Demand Subsidies Versus R&D: Comparing the Uncertain Impacts of Policy on a Pre-commercial Low-carbon Energy Technology

Gregory Nemet and Erin Baker

The Energy Journal, 2009, vol. Volume 30, issue Number 4, 49-80

Abstract: We combine an expert elicitation and a bottom-up manufacturing cost model to compare the effects of R&D and demand subsidies. We model their effects on the future costs of a low-carbon energy technology that is not currently commercially available, purely organic photovoltaics (PV). We find that: (1) successful R&D enables PV to achieve a cost target of 4c/kWh, (2) the cost of PV does not reach the target when only subsidies, and not R&D, are implemented, and (3) production-related effects on technological advanceÑlearning-by-doing and economies of scaleÑare not as critical to the long-term potential for cost reduction in organic PV than is the investment in and success of R&D. These results are insensitive to two levels of policy intensity, the level of a carbon price, the availability of storage technology, and uncertainty in the main parameters used in the model. However, a case can still be made for subsidies: comparisons of stochastic dominance show that subsidies provide a hedge against failure in the R&D program.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (32)

Downloads: (external link)
http://www.iaee.org/en/publications/ejarticle.aspx?id=2337 (text/html)
Access to full text is restricted to IAEE members and subscribers.

Related works:
Journal Article: Demand Subsidies Versus R&D: Comparing the Uncertain Impacts of Policy on a Pre-commercial Low-carbon Energy Technology (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aen:journl:2009v30-04-a02

Ordering information: This journal article can be ordered from
http://www.iaee.org/en/publications/ejsearch.aspx

Access Statistics for this article

More articles in The Energy Journal from International Association for Energy Economics Contact information at EDIRC.
Bibliographic data for series maintained by David Williams ().