Discussing Energy Economics on the Internet

A Bold Move

Posted in California,Oil by Cheryl Morgan on the November 28th, 2008

Even in these environmentally-conscious times it takes a brave man to suggest that Californians should pay more for their gasoline, yet that is exactly what Severin Borenstein of UCEI Berkeley will do next week. He does, however, have a get-out clause: he wants the tax surcharge inversely indexed to the price of oil. Here’s the abstract of his paper:

California is faced with an unprecedented budget crisis. The state is also committed to significant reductions in greenhouse gases that cause climate change. Meanwhile, the price of gasoline is plunging as the world economic slowdown cuts oil demand. At the intersection of these three situations lies an opportunity. I analyze the effects of a transportation fuel surcharge that moves inversely to the price of oil. Such a surcharge could stabilize gasoline prices at levels that a few months ago would have been celebrated by consumers and still significantly reduce California’s budget deficit. It would also slow the return of gas-guzzling vehicles that will otherwise result if oil prices remain at current levels.

If you would like to see him make the point to the public, he will be at the Hyatt Regency Hotel, Regency F, 1209 L Street, Sacramento from 4:00pm to 5:30pm on Wednesday, December 3rd. Some of us, however, will be at or on our way to New Orleans.

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Some Linkage

Posted in Texas,USA Federal by Cheryl Morgan on the November 26th, 2008

Knowledge Problem has an update on the negative prices in Texas issue.

Mike Giberson also muses on this very interesting article from the WSJ. If electricity demand growth in the US really has stopped that is a very big story.

And finally the nodal market in Ercot, due to go live next month, has been pushed back all the way to December 2010.

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December EEnergy Informer

Posted in EEnergy Informer by Cheryl Morgan on the November 26th, 2008

The December 2008 issue of EEnergy Informer is now available. Here is the contents list:

  • Draconian Measures Needed To Avert Climate Change
  • Don’t Be Fooled By Current Low Oil Prices
  • Schwarzenegger Orders 33% RPS For California
  • FERC Institutionalizes DR
  • NERC: Wind Major Factor In Coming Decade
  • No Reprieve For Coal
  • PHEVs More About The Grid Than The Vehicles
  • Wind To Supply 30% Of Global Energy By 2050?
  • Ausra’s First Solar Plant Goes On Line
  • New World Order
  • Sustainable Capitalism?
  • Financial Turmoil Hits CleanTech Along With Everything Else

The article demand response is available for free. All other articles currently require a subscription to the paper edition of the magazine. To subscribe to EEnergy Informer click here.

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To Green, or Not To Green?

Posted in California,Renewables,Texas by Cheryl Morgan on the November 25th, 2008

Things have been a little quiet here of late due to pressure of work on other projects, but while I have been busy various other things have been going on:

  • Governor Schwarzenegger committed California to a target of 33% renewable generation by 2020;
  • Mike Giberson complained about excess wind capacity causing negative prices in Texas; and
  • I received a fat document from the Cato Institute railing against the evils of renewable energy subsidies.

I’m not paying much attention to the Cato rant. As usual with such things it highlights all of the problems with the issue under attack while conveniently turning a blind eye to any problems associated with the big businesses whose entrenched interests Cato is trying to protect.

Giberson is much more even handed, but I find myself wondering whether asking for perfection in government action is wise. Of course other forms of generation get subsidies too – sometimes very well hidden, but they are there. If you try to take those subsidies away the companies that enjoy them will complain about being victimized. And of course we really ought to focus on the problem in hand, but if that means taxing something then the voters will get mad. Government interference is, I suspect, inherently inefficient, but if we want something to be done about climate change then governments need to prod markets into action.

Still, there are always things that can be done, and here is a paper on how real time pricing might reduce the problems that wind generation causes.

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New From Berkeley

Posted in California,Papers,Retail by Cheryl Morgan on the November 17th, 2008

There is another new paper out from the Center for the Study of Energy Markets at UC Berkeley. This one, titled “Equity Effects of Increasing-Block Electricity Pricing”, is by Severin Borenstein, and it looks at how successful the California government has been in designing a tariff system that will help the poor. Here’s the abstract:

Utility regulators frequently attempt to use tariff structures to pursue both distributional and efficiency goals. Efficiency necessitates setting prices as close to marginal costs as possible while still allowing the firm to cover its costs. The common distributional goal is to protect low-income customers from high prices. Perhaps nowhere is the conflict between these goals greater than in the use of increasing-block residential utility pricing, in which the marginal price to the customer increases as the customer’s usage rises. Since the 2000-01 California electricity crisis, the state has adopted some of the most steeply increasing-block tariffs in electric utility history, but the distributional and efficiency effects have not been analyzed in detail. Using a novel approach for matching customer bill data with census data on area income distributions, I derive estimates of the income redistribution effected by the increasing-block tariffs used by California regulated electric utilities. I find that the rate structure does redistribute income to lower-income groups, but that the effect is fairly modest, particularly compared to a means-tested program also in use. While the distributional impact of these tariffs do not seem to be large, the efficiency costs may not be great either. Examining the distribution of customer demand quantities, I find preliminary evidence that customers do not respond to the increasing marginal prices they face.

You can read the full paper here, but if academic rigor is a bit much for you CSEM also publishes their Research Review magazine that explains recent papers in plain language. The latest issue has just been published. In addition to the Borenstein paper, it also has articles on:

  • Time to Push Energy Conservation AND Energy Efficiency; and
  • Permits to Pollute: Insights on How to Design a Pollution Market

The magazine is available as a free download here.

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New CSEM Paper on Daylight Saving

Posted in Demand Management,Papers by Cheryl Morgan on the November 7th, 2008

UC Berkeley’s Center for the Study of Energy Markets has released a new paper on the energy-saving benefits, or lack thereof, of clock changes. It is by Matthew J. Kotchen and Laura E. Grant of UC Santa Barbara. Here is the abstract:

The history of Daylight Saving Time (DST) has been long and controversial. Throughout its implementation during World Wars I and II, the oil embargo of the 1970s, consistent practice today, and recent extensions, the primary rationale for DST has always been to promote energy conservation. Nevertheless, there is surprisingly little evidence that DST actually saves energy. This paper takes advantage of a natural experiment in the state of Indiana to provide the first empirical estimates of DST effects on electricity consumption in the United States since the mid-1970s. Focusing on residential electricity demand, we conduct the first-ever study that uses micro-data on households to estimate an overall DST effect. The dataset consists of more than 7 million observations on monthly billing data for the vast majority of households in southern Indiana for three years. Our main finding is that­ contrary to the policy’s intent­ DST increases residential electricity demand. Estimates of the overall increase are approximately 1 percent, but we find that the effect is not constant throughout the DST period. DST causes the greatest increase in electricity consumption in the fall, when estimates range between 2 and 4 percent. These findings are consistent with simulation results that point to a tradeoff between reducing demand for lighting and increasing demand for heating and cooling. We estimate a cost of increased electricity bills to Indiana households of $9 million per year. We also estimate social costs of increased pollution emissions that range from $1.7 to $5.5 million per year. Finally, we argue that the effect is likely to be even stronger in other regions of the United States.

You can read the whole paper here. And here is the Wall Street Journal’s take on the subject.

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November EEnergy Informer

Posted in EEnergy Informer by Cheryl Morgan on the November 6th, 2008

The November issue of EEnergy Informer is now available. Here is the contents list:

  • Gore vs. Coal
  • Australia Approaches Climate Change With Apprehension
  • OFGEM: No Cartel In British Market
  • RGGI Goes Live
  • Is ERCOT Market Performing Well?
  • California Tops ACEEE Rankings On Energy Efficiency
  • CCS Technology Viable
  • What Is Google Doing In Energy Space?
  • Acceptable Nuclear?
  • US Nuclear Agreement Opens Doors To India
  • Market Woes May Be A Blessing In Disguise
  • Germany Moving Towards A National Grid
  • Financial Turmoil Affects Dynamics of Power Markets

And it appears that due to rush projects elsewhere I completely forgot to bring you the contents list for the October issue, so here it is:

  • CA Regulators Adopt 33% RPS Despite Rising Costs
  • Turmoil In Financial Markets Overspills To Energy
  • Who Delivers Better Results? Markets Or Central Planners?
  • GE And Google To Promote Smart Grid
  • Data Centers Belatedly Go Green
  • US Wind $60 Billion Business By 2013
  • Xcel Finds No Reprieve For Coal
  • Germany To Reconsider Nuclear Phase-out
  • Give Us Our Daily Juice
  • Marketing Green Electricity: How Much Is too Much?
  • Megawatts vs. Negawatts: How So Little Can Do So Much
  • Book review: Hot, Flat & Crowded

The articles on Australia and data centers are available for free. All other articles currently require a subscription to the paper edition of the magazine. To subscribe to EEnergy Informer click here.

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California Rejects Green Pork

Posted in California,Renewables by Cheryl Morgan on the November 5th, 2008

Californians are a lot more cautious about energy measures these days. While they are still very much pro-environment (an animal welfare measure and various rail funding proposals passed), they will no longer pass an energy measure just because it says that it is green. Two propositions on yesterday’s ballot, numbered 7 and 10, were both defeated by sizable margins.

The two propositions managed to showcase some of the worst aspects of energy planning. Proposition 7 was a classic example of California’s passion for trying to micro-manage the state through ballot box legislation. The measure was so complicated, and poorly written, that it managed to draw opposition from a coalition comprising the Republicans, the Democrats, all of the major utility companies, the Public Utilities Commission, the Environmental Defense Fund, the Sierra Club, the Union of Concerned Scientists and, well, just about everyone except those voters taken in by the “it is green so it must be good” ads of the measure’s backers.

Proposition 10 was part of T. Boone Pickens‘ campaign to boost renewables. The voters saw it as simply an excuse to give millions of dollars in subsidies to Pickens’ company, Clean Energy Fuels, which provided most of the campaign finance for the measure. San Francisco city also rejected a renewable energy-related measure.

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