Peter H. Kobos* and Braeton J. Smith**
This year’s conference was infused with both interesting discussions ranging from shale gas plays to the widespread implications for nuclear power generation after the Fukushima Daiichi disaster in March of 2011 as well as a tremendous level of student participation. The first ‘Student Poster Session’ and contest were held in Washington, D.C. as part of a networking reception that was very well attended.
For some, the conference began bright and early on Sunday morning, as Eric Hittinger (USAEE Student Representative, Carnegie Mellon University) led a group of students on a 4 mile walking tour of the major D.C. sites. This was followed by the USAEE Council/Student Lunch, which provided an excellent icebreaker for students as they were able to meet with current and future council members. Later in the evening was the opening reception in which Ben Schlesinger (President of the USAEE, Benjamin Schlesinger and Associates) gave a brief welcome before the delegates convened for a set of themed networking dinners. He thanked the panel who pulled together the conference, including Omowumi O. Iledare (LSU Center for Energy Studies), John Holding (Independent Practitioner), Troy Thompson (Chevron), David Williams (Executive Director, USAEE), and sponsors for their generosity. Additionally, he asked for the people new to the conference, and members with 5, 15 and 20 years or longer to identify themselves to highlight the importance of ongoing participation of the members. The National Chapter Area Association (NCAC) President (Neelesh Nerukar, U.S. Congressional Research Service) also discussed NCAC programs and efforts to develop the conference.
During the opening session, Mine Yücel (IAEE President, Federal Reserve Bank of Dallas) talked about when she helped develop the D.C. conference some years ago and highlights of the IAEE where Russia, Poland and regional Latin America affiliates are new this year. She discussed the recent conference in Stockholm, and upcoming conferences in Perth, Venice, and Austin. Additionally, she mentioned the development of a second journal (Economics of Energy & Environmental Policy) by the IAEE that in her view fits well with the blending interests of economists, business and academia. It is a refereed journal that will be published twice a year and has a format where few equations and shorter article length will hopefully appeal to a broader audience beyond economists (e.g., policy related papers). Adam Sieminski (Deutsche Bank AG) then mentioned how this is the 30th USAEE/IAEE conference and that from his perspective it is interesting how the general theme of this conference in many ways hasn’t changed over the years. What drives this conference involves oil, nuclear and natural gas issues, coal’s contribution, and its use in China and India. He also mentioned that there are several critical alternative energy issues in the news which are being discussed at this conference, particularly noting the importance of the Solyndra issue. Lori Smith Schell (Empowered Energy and the plenary session coordinator for this year’s Washington, D.C. conference), reiterated the panel’s invitation to help get involved in the organization, including for next year’s USAEE conference in Austin.
In the opening plenary session, “Changing U.S. & International Energy Policy Perspectives,” Frank A. Verrastro (Senior Vice President and Director of the Center for Strategic and International Studies’ (CSIS) Energy and National Security Program) presided over the session and discussed the continued growth in demand for oil and the need to view energy policy as the intersection of three factors: economics, environmental objectives, and security & foreign policy. In his view, growth is centered in the non-developed world, and now China uses large portions of the global energy resources. He went on to discuss how the U.S. is 70% energy self sufficient and how the challenges going forward are tremendous. The energy demand growth in 2010 (before the “Arab Spring”) was the highest we’ve seen in 30 years. The bigger concern was that the issues may move into Saudi Arabia, but in reality all that was lost was the Libyan light sweet crude production.
He went on to discuss how the shape of the economic recovery matters (in light of recent events including the expiration of QE2, the Acceleration/Expansion of the European Debt Crisis, a slowing Global Economy, and the recent U.S. AAA rating downgrade) and that across the globe we are concerned about the choke points in the supply chain. In his view, we also have the risks of climate change that haven’t really gone away, and we have ‘conflict zones’ vs. conventional producers where the ‘threat multiplier’ will affect less developed parts of the world that include producers of energy. Energy efficiency may help in his view where saving a barrel of oil in the U.S. is the same as saving a barrel in other parts of the world. In the U.S. unconventional gas resource market (North American shale plays), there are over 26 plays in North America, and global shale plays could help change the delinking of oil and gas markets especially in Liquefied Natural Gas (LNG) regions. The growth in renewables has been astounding, but all renewables constitute less than 10% of energy supply. As with all energy technologies, issues of timing and commerciality with renewables must face environmental, economic, and security & foreign policy objectives all at once.
