Foundations of the Applied Analysis

The analytical situation studied in the theoretical part is applied in this second part to the concrete circumstances of structural and gradual technological change as expected for the German electricity industry around 2015. The primary aim is to quantify, and to study the relevance of, the welfare and policy implications of the split social and private time preferences derived above theoretically, at one particular, relevant case. Therefore, the economics of conventional energy technologies is, for this case, newly discussed, taking into account one renewed and one new aspect: the deployment of new nuclear power stations and the new introduction of carboncapture- and-storage (CCS) technologies for (quasi-)complete emission abatement. The explorative analysis focuses on two investment-related decisions of a single cost-minimising utility, its choice (i) among three new generation technologies, and (ii) of the optimal moment of transition from an established polluting to a new less polluting technology. Each decision is studied under seven scenarios.

In this chapter the analytical setting and specifics of the applied investigation are introduced (section 5.1). Moreover, the chapter sets out the financial model to calculate the unit costs of electricity of the different generation technologies (section 5.2), describes the technologies referred to and specifies the technical and economic parameters (section 5.3), and introduces the policy parameters (section 5.4). Table B.1 in appendix B.1 summarises the assumptions for the technical, financing, and cost parameters.