Potential gains of long-distance trade in electricity

Electrification of all economic sectors and solar photovoltaics (PV) becoming the lowest-cost electricity generation technology in ever more regions give rise to new potential gains of trade. We develop a stylized analytical model to minimize unit energy cost in autarky, open it to different trade c...

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Bibliographic Details
Published in:Energy economics 2023-08, Vol.124, p.106739, Article 106739
Main Authors: López Prol, Javier, Steininger, Karl W., Williges, Keith, Grossmann, Wolf D., Grossmann, Iris
Format: Article
Language:English
Subjects:
Economic development
Electrification
Gains of trade
Renewables
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Summary:Electrification of all economic sectors and solar photovoltaics (PV) becoming the lowest-cost electricity generation technology in ever more regions give rise to new potential gains of trade. We develop a stylized analytical model to minimize unit energy cost in autarky, open it to different trade configurations, and evaluate it empirically. We identify large potential gains from interhemispheric and global electricity trade by combining complementary seasonal and diurnal cycles. The corresponding high willingness to pay for large-scale transmission suggests far-reaching political economy and regulatory implications. •We develop a model of inter-hemispheric and global trade in electricity•We derive the willingness to pay for trade in renewable electricity•Interhemispheric trade removes PV seasonality•Numerical evaluation reveals high willingness to pay for trade•Results explain drivers of observed long-distance transmission projects
ISSN:0140-9883
1873-6181
DOI:10.1016/j.eneco.2023.106739