Teaching Microeconomics of Renewable Energy ISEE Conference Reykjavík, Iceland August 13, 2014 David Timmons University of Massachusetts Boston
kW = 9.8ηQH Dam functions: 1. create head 2. store water (store energy) Renewable Energy: Physical Basis photo: Orkustofnun, Iceland National Energy Authority
W = 0.5 ρAV 3 Renewable Energy: Physical Basis
Adapted from Murphy and Hall (2010) Renewable Energy Cost Factors: Net Energy Ratios
Adapted from EIA (2013) Renewable Energy Cost Factors: Capital Intensity
Renewable Energy Cost Factors: Intermittency pumped storage: Northfield, Massachusetts
source: EIA (2014) Renewable Energy Supply source: Jacobson and Delucchi (2011) terawatts (TW) 2012 $/kWh 2030 est. demand = 17 TW
P Q MC H A. Hydropower: low initial cost, but limited quantity Microeconomic Concepts: marginal cost Renewable Energy Supply
P Q MC H P Q MC W A. Hydropower: low initial cost, but limited quantity B. Wind: higher cost, higher quantity Microeconomic Concepts: marginal cost Renewable Energy Supply
P Q MC H P Q MC W P Q A. Hydropower: low initial cost, but limited quantity B. Wind: higher cost, higher quantity C. Solar PV: highest cost, unlimited quantity Microeconomic Concepts: marginal cost supply elasticity Renewable Energy Supply MC PV
P Q MC H P Q MC W P Q P Q MC agg A. Hydropower: low initial cost, but limited quantity B. Wind: higher cost, higher quantity C. Solar PV: highest cost, unlimited quantity D. Aggregate renewable supply, and demand MC PV Microeconomic Concepts: marginal cost supply elasticity aggregate supply Renewable Energy Supply
P Q MC H P Q MC W P Q P Q D MC agg A. Hydropower: low initial cost, but limited quantity B. Wind: higher cost, higher quantity C. Solar PV: highest cost, unlimited quantity D. Aggregate renewable supply, and demand Microeconomic Concepts: marginal cost supply elasticity aggregate supply market equilibrium Renewable Energy Supply MC PV
P Q MC H P Q MC W P Q P Q D MC agg A. Hydropower: low initial cost, but limited quantity B. Wind: higher cost, higher quantity C. Solar PV: highest cost, unlimited quantity D. Aggregate renewable supply, and demand Renewable Energy Supply Microeconomic Concepts: marginal cost supply elasticity aggregate supply market equilibrium equimarginal principle MC PV
P Q MC H P Q MC W P Q P Q P Q MC C D MC agg A. Hydropower: low initial cost, but limited quantity B. Wind: higher cost, higher quantity C. Solar PV: highest cost, unlimited quantity E. Conservation: high quantity available at MC of solar PV D. Aggregate renewable supply, and demand Renewable Energy Supply Microeconomic Concepts: marginal cost supply elasticity aggregate supply market equilibrium equimarginal principle MC PV
Coal Hydro Power Geothermal Peat PJ (petajoule) 1 petajoule = joule = 0,278 TWh Source: Orkustofnun 2004 Geothermal Heating in Iceland Oil 2000
Coal Hydro Power Geothermal Peat PJ (petajoule) 1 petajoule = joule = 0,278 TWh Source: Orkustofnun 2004 Geothermal Heating in Iceland 0% 20% 40% 60% 80% 100% Proportional contribution of sources Oil 2000
Geothermal Heating in Iceland
Ísafjörður
District Heat Energy Sources 2008 electricity, 86% oil, 4% District Heating System Ísafjörður, Iceland Population: 2,600 Midtown District (Skutulsfjardareyri) Southern District (Holtahverfi ) incinerator plant incinerator, 10%
P MC renewable1 Time MC fossil t1t1 Renewable Energy Transition Dynamics
t2t2 P Time MC fossil MC renewable1 t1t1 MC renewable2
SMC fossil t2t2 Renewable Energy Transition Dynamics P Time MC fossil t3t3