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Energy-saving Technology Adoption under Uncertainty in the Residential Sector

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  • Dorothée Charlier
  • Alejandro Mosino
  • Aude Pommeret

Abstract

Home renovation is generally asserted to be a highly effective means for households to lower expenditures on energy. In this sense, home renovation can also be thought as a means to reduce GHG emissions. In this paper we consider a homeowner who makes an irreversible energy-saving investment in an uncertain environment. In a general equilibrium framework, we solve the program of a representative consumer who uses his wealth to invest in the energy-saving technology, to save or to consume energy goods and non-energy goods. Resolution is analytical in a zero discounting case and numerical for the general case, based on collocation and Chebyshev polynomials. In particular, we show that the usual explanation of the energy paradox based on the existence of an option value in partial equilibrium is no longer valid when the analysis is extended to a general equilibrium framework.

Suggested Citation

  • Dorothée Charlier & Alejandro Mosino & Aude Pommeret, 2011. "Energy-saving Technology Adoption under Uncertainty in the Residential Sector," Annals of Economics and Statistics, GENES, issue 103-104, pages 43-70.
    • Handle: RePEc:adr:anecst:y:2011:i:103-104:p:43-70
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    Cited by:

    1. Prudence Dato, 2018. "Investment in Energy Efficiency, Adoption of Renewable Energy and Household Behavior: Evidence from OECD Countries," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    2. Prudence Dato, 2017. "Energy Transition Under Irreversibility: A Two-Sector Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(3), pages 797-820, November.
    3. Mosiño, Alejandro, 2012. "Producing energy in a stochastic environment: Switching from non-renewable to renewable resources," Resource and Energy Economics, Elsevier, vol. 34(4), pages 413-430.
    4. Theofano Fotiou & Alessia de Vita & Pantelis Capros, 2019. "Economic-Engineering Modelling of the Buildings Sector to Study the Transition towards Deep Decarbonisation in the EU," Energies, MDPI, vol. 12(14), pages 1-28, July.

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