Dr. Jorge Padilla is an Economics Professor at the University of Oxford and co-editor of "Harnessing Renewable Energy: in Electric Power Systems”, a book that aims to find the middle ground between what Padilla describes as two extreme views – the ultra-ecologist, 100% renewables persepective or the Bush-style ‘oh well, this is a disaster’ approach.
The publication, containing a forward by EU Energy Commissioner, Günther Oettinger, and takes a purely cost-benefit approach to analysing the role of renewable energy in the electricity sector.
“The driving force behind support for renewables is the need to curb emissions,” explains Padilla, adding, “a series of arguments has pointed towards saying: look, renewables generate a whole series of benefits, benefits that are highly important, but that market mechanisms would not give rise to on their own”.
As a result, Padilla believes there is an economic argument for public support for renewable energies, the best form of which is a feed-in tariff. “We have used direct investment grants, quotas or caps, and the famous feed-in tariffs [FiT]. I think empirical evidence shows that, in terms of effectiveness and efficiency, FiTs have encouraged investment and have done so on the basis of efficiency and effectiveness at a reasonable cost,” he says. Nonetheless, the economist warns that such public support must be carefully targeted.
“Is it worthwhile continuing to subsidise wind. No, because wind power is a mature technology… the wind sector is operating as it always will,” considers Padilla. “PV is different, as it is not mature. Here, there is a lot of room for technological improvement, innovation. Of course, one must still decide what you are going to support.” Padilla considers. “I believe that if the argument is based on technological externalities, learning by doing, the economies of learning, then money has to be given to those conducting R&D.”
From a strictly economic standpoint, however, Padilla reveals that the best way of combating climate change is by using less energy. “Economics is the science of efficient allocation of scarce resources. Most economists believe that the first thing to be encouraged is energy efficiency,” he says. “For me, the best option is energy efficiency, carbon taxes, and then you turn to energy generation.”
Padilla explains that the logic behind his publication was not to say yes or no to renewable energy, but to say ‘OK, are we going to have renewables? If so, we have to make sure they work as well as possible’. “That was our logic: the logic has been to search for this middle ground and shift the [energy] debate from what we perceived as a debate between two extreme views to the middle ground, to the economists’ position, which is all about cost-benefit,” he concludes.
To gain more of insight into Padilla’s views as an economist about the energy debate, click here:
Interview with Oxford University Professor of Economics, Dr. Jorge Padilla
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