A future changeover to renewable energies is the subject of a new study by a team of economic scientists. Two major problems with our energy supplies make such a transition inevitable: the scarcity of fossil fuels and the global warming we are causing by burning them. A project sponsored by the Austrian Science Fund FWF will analyse this transition in theoretical terms from a number of different perspectives. Researchers will look particularly at the economic aspects and obstacles – especially taking dynamic developments into account.
It's something of a paradox: Though fossil fuels are feeding global warming AND running out, their consumption at the hands of humanity continues to rise unabated. With all of the unforeseeable consequences. Yet there appears to be a simple solution: alternative and renewable energies. Their use is unlimited and they do not give off any additional greenhouse gases. However, the economic conditions and obstacles that could be precipitated by mankind's move to widespread use of such energies are still largely unknown or are being disregarded. A team from the University of Vienna's Institute of Business Administration is doing a great deal to change that.
Prof. Franz Wirl, Project Manager and Chair in Industry, Energy and Environment, is planning on employing a whole range of methods: "Over the next three years we will be using an array of approaches to examine different aspects of the economic conditions involved in the transition to renewable energies. Methods include equilibrium models, dynamic optimisation and deterministic, as well as stochastic and dynamic games. Though our project is theoretical in nature it will definitely involve applied and empirical techniques as well."
Consideration of the oil peak, or the time of maximum oil production, will form an integral part of the work. The oil peak is essentially determined by the extent of reserves and the rate of extraction. Prof. Wirl and his team are now analysing the impact of the oil peak on Russia in particular, being the world's second-largest oil-exporting nation.
The different political regulatory mechanisms and their limitations also form a focal aspect of the project. It is these that incentivise the use of renewable energy – or place obstacles in the path of burning fossil fuels – thereby furthering the market penetration of alternative energy sources. In actual fact, their consequences and limitations are still fairly uncertain – although even the public debate is clear on the fact that the external effects of our current energy usage are in need of regulation or government intervention.
Less Is More
A drastic scenario that brings this home to us has been dubbed the "green paradox": Reducing fossil fuel consumption in industrialised countries would bring down the price of oil, gas and coal, which would actually increase their consumption – particularly in developing and emerging nations. Another point that is often brushed aside in this context, but which will now be examined in more detail, is the fact that governments' ability to commit themselves long term is limited – as the Greek debt crisis currently confirms. What this means is that investors – large or small – cannot actually rely on "promised" conditions being permanent.
However, these are not the only elements that stand in the way of a move to alternative energies – and this FWF project sets out to examine other market and natural forces in more detail. These include the competition between biomass and food production over arable land. But it also involves looking at the "erratic" availability of wind and solar power and their effects on the landscape around us. In this endeavour, Prof. Wirl and his team will be making a fundamental contribution to a better understanding of what will, hopefully, be an unavoidable shift in our energy supply system and what options we have for dealing with it.
Univ.-Prof. Dr. Franz Wirl
University of Vienna
Institute of Business Administration
Brünner Straße 72
1210 Vienna, Austria
T +43 / 1 / 4277 - 38101
Austrian Science Fund FWF
Mag. Stefan Bernhardt
Haus der Forschung
1090 Vienna, Austria
T +43 / (0)1 / 505 67 40 - 8111
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Vienna, February 11th, 2013