Abstract
Socio-technical or strategic approach to renewable energy deployment all suggests that the uptake of renewable energy technology such as solar photovoltaic is as much a social issue as a technical issue. Among social issues, one most direct and immediate component is the cost of the renewable energy technology. Because renewable electricity provides no new functionality—a clean electron does the same work as a dirty electron does—but is relatively expensive compared with fossil fuel based electricity, there is currently an under-supply of renewable electricity. Policy instruments based on economics approaches are therefore developed to encourage the production and consumption of renewable electricity, aiming to remediate the market inefficiencies that stem from the failure in internalizing the environmental or social costs of fossil fuels. In this vein, the most discussed instruments are renewable portfolio standard or quota based system and the general category of feed-in tariff. Feed-in tariff is to support output or generation of the renewable electricity by subsidizing revenues. The existing discussions have all concerned about the relative effectiveness of these two instruments in terms of cost, prices and implementation efficiency. This paper attempts a different basis of evaluation of these two instruments in terms of cost and (network) externality effects. The cost effect is driven by deploying the renewable as a manufactured technology, and the network externality effect is driven by deploying the renewable as an information technology. The deployment instruments are studied in terms of how these two effects are leveraged in the deployment process. Our formulation lends itself to evolutionary policy interpretation. Future research directions associated with this new energy policy framework is then suggested.
Highlights
According to the World Energy Outlook [1], power generation is currently responsible for 41% of global energy-related carbon dioxide emissions
The type of renewable may depend upon local renewable resource endowment, but in general, the more generation capacity from renewable is integrated to the grid, the less the electricity needs to be generated by fossil fuels, assuming access to the grid is in place
Along the innovation chain for renewable energy deployment, more public R&D fund can be allocated for the development and perfection of renewable energy technology; closer to the market, private equity capitals should be increased to deploy those advanced technologies at commercial scale so that they can start to leverage upon the learning
Summary
According to the World Energy Outlook [1], power generation is currently responsible for 41% of global energy-related carbon dioxide emissions. Likewise, learning investment can first be jumpstarted by government and gradually be taken over by the private or market initiatives Another important category of policy that accelerates the uptake of renewable is to establish a price for carbon [3,4] that would internalize the environmental or social costs of fossil fuels, leveling the playing field of the renewable technology. The price approach is such that a utility or electricity supplier is obliged to buy renewable electricity generated from renewable sources (RES-E) at above-market rates set by the government We build upon the notion of technological trajectory but we focus on the differences between the broad categories of manufactured technology vs. information technology and the respective basis of increasing return
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