Three essays on substitution in clean energy applications

Abstract

This dissertation presents three essays that deal with the measurement of substitutability in different contexts pertaining to clean energy. The first two essays deal with material substitution in permanent magnets used in wind turbines that rely on rare earth elements for the provision of certain essential properties. These two chapters use two somewhat nontraditional approaches to measuring price responsiveness, since quality data on uses of rare earth elements is scarce. These are followed by an essay on substitution between programs offered by electric utilities to satisfy preferences for clean energy production. This third essay uses more traditional econometric techniques. The first essay evaluates the role increased and uncertain material costs play in inducing different material substitution types in the short to medium term. Specifically, it uses an expert survey to evaluate the extent to which magnet and wind turbine manufacturers substituted materials in response to the rapid and significant rare earth element price increases that occurred in 2010 and 2011. The second essay assesses the potential ability of producers to respond to future sustained cost increases of material inputs—specifically the ability of rare earth magnet manufacturers to respond to future heavy rare earth price increases. Since sufficient disaggregated data is not available for the use of more traditional methods, this question is answered by estimating long-run demand curves and price elasticities using data gathered from an expert elicitation survey. The third essay evaluates the substitutability between two types of clean energy programs offered by electric utilities. It analyzes whether participation in green pricing programs acts as a substitute for net metering programs.