re-pay debts of incumbent power plants. However, when the share of renewable energy increases too quickly, financial stability may be at stake as the burden of financing investments in renewable energy offsets the improved profitability of existing power stations. All in all, this study provides a unique and novel perspective on the relationship between renewable energy investments and financial stability. Keywords: Complexity; Financial stability; Renewable energy; Sustainability transitions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:108:y:2017:i:c:p:12-20 DOI: 10.1016/j.enpol.2017.05.042 Access Statistics for this article Energy Policy is currently edited by N. France More articles in Energy Policy from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.