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Energy Sector Innovation and Growth: An Optimal Energy Crisis

Author

Listed:
  • Peter Hartley
  • Kenneth B. Medlock III
  • Ted Temzelides
  • Xinya Zhang
Abstract
We study the optimal transition from fossil fuels to renewable energy in a neoclassical growth economy with endogenous technological progress in energy production. Innovations keep fossil energy costs under control even as increased exploitation raises mining costs. Nevertheless, the economy transitions to renewable energy after about 80% of available fossil fuels are exploited. The energy shadow price remains more than double current values for over 75 years around the switch time. Consumption and output growth decline sharply during the transition period, which we thus identify as an “energy crisis.†The model highlights the important role energy can play in influencing economic growth.

Suggested Citation

  • Peter Hartley & Kenneth B. Medlock III & Ted Temzelides & Xinya Zhang, 2016. "Energy Sector Innovation and Growth: An Optimal Energy Crisis," The Energy Journal, , vol. 37(1), pages 233-258, January.
    • Handle: RePEc:sae:enejou:v:37:y:2016:i:1:p:233-258
    DOI: 10.5547/01956574.37.1.phar
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    Cited by:

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    3. Nidhi R. Santen & Mort D. Webster & David Popp & Ignacio Pérez-Arriaga, 2017. "Inter-temporal R&D and capital investment portfolios for the electricity industrys low carbon future," The Energy Journal, International Association for Energy Economics, vol. 0(Number 6).
    4. Zou, Hongyang & Du, Huibin & Brown, Marilyn A. & Mao, Guozhu, 2017. "Large-scale PV power generation in China: A grid parity and techno-economic analysis," Energy, Elsevier, vol. 134(C), pages 256-268.
    5. Bernardino Adão & Borghan Narajabad, 2021. "Scrapping, Renewable Technology Adoption, and Growth," Working Papers w202111, Banco de Portugal, Economics and Research Department.
    6. Di Yin & Youngho Chang, 2020. "Energy R&D Investments and Emissions Abatement Policy," The Energy Journal, , vol. 41(6), pages 133-156, November.
    7. Adão, Bernardino & Narajabad, Borghan & Temzelides, Ted, 2024. "Renewable technology adoption costs and economic growth," Energy Economics, Elsevier, vol. 129(C).
    8. Peter R. Hartley, 2018. "The Cost of Displacing Fossil Fuels: Some Evidence from Texas," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    9. Hou, Yaru & Yang, Mian & Ma, Yanran & Zhang, Haiying, 2024. "Study on city's energy transition: Evidence from the establishment of the new energy demonstration cities in China," Energy, Elsevier, vol. 292(C).
    10. Zhanna A. Mingaleva & Maria V. Sigova, 2022. "Financial Aspects of the Implementation of the Fourth Energy Transition," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 43-58, October.
    11. Mohn, Klaus, 2016. "Undressing the emperor: A critical review of IEA’s WEO," UiS Working Papers in Economics and Finance 2016/6, University of Stavanger.
    12. Radu Lupu & Adrian Cantemir Călin & Cristina Georgiana Zeldea & Iulia Lupu, 2021. "Systemic Risk Spillovers in the European Energy Sector," Energies, MDPI, vol. 14(19), pages 1-23, October.
    13. Victor Court & Pierre-André Jouvet & Frédéric Lantz, 2018. "Long-term endogenous economic growth and energy transitions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).

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    More about this item

    Keywords

    Energy innovation; Energy transition; Energy cost; Economic growth;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

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