IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v37y2009i9p3336-3347.html
   My bibliography  Save this article

Economic efficiency of solar hot water policy in New Zealand

Author

Listed:
  • Gillingham, Kenneth

Abstract

New Zealand has recently followed the path of several other countries in promoting solar hot water (SHW) systems in the effort to reduce greenhouse gas emissions, yet the economic efficiency of large-scale policies to encourage SHW remains a pressing question for policymakers. This paper develops an economic framework to examine policies to promote SHW in New Zealand, including the current information, training, and subsidy policy. The economic framework points to environmental, energy security, and average-cost electricity retail pricing market failures as motivation for SHW policy, with the global climate change externality the most important of these. The results indicate that domestic SHW systems are close to being financially attractive from a consumer perspective, but a more substantial subsidy policy would be necessary for SHW to appeal to a wider audience. Such a policy is far more likely to have positive net benefits than a policy of mandating SHW on all homes or all new homes in New Zealand, and could be justified on economic efficiency grounds under reasonable assumptions. However, this result reverses under an economy-wide carbon trading system that internalizes the environmental externality.

Suggested Citation

  • Gillingham, Kenneth, 2009. "Economic efficiency of solar hot water policy in New Zealand," Energy Policy, Elsevier, vol. 37(9), pages 3336-3347, September.
    • Handle: RePEc:eee:enepol:v:37:y:2009:i:9:p:3336-3347
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301-4215(09)00012-3
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Paul Joskow & Jean Tirole, 2007. "Reliability and competitive electricity markets," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 60-84, March.
    2. Arthur van Benthem & Kenneth Gillingham & James Sweeney, 2008. "Learning-by-Doing and the Optimal Solar Policy in California," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 131-152.
    3. Gillingham, Kenneth & Newell, Richard G. & Palmer, Karen L., 2004. "Retrospective Examination of Demand-Side Energy Efficiency Policies," Discussion Papers 10477, Resources for the Future.
    4. Paul Joskow & Jean Tirole, 2006. "Retail electricity competition," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 799-815, December.
    5. Paul Joskow & Jean Tirole, 2006. "Retail electricity competition," RAND Journal of Economics, The RAND Corporation, vol. 37(4), pages 799-815, December.
    6. Loschel, Andreas, 2002. "Technological change in economic models of environmental policy: a survey," Ecological Economics, Elsevier, vol. 43(2-3), pages 105-126, December.
    7. Tooraj Jamasb, 2007. "Technical Change Theory and Learning Curves: Patterns of Progress in Electricity Generation Technologies," The Energy Journal, , vol. 28(3), pages 51-72, July.
    8. Nemet, Gregory F., 2006. "Beyond the learning curve: factors influencing cost reductions in photovoltaics," Energy Policy, Elsevier, vol. 34(17), pages 3218-3232, November.
    9. Roulleau, T. & Lloyd, C.R., 2008. "International policy issues regarding solar water heating, with a focus on New Zealand," Energy Policy, Elsevier, vol. 36(6), pages 1843-1857, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ma, Ben & Song, Guojun & Smardon, Richard C. & Chen, Jing, 2014. "Diffusion of solar water heaters in regional China: Economic feasibility and policy effectiveness evaluation," Energy Policy, Elsevier, vol. 72(C), pages 23-34.
    2. Yurtsev, Arif & Jenkins, Glenn P., 2016. "Cost-effectiveness analysis of alternative water heater systems operating with unreliable water supplies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 54(C), pages 174-183.
    3. Wasi, Nada & Carson, Richard T., 2013. "The influence of rebate programs on the demand for water heaters: The case of New South Wales," Energy Economics, Elsevier, vol. 40(C), pages 645-656.
    4. Arif Yurtsev & Glenn P Jenkins, 2016. "An economic analysis of policies for promoting economically efficient water heater systems operating under seasonal climatic conditions," Energy & Environment, , vol. 27(2), pages 227-240, March.
    5. Naspolini, Helena F. & Rüther, Ricardo, 2012. "Assessing the technical and economic viability of low-cost domestic solar hot water systems (DSHWS) in low-income residential dwellings in Brazil," Renewable Energy, Elsevier, vol. 48(C), pages 92-99.
    6. Lucia Bednárová & Henrieta Pavolová & Zuzana Šimková & Tomáš Bakalár, 2023. "Economic Efficiency of Solar and Rainwater Systems—A Case Study," Energies, MDPI, vol. 16(1), pages 1-11, January.
    7. Rout, Auroshis & Sahoo, Sudhansu S. & Thomas, Sanju, 2018. "Risk modeling of domestic solar water heater using Monte Carlo simulation for east-coastal region of India," Energy, Elsevier, vol. 145(C), pages 548-556.
    8. Aydin, Erdal & Eichholtz, Piet & Yönder, Erkan, 2018. "The economics of residential solar water heaters in emerging economies: The case of Turkey," Energy Economics, Elsevier, vol. 75(C), pages 285-299.
    9. Baskaran, Ramesh & Managi, Shunsuke & Bendig, Mirko, 2013. "A public perspective on the adoption of microgeneration technologies in New Zealand: A multivariate probit approach," Energy Policy, Elsevier, vol. 58(C), pages 177-188.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mier, Mathias, 2021. "Efficient pricing of electricity revisited," Energy Economics, Elsevier, vol. 104(C).
    2. Daniel Adelman & Canan Uçkun, 2019. "Dynamic Electricity Pricing to Smart Homes," Operations Research, INFORMS, vol. 67(6), pages 1520-1542, November.
    3. Joskow, Paul L., 2008. "Capacity payments in imperfect electricity markets: Need and design," Utilities Policy, Elsevier, vol. 16(3), pages 159-170, September.
    4. Arthur van Benthem & Kenneth Gillingham & James Sweeney, 2008. "Learning-by-Doing and the Optimal Solar Policy in California," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 131-152.
    5. Roques, Fabien A., 2008. "Market design for generation adequacy: Healing causes rather than symptoms," Utilities Policy, Elsevier, vol. 16(3), pages 171-183, September.
    6. Boom, Anette, 2009. "Vertically integrated firms' investments in electricity generating capacities," International Journal of Industrial Organization, Elsevier, vol. 27(4), pages 544-551, July.
    7. Peter Cramton & Axel Ockenfels & Steven Stoft, 2013. "Capacity Market Fundamentals," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    8. Rubin, Edward S. & Azevedo, Inês M.L. & Jaramillo, Paulina & Yeh, Sonia, 2015. "A review of learning rates for electricity supply technologies," Energy Policy, Elsevier, vol. 86(C), pages 198-218.
    9. van Kooten, G. Cornelis, 2015. "All you want to know about the Economics of Wind Power," Working Papers 241693, University of Victoria, Resource Economics and Policy.
    10. Elofsson, Katarina, 2014. "International knowledge diffusion and its impact on the cost-effective clean-up of the Baltic Sea," Working Paper Series 2014:06, Swedish University of Agricultural Sciences, Department Economics.
    11. Witajewski-Baltvilks, Jan & Verdolini, Elena & Tavoni, Massimo, 2015. "Bending the learning curve," Energy Economics, Elsevier, vol. 52(S1), pages 86-99.
    12. Xuejuan Su, 2015. "Have customers benefited from electricity retail competition?," Journal of Regulatory Economics, Springer, vol. 47(2), pages 146-182, April.
    13. Allcott, Hunt, 2011. "Rethinking real-time electricity pricing," Resource and Energy Economics, Elsevier, vol. 33(4), pages 820-842.
    14. De Castro, Luciano & Dutra, Joisa, 2013. "Paying for the smart grid," Energy Economics, Elsevier, vol. 40(S1), pages 74-84.
    15. Li, Bingbing & Long, Yan, 2024. "Output Uncertainty Mitigation in Competitive Markets," Center for Mathematical Economics Working Papers 698, Center for Mathematical Economics, Bielefeld University.
    16. Ray REES & Sebastian SCHOLZ, 2010. "Electricity Market Design for Germany," Sosyoekonomi Journal, Sosyoekonomi Society, issue 2010-EN.
    17. Samadi, Sascha, 2018. "The experience curve theory and its application in the field of electricity generation technologies – A literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 82(P3), pages 2346-2364.
    18. Mier, Mathias & Weissbart, Christoph, 2020. "Power markets in transition: Decarbonization, energy efficiency, and short-term demand response," Energy Economics, Elsevier, vol. 86(C).
    19. Poletti, Steve, 2009. "Government procurement of peak capacity in the New Zealand electricity market," Energy Policy, Elsevier, vol. 37(9), pages 3409-3417, September.
    20. Hong, Sungjun & Chung, Yanghon & Woo, Chungwon, 2015. "Scenario analysis for estimating the learning rate of photovoltaic power generation based on learning curve theory in South Korea," Energy, Elsevier, vol. 79(C), pages 80-89.

    More about this item

    Keywords

    Solar Greenhouse gases Electricity;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:37:y:2009:i:9:p:3336-3347. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.