Discussing Energy Economics on the Internet

Greening Energy Centers

Posted in Demand Management,Papers by Cheryl Morgan on the December 11th, 2008

There is a new paper available in UCEI Berkeley’s Energy Development and Technology series. Written by Arpad Horvath and Arman Shehabi, it looks at ways in which those energy-hungry server farms can do their bit towards reducing our carbon footprint. Here’s the abstract:

Data centers greatly impact California’s natural environment and economy. These buildings host computer equipment that provide the massive computational power, data storage, and global networking that is integral to modern information technology. The concentration of densely packed computer equipment in data centers leads to power demands that are much higher than those of a typical residence or commercial office building. Data centers typically consume 15 times more energy per square foot than a typical office building and, in some cases, may be 100 times more energy intensive (Greenberg et al. 2003). Nationally, data centers consumed 61 Terawatt hours in 2006; equivalent to the practical power generation of more than 10, 1 Gigawatt nuclear power plants (Brown et al., 2007). This is approximately equal to annual electricity consumption for the entire state of New Jersey (EIA, 2006). California has the largest data center market in the U.S., indicating that a significant portion of this energy is consumed within the State (Mitchell-Jackson, 2001).

This research project focused on identifying how data centers are currently designed and exploring potential energy saving associated with alternative building design options. The energy savings were quantified to understand when design changes resulted in significant benefits and when the benefits from alternative designs were minimal. The potential energy savings benefits were juxtaposed against changes to the environmental conditions in data centers and evaluated within the context of computer reliability concerns. The objective of this research is to provide data center designers and other decision makers with a better understanding of the benefits and concerns associated with data center energy efficiency, thereby reducing the unknown consequences that may hinder attempts to shift away from conventional design practices.

And you can read the whole paper here.

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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.

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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.)

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USAEE 2009 – The Rosenfeld Curve

Posted in California,Demand Management,Papers by Cheryl Morgan on the December 5th, 2008

Time to be nice to Stanford for a change. The best paper I have seen here was delivered by Anant Sudarshan, a PhD student studying under Jim Sweeney. It was about the Rosenfeld Curve. For those of you from outside California, this is all about the fact that while most of the US has high and ever-increasing electricity use per capita, the usage levels in California have been steady since the 1970s are are currently similar to those of responsible Scandinavians such as the Danes. Many people want to know why this is so. Some excuse it on the basis of California’s balmy climate, lack of heavy industry and very high prices. Others give credit to the state’s progressive demand reduction policies.

At Sweeny’s suggestion, Sudarshan set about testing various variables to see which ones had actual explanatory value. You can read the whole paper here. I haven’t had a chance to do so yet, but here are some key points I got from the presentation.

  • The lack of heavy industry is not a major explanatory factor
  • California’s commercial sector uses significantly less floor space per capita than the rest of the country (possibly due to high property costs)
  • The average size of families in California is rising, while it is falling in the rest of the country (large families use less energy per capita due to economies of scale)
  • California has a higher proportion of poor families than the rest of the country
  • Around 23% of the reduced usage can be ascribed to policy effects (high prices were counted as a policy, but policy also included things such as buildings and appliance standards)

While the California Energy Commission will doubtless be disappointed not to be able to take the entire credit for the Rosenfeld effect, 23% is still a significant proportion of the savings and California’s policies might therefore be usefully adopted by other states wishing to reduce electricity demand growth.

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USAEE 2009 – Friday Morning

Posted in Biomass,Conferences,Modeling by Cheryl Morgan on the December 5th, 2008

The session on electricity market modeling was interesting but not very useful. Supply Function Equilibrium models are all very well, but most clients can’t understand you if you talk only in equations, and whenever I see presentations about these things they always seem to focus on approximations necessary to get the model to solve rather than on whether the model accurately reflects reality.

I’m afraid I was rather mean to the young man who tried to excuse the potential impacts of his grand plans for biofuels by claiming that he only used non-food biomass. Unless the stuff is waste, or grows only in areas unsuitable for food crops, it all competes for the same agricultural land.

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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.

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USAEE 2009 – Thursday Morning

Posted in Conferences,Risk Management by Cheryl Morgan on the December 4th, 2008

I was up bright and early this morning for a breakfast meeting looking at plans for next year’s IAEE conference in San Francisco, which looks to be coming along nicely. More on that later.

The conference information sheet I got when I signed up said that the dress code was “business casual” and that the wearing of suits was strongly discouraged. This instruction has been almost universally ignored, which may say something about the attendees.

The opening address was by Dennis Lockhart, President of the Federal Reserve Bank of Atlanta, who stepped in at the last minute when his colleague from Dallas, Richard Fisher, fell ill. Most of his speech focused on doom and gloom in the economy, and hope for recovery, which was pretty much as expected. I happened to end up in an elevator with him afterward and we chatted briefly about risk and human nature. He noted that sometimes tail risks do play out, to which I could only add that perhaps next time I give a lecture on VaR and talk about the need for stress testing maybe some of the audience will listen.

Live From USAEE 2008

Posted in Conferences by Cheryl Morgan on the December 4th, 2008

Here I am in New Orleans at the 2008 USAEE Conference. The conference program is available here. I shall report back as and when I can. if there is anything that particularly interests you that you’d like me to report on, please leave a comment.

CSEM Policy Conference

Posted in California by Cheryl Morgan on the December 4th, 2008

Next week the UCEI Berkeley Center for the Study of Energy Markets will be holding a policy conference in Sacramento. The event takes place from 1:00pm to 5:30pm in the Auditorium of the CalPERS Building, 400 P Street. A full program is available here.

It is tempting, but I suspect I’ll have way too much catching up to do after 4 days in New Orleans.

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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.

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