Optimal Extraction Paths with Electric Power Generation

It would seem that Hotelling's rule and its related models of resource extraction and electricity production as largest consumer of scarce resources are closely related. However, although fixed costs and a non-storable product are essential in characterizing electricity markets, they can hardly be found in respective literature. We show optimal extraction paths when coal, gas and a renewable with differing fixed and variable costs as well as carbon intensities are considered. The technology with lowest fixed costs will then – though relying on a scarce resource – always be used in perpetuity. The high fixed-cost fossil technology may be exploited at a definite point of time if it is relatively scarce or also used ad infinitum