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Non-renewable and intermittent renewable energy sources: friends and foes?

Author

Listed:
  • Edmond Baranes

    (LAMETA and Labex Entreprendre, University of Montpellier 1)

  • Julien Jacqmin

    (LAMETA, University of Montpellier 1)

  • Jean-Christophe Poudou

    (LAMETA, University of Montpellier 1)

Abstract
This paper studies the links between non-renewable and intermittent renewable energy sources in the production of electricity. We argue that the relationship between the price of natural gas and investments in solar and wind capacity is represented by a bell-shaped curve, as opposed to being linear. Hence, for relatively low natural gas prices, the two modes of production are substitutes. After a price threshold is reached, the two are complementary. A theoretical model explains this as the trade-off resulting from two forces: the input price differential of these two modes of production and the risks related to the unpredictable nature of renewable energy. Using U.S. state-level data from 1998 to 2012, we find that this relationship is robust to various empirical specifications.

Suggested Citation

  • Edmond Baranes & Julien Jacqmin & Jean-Christophe Poudou, 2015. "Non-renewable and intermittent renewable energy sources: friends and foes?," Working Papers 2015.02, FAERE - French Association of Environmental and Resource Economists.
    • Handle: RePEc:fae:wpaper:2015.02
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    References listed on IDEAS

    as
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    6. A. Gürhan Kök & Kevin Shang & Şafak Yücel, 2020. "Investments in Renewable and Conventional Energy: The Role of Operational Flexibility," Manufacturing & Service Operations Management, INFORMS, vol. 22(5), pages 925-941, September.
    7. Julien Jacqmin, 2018. "The role of market-oriented institutions in the deployment of renewable energies: evidences from Europe," Applied Economics, Taylor & Francis Journals, vol. 50(2), pages 202-215, January.
    8. Sam Aflaki & Serguei Netessine, 2017. "Strategic Investment in Renewable Energy Sources: The Effect of Supply Intermittency," Manufacturing & Service Operations Management, INFORMS, vol. 19(3), pages 489-507, July.
    9. Hongwei Wu & Fabrice Locment & Manuela Sechilariu, 2019. "Experimental Implementation of a Flexible PV Power Control Mechanism in a DC Microgrid," Energies, MDPI, vol. 12(7), pages 1-12, March.
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    More about this item

    Keywords

    Renewable energy production; natural gas; factor complementarity; electricity production.;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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