Vol. 24, No. 1 (January 2016)
USAEE Dialogue is the official on-line newsletter of the United States Association for Energy Economics. Its mission is to communicate non-partisan information about recent research, analyses and case studies on issues of energy economics of general interest to its members. USAEE Dialogue is also a forum for reports of local USAEE Chapter and other USAEE/IAEE-sanctioned activities. USAEE members in all sectors of the energy economics’ community -- academia, including students; business/consulting; and government -- are invited to contribute articles for publication. For further information please consult: "Guidelines for Submissions of Articles" at: http://www.usaee.org/pdf/blog/Dialogue_Article_Submission_Guidelines.pdf.
From the President, USAEEJames L. SmithCary M. Maguire Chair in Oil & Gas Management
Edwin L. Cox School of BusinessSouthern Methodist University
My best new year’s greetings go out to all USAEE members.
The past year was certainly interesting from the energy point of view, with enough disruptions to keep all of us busy, puzzled, and thinking hard for many months to come. Since not one of the volatile elements that have recently upset the global energy scene has yet expired, we all better keep our thinking caps on and continue to pay close attention. This is where the diverse membership of the USAEE comes to the fore. The interplay of ideas among our business, government, and academic members creates unique perspectives and insights that transcend the usual boundaries—as recently demonstrated at the highly successful USAEE/IAEE North American Conference in Pittsburgh. I applaud all the planners, participants, and sponsors who contributed to that event for a job well done. And we look forward to more of the same in October 2016 for our 34th USAEE/IAEE North American Conference to be held in Tulsa.
Information on Climate Data Designations and Global Warming*
Julian SilkAdjunct ProfessorUniversity of MarylandRockville, MDsilk30918@earthlink.net
Data for Cooling Degree Days (CDDs), Heating Degree Days (HDDs), Precipitation and other weather-related variables are collected for the U.S. by the National Oceanographic and Atmospheric Administration (NOAA), an agency of the U.S. Government. NOAA is the parent organization of the National Climate Data Center (NCDC), which collects the information. This document updates the information in “Global Warming: Data and Some Thoughts on the Role of Economics”, published in the USAEE Dialogue, November 2008, (see https://www.usaee.org/pdf/Nov08.pdf, 20-24) as the location of the data has changed.
A Comparison of the Economic and Labor Market Impacts of Resource ExtractionMallory C. Vachon
Recently, many empirical studies in economics have focused on the local labor market and economic impacts of the shale boom. These papers generally find that the boom led to large increases in earnings in oil- and natural gas-rich areas. Such economic impacts include educational attainment, social insurance program benefits and participation, migration, and state and local public finances.
Census from Heaven: An Estimate of Global Electricity Demand
Nadejda VictorAssociateBooz-Allen Hamilton Pittsburgh, PAvictor_nadejda@bah.com Christopher NicholsSenior Analyst, National Energy Technology Laboratory,Morgantown, WV
How much electricity does the world really need? Economic theory suggests that electricity demand is based on a number of factors such as per capita income, economic output, population, supply and cost of electricity. GDP is a crucial indicator in many socio-economic studies and an important reference for political decision making. However, GDP is imperfectly measured all over the world (Feige & Urban, 2008). Many developing countries have only rudimentary economic statistics and the poor data quality has obstructed attempts to estimate economic growth, poverty, health and environmental quality in these countries (Nordhaus and Chen, 2014). The lack of good sub-regional data has been even more discouraging for researchers working at the sub-national level.
The New Era of Global Energy AbitrageRoman Zytek
Official forecasts of oil prices have proven unreliable in predicting oil prices (Horn 2004; Winebrake and Sakva 2006; EIA 2004-2014). This paper argues that the current decline in oil prices represents another leg in the process of restoring competitiveness of energy from crude oil in the energy market. The surge in the price of oil from 2005 to 2008 will go into history as another short-lived economic incident. The price surge created energy arbitrage opportunities which triggered three standard market responses: (1) efforts to substitute other energy -- coal, gas, and increasingly renewable sources -- for oil; (2) deployment of technologies to increase oil supply from regions outside of OPEC’s control; and (3) market integration within and across fuel classes. These three demand and supply responses are creating one, fully integrated -- geographically and across fuels – global market for energy. They are bringing the energy market back into long-term equilibrium and eliminating the abnormal rents earned by oil producers. Going forward, forecasters of energy prices should pay more attention to the competitive position of each energy fuel in the energy mix, and less attention to the marginal cost of production of the more expensive fuels at any point in time.
SUMMARIES OF SELECTED CONCURRENT SESSION PRESEENTATIONS AT THE
33rd USAEE/IAEE NORTH AMERICAN CONFERENCE
Causes and Consequences of Oil Price Shocks: a VECM Decomposition Analysis
Gbadebo OladosuResearch EconomistOak Ridge National LaboratoryKnoxville, TNoladosuga@ornl.gov
The potential causes of recent sharp declines in the oil price include changes in the global economic outlook, changes in oil supply and demand, geopolitical events, appreciation of the U.S. dollar, and responses by oil producers and consumers, among others (Baffes et al, 2014). There are a number of qualitative evaluations of the roles of these factors, but quantitative estimates of their contributions to the oil price change and the economic consequences are just emerging (Arezki and Blanchard, 2014; Baffes et al, 2015; Hou et al., 2015; EIU, 2014; Tokic, 2015). Quantitative assessments are indispensable because the economic consequences of oil market changes depend on the composition of the underlying drivers and their net market impacts (Kilian, 2014). In addition, understanding the relative importance of the different drivers is important to gauging the future direction of the oil market.
The Relationship between Shale Gas Production and Carbon Capture and Storage under CO2 Taxes: MARKAL Modeling
Nadejda VictorAssociateBooz-Allen Hamilton Pittsburgh, PAvictor_nadejda@bah.com Christopher NicholsSenior AnalystNational Energy Technology LaboratoryMorgantown, WV
One of the major challenges of U.S. energy policy is to achieve greenhouse gases emissions reductions at low cost. Economists tend to prefer policies that effectively establish a price of emissions. This paper examines the impacts of carbon taxes that are equal to the social costs of carbon in the U.S. energy system under different assumptions about shale gas development and with respect to carbon capture and storage (CCS) deployment. We use the MARKet ALlocation (MARKAL) energy system model that allows policy instruments to be examined quantitatively in a dynamic energy system context. In this study we adopt the EPAUS9r2014 MARKAL database representing the U.S. energy system by the nine U.S. Census divisions.
Winner of the Best Student Paper Competition at the 33rd USAEE/IAAEE North American Conference
Wind Power Plant’s Cost Structure and Associated Market Power ProblemYang YuPh.D. CandidateStanford UniversityStanford, CAyangyu1@stanford.edu
While wind-power penetration has reached a significant level in some countries and continues to growth , it is important to clarify whether and when wind power plants (WPPs) have the ability to exercise their market power. If they have, what are their possible strategies? In the paper presented in the 2015 USAEE/IAEE North American Conference, I establish a multi-hour-two-stage stochastic model to analyze these questions. The multi-hour model setting captures the impact of wind-energy ramping. The two-stage model setting is used to simulate the sequential dispatch process and analyze impacts of the wind-energy uncertainty .
Historical Construction Costs of Global Nuclear PowerArthur YipPh.D. Student Carnegie Mellon UniversityPittsburgh, PAarthuryip@cmu.edu
At the USAEE conference in Pittsburgh, I presented a retrospective analysis of the construction costs of global nuclear power reactors, which was conducted at the Breakthrough Institute and co-authored by Jessica Lovering and Ted Nordhaus. Given the controversial and hazy nature of this subject, the Breakthrough Institute was interested in re-examining common assumptions and assertions.
33rd USAEE/IAEE North American Conference
"The Dynamic Energy Landscape"
October 25-28, 2015
Videos and Photos from the conference may be found at http://www.usaee.org/usaee2015/
You can also see what topics conference attendees were actively tweeting about under the Twitter hashtag #USAEE2015
Nathaniel HornerPh.D. CandidateCarnegie Mellon UniversityPittsburgh, PAnhorner@andrew.cmu.edu
On October 25-28, 327 representatives from the energy industry, government, and academia in 26 countries gathered amid brilliant fall foliage at the confluence of the Allegheny and Monongahela Rivers to discuss "The Dynamic Energy Landscape," the theme of the 33rd USAEE/iAEE North American Conference.
IAEE Awards Presented at the Conference
Outstanding Contribution to the Profession Award
Student Competitions & Mentoring Session
Best Student Paper Award
Student Mentoring Session
Technical ProgramJulian LamyPh.D. Candidate
At the 33rd USAEE/IAEE Conference in Pittsburgh, delegates from across the globe (U.S., Europe, Asia, and the Middle East) met to discuss and exchange ideas about the most pressing energy issues of today. This is no surprise given the group’s reputation. However, one of the unique elements of the conference was the setting: the historic city of Pittsburgh, which has transformed from an industrial powerhouse led by the steel industry, to the center of U.S. natural gas production and a test-bed for new energy technologies. Delegates took advantage of this venue by attending two technical tours hosted by USAEE: a visit to a local wind farm and to a shale gas well-pad, both just outside of Pittsburgh.
Local Chapter Activities
Presidents of local USAEE Chapters are encouraged to share information about your local events and activities by submitting write-ups with photographs of member participation. Please contact the Editor for submission guidelines.
Lehigh University Student Chapter (Bethlehem, PA)
Kevin Forbes' Presentation on the Accuracy of Wind and Solar Energy Forecasts
(L to R): Lehigh University Student Chapter Officers: Guilherme Junqueira Perticarari, Vice President; Fernando Fontes, Treasurer; Jeff Kasle, President; and Jade Van Streepen,Secretary;with Prof. Kevin Forbes (USAEE Distinguished Lecturer).
On November 5, 2015, USAEE Distinguished Lecturer Kevin Forbes discussed the accuracy of wind and solar energy forecasts and the prospects for improvement at Lehigh University in Bethlehem, Pennsylvania. Forbes has been an active member of USAEE for over 20 years and is serving as the Vice President of Membership. He is also currently an associate professor of economics at The Catholic University of America. The Lehigh chapter of USAEE is grateful to the national organization for making this event possible through the Distinguished Lecturer Series.
Louisville Chapter (KY)
Guy Caruso's Presentation on Global Energy Supply and Demand
(L to R): Eric Yussman, Louisville Chapter President; Guy Caruso, USAEE Distinguished Lecturer; Tracy Terkelsen, Louisville Chapter Treasurer.
On September 30, 2015, Guy Caruso, former Administrator of the Energy Information Administration and now a senior adviser in the "Energy and National Security Program" at the Center for Strategic and International Studies in Washington, D.C., discussed the geopolitics of energy. The USAEE-Louisville chapter is very grateful the national USAEE arranged for two “distinguished lecturer” speakers to visit us in recent years: ExxonMobil’s Todd Onderdonk in 2013 and Mr. Caruso this year.
Forthcoming USAEE / IAEE Conferences
An important benefit of our USAEE membership is the opportunity of participating in a wide range of USAEE/IAEE conferences around the world. Please take note of the following events for 2016.
34th USAEE/IAEE North American Conference
October 23-26, 2016 -- Tulsa, Oklahoma
Abstract Deadline: May 19, 2016
Please see the conference website for further information.
5th IAEE Asian Conference
February 14-17, 2016 -- Perth, Australia
The 5th IAEE Asian Conference to be held in Perth from February 14-17, 2016 will discuss the challenges of meeting what is expected to be continuing enormous growth in Asian energy demand over the next few decades. There is also a post-conference workshop on developments in floating LNG technology and a technical tour that includes a visit to the “mine of the future” remote control facility.
Please see the conference website for further information:
39th IAEE International Conference
June 19-22, 2016 -- Bergen, Norway
Abstract Deadline: January 15, 2016
Please see the conference website for further information:
Acknowledgements and Call for Articles
From the Editor:Robert Eric BorgströmAdvisor on Energy Regulatory Policy and ManagementWashington, DCrobertborgstrom2@gmail.com
USAEE Dialogue is completely dependent upon member input and in that respect I am sincerely appreciative of the contributions of members who have written articles for this issue.
Engaged as we are in virtually every aspect of energy economics, I am hopeful that in the coming months many of you will want to share your research and case studies with your fellow members via the digital platform of USAEE Dialogue. All members are strongly and sincerely encouraged to help keep this avenue of member communications open by contributing articles of 1000-4000 words.
The deadline for inputs to our next issue (May 2016) is March 31, 2016. Members interested in proposing articles for that issue should contact me at email@example.com well in advance of that deadline for further information and guidelines for submission of manuscripts. I look forward to hearing from you soonest.