Chris Smith (Deputy Assistant Secretary, Office of Oil and Natural Gas), discussed basic challenges within oil and natural gas and how the decisions we make now affect the future possibilities for energy systems. He discussed priorities on energy, including “Winning the Future: American Energy,” and discussed whether we are doing all we can to develop our natural gas resources (e.g., onshore shale gas was 23% of U.S. domestic gas production in 2010 and is projected to rise to 47% in 2035). He also explained that globally, 5 million barrels of oil per day are produced in deep water (>500 feet), a number which is projected to double by 2020. We do have a somewhat disaggregated regulatory environment in some of the regions for onshore resources as compared to the offshore regulatory environment which is more consolidated for deepwater resources. He went on to discuss the Department of Energy’s “Strategic Plan” from May of 2011, and how Secretary Chu asked the national petroleum sector to reduce greenhouse gases by 2050. Therefore, in Chris Smith’s view, if the U.S. is still talking about importing LNG like 5 years ago, industry could rise to the challenge of figuring out what we need to supply that energy. He discussed the dramatic impact that shale gas has had on the LNG market. He also highlighted points from the National Petroleum Council’s “Prudent Development” report, and the Secretary of Energy Advisory Board’s “Shale Gas Production Subcommittee 90-day Report” such that the administration is making sound decisions with shale gas development, including working with the Environmental Protection Agency (EPA). He talked about the Ocean Energy Safety Committee and looking at the next steps for regulatory reform to help focus our portfolio for safety management systems. Lastly, he discussed the cooperative work between the U.S. and Brazil as well as China on shale gas and complex regulatory building (for China’s focus on shale gas).
Next was David C. “Clay” Bretches (Anadarko Petroleum Corporation) who also discussed the National Petroleum Council (NPC) report, “Prudent Development.” He pointed out that since 2007, known natural gas reserves have increased substantially and noted several reasons (both environmental and economic) why prudent progress is needed in the industry. A few of the core findings and recommendations include that these basins may be able to meet a sizable portion of our needs for natural gas, and many jobs and other benefits may be realized if we can do it correctly and prudently. One of his concluding points was that natural gas is an abundant resource, the benefits of which depend upon access and responsible development. He also called upon a more standardized method to look at water and land disturbances across natural gas, wind, and coal as this may assist with cross comparisons. Internationally, (wearing his “Anadarko hat”) he explained that while over 30,000 shale wells have been drilled in North America (which equates to roughly 5,000 wells per year since 2006), only 20 to 30 shale wells have been drilled outside of it. This presents an opportunity to expand the technology internationally.
Robert Simon (Staff Director, Committee on Energy and Natural Resources) explained he came with a broader view of his personal take on things. He said ensuring adequate and affordable supplies of energy from all sources is necessary, but argued that our energy system is so large we need assistance from both the supply and demand side while keeping environmental and market issues in mind. He highlighted several differences between past and present energy policy, noting that obstacles in the present today for energy policy are the current debate over government finances, a new reluctance to “authorize” new programs without “terminations” of existing programs, and the influence of energy constituencies. He continued by describing the need for policy support for renewables, transmission lines, and a sense that we may need a better balance of the “nexus connection between energy and water.” He described some of the concerns and opportunities on the horizon including the national electric grid and cyber attack and providing policy support for early-mover projects for CO2 capture and storage (CCS), noting that many of these types of efforts face challenges because the definition of ‘success’ changes between administrations. Additionally, the politics of developing newer program efforts may be at the expense of another program, and thus champions from existing programs may not appreciate their funding shifting to support other efforts. He closed by discussing how energy politics are often event driven, and challenged the audience to think about what unforeseen events could drive energy legislation in the years to come.
