Integrative Analysis of Non-Renewable and Renewable Energy Sources for Electricity Generation in U.S. Demand and Supply Factors, Environmental Risks and Policy Evaluation

An equilibrium economic model for policy evaluation related to electricity generation was developed; the model takes into account non-renewable and renewable energy sources, demand and supply factors and environmental constraints. Nonrenewable energy sources include three types of fossil fuels: coal, natural gas and petroleum, and renewable energy sources include nuclear, hydraulic, wind, etc. Energy demand sectors include households, industrial manufacturing and commercial enterprises. Energy supply takes into account the electricity delivered to the consumer by the utility companies at a certain price which maybe different for retail and wholesale customers. Environmental risks primarily take into account the CO₂ generation from fossil fuels. The model takes into account the employment in various sectors and labor supply and demand. Detailed data of electricity supply and demand, electricity cost, employment in various sectors and CO₂ generation were collected for a period from 1990 to 2006 in U.S for model calibration. The calibrated model was employed for policy analysis experiments if a switch was made in sources of electricity generation, namely from fossil fuels to renewable energy sources. The consequences of this switch on supply and demand, employment, wages, and emissions were obtained from the economic model under three scenarios: (1) energy prices were fully regulated, (2) energy prices were fully adjusted with electricity supply fixed, and (3) energy prices and electricity supply both were fully adjusted. The model output suggested possible increase in employment with such switch, while government regulation was necessary to achieve any sort of carbon reduction through such switch.