Feasibility and Economic Impacts of the Energy Transition

Abstract

There is currently no consensus regarding whether or not renewable energies are capable of supplying all of our energy needs in the near future. To shed new light on this controversy, this paper develops a methodology articulating a macroeconomic model with two sectors (energy and non-energy) and an energy model that is able to calculate the maximum potentials of solar and wind energy. The results show that, in a business-as-usual context, a complete energy transition on a global scale is unachievable before the end of the century. The reason lies in the increasing capital needs of the energy sector, which slows, if not stops, economic growth and the energy transition. A complete transition can be achieved by 2070 provided that (i) energy demand is kept under control at its current level, (ii) a sufficient rate of capital growth is sustained (above its historical level), and (iii) substantial progress is made in terms of energy efficiency. However, this strategy requires a significant increase in the savings rate, with a negative impact on consumption, which ends up stagnating at the end of the transition.