Model of a world transiting from fossil fuels to renewables
An economist from University of Adelaide has modelled substitutions and interactions between a world powered by fossil fuels and alternative, renewable energy.
Dr Raul Barreto, Senior Lecturer from the University's School of Economics, has examined the short and long-term consequences of the relative productivity differential between fossil fuel and renewable energy.
"The transition from fossil fuels to alternative energy is dependent on their relative productivity. Sustainable energy will increasingly replace fossil fuels as the former becomes a less productive, more expensive source and the latter becomes more productive and less expensive," says Dr Barreto.
The research, published in the journal, Economic Modelling, shows that fuel productivity determines whether renewable energy is a viable source and how economies will transition from today's world in which sustainable energy complements fossil fuels, to one solely powered by sustainable sources.
"Fossil fuels have the advantage of being a relatively inexpensive and stable source of energy, but stocks are finite," says Dr Barreto."Sustainable energy sources such as solar and wind power are potentially limitless, but supply is inconsistent, and they require large amounts of capital investment to make them a viable source."
With arguments still looming on subjects of ‘peak oil’ and depletion of non-renewable energy reserves, it is hard to estimate a time when the threat will finally start to express itself in economies. However, it is popularly believed that in 50 to 100 years from now depleting reserves will become an issue.
"Hypothetical scenarios predict that finite stocks of fossil fuels will be depleted and economies that are solely dependent on those sources of energy will collapse causing severe welfare problems," says Dr Barreto. "These predictions assume that the supply of fossil fuel cannot be influenced by productivity increases, economies of scale or substitution. However, alternative energy substitution can alleviate the negative implications on growth and welfare of an ever-depleting fuel source on an energy dependent dynamic economy."
As the alternative energies catch up to oil, a relative decrease in consumption could be observed. If advancements on alternative energies are not of the standards of Oil and Gas, our economies will experience a drop in growth due to an abrupt switch to alternative, less efficient energy source
"If society can improve the productivity of alternative energy in the long run to a level comparable to oil, then the future will be at least as bright as it was at the peak of the economy's oil dependence. If instead, alternative energy always remains oil's weaker cousin, then the eventual result is a world that is at best nostalgic of the heydays of cheap oil," Dr Barreto concluded.