(Mis)allocation of Renewable Energy Sources

Abstract

Policies to incentivize the adoption of renewable energy sources (RES) usually offer little flexibility to adapt to heterogeneous benefits across locations. We evaluate the geographical misallocation of RES associated with the uniform nature of subsidies. We estimate the dispersion of marginal benefits from solar production in Germany and compute the social and private benefits from optimal reallocations of residential solar installations keeping total capacity fixed. We find that total value of solar would increase by 6.4% relative to the current allocation using conservative values for solar penetration. Reallocating all solar and taking into account transmission would yield considerably larger gains.

(Mis)Allocation, Market Power, and Global Oil Extraction

“…That said, we have no precise way to pin down the extent to which our numbers are confounded by either measurement error or expectational errors. 13 This paper is organized as follows. Section II presents a short description of the oil market, to which we apply our empirical framework, and introduces the unit of observation used throughout the analysis.…”

“…First, in Figure 9, we present the observed marginal cost schedule for the largest oil field in our data, Ghawar Uthmaniyah in Saudi Arabia, with cumulative production on the horizontal axis and costs on the vertical axis. We also plot the predicted marginal cost derived from estimating the cost specification in equation (13).…”

“…Note that the unit of observation in our data is the field-year, so the measurement error in this exercise is persistent over years. See the online Appendix for more details 13. Note that a field can contain many wells so that, even if the cost of capping a well is prohibitive given market conditions, production can be scaled by adjusting the rate at which wells are replaced and added 14.…”

“…In Section V we use 11,455 fields, rather than the reported number of fields(13,248) reported in the summary statistics, since we drop fields with no reported discovery year. This leaves us with 99.985 percent of global reserves.…”

Locational Marginal Network Tariffs for Intermittent Renewable Generation

“…Callaway et al (2018) and Sexton et al (2018) examine renewable energy subsidies in the US in relation to greenhouse gas emissions and other pollutants based on simulated production data for wind and solar power. Lamp and Samano (2019) apply our approach to evaluate the efficiency of solar power expansion in Germany, based on non-simulated data. 4 None of those papers discuss the role of network tariffs for renewable investment.…”