Potential gains of long-distance trade in electricity

TL;DR

This paper explores how long-distance electricity trade, enabled by solar PV and seasonal cycles, can significantly reduce costs and has important political and regulatory implications.

Contribution

It develops an analytical model to evaluate potential gains from global electricity trade, highlighting the importance of seasonal and diurnal cycle complementarities.

Findings

Large potential gains from interhemispheric trade

High willingness to pay for extensive transmission

Significant policy implications for trade regulation

Abstract

Electrification of all economic sectors and solar photovoltaics (PV) becoming the lowest-cost electricity generation technology in ever more regions give rise to new potential gains of trade. We develop a stylized analytical model to minimize unit energy cost in autarky, open it to different trade configurations, and evaluate it empirically. We identify large potential gains from interhemispheric and global electricity trade by combining complementary seasonal and diurnal cycles. The corresponding high willingness to pay for large-scale transmission suggests far-reaching political economy and regulatory implications.