Thesis
Technological change and sustainable energy policies : modelling exercises for Scotland and the UK
- Creator
- Awarding institution
- University of Strathclyde
- Date of award
- 2014
- Thesis identifier
- T13864
- Qualification Level
- Qualification Name
- Department, School or Faculty
- Abstract
- Amid growing environmental concerns, the UK energy sector faces considerable challenges in order to comply with national and regional commitments to decarbonisation. In light of these challenges, the government has implemented a number of policies aimed at ensuring sustainability in the UK energy sector (both in terms of environmental impact and security of supply), while ensuring that the reforms and changes to the sector are achieved at the lowest costs to consumers. Innovation in energy technologies are expected to play a large role in reaching this sustainability objective. The focus of this thesis is to explore the economic and environmental impacts of two UK sustainable energy policies, while considering the role that technological innovation might play in delivering on these objectives. The thesis is divided in two parts; each focusing on the system-wide economic impact of a specific energy policy instrument, in presence of technological change. Part A focuses on the supply side of the electricity sector. It explores the impact of introducing targeted subsidies in a renewable energy sector in Scotland, in presence of endogenous learning-by-doing effects. The literature review highlights the growing awareness in the role of technological change in energy policy. Correspondingly, system-wide energy-economy-environment models used to analyse these policies have increasingly introduced endogenous technological change as a major design feature, whether it is induced through R&D spending or learning effects. Because the latter is the most commonly adopted, it is the focus of the modelling exercise in Part A. A number of alternative specifications of learning-by-doing are identified in the literature and are explored first through micro-simulations. Then, in a CGE model for Scotland, learning-by-doing is introduced in the presence of a production subsidy in the marine energy sector. As the subsidy stimulates the marine electricity generation sector through costs reductions in production, electricity generation from other sources is displaced and the Scottish economy experiences a small expansion. The presence of learning effects is found to accentuate the stimulus from the subsidy. Indeed the costs of marine generation are further reduced as the sector expands.;The choice of assumptions to represent endogenous learning-by-doing is found to matter greatly for the speed and paths of adjustments. In particular, the use of an "economic" functional form (inspired by endogenous growth theory and originating in the top-down modelling literature) to represent learning is favoured in the model, but only when negative returns-to-knowledge are imposed. Part B focuses on the demand side of the energy system and more specifically on households. It examines the economy-wide rebound effects from efficiency gains as a side effect of a one-off energy innovation at UK level: the roll-out of smart electricity meters. First, the household and total rebounds in electricity use in the UK are calculated using an Input-Output model, where reductions in household electricity expenditures are redistributed to other consumption goods. Results show that total rebound is generally smaller than household rebound, reflecting a negative indirect rebound from reductions in the industrial use of electricity. This is due to the relative electricity intensity of electricity compared to other sectors. A disaggregation of the electricity sector into network and generation activities reduces the indirect rebound, and thus the gap in household and total rebound and confirms the strong backwards linkages in electricity activities. The analysis is extended to a CGE model incorporating endogenous prices and incomes. The same efficiency gain is simulated and its system-wide economic and environmental impacts (CO2 emissions) are established. Using findings from the econometric literature on household energy demand, several simulations are conducted to explore rebound effects with alternative consumption structures, where households have different substitution possibilities between electricity and gas. Increased substitution between fuels increases the household electricity rebound (as households substitute more efficient electricity for gas) and in turn total rebound; leading to the extreme case of backfire, but accompanied by the largest CO2 emissions reductions. CGE results persistently show a smaller total rebound than household rebound, (similarly to the IO results) suggesting that the reduction in total UK electricity use could be larger than the reduction in household consumption estimated by the policy-makers, by considering economy-wide effects. Overall, the results of the modelling exercises of this thesis confirm the crucial role of technological change in achieving the goals of sustainability in energy policies, while providing insights on the assumptions for the analysis and modelling of these policies in an economy-wide framework.
- Resource Type
- DOI
- Date Created
- 2014
- Former identifier
- 1041247
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