Optimal Transition from Coal to Gas and Renewable Power under Capacity Constraints and Adjustment Costs

Lecuyer, Oskar; Vogt-Schilb, Adrien

doi:10.1596/1813-9450-6985

Cited by 14 publications

(9 citation statements)

References 82 publications

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“…These scenarios therefore lead to additional low-carbon capacity installation. This is consistent with other work (Lecuyer and Vogt-Schilb 2014), that notes that stranded assets increase the cost of the transition, and might be politically unacceptable (Rozenberg et al 2014b). There are several ways of mitigating this issue.…”

Section: Discussionsupporting

confidence: 90%

Determinants of energy futures—a scenario discovery method applied to cost and carbon emission futures for South American electricity infrastructure

Moksnes

Rozenberg

Broad

et al. 2019

Environ. Res. Commun.

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Energy policy and investment are commonly informed by a small number of scenarios, modelled with proprietary models and closed data-sets. It limits what levels of insight that can be derived from it. This paper overcomes these critical concerns by exploring a large number of scenarios with an open-data and open-source model to address regional mitigation policy. Focusing on South America, we translate an ensemble of long-term electricity supply scenarios into policy insights and use postprocessing methods to present a systematic mapping of solution outputs to model inputs. We find demand levels, the cost of capital and the level of CO 2 -limits to be significant determinants of total investment cost. Low-carbon pathways are associated with low demand and low cost of capital. When cost of capital increases a shift away from wind and hydropower to natural gas and solar PV is seen. We further show that appropriate concessionary finance together with energy efficiency measures are critical-at a continental level-to unlock economic, low-carbon investment.

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Section: Discussionsupporting

confidence: 90%

Determinants of energy futures—a scenario discovery method applied to cost and carbon emission futures for South American electricity infrastructure

Moksnes

Rozenberg

Broad

et al. 2019

Environ. Res. Commun.

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“…6,44 Keeping the same example, the EU would need to strand the new gas power plants and replace them with renewable or other carbon-free power plants. 45 A particularly important factor of possible carbon-intensive lock-ins for developing countries is urbanization, if fast-growing cities continue to grow like today, with low density and high reliance of individual vehicle. In the 2030s, when decarbonizing transport becomes necessary to achieve more ambitious target, decision-makers may find themselves facing an impossible task and may regret not to have considered the long-term climate objectives earlier.…”

Section: A Roadmap Toward Full Decarbonization and A Set Of Sectoralmentioning

confidence: 99%

“…Focusing short‐term action of the cheapest options could lead to a carbon‐intensive lock‐in, where emission reductions needed between 2030 and 2050 become extremely expensive . Keeping the same example, the EU would need to strand the new gas power plants and replace them with renewable or other carbon‐free power plants …”

Section: Getting the Ambition Right: The Long‐term Target Needs To Drmentioning

confidence: 99%

“…Policy options to achieve this include increasing disclosure and transparency on climate‐related financial risks . The pricing of assets need to reflect the risk of stranding, so that the asset price adjustment can be smoothed over time, instead of generating a financial shock that may trigger a financial crisis. Some have also suggested spreading awareness about the risk of stranded assets and ‘change the culture’ of agents in the financial industry so that they consider it part of their due diligence to beware of potential stranded assets .…”

Section: Designing Effective and Politically Acceptable Policies To Ementioning

confidence: 99%

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Climate policies and nationally determined contributions: reconciling the needed ambition with the political economy

Vogt-Schilb

Hallegatte

2017

WIREs Energy & Environment

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“…An open question is whether modelling explicitly sunk entry costs in the process of polluting capital accumulation (e.g.,Lecuyer and Vogt-Schilb, 2014) would allow the owners of polluting capital to keep some revenue when the second-best phased-in carbon price is implemented.…”

mentioning

confidence: 99%

Instrument choice and stranded assets in the transition to clean capital

Rozenberg

Vogt-Schilb

Hallegatte

2020

Journal of Environmental Economics and Management

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.To mitigate climate change, some governments opt for instruments focused on investment, like performance standards or feebates, instead of carbon prices. We compare these policies in a Ramsey model with clean and polluting capital, irreversible investment and a climate constraint. Alternative instruments imply different transitions to the same balanced growth path. The optimal carbon price minimizes the discounted social cost of the transition to clean capital, but imposes immediate private costs that disproportionately affect the current owners of polluting capital, in particular in the form of stranded assets. A phased-in carbon price can avoid stranded assets but still result in a drop of income for the owners of polluting capital when it is implemented. Secondbest standards or feebates on new investment lead to higher total costs but avoid stranded assets, preserve the revenues of vested interests, and smooth abatement costs over individuals and time. These results suggest a trade-off between political feasibility and cost-effectiveness of environmental policies. JEL: L50, O33, O44, Q52, Q54, Q58

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Optimal Transition from Coal to Gas and Renewable Power under Capacity Constraints and Adjustment Costs

Cited by 14 publications

References 82 publications

Determinants of energy futures—a scenario discovery method applied to cost and carbon emission futures for South American electricity infrastructure

Determinants of energy futures—a scenario discovery method applied to cost and carbon emission futures for South American electricity infrastructure

Climate policies and nationally determined contributions: reconciling the needed ambition with the political economy

Instrument choice and stranded assets in the transition to clean capital

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