Economic impact of investments in the electricity sector - a hybrid general equilibrium and technological analysis

Abstract

This work combines a detailed model of the electricity sector with a general equilibrium model for Spain, to analyze the effects of new investments and technological evolution in the electricity sector, as well as their impact in global aspects of the economy. A reference scenario with high prices for CO2 emissions together with insufficient investments in renewable energy was simulated, showing an expected negative economic impact. This scenario was then combined with five potential policies of economic reactivation. The most positive one was related to the reduction of the cost of access to capital, leading to improvements in capital income and GDP, thus mitigating the impact of the electricity price increase. This policy also leads to a migration of the labour from the production to the service sectors and suggests that a transition towards a cleaner electricity sector with minor economic impacts is possible, when energy policies are combined with adequate fiscal policies.