Monday’s concurrent sessions began with topics ranging from “OPEC & Crude Oil Market Issues,” to “Smart Grid Technology & Economics,” to traditional and alternative fuel markets and trends. Jan Schäechtele (EBS Universität für Wirtschaft und Recht i.Gr.) and his colleagues presented on their work regarding the rollout of smart meters with a unique focus on how the distribution of benefits may change across, for example, the U.S. Independent System Operators (ISOs). They explained how smart meter systems are a multi-faceted issue and that high, up front transaction costs may prove challenging for single technology adopters to address. This has broad implications for “who pays” what relevant price structure given the actual prices may not reflect the marginal cost. Their suggestion is to focus on a consumer-based market structure where the costs and benefits match those across the consumer base.
In the “Smart Grid Technology & Economics” concurrent session, John Caldwell (Edison Electric Institute) presented some of the challenges to wide-spread adoption of smart grid technology from his perspective. Specifically, he explained that it is often challenging to describe, “Will it produce tangible, monetary benefits or savings to the ratepayer?” He explained that smart grid technology is a platform technology not unlike the national highway system that needs to orient the value chain in each business case towards its relevant beneficiary.
Scott M. Nystrom (Regional Economic Models (REMI), Inc.) continued the session by describing the benefits of energy programs in specific states within the U.S. under various scenarios. Specifically, he presented the case of the Missouri Renewable Portfolio Standard (RPS) in which wind energy will be the most likely technology to meet RPS goals. He also explained the need for clarity within energy policy regulations and their interpretation. One of their main findings indicates that if electricity prices did rise, other spending may offset the price increases in the electricity sector.
Melissa Chan (Navigant) presented the work of her team on preliminary U.S. DOE Smart Grid efforts and how the Smart Grid Investment Grant (SGIG) program will help pay for 15.5 million residential and commercial smart meters.
In another concurrent session entitled “Renewable Energy Policy Evaluation,” Julia Frayer (London Economics International LLC) presented on the effectiveness of U.S. technology policy on clean energy, finding that at a basic research level, the U.S. is not falling behind in research and development. However, her group found that the U.S. is falling behind in the necessary commercialization, deployment, and manufacturing. In the same session, Gireesh Shrimali (Climate Policy Initiative) investigated the effectiveness of state government policies in promoting the deployment of renewable electricity. A key point of the work highlights the different effects of mandatory versus voluntary policies on the share of renewable capacity, finding that a required green power option increases renewable capacity by an average of 1.1 percent (mainly by wind), renewable portfolio standards have a mixed effect, and that voluntary policies have had almost no effect.
During Monday’s lunch events, several awards and words of praise were given. Mina M. Dioun (Lower Colorado River Authority), Kenneth B. Medlock III (Rice University) and Peter K. Nance (Teknecon Energy Risk Advisors LLC) were given the USAEE Senior Fellow Award. James L. Sweeney (Stanford University) gave a few words in memory of Lee Schipper, who passed away last August, for his contributions to energy issues and progress in the transportation sector. After a moment of silence, the events moved on to the main award. For his contributions to the field of energy economics, William W. Hogan (Harvard University) received the Adelman-Frankel award. In his acceptance speech, he discussed a few observations on how the cap-and-trade system was eliminated by calling it ‘cap-and-tax’, and how those in our profession are here to tell the truth through ongoing good work (he mentioned the DICE work by William Nordhaus as one example). From his perspective, there are many technologies today that are not necessarily ready, but it is a ripe period for clear thinking on research & development (R&D) work (he mentioned work with James Sweeney and others that help provide real insight on policies).
The lunchtime keynote speaker, David B. Sandalow (Assistant Secretary for Policy and International Affairs, U.S. DOE) asked the audience how many of them have cell phones, laptop computers with internet access, and GPS units now versus 20 years ago (15 years ago for GPS). Additionally, he asked how many people have solar PV at home, who plugged in their car the last time they parked, and if they knew the energy cost of their refrigerators. He stated his belief that 20 years from now more people will drive electric cars and have photo cells on their roofs. His points were to help focus the discussions on how quickly and widespread technology can become in our everyday lives in a relatively modest amount of time, yet we may not know all of the salient information on their energy costs.
