Sustainable Development Seminar: Michael J. Roberts

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Past Event

Sustainable Development Seminar: Michael J. Roberts

April 29, 2019
4:15 PM - 5:45 PM
801 International Affairs Building, 420 W 118th St, New York, NY 10027

On a levelized-cost basis, solar and wind power generation are now cheaper than fossil fuels, but are intermittent. As a result, the benefits of using variable, marginal-cost retail pricing will grow. We evaluate the potential gains from dynamic pricing using a novel model of power supply and demand in Hawaii. The model breaks new ground by simultaneously optimizing generation and storage capacity with chronological operation of the system, including reserves, and a demand system with different interhour elasticities for different end uses. We find that in fossil systems, dynamic pricing improves welfare by just 2.6 to 4.6 percent of baseline expenditure, but rises to 8.5 to 23.4 percent in a 100 percent renewable system with otherwise similar assumptions. With more elastic demand, variable pricing can improve welfare by as much as 47 percent. Excluding pollution externalities, welfare-maximizing systems are projected to reach 75-90 percent renewable by 2045.