Modelling Energy Futures: A CGE framework for investigating investment in renewable energy applied to the EU electricity sector

Jonathan Pycroft and Hélène Maisonnave

No 332088, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: The paper addresses the issue of introducing renewable electricity production into a CGE framework. This involves introducing an investment function that considers the relationship between two industries that produce the same commodity. This includes the possibility that a small sector (renewable electricity production) may grow more rapidly than would occur under standard model assumptions. Alternative functional forms for the investment functions are proposed. To analyse these functions, the paper uses the PEP-1-t model, with Europe-27 represented as a single region and the rest of the world exogenous. Each function is introduced into the model code, and tested through a simple simulation (subsidising the purchase of capital equipment). Comparing the functional forms, the paper suggests how improvements can be made to the standard model in cases where there is the potential for a transition between technologies (such as from conventionals to renewables in electricity production). The paper contends that the split in investment between two such industries should be dependent on the relative rental rates. Furthermore, it is argued that this relationship is best represented by a sigmoid curve, such as the logistic.

Keywords: Resource/Energy Economics and Policy; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 19
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/332088/files/5255.pdf (application/pdf)

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: https://EconPapers.repec.org/RePEc:ags:pugtwp:332088

Access Statistics for this paper

More papers in Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().