The cost of failing to install renewable energy in regional Western Australia

Liam Byrnes

No 9-2014, Energy Economics and Management Group Working Papers from School of Economics, University of Queensland, Australia

Abstract: Providing electricity to regional and remote communities is challenging and expensive. Uniform tariff policies result in subsidised electricity costs for consumers in high cost regional areas. Prices have a dual role of incentivising efficient use of resources and distributing income. These dual roles cause tension between efficient resource use and the provision of reliable and affordable electricity access regardless of location and economic circumstances. This study assesses the benefit resulting from deployment of solar PV across distributed networks in the case of regional Western Australia. Installing solar PV reduces the total cost to supply, particularly for diesel powered networks. The reduction reduces the required subsidy and inefficiency associated with the cross-subsidisation of electricity tariffs. However, the results also highlight that requiring technological adaptation to manage intermittent supply prior to connection acts as a disincentive to deployment. If governments and electricity utilities intend to exploit the reductions in cost of supply that solar PV can provide, careful consideration needs to be given to the requirement to pay for adaptation to existing infrastructure prior to connection. Failure to do so will likely reduce incentives for grid connected renewable energy, while simultaneously reinforcing the status quo – and consequently the inefficient allocation of resources.

Keywords: Energy Economics; Electricity Markets; Energy Policy; Renewable Energy (search for similar items in EconPapers)
JEL-codes: Q41 Q43 Q48 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-ene and nep-env
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Citations: View citations in EconPapers (2)

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