Among all of the recent publicity garnered by shale gas, he pointed to a paper from the 1980s which noted the usefulness and possibility of extracting shale gas. He also noted that many examples of successful innovations resulted from R&D funds from the U.S. government, from which we are now reaping the benefits. He likened the ARPA-E programs’ funding approach to baseball such that “we are swinging for the fences” and that with such an approach, we will either strike out or hit a home run.
He argued that the private sector under invests in fundamental research, and thus, that government support is necessary for innovation. He presented five reasons why the government is important to innovation and defended the DOE’s “Loan Guarantee Program,” noting that Germany, France, and China are all offering more support than the U.S. In light of the failure of Solyndra, however, he cautions that all bad loans should be reviewed. “Will government make mistakes?” he asked, “Yes, but so does the private sector,” and he argued that this is a risk that comes with investment in innovative technology. The role of government, in his view, was to assist with innovation because of the longer timelines required and the uncertainty involved with new ideas, noting that R&D and innovation contribute to GDP (he mentioned the work of Robert Solow). When asked about energy technologies and climate change issues he replied, “Create jobs, save the planet.”
During Monday afternoon’s dual plenary sessions, topics ranged from “Prospects for Nuclear Power After Fukushima” to “Energy Access and Economic Development.” During the former session, Christophe Bonnery (Vice President, Energy Policy, AREVA) discussed the cycles in energy investment, nuclear energy issues, oil shocks, and how all of these variables in the markets leading up to the accident will affect the timing of developments after it. Kyoichi Miyazaki (Senior Consultant, Poten & Partners) discussed some of the implications of the Fukushima disaster for Japan. He pointed out that Japan lost 25 percent of its nuclear capacity (12.4 GW of power offline) after the incident and that as of October only 10 of 54 reactors were in operation. He also noted that the earthquake strongly affected LNG demand in Asia (due in part to the short-term substitution of nuclear electricity in Japan with natural gas); however, due to the new supplies of shale gas in the U.S., North America was not affected and this helped to dampen the impacts to Asia. In the eastern region of Japan, natural gas plants played a much larger, important role because the nuclear plants were offline as were many of the coal plants. There is some debate regarding the Ministry of Economy, Trade and Industry (METI) scenario planning to have Japan become 50% nuclear by 2030 in that perhaps a larger share of renewables and natural gas could be considered. By the estimates of his institution, they calculated the demand for natural gas after the nuclear issue could be 10 – 15 million tons of LNG annually, representing a large global shock. Luckily, he explained, that due in part to the shale gas revolution in the U.S., Japan didn’t need to import a lot of LNG, and Qatar production in 2010 meant a good supply of natural gas was on the world market to meet Japan’s demand.
Laurent Stricker (Chairman, World Association of Nuclear Operators (WANO)) explained how WANO serves a facilitation role for oversight of nuclear power. He estimated that the events at Fukushima will have a profound effect on the nuclear landscape, yet reminded the audience that although the shape of the nuclear landscape will change, energy demand worldwide remains. He stated that while collective responsibility holds at the international level, at the national level it is individual responsibility that is necessary to ensure the safety and security of nuclear operators worldwide. He closed by suggesting the nuclear industry (and WANO) must shift from a “prevention” to a “prevention and mitigation” mindset.
Peter Bradford (Adjunct Professor, Vermont Law School) discussed his view that the nuclear industry was facing substantial challenges before the Fukushima accident due to its relatively high cost structure. He argued that even before Fukushima, the biggest obstacle for nuclear generation was its lack of competitiveness in the marketplace, not to mention the challenges of proliferation and waste disposal. Peter Bradford pointed out that cost projections from the U.S. DOE for gas-fueled generation will not exceed 8 cents/kWh for 20 years (whereas new nuclear will cost anywhere from 12 - 20 cents/kWh) and that nuclear generation is not possible without loan guarantees. He is also uncertain how the Fukushima accident will play into market developments in the future. He ended by commenting that society doesn’t fight hunger with caviar, so why meet energy challenges with 12 cents/kWh electricity?
