Application of sector and location specific models of the "worth" of renewable energy technologies

Abstract

Renewable energy sources such as solar and wind hold the potential for providing a significant portion of the U.S. energy requirements in the decades ahead. Unlike other energy sources their availability is determined by nonrandom events beyond the control of the consumer. In addition, macro-, meso-, and microclimatic conditions play a major role in determining the worth of such renewable energy sources to their owners. The worth of these new technologies will be a function of owner, location, and application as well as the traditional capital and operating cost, i.e., their worth to an owner in the southwest will be different form that to an owner in the northeast or the southeast. Dealing with energy sources, with geographic and sectorally specific energy values and with energy technologies with which we have little or no experience in the marketplace has created a set of challenges in analysis and modeling of these new technologies in competition with traditional energy technologies and with other emerging technologies. This paper will look at one simulation methodology for estimating the worth of renewable energy systems providing electricity, such as wind or solar photovoltaic power systems, and will discuss the interaction between such systems and traditional electric utilities with which they may or may not be integrated, be owned or be co-located. The paper concludes with a discussion of the issues associated with the incorporation of econometric techniques into such a simulation modeling structure.