Discussing Energy Economics on the Internet

Save the Planet – Only €530 billion

Posted in Climate by Cheryl Morgan on the January 27th, 2009

That’s the opinion of McKinsey anyway. And given that many scientists and environmentalists are already saying it is too late to prevent a disaster, that’s a bargain.

Perhaps more significantly, the McKinsey report estimates the cost of action to abate climate change to be less than 1% of global GDP. That compares to an estimate of 20% of global GDP that the Stern Report suggested the impending disaster would cost.

Of course, no one really knows. Doubtless the doom mongers will already be lining up their complaints. But doom mongering rarely begets action. Perhaps what politicians need is exactly the sort of upbeat, positive message that McKinsey is pushing.

You can find the whole report here, or there is a summary on EurActive.

Comments Off on Save the Planet – Only €530 billion

More on EU Carbon Prices

Posted in Climate,Emissions Trading by Cheryl Morgan on the January 22nd, 2009

Sandbag has another article up, citing this Reuters article in support of the claim that the Emissions Trading System is proving windfall profits for European generators.

Meanwhile at Knowledge Problem Mike Giberson argues that clean energy projects in the developing world are just another industry and it doesn’t matter whether they get funded or not.

I particularly liked this point from the Sandbag article:

I have long believed that Europe took a wrong turn when it embarked on a unilateral emissions trading scheme that covered industries whose products are priced in a global market. It was always going to result in fierce lobbying and inevitable political compromise. Had they decided to stick with the large sectors like electricity, which cannot move and are not exposed to international competition, they would have been able to proceed with much more ambition and clarity of purpose.

Of course letting some industries off the hook would have infuriated those environmentalists who are are more interested in ensuring that the “bad guys” get punished than in fixing the climate change problem. For the rest of us, however, the issue ought to be “will it work?” If we are going to have masses of new government subsidies and regulations to save the planet, the #1 priority has to be whether those measures will work or not.

The same applies to clean development. Governments in rich countries should be subsidizing such schemes in order to help combat climate change, not just to boost exports. If a collapse in carbon prices means such schemes don’t get off the ground (and developing countries choose to burn coal instead) then we have a problem.

Of course all of this assumes that economies and ecosystems can be “fixed” by government intervention. As Lynne Kiesling points out, that is easier said than done.

Comments Off on More on EU Carbon Prices

Behind the Curve

Posted in California,Climate,USA Federal by Cheryl Morgan on the December 9th, 2008

One of the most memorable parts of the panel on energy policy in New Orleans was listening to Jim Sweeney talk about where the Obama Administration needs to go with its climate change policy. It wasn’t enough, he said, for the US to catch up with the rest of the world and actually have a policy; it needs to become a leader in climate change technology, and to help and encourage other companies to reduce their carbon emissions. It is a grand scheme, but apparently the US has a lot of catching up to do.

Over at EU Energy Policy Matthieu Glachant from the School of Mines in Paris is talking about research that he and his colleagues have done into innovation in climate change technologies. It is clear from looking at the data on patents that work is proceeding rapidly in this area, and that the technology is strongly global. One area of the world, however, is lagging behind. Yes, you guessed it, the USA is behind the curve.

The full report is available here. I did a quick search for California to see if it was once again bucking the trend, but there were no matches. Patent law in the US is a federal issue, so it would have been difficult separate out the performance of individual states. Still, we can hope. Innovation is supposed to be something that California is good at.

Comments Off on Behind the Curve

Exploiting the Interior

Posted in Climate,USA Federal by Cheryl Morgan on the December 5th, 2008

The lunch speaker here today was C. Stephen Allred, the Assistant Secretary of the Interior for Land and Minerals at the Department of the Interior. He gave us a fascinating insight into the mindset of the Bush Administration, and its current drive to open up as much federal land as possible to energy exploration before Mr. Obama gets into office. The Allred doctrine was basically as follows:

  1. 1. There is an urgent need for the US to establish energy independence, because too much of the world’s energy supplies is controlled by Communists and Muslims (though he didn’t put it quite that bluntly);
  2. 2. Renewable energy is unlikely to ever account for more than about 10% of the total energy usage in the US; and
  3. 3. The federal government can make lots of money by leasing land to energy companies.

Allred did have a very good point in that even renewable energy development has a substantial effect on the environment. For example, solar farms cover a vast acreage of desert (and the DoI currently has planning applications for around twice the amount of land that it has available to lease). Also if you site wind and solar farms out in the desert then you still need to build transmission lines to bring the power to population centers.

On the other hand, some of what he said was a little suspicious. Allred made a big point of wanting consistency between federal policies on land use and the policies in place on neighboring private lands. I believe that is code for, “if private land owners allow their land to be exploited than the government should be allowed to do so too.”

There are also questions to be asked about the potential effects of some of this hydrocarbon search. One of the biggest potential sources of energy is the collection of oil shale fields in Wyoming, Utah and Colorado. However, if Canadian experience is anything to go by, exploiting them could cause an environmental disaster.

