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A strong argument for using non-commodities to generate electricity

Author

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  • Santiago, Katarina Tatiana Marques
  • Campello de Souza, Fernando Menezes
  • de Carvalho Bezerra, Diogo

Abstract

An optimal control approach towards generating electricity is used to analyze the trade-off between using of primary sources which are regarded as commodities, such as fossil fuels, biomass and water to generate electricity, and exploiting these sources for their other economic uses (for example, in the petrochemical industry, in the production of fuels, in agriculture, in steelmaking, and so forth). In order to do so, a dynamic model is presented which establishes relationships between economic growth, the fossil fuel, water and biomass sectors, and energy policies, based on the application of the Pontryagin Maximum Principle. Among other results, the analysis establishes that, under the optimal path, the price of commodities for non-energy uses should be twice the price of the energy assets. This indicates that sources which are not commodities such as solar energy, wind energy, and geothermal energy, should be used to generate electricity.

Suggested Citation

  • Santiago, Katarina Tatiana Marques & Campello de Souza, Fernando Menezes & de Carvalho Bezerra, Diogo, 2014. "A strong argument for using non-commodities to generate electricity," Energy Economics, Elsevier, vol. 43(C), pages 34-40.
    • Handle: RePEc:eee:eneeco:v:43:y:2014:i:c:p:34-40
    DOI: 10.1016/j.eneco.2014.01.011
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    References listed on IDEAS

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    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    2. Alexandre Stamford da Silva & Fernando Campello de Souza, 2008. "The economics of water resources for the generation of electricity and other uses," Annals of Operations Research, Springer, vol. 164(1), pages 41-61, November.
    3. R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 29-45.
    4. Dorfman, Robert, 1969. "An Economic Interpretation of Optimal Control Theory," American Economic Review, American Economic Association, vol. 59(5), pages 817-831, December.
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    Cited by:

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    More about this item

    Keywords

    Energy policy; Exhaustible resources; Commodities; Optimal economic growth; Uses of fossil fuels;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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