Wilfrid L. Kohl (Senior Advisor and Adjunct Professor, Johns Hopkins University, SAIS) noted that there are 15 countries with reactors currently under construction (with China and Russia in the lead). In his view, the nuclear industry could emerge stronger due to implementing safety review, which would lead to new regulations. He expects that, after a pause, most countries are likely to continue to use and develop nuclear power to reduce carbon emissions because “they have operated safe programs and need to expand non-carbon base-load electricity.”
The audience asked the panel what the alternative fuel may be to nuclear in Japan. Kyoichi Miyazaki suggested that LNG may help on the supply side, whereas on the demand side, he emphasized the great efforts by the Japanese people and industries to reduce their demand load where, for example, Toyota shifted some operations to the weekends during off-peak use.
The concurrent sessions continued with topics including energy security and risk assessment to price volatility, uncertainty management, smart grid application issues, RPS, carbon capture and sequestration, and energy resource modeling and impact assessment. In the concurrent session “Public & Legal Concerns on Carbon Capture and Sequestration” presided over by Thomas E. Drennen (Hobart & William Smith Colleges and Sandia National Laboratories), many issues regarding both modeling and the public’s perspective on CCS were discussed from both a theoretical and pragmatic perspective. Christopher J. Nichols (DOE/NETL) discussed his team’s work on how CCS may help energy planning achieve the U.S. Clean Energy Standard (CES) goals. Under one of their many MARKAL model scenarios, they see CCS moving into the U.S. energy portfolio around 2030 – 2040 depending on the effect of taxes and other policies. They also showed that out of 300 GW of installed capacity, only 75 GW of existing plants are good candidates for CCS due to cost issues.
David C. Warren (Indiana University School of Public and Environmental Affairs) described his team’s survey work from Indiana on public perceptions of CCS. They chose southwestern Indiana for their survey work because of the planned CCS pilot plant in Edwardsport, IN. He discussed how people’s perceptions of CCS may be influenced by their familiarity with the mining industry, trust in institutions (e.g., government), and their risk profiles. The initial survey results suggest those with a perception of more risk in the world may perceive CCS as risky, but there are also a good portion of results indicating respondents ‘somewhat’ support CCS.
Viviane Romeiro (University of Sao Paulo) described her team’s work involving liability and legal issues surrounding CCS regulation. These issues include the scale up of CCS projects and how they raise many public health, safety and environmental protection issues such that government may need to assume liability in the future. In Brazil, Romeiro explained, the Constitution of 1988 exclaims that, “All resources in public or private lands with possible economic value are owned by the Government” referring largely to extracted (as opposed to injected) resources. Thus, in her view, this suggests that to scale up CCS in the short term, the project owner is the most likely entity to be responsible, but in the longer term, the complexity of underwriting the risk and ensuring liability will present some challenges.
In another concurrent session, entitled “RPS and Programs,” Deborah Baker Brannan (University of Colorado – Boulder) examined the relationship between the adoption of an RPS and renewable generation, which she found to be positive. She noted that renewable generation is generally produced by independent power producers rather than by utilities. Kenneth T. Gillingham (Yale University) presented on the economic efficiency of RPS in the presence of cap-and-trade and questions why a governing body would want both. He pointed out that if there is an externality that has already been internalized, an RPS will be efficiency-reducing, and adding a binding RPS to an existing cap reduces the optimal permit price (assuming that there are market failures and no innovation). Ultimately, he argued that it will be difficult to justify large-scale RPS policy in the presence of cap-and-trade. In yet another concurrent session, “Smart Grid Application and Impact on Consumer Behavior,” Maria Woodman (New York University) presented on the occurrence of negative wholesale prices for electricity in Germany. She found that these occur, in part, due to credits to wind producers who produce when demand is low.
On Tuesday morning, Lori Smith Schell presided over the ‘Town Hall’ breakfast with the Energy Information Administration’s (EIA) Deputy Administrator and Keynote Speaker, Howard K. Gruenspecht. The purpose of this useful event was to discuss what kinds and how much data the EIA needs to continue developing to address the energy research community’s needs and desires. The discussions were to help the EIA