Firing the Furnace? An Econometric Analysis of Utilities' Fuel Choice

Tauchmann H (2006)


Publication Language: English

Publication Type: Journal article

Publication year: 2006

Journal

Publisher: Elsevier

Book Volume: 34

Pages Range: 3898-3909

Journal Issue: 18

DOI: 10.1016/j.enpol.2005.09.014

Abstract

This paper attempts to estimate how the fuel mix of German electricity producers does react to fuel price changes. The empirical analysis is based on panel data (1968-1998) of major utilities. Two different aspects of fuel choice are distinguished: at the one hand, the construction of usually fuel-specific capacities for electric power generation, i.e. investment decisions that determine the fuel mix in the long run; at the other, fuel use conditional on existing generation capacities, i.e. short-run inter-fuel substitution. According to the results from panel unit root tests, both the econometric models which describe these two aspects are specified in changes rather than levels. The partly discrete nature of investment decisions is taken into account, by constructing a discrete model of capacity adjustment. Our estimation results suggest that the fuel mix of electric utilities is price inelastic either if long-term investment or short-term inter-fuel substitution is considered. Finally, the empirical results are used to predict the potential impacts of CO2 emissions trading on fuel choice in the German electric power industry. © 2005 Elsevier Ltd. All rights reserved.

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How to cite

APA:

Tauchmann, H. (2006). Firing the Furnace? An Econometric Analysis of Utilities' Fuel Choice. Energy Policy, 34(18), 3898-3909. https://doi.org/10.1016/j.enpol.2005.09.014

MLA:

Tauchmann, Harald. "Firing the Furnace? An Econometric Analysis of Utilities' Fuel Choice." Energy Policy 34.18 (2006): 3898-3909.

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