Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2014/14: Estimating the cost of future global energy supply

Patrick A. Narbel () and Jan Petter Hansen ()
Additional contact information
Patrick A. Narbel: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Jan Petter Hansen: Dept. of Physics and Technology, University of Bergen, Postal: University of Bergen, Department of Physics and Technology, Allégt. 55, N-5007 Bergen, Norway

Abstract: This study produces an attempt to estimate the cost of future global energy supplies. The approach chosen to address this concern relies on a comparative static exercise of estimating the cost of three energy scenarios representing different energy futures. The first scenario, the business as usual scenario, predicts the future energy-mix based on the energy plans held by major countries. The second scenario is the renewable energy scenario, where as much of the primary energy supply as possible is replaced by renewable energy by 2050. The cost of the renewable energy generating technologies and their theoretical potential are taken into account in order to create a plausible scenario. The third scenario, the nuclear case, is based on the use of nuclear and renewable energy to replace fossil-fuels by 2050. Endogenous learning rates for each technology are modeled using an innovative approach where learning rates are diminishing overtime. It results from the analysis that going fully renewable would cost between -0.4 and 1.5% of the global cumulated GDP over the period 2009-2050 compared to a business as usual strategy. An extensive use of nuclear power can greatly reduce this gap in costs.

Keywords: Primary energy supply; experience curve; scenario

JEL-codes: Q40; Q42

13 pages, April 14, 2014

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