| ID | 150477 |
| Title Proper | Innovation subsidies versus consumer subsidies: |
| Other Title Information | a real options analysis of solar energy |
| Language | ENG |
| Author | Kiran Torani, Gordon Rausser, David Zilberman ; Torani, Kiran ; Rausser, Gordon ; David Zilberman, |
| Summary / Abstract (Note) | Given the interest in the commercialization of affordable, clean energy technologies, we examine the prospects of solar photovoltaics (PV). We consider the question of how to transition to a meaningful percentage of solar energy in a sustainable manner and which policies are most effective in accelerating adoption. This paper develops a stochastic dynamic model of the adoption of solar PV in the residential and commercial sector under two sources of uncertainty – the price of electricity and cost of solar. The analytic results suggest that a high rate of innovation may delay adoption of a new technology if the consumer has rational price expectations. We simulate the model across alternative rates technological change, electricity prices, subsidies and carbon taxes. It is shown that there will be a displacement of incumbent technologies and a widespread shift towards solar PV in under 30 years – and that this can occur without consumer incentives and carbon pricing. We show that these policies have a modest impact in accelerating adoption, and that they may not be an effective part of climate policy. Instead, results demonstrate that further technological change is the crucial determinant and main driver of adoption. Further, results indicate that subsidies and taxes become increasingly ineffective with higher rates of technological change. |
| `In' analytical Note | Energy Policy Vol. 92, No.92; May 2016: p. 255–269 |
| Journal Source | Energy Policy 2016-05 92, 92 |
| Key Words | Climate Change ; Government Policy ; Technological Change ; Renewable Energy ; Option Value |