Moxnes, Erling, "Interfuel Substitution in Oecd-European Electricity Production", 1986
ua435
A dynamic simulation model of interfuel substitution in Oecd-European electricity production is presented. A combination of a priori information and a calibration of the model to hictorical development produces several important results. Adjustment times are much longer than usually assumed, and price elasticities are much higher. Both the simulation model and econometric estimates indicate that the LOGIT model is a better representation of fuel choice in the sector than a constant elasticity function. The LOGIT model explains why estimates of price elasticities tend to vary over time. It also indicates that a fuel can price itself completely out of the market. Finally, the results indicate that coal is protected equivalent to a price subsidy of about 36 percent.