The Productivity Institute - Driving zero-carbon transitions and productivity growth

Research and In order to ensure the productivity impacts of the zero-carbon transition are development captured, the first stage of this work involved adding new developments to FTT: Power which improve the feedbacks to the E3ME model and hence allow the productivity effects of the transition to be captured in greater detail: - Improving the learning rates for operation and maintenance (O&M) and a. [...] The effect of For renewable technologies, CAPEX governs the majority of the LCOE due to learning on the the low operation and maintenance costs driven by the elimination of fossil different fuels (Steckel and Hirth 2016). [...] Changes in the balance of trade in the short term are driven both by the change in investment, where the electricity industry is the largest contributor, as well as changes in fossil fuel imports and exports. [...] Comparing the Policy and Policy + scenarios, which have a similar percentage of renewables in the power mix in the medium term, labour Cambridge Econometrics 47 Driving zero-carbon transitions and productivity growth productivity per unit of power generated is higher in the medium term in the latter due to the increased role of onshore wind. [...] However, in the long term the higher penetration of renewables in the power mix in the Policy + scenarios leads to higher employment compared to the Policy scenarios and the baseline, which means productivity is overall reduced.