Evaluating the case for supporting renewable electricity

Newbery, David

doi:10.1016/j.enpol.2018.05.029

Cited by 39 publications

(21 citation statements)

References 29 publications

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“…Long-run cost reductions may require higher costs today to drive down future costs by innovation, demonstration and deployment. The EU Renewables Directive (2009/28/EC) 1 aims at these longer-term goals, as does Mission Innovation (Newbery, 2018). This paper shows how to estimate CO 2 reductions in electricity from specific policies, ignoring these longer run benefits.…”

Section: Introductionmentioning

confidence: 99%

The Impact of a Carbon Tax on the CO2 Emissions Reduction of Wind

Chyong¹,

Guo²,

Newbery³

2020

The Energy Journal

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Energy policy aims to reduce emissions at least long-run cost while ensuring reliability. Its efficacy depends on the cost of emissions reduced. Britain introduced an additional carbon tax (the Carbon Price Support, CPS) for fuels used to generate electricity that by 2015 added £18/t CO2, dramatically reducing the coal share from 41% in 2013 to 6% in 2018. Policies have both short and long-run impacts. Both need to be estimated to measure carbon savings. The paper shows how to measure the Marginal Displacement Factor (MDF, tonnes CO2 /MWh) for wind. The short-run MDF is estimated econometrically while the long-run MDF is calculated from a unit commitment model of the GB system in 2015. We examine counter-factual fuel and carbon price scenarios. The CPS lowered the short-run SR-MDF by 7% in 2015 but raised the long-run LR-MDF (for a 25% increase in wind capacity) by 18%. We discuss reasons for the modest differences in the SR and LR MDFs. The CPS raised the 2016 wholesale price by £6.22/MWh with impacts on interconnector trade. Cambridge Working Papers in Economics Faculty of Economics www.eprg.group.cam.ac.uk The impact of a Carbon Tax on the CO 2 emissions reduction of wind EPRG Working Paper 1904

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Section: Introductionmentioning

confidence: 99%

The Impact of a Carbon Tax on the CO2 Emissions Reduction of Wind

Chyong¹,

Guo²,

Newbery³

2020

The Energy Journal

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“…At the same time it is clear from the evidence summarized in the second part of section 4 that technology and sector-specific incentives and market-building programs like the Energiewende have driven more radical and game-changing innovation, such as now seen in renewables. The implicit climate value of specific PV investments was by implication very much higher than, say, coal to gas switching, as demonstrated mathematically by (Newbery, 2018).…”

Section: Discussionmentioning

confidence: 99%

Modeling Myths: On the Need for Dynamic Realism in DICE and other Equilibrium Models of Global Climate Mitigation

Grubb

Wieners

2020

INET Working Paper Series

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We analyze and critique how optimizing Integrated Assessment Models, and specifically the widely-used DICE model, represent abatement costs. Many such models assume temporal independence -abatement costs in one period are not affected by prior abatement. We contrast this with three dimensions of dynamic realism in emitting systems: inertia, induced innovation, and path dependence.We extend the DICE model with a stylized representation of such dynamic factors. By adding a transitional cost component, we characterize the resulting system in terms of its capacity to adapt in path-dependent ways, and the transitional costs of accelerating abatement. We formalize a resulting metric of the pliability of the system, and the characteristic timescales of adjustment.With the resulting DICE-PACE model, we show that in a system with high pliability, the optimal strategy involves much higher initial investment in abatement, sustained at roughly constant levels for some decades, which generates an approximately linear abatement path and emissions declining steadily to zero. This contrasts sharply with the traditional formulation. Characteristic transition timescales of 20-40 years result in an optimum path † Professor of Energy and Climate Change, University College London. m.grubb@ucl.ac.uk ‡ Postdoctoral researcher at which stabilizes global temperatures around a degree below the traditional DICE behavior; with otherwise modest assumptions, a pliable system can generate optimal scenarios within the goals of the Paris Agreement, with far lower long run combined costs of abatement and climate damages.We conclude that representing dynamic realism in such models is as important as -and far more empirically tractable than -continued debate about the monetization of climate damages and 'social cost of carbon'.https://doi.org/10.36687/inetwp106 JEL Codes: Q5, H23, Q54, Q55The aim of the DICE model, and many others following its general philosophy, is to calculate a longterm balance of costs and benefits. Figure 1 shows the results obtained from the most recent version of DICE (2016). With Nordhaus' standard default published assumptions, it produces an emissions path which (after a drop to a present 'optimal level') has modest initial emissions abatement, strengthening over time due to rising climate damages and assumed falling cost of emission abatement. Abatement tends to be deferred, global emissions in 2050 rise back to about present levels before declining at an accelerating rate towards zero early in the next century. The underlying assumptions mean that 'climate damages' -represented as impact on global GDP -remain below 4% of GDP to the end of the century (then doubling by about 2150). Global GDP is assumed to increase seven-fold over the century and climate in the standard DICE is assumed to be a modest issue, with both the global damages and abatement costs having negligible impact on the assumed continued growth in global GDP.

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“…Standard arguments suggest that it is preferable to separately identify and provide any innovation support. That can also be subject to a competitive allocation (Newbery, 2018c). It might also be possible to allow less mature supported technologies to compete with mature technologies through a more complex package auction.…”

Section: Discussionmentioning

confidence: 99%

Policies for decarbonizing a liberalized power sector

Newbery

2018

Economics

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Given the agreed urgency of decarbonizing electricity and the need to guide decentralized private decisions, an adequate and credible carbon price appears essential. The paper models and quantifies the break-even carbon price for mature zero-carbon electricity investments. It appears an attractive alternative given the difficulty of measuring the social cost of carbon, but modelling shows it extremely sensitive to projected fuel prices, the rate of interest, and the capital cost of generation options, all of which are very uncertain. This has important implications, and justifies combining a carbon price floor with suitable long-term contracts for electricity investments.JEL C65 Q42 Q48 Q51 Q54

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Evaluating the case for supporting renewable electricity

Cited by 39 publications

References 29 publications

The Impact of a Carbon Tax on the CO2 Emissions Reduction of Wind

The Impact of a Carbon Tax on the CO2 Emissions Reduction of Wind

Modeling Myths: On the Need for Dynamic Realism in DICE and other Equilibrium Models of Global Climate Mitigation

Policies for decarbonizing a liberalized power sector

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