Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/172441 
Year of Publication: 
2017
Series/Report no.: 
HEMF Working Paper No. 07/2017
Publisher: 
University of Duisburg-Essen, House of Energy Markets & Finance, Essen
Abstract: 
It would seem that Hotelling's rule and its related models of resource extraction and electricity production as largest consumer of scarce resources are closely related. However, although fixed costs and a non-storable product are essential in characterizing electricity markets, they can hardly be found in respective literature. We show optimal extraction paths when coal, gas and a renewable with differing fixed and variable costs as well as carbon intensities are considered. The technology with lowest fixed costs will then - though relying on a scarce resource - always be used in perpetuity. The high fixed-cost fossil technology may be exploited at a definite point of time if it is relatively scarce or also used ad infinitum.
Subjects: 
Scarce resoureces
Optimal control theory
Hotelling
Valuation
Non-renewable resource
Pollution target
Climate change
Peak-load-pricing
JEL: 
C61
Q32
Q41
L94
Document Type: 
Working Paper

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