Economics of Solar Panel Subsidies
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Transcript of Economics of Solar Panel Subsidies
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Unit 1 MicroSolar Panel Subsidies
– Analysis and Evaluation
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Renewable Energy & Solar Subsidies
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Using cross-elasticity of demand, assess the likely relationship between the demand for solar panels and the price of household electricity from non-renewable sources
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Rising electricity prices
Incentives to switch to
renewable energy
There is a cost to switching
Rising market demand for solar
panels
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Despite a strong rise in demand, the market price of solar panels has fallen in recent years. With the help of a supply and demand diagram, explain why this can have happened
Price of solar
panels
Quantity
D1
S1
P1
Q1
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Despite a strong rise in demand, the market price of solar panels has fallen in recent years. With the help of a supply and demand diagram, explain why this can have happened
Price of solar
panels
Quantity
D1
S1
P1
Q1
D1
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Despite a strong rise in demand, the market price of solar panels has fallen in recent years. With the help of a supply and demand diagram, explain why this can have happened
Price of solar
panels
Quantity
D1
S1
P1
Q1
D2
P2
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Despite a strong rise in demand, the market price of solar panels has fallen in recent years. With the help of a supply and demand diagram, explain why this can have happened
Price of solar
panels
Quantity
D1
S1
P1
Q1
D2
P2
S2
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Despite a strong rise in demand, the market price of solar panels has fallen in recent years. With the help of a supply and demand diagram, explain why this can have happened
Price of solar
panels
Quantity
D1
S1
P1
Q1
D2
P2
S2
P3
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Despite a strong rise in demand, the market price of solar panels has fallen in recent years. With the help of a supply and demand diagram, explain why this can have happened
Price of solar
panels
D1
S1
P1
Q1
D2
P2
S2
P3
Q2
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Evaluate the argument for government intervention in the
market for solar panels to encourage the growth of renewable energy rather than allowing free market
forces to operate
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The case for solar subsidiesPromotes renewable energy and lowers oil dependency
Creates thousands of new jobs – + a positive multiplier effect
Cuts bills for consumers & councils
Economies of scale if the take-up of panels increases
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Positive consumption externalities
Costs and Benefits
Output
Marginal private benefit
Marginal private cost and social cost
A
B
Marginal social benefit
C
D
Loss of Social Welfare due to market failure
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Solar subsidies – critical evaluation
Subsidies benefit richer households
Limited effectiveness for money spent – opportunity cost
Mis-selling of solar panels especially to vulnerable households
Most solar panels are imported