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.

Comments Off on Greening Energy Centers

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.

Comments Off on USAEE 2009 – The Rosenfeld Curve

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.

Comments Off on New From Berkeley

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.

Comments Off on New CSEM Paper on Daylight Saving

Sources of Pollution

Posted in China,Emissions Trading,Papers by Cheryl Morgan on the October 8th, 2008

The generally accepted wisdom in the West tends to be that China is industrializing on the cheap, and spewing out vast quantities of pollution from poorly built power stations. A new study from MIT takes aim at that idea. New Chinese power stations, they say, are often very modern and efficient. What they lack is not technology, but economic incentives. Because China has no emissions markets, power station owners choose to burn the cheapest coal that they can find, regardless of how much pollution this generates. And although their power stations come with expensive gadgets like smokestack scrubbers, they don’t use them because that costs money. The full paper is available here.

Comments Off on Sources of Pollution

New UCEI Paper on Oil Prices

Posted in Oil,Papers by Cheryl Morgan on the June 19th, 2008

UCEI has a new paper available online. “Understanding Crude Oil Prices” by James D. Hamilton looks at the causes of oil price rises. The abstract sounds quite interesting:

This paper examines the factors responsible for changes in crude oil prices. The paper reviews the statistical behavior of oil prices, relates these to the predictions of theory, and looks in detail at key features of petroleum demand and supply. Topics discussed include the role of commodity speculation, OPEC, and resource depletion. The paper concludes that although scarcity rent made a negligible contribution to the price of oil in 1997, it may be an important feature of the most recent data.

Comments Off on New UCEI Paper on Oil Prices

New Energy Journal Online

Posted in Papers by Cheryl Morgan on the June 19th, 2008

Email from the IAEE informs us that Vol. 29, No. 4 of The Energy Journal is now available. This is a members only publication so we can’t link to it, but it does contain a number of interesting papers. One that caught the eye was “Carbon Tax or Carbon Permits: The Impact on Generators’ Risks” by Richard Green. According the the abstract, preference for carbon trading or a carbon tax is different depending on whether a the generator is a carbon emitter or not. In an uncertain political world, this might suggest that British Energy‘s idea of joint ventures might be a good hedge against the risk of not knowing what sort of scheme will be implemented.

Comments Off on New Energy Journal Online

USAEE Working Papers Found

Posted in Papers,Web by Cheryl Morgan on the June 19th, 2008

The kind folks at SSRN have written to explain how to find the USAEE Working Papers series. And lo, there are 138 of them! You can find the full list here. Currently there is no means of being notified when a new paper is posted, but we’ll keep an eye on the site and mention anything new here.

Comments Off on USAEE Working Papers Found

USAEE Working Paper Series

Posted in Papers,Web by Cheryl Morgan on the June 17th, 2008

An email from the USAEE states that they are starting a working papers series. The papers will be stored on the Social Science Research Network web site. There doesn’t appear to be anything there at the moment, but perhaps that is because no one has submitted any papers. We’ll keep an eye on it.

Comments Off on USAEE Working Paper Series

New UCEI Paper on NOx Markets

Posted in Emissions Trading,Papers by Cheryl Morgan on the May 27th, 2008

UCEI has issued a new working paper. “When to Pollute, When to Abate? Intertemporal Permit Use in the Los Angeles NOx Market” is by Stephen P Holland and Michael R Moore, and looks at intertemporal trading in the NOx market in Southern California. The abstract is as follows:

Intertemporal tradability allows an emissions market to reduce abatement costs. We study intertemporal trading of nitrogen oxides permits in the RECLAIM program in Southern California. A theoretical model captures the program’s key intertemporal features: two overlapping permit cycles, two compliance cycles for facilities, and tradable permits. We characterize the competitive equilibrium; show that it is cost effective; and demonstrate the firms’ incentive to delay abatement, i.e., to trade intertemporally. Using model extensions to explore market design issues, an arbitrage condition implies that the equilibrium is invariant to overlapping compliance cycles, but depends crucially on overlapping permit cycles. We empirically investigate intertemporal trading of permits using panel data on RECLAIM facilities for 1994-2006. Facilities undertake trading by using a considerable proportion of permits of the opposite cycle. We econometrically test two theoretical propositions – delayed abatement and trading across cycles – with a difference-in-differences estimator. The results neither contradict nor provide conclusive support of the theory.

A PDF of the paper is available here.

Comments Off on New UCEI Paper on NOx Markets