Three Essays on the Renewable Energy Policy Focusing on the Long-term Direction and Effective Implementation

Abstract

This study discussed three major issues concerning long-term renewable energy policy direction at the national level and the effective implementation of policy tools in this area. First, a new viewpoint was suggested for the causal relationship between renewable energy consumption and economic growth. Then, an empirical study under the proposed and conventional viewpoints was conducted using the data of OECD and non-OECD countries, and directions for a long-term renewable energy policy were proposed. Second, a methodology was introduced for choosing optimal renewable energy options at the national level, to achieve renewable energy policy goals efficiently. In particular, factors and criteria were derived for sectors where future expansion is expected, and an empirical analysis was conducted to select optimal alternatives. Last, with respect to public perception, which has emerged as the largest obstacle against the achievement of renewable energy policy goals, public willingness to accept (WTA) utility loss caused by renewable energy production and utilization was estimated. Factors that affect the rate of participation were analyzed to propose how public participation may be increased.

1) Causal relationship between renewable energy consumption and economic growth This study recognized and addressed the problem posed by the previous studies and suggested a new viewpoint for addressing the causal relationship between renewable energy consumption and economic growth. The conventional viewpoint focused on the role of renewable energy as an input factor for production. However, renewable energy is more appropriately characterized as a technology or an industry rather than an energy source, when compared to conventional energy sources, especially for developed countries. Therefore, by suggesting a new viewpoint in this regard, this paper breaks new ground. The results of the empirical analysis for the new viewpoint revealed that for developed countries the momentum of the renewable energy industry is insufficient to lead economic growth. Rather, the industry has grown due to economic growth and the governments supporting policies. However, a very different result was obtained when the analysis targets were limited to the top five countries (USA, Japan, Germany, Denmark, and Spain) having the most mature renewable energy industries. These results showed that the growth hypothesis between renewable energy and economic growth is valid for these countries. This signifies that the renewable energy industry can play an important role in economic growth. A comparison of both analytical results shows that during the early-to-middle stages of the renewable energy industry, economic growth and the resulting fiscal expansion contributes to the industrys expansion. However, once the renewable energy industry matures to some degree, it contributes to economic growth.

2) Choosing the appropriate renewable energy source Narrowing down the perspective to Korea, the problem is its recent economic slowdown coupled with an insufficient government budget. These factors make it difficult to attain public agreement for expanding support for the renewable energy sector. Therefore, a selection and concentration strategy is required for effective implementation of a renewable energy policy under these circumstances. A combination of fuzzy analytic hierarchy process (fuzzy-AHP) and the benefits, opportunities, costs, risks (BOCR) approach was employed as the methodology for selecting an appropriate renewable energy option at the national level. The empirical results revealed that economic and industrial factors, such as market size and trade balance improvement, play a more significant role in effective policy implementation than energy–environmental factors such as energy cost and environmental cost. This result is in line with the new viewpoint, which focuses on the industrial aspect of renewable energy. Furthermore, the geothermal heat pump was chosen as the optimal alternative for the analyzed sectors, while the oil boiler, which is the most widely used technology at present, was revealed to be the least appropriate alternative. This result indicates that the current energy mix and energy policies are inappropriate for the studied sectors. Therefore, a paradigm shift is required in energy policy, covering not just the supply of clean and low-cost energy sources but also technological competitiveness enhancement and development of a new domestic industry.

3) Public perception of renewable energy production It is vital to secure a minimum domestic market and construct a test bed in order to foster the renewable energy industry when it is at a nascent stage. However, the recent cases of public utility loss in the process of renewable energy deployment act as an obstacle against implementing renewable energy policies and, therefore, government choice. Accordingly, it was necessary to study public perception in terms of opportunity cost. And an empirical analysis on the feasibility of increasing waste cooking oil (WCO) collection rates for biodiesel production was conducted. The results indicated that regular households average WTA WCO collection was similar to or lower than the WCO market price, and if an appropriate collection system is constructed, over 40% of the households were willing to participate, provided the compensation level was comparable to the market price of the WCO. Considering that the household WCO collection rate identified by the survey was 6.9%, it is likely that appropriate compensation would raise WCO collection significantly. Therefore, the result of the empirical analysis showed that the utility loss caused by renewable energy deployment can be sufficiently overcome if a proper compensation system is constructed. In other words, to achieve the long-term renewable energy policy goals effectively, it is necessary to accurately identify the cause of the utility loss and respond to it by constructing a proper compensation system.

The overall conclusion of this study is as follows. Renewable energy should be considered as a new industry, and the industrys potential should be judged in line with the proposed selection and concentration strategies from a long-term perspective. Public utility loss, which occurs in the process of securing domestic markets for renewable energy and building test beds, can be overcome with a proper compensation system, the implementation of which will contribute to the effective implementation of renewable energy policy.

The contributions of this study are three-fold. First, it suggests a new viewpoint on the causal relationship between renewable energy consumption and economic growth and the empirical results showed that the contribution of the renewable energy industry to economic growth depends on the phase of the renewable energy industry. Second, this paper is the first to highlight the use of fuzzy-AHP with BOCR approach toward the investigation of optimal energy alternatives for the horticulture and stockbreeding sectors and provided insights into new long-term renewable energy policy directions for these sectors. Last, this paper uses the WTA measure, instead of the willingness to pay (WTP) measure, for waste collection unlike most previous studies. Notably, this was the first attempt to study public perception of WCO collection in terms of opportunity cost.