Economics at your fingertips  

On the optimal accumulation of renewable energy generation capacity

Gilbert Kollenbach

Journal of Economic Dynamics and Control, 2017, vol. 77, issue C, 157-179

Abstract: As fossil fuels are finite and responsible for environmental problems, renewables have been promoted in recent decades. To study the optimal accumulation of a generation capacity for renewable energy (backstop) and the trade-off between capital investments, backstop capacity investments and consumption, we develop a capital-energy economy with exhaustible fossil fuels. It turns out that optimal economic evolution and, therefore, the steady-state levels of capital, backstop capacity, and consumption depend on the capital endowment and the time preference rate. If the latter is low and the former is high, an intertemporal consumption trade-off renders the accumulation of an excess capacity optimal. In contrast, given a low capital endowment and a high time preference rate, the trade-off is not beneficial, so that capacity investments are nil for all points of time.

Keywords: Energy transition; Renewable energy; Capacity constraint; Fossil fuels (search for similar items in EconPapers)
JEL-codes: O10 Q32 Q40 Q42 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
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:

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-11-14
Handle: RePEc:eee:dyncon:v:77:y:2017:i:c:p:157-179