Template-Type: ReDIF-Article 1.0
Author-Name:  Peter R. Hartley 
Author-Name: Kenneth B. Medlock III
Title:  The Valley of Death for New Energy Technologies
Classification-JEL: F0
Volume:  Volume 38
Issue:  Number 3
Year:  2017
Abstract:  It is often claimed that a difficulty of raising investment funds prevents promising new energy technologies from attaining commercial viability. We examine this issue using a dynamic intertemporal model of the displacement of fossil fuel energy technologies by non-fossil alternatives. Our model highlights the fact that since capital used to produce energy services from fossil fuels is a sunk cost, it will continue to be used so long as the price of energy covers merely short-run operating costs. Until fossil fuels are abandoned, the price of energy is insufficient to cover even the operating costs of renewable energy production, let alone provide a competitive return on the capital employed. The full long-run costs of renewable energy production are not covered until some time after fossil fuels are abandoned. 
Handle: RePEc:aen:journl:ej38-3-Hartley
File-URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=2926
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