MJC H2 ECON CSQ1 MJC

JC2 H2 E Prelim (a) Both a than oi (b) Artificia produc energy lower p destroy (c) (d) ECONOMICS  Case Stud Comp world re increas l prices Expla destr ally low e ction, increa y sources  profitability yed. With new l To wh energ PRELIM EXA dy H2 Q1 S pare chan d solar ene ing. (1)Exi ain why ‘ a oy incentiv energy pr ases supp  reduce y in altern the help o law on a fir T h m f T P p hat extent gy markets AMINATION _ Suggested ges in oil rgy capaci sting world artificially l ves to inve ices cau s ly and dec the dema ative tech of a diagr a rm like Tep The prop o have to b means. T h for the elec The firm’s Proposed profit, area will the ch s of differen _CASE STUDY d Answers prices fr o ity over the d solar en low energ st in altern sed by s u creases pri nd for alt e nologies a am, expla i pco. osed new uy all ele c his results ctricity whi s original new law a P2efg. hanges in o nt econom Y QUESTION om 1996 t o e same tim ergy capac y prices i native tech ubsidies. ces artifici N e a l out At cos mo ben dea hen Su ch e ernative en and incen t in the im p law woul d ctricity ge n in Tepco ch it distrib supernorm resulting oil prices im ies?  1_110911_ o 2010 a n me period. city is risi n ncrease w nologies’. Subsidies ally w market e ower pric e tput at Q2. Q2, the st of the ore than th nefit. The r adweight nce, resou bsidies m eaper t h nergy sour tives to in v act of the d mean t h nerated th incurring butes. mal profit in a sm a mpact the _MJC  nd existin g ng at a fa s waste an d reduce c equilibrium e P2 and . (1) additional unit prod u he margina re is a r e loss of urces are w make oil han alt e rces. (1) A vest in th propose d hat Tepc o hrough re n higher un is area aller supe r renewable g [2] ster rate d [6] cost of m lies at higher social uced is al social esulting ABC, wasted. much ernative As such, em are d [4] o would newable it costs P1acd. rnormal e [8]

JC2 H2 ECONOMICS PRELIM EXAMINATION _CASE STUDY QUESTION 1_110911_MJC  1. Rising prices of oil  increase demand for r enewable energy. Different economies have also adopted different policies for renewable energy ( extract) .  changes in oil prices will impac t renewable energy markets of different economies differently. 2. Increase prices of oil  Increase demand (DDDD’) for renewable energy  Increase pressure for prices and quantities to rise. 3. The XED value of oil and renewables may differ across economies. Countries who are better equipped to switch may have higher demand compared to those that do not (e.g. Extract 5: Japan whose grid is not suited for renewable energy). As such, the extent of shift of the demand for renewables will be more for the some countries (D1) compared to other countries like Japan (D2). The impact of increasing oil prices will be less for countries like Japan (less increase in prices, P1 and quantity traded, Q1) than for countries like Spain (P2,Q2) since they are less able to switch oil for renewables. 4. However, different economies have different capacities and capabilities for renewable energy markets. Economies that are ahead in the technology (e.g. China and EU who have spent a lot more money on renewable energy comp ared to Indonesia and Japan who are only just starting development in the area) are likely to be better able to respond to price changes in renewable energy.  PES of renewable energy in China and EU likely to be higher than PES of renewable energy in Indonesia and Japan. Hence, increasing oil prices will lead to higher renewable energy prices (P3) in Indonesia and Japan compared to China and EU (P4) wh ile the latter will have higher output (Q3 vs Q4). 5. The overall effect would depend on the re lative extent of sh ifts in the DD and the PES value of renewable energy of the different economies. 6. Different countries have invested different amounts into renewables. Economies in the EU have cut spendi ng, Indonesia and Japan have yet to develop renewable energy, while Ch ina has increased investments significantly Conclusion: Synthesis Extent of impact of rising oil prices on different ec onomies depending on PES value

JC2 H2 E of ren e supply contrib forese e are the L3 L2 L1 (e) Need t subsidi social o Existin utilities, Argum Govern . Evalu a   Evalua  ECONOMICS  ewables i n . There a r bute to ris e that the i e closest su Well deve support di case mate Largely un Answers w In lig would renew to interve n ies in Eu r optimum g utility h a , Singapore ments for l nment failu ation of EU Subsidies Info failur ation of Jap Japan’s ta inequity as PRELIM EXA n different re also ot h ing dema impact of r ubstitutes t Knowledg eloped respo iscussion w erial. nderdevelop with concep ht of the d d you rec o wable ener ne to ac h rope and as no inc e e's SP eaving to ure ’s subsidie s are costl re (govt fai pan’s feed- ariffs actua s some low AMINATION _ economie her factor s nd for re n rising oil pr to oil other ge, Unders onse with th within a clea ped respon ptual inaccu data provid ommend t rgy to the f Argum Positiv   there under E1E2 hieve soci a China  entive to p market: es ly  Gove lure) -in tariffs lly lead to wer-income _CASE STUDY es and rel a s that ma y newables. rices on re r than nucl standing, A he relevant r theoretica se with limi uracies and/ ded, if you that Sing a free marke ments aga ve Externa Market eq Socially o is an rallocation b) ally optim a Interventio produce r e ernment de an increas e earners m Y QUESTION ative exte n y affect th e However, enewables ear energy Application economic c al framework ted rigour /or did not r were a c o apore lea v et? Justify y ainst leavi alities in Pr quilibrium optimal eq under-pr of reso u al output on: Incre a enewable e ebt as in Ex se in the pr may not be  1_110911_ nt of shift s e renewa b in the l o is likely to y. , Analysis concepts us k and uses efer to case onsultant e e the pro your answe ing to mar roduction  MPB=M uilibrium roduction urces d  Evide n ses SS t o energy  xtract 2 rice of elec e able to af _MJC  s in dem a bles mark e ong run, w o be large sed to appropriate e material. economist, oduction o f er. rket: MPC  MSB=MS of Qm Q deadweigh nce: Exist e o MSC, r e Evidence: ctricity ( inc fford it and and et. That we can as they e 6 - 8 4 - 5 1- 3 , f [10] SC (e Q*  ht loss, ence of eaching Japan's creases

JC2 H2 ECONOMICS PRELIM EXAMINATION _CASE STUDY QUESTION 1_110911_MJC    Efficiency can be attained by the market Conclusion: Synthesis Land scarce Singapore  Singapore has little/no capacity for other forms of renewable energy SR: Benefits may be limited (little external benefit) and costs too high to justify government interventio n. LR: Potential area for growth, Falling costs and rising demand: Greater justification for intervention. Knowledge, Understanding, Application, Analysis L3 A balanced discussion with a clear theoretical framework that considers the entire case material. 7 -10 L2 Some attempt to respond to the question but is largely one-sided and/or arguments lack rigour. Limited use of case materials 4 - 6 L1 Largely theoretical response that has inaccuracies 1- 3