Essays on the economics of renewable energy
Scotland is entering a transition period for its environment and economy as it decides which path to follow in meeting its energy and electric power needs over the coming decades. This thesis describes and evaluates several of the major dimensions which will contribute to those decisions and see welfare improvements for individuals and society in Scotland. Chapter One presents the current state of energy consumption in Scotland and provides technical details to understand the role of power generation. The dramatic need to plan replacement of aging power infrastructure is also documented. The United Kingdom’s international commitment to the European Union and the United nations for reducing green house gas emissions and how that commitment is shared around the world is reviewed. Finally, Scotland is compared to several European countries on the basis of government policies and attainment of renewable energy deployment. Chapter Two describes the current policy initiative in Scotland to use market mechanisms to incentivise the deployment of renewable power technologies. The operation and effectiveness of the Renewables Obligation (Scotland) program is described and analysed in depth. Chapter Three is a literature review of public perceptions, opinions and attitudes toward renewable energy. This chapter also presents evidence about the value of environmental changes that may occur with the deployment of renewable technologies. The environmental concerns examined are landscape, wildlife, and air pollution. Chapter Four presents a choice experiment to estimate the value of environmental changes and employment which may occur from renewable energy projects being built around Scotland. The household willingness-to-pay was estimated. Significant differences between urban and rural values were identified in regards to environmental impacts. Rural populations were found to value environmental impacts lower in exchange for the employment and economic development that would result locally from energy projects being built. Chapter Five discusses some of the controversial issues and technical problems with choice experiments. Chapter Six is a game theory model of interactions between small renewable energy producers and a large dominant traditional power producer. This chapter develops a model which better represents the actual behaviour and functional operating environment of the green certificate market. The model consists of two power producers producing an identical product (electricity); the dominant power producer uses only brown fuels and is required to purchase green certificates from the fringe green firm. The model attempts to find the policy and market equilibrium points for two firms trading two goods in two markets while minimising the cost to society of a green certificate program. The final chapter presents the major findings of this thesis and concludes by advocating policies which would address the goal of maximising social welfare from the deployment of renewable energy technology in Scotland.