Sensitivity of energy system investments to policy regulation changes: Too many, too fast?

Anton Bondarev () and Hannes Weigt

Energy Policy, 2018, vol. 119, issue C, 196-205

Abstract: In this paper we argue, that the interaction of energy policy regulations in the European electricity sector may be described by the slow-fast class of dynamical systems. Such systems may exhibit drastic changes in their dynamics known as bifurcations; one important being the so called blue sky catastrophe. Once reaching such a state, the slow system becomes unresponsive to the changes in the fast system. For the energy-policy nexus this translates into the energy system becoming unresponsive to policy interventions leading to a freeze in the system dynamics. Application of this result allows us to argue that caution is needed when updating economic policies to achieve a faster transition towards a low carbon energy supply structure. To avoid this risk the policy design should be aimed at long term incentive structures with less frequent but more consistent interventions.

Keywords: European energy transition; Energy infrastructure; Investments; Policy design; Slow-fast systems; Blue sky catastrophe (search for similar items in EconPapers)
JEL-codes: C02 C6 L51 Q48 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:119:y:2018:i:c:p:196-205

DOI: 10.1016/j.enpol.2018.04.031

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