Non-renewable and intermittent renewable energy sources: friends and foes?

Edmond Baranes, Julien Jacqmin and Jean-Christophe Poudou

No 2015.02, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: This paper studies the links between non-renewable and intermittent renewable energy sources in the production of electricity. We argue that the relationship between the price of natural gas and investments in solar and wind capacity is represented by a bell-shaped curve, as opposed to being linear. Hence, for relatively low natural gas prices, the two modes of production are substitutes. After a price threshold is reached, the two are complementary. A theoretical model explains this as the trade-off resulting from two forces: the input price differential of these two modes of production and the risks related to the unpredictable nature of renewable energy. Using U.S. state-level data from 1998 to 2012, we find that this relationship is robust to various empirical specifications.

Keywords: Renewable energy production; natural gas; factor complementarity; electricity production. (search for similar items in EconPapers)
JEL-codes: D22 D24 Q41 Q42 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2015-02
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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http://faere.fr/pub/WorkingPapers/Baranes_Jacqmin_Poudou_FAERE_WP2015.02.pdf First version, 2015 (application/pdf)

Related works:
Journal Article: Non-renewable and intermittent renewable energy sources: Friends and foes? (2017)
Working Paper: Non-renewable and intermittent renewable energy sources: Friends and foes? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2015.02

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