Being a polite lot, none of us was willing to challenge Mr. Allred on what he said, though a gentleman from Platts did ask Allred if he thought he would still be employed under the Obama Administration. Mr. Allred said he was looking forward to retirement.

On the other hand, the final plenary session of the day was about energy policy, and being something of a troublemaker I asked the panel to comment on Allred’s speech. John W. Jimison, who is a Counsel for the Committee on Energy and Commerce at the House of Representatives gave a very succinct answer: the Obama Administration, he said, is all about change.

More generally the panel agreed with Allred’s point 3 (which is fairly obvious) and with point 2, though they did note that the low proportion of renewable use did not preclude reductions in carbon emissions due to efficiency programs and so on. However, unlike Mr. Allred, the panel was firmly in favor of international trade in energy, and of developing carbon emission abatement systems that could usefully be exported to the rest of the world. Obviously none of them speak for the Obama Administration, but the panelists were chosen because of their insights on policy issues.

(The other panelists were Shirley Neff, President & CEO of the Association of Oil Pipelines, and Jim Sweeney, a Stanford professor and policy adviser to Governor Schwarzenegger.)

Comments Off on Exploiting the Interior

USAEE 2009 – Thursday Evening

Posted in Climate,Conferences,Demand Management,Louisiana,Market Design by Cheryl Morgan on the December 4th, 2008

I caught a plenary session on demand management and renewables that was quite interesting. Brandi Colander of NRDC gave a lightning fast presentation on demand reduction starting from the fact that DR is apparently much cheaper than generation, but no one puts any money into it. There are many reasons for this, but one that I hadn’t thought of before is rental property. If a property is rented and the tenant pays the energy bills then the landlord has no incentive to improve the property, but if the landlord pays the energy bills then the tenant has no incentive to manage usage. Regulatory issues play a part too, and Brandi was very hot on the need to decouple utility profits from the process of selling more energy.

The session on restructured markets majored on issues regarding whether consumers are better off under deregulation. Jay Zarnikau revealed that in Texas prices had risen much more in the areas of retail competition than in areas where prices are still regulated, but the market is young and that could simply be a matter of private companies passing on costs more quickly than regulators. John Kelly of APPA claimed that prices in the PJM have risen much more sharply than prices in neighboring regulated states, but it is one thing to say that this has happened and another to prove that it is the result of anti-competitive behavior.

The Japanese are apparently worried about their nuclear industry because no one wants to work in it. This is a story that the UK can probably relate to.

The winner of the student paper contest was Derek M Lemoine from Berkeley for a paper using real options to value plug-in hybrid vehicles. Go Bears! (And yes, one of the other finalists was from Stanford.)

The after dinner speaker was Brent W. Dorsey, the Director of Corporate Environmental programs at Entergy. It is perhaps unsurprising that the company whose systems have been wrecked by hurricanes Rita, Katrina, Gustav and Ike believes in global warming, but it was still a pleasure to hear a senior utility executive not only say so, but quote The Onion to make his point. Of course Entergy’s money is not in the coal business, but Mr. Dorsey recognized the plight of his colleagues in the industry and made an impassioned plea for the US to become a world leader in technologies such as clean coal and carbon sequestration, which it could then export to China and India.

We have another full day of program tomorrow.

Comments Off on USAEE 2009 – Thursday Evening

Live-ish from COP 14

Posted in Climate by Cheryl Morgan on the December 2nd, 2008

The Green Prices web site has established a blog to report on the current COP 14 UN climate change conference taking place in Poznan, Poland. Oddly there doesn’t appear to be an RSS feed, but it should provide much better energy-focused reporting than newspapers.

Comments Off on Live-ish from COP 14

Is Nuclear Green?

Posted in Climate,France,Nuclear by Cheryl Morgan on the September 26th, 2008

In the wake of EdF’s (planned) purchase of British Energy, Oliver Morton tackles the issue of whether nuclear energy will indeed lead to a reduction in CO2 emissions. He notes that between 1977 and 2003 the amount of nuclear generation in France grew by 4000%, and yet:

According to the Stern review fossil fuel emissions in France during the 25 years of that 4000% increase fell, on average, by less than 1% a year. Emissions from the generating sector dropped 6% a year, which is about 80% over the 25 years, which is great — but the rest of the economy kept growing and burning fossil fuels in cars and heating systems and factories and all that.

Looking at the chart he used for generation data, it appears that the growth in nuclear generation accounted for all of the growth in electricity consumption, while other fuel sources remained roughly constant. Obviously if nuclear were to replace existing generation then things would be rather different.

But then again, nukes are not very flexible plants. You have to have some flexible generation in your mix. Looking at Morton’s data (which is from Wikipedia and which I haven’t checked), less than 20% of France’s generation comes from non-nuclear sources. How much lower could that go, and still have the system remain manageable?