Renewables vs. energy efficiency: the cost of carbon emissions reduction in Spain

Abstract

While renewable support instruments have succeeded to deploy a large volume of installed capacity in Spain during the 1996-2008 period, little attention has been paid to energy efficiency measures, resulting in a high energy intensity and large growth of energy demand. As a consequence energy-related CO2 emissions have increased significantly, despite the also important investments in combined cycle gas turbines. In this paper we analyze whether, from a cost minimization viewpoint, renewable support has been the best policy for reducing emissions, when compared to the promotion of energy efficiency in sectors such as transportation or buildings. We use a model of the Spanish energy sector to examine its evolution in the time period considered under different policies. We conclude that demand side management clearly dominates renewable support instruments if reduction of emissions at minimum cost is the only concern, and we also quantify the savings that could have been achieved.