Exploring renewable energy pricing with analytic network process - Comparing a developed and a developing economy

Increasing use of renewable sources has a vital importance in mitigating increasing energy demand and global warming. The limited reserves and negative environmental impacts associated with fossil fuel consumption make the renewable energy sources considerable alternatives in case environmental externalities are taken into consideration. Pricing models for renewable energy alternatives are commonly based on the same fundamentals as the fossil fuels, but this approach neglects some of the characteristics that are unique to renewable energy alternatives. In order to develop more accurate pricing models these unique variables which are mostly considered as market externalities need to be integrated in the current forms of pricing models. The originality of this work is its ability to combine social, technical, environmental and economic aspects using analytic network process in order to provide a more holistic point of view on factors impacting renewable energy pricing through a comparison of two case studies. United States (U.S.) and Turkey are the two cases analyzed in this paper. U.S. represents a developed economy whereas Turkey represents a developing economy. It is expected that the results of this work would be helpful for further research in understanding the dynamics behind pricing mechanism of the renewable sources in different environments. For instance, fundamental differences in relative importance of pricing factors between two case countries have been identified as different levels of enforcement through laws and regulations, impact of geographic characteristics on site selection and job opportunities created through new investments. (C) 2012 Elsevier B.V. All rights reserved.