Optimal transition from coal to gas and renewable power under capacity constraints and adjustment costs

Oskar Lecuyer () and Adrien Vogt-Schilb

No 6985, Policy Research Working Paper Series from The World Bank

Abstract: This paper studies the optimal transition from existing coal power plants to gas and renewable power under a carbon budget. It solves a model of polluting, exhaustible resources with capacity constraints and adjustment costs (to build coal, gas, and renewable power plants). It finds that optimal investment in renewable energy may start before coal power has been phased out and even before investment in gas has started, because doing so allows for smoothing investment over time and reduces adjustment costs. Gas plants may be used to reduce short-term investment in renewable power and associated costs, but must eventually be phased out to allow room for carbon-free power. One risk for myopic agents comparing gas and renewable investment is thus to overestimate the lifetime of gas plants -- e.g., when computing the levelized cost of electricity -- and be biased against renewable power. These analytical results are quantified with numerical simulations of the European Commission's 2050 energy roadmap.

Keywords: Climate Change Mitigation and Green House Gases; Energy Production and Transportation; Carbon Policy and Trading; Environment and Energy Efficiency; Energy and Environment (search for similar items in EconPapers)
Date: 2014-07-01
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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Related works:
Journal Article: Optimal Transition from Coal to Gas and Renewable Power Under Capacity Constraints and Adjustment Costs (2019)
Working Paper: Optimal Transition from Coal to Gas and Renewable Power under Capacity Constraints and Adjustment Costs (2014)
Working Paper: Optimal Transition from Coal to Gas and Renewable Power under Capacity Constraints and Adjustment Costs (2014)
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