Economics of Renewable Energy Production
Title
Economics of Renewable Energy Production
Author
Nemet, Gregory F.
Research Area
Social Processes
Topic
Environmental and Climate Change
Abstract
Renewable energy (RE) includes a diverse set of technologies that produce useful energy from nondepleting resources, emit little pollution, and involve no fuel costs. While RE comprises only about an eighth of world energy supply, it is growing quickly and could become a much larger share without approaching resource supply constraints. Valuation of the costs and benefits of RE has improved as studies have become more comprehensive in scope and more precise. Still valuation remains complicated and subject to wide bands of uncertainty for several reasons: heterogeneity among RE technologies; accounting for externalities, such as pollution, that are not always traded in markets; and benefits that depend on counterfactuals that vary substantially by time and location. Costs have to account for intermittency, which depends on many factors such as how thin a reserve margin to maintain, as well as technology dynamics, which over the long term may reduce costs. Experience with substantial shares of RE generation in real commercial settings has provided data and opportunities to analyze the integration of RE with the surrounding energy market. A key research challenge is to use this fuller accounting of costs and benefits to produce general insights about energy markets, without being limited by the technological, location, and temporal idiosyncrasies, which so far appear dominant. Future research questions revolve around whether costs are increasing or decreasing in deployment and include considerations of resource availability, temporal correlation in production across space and technologies, technological change in RE and complementary technologies, and emergent properties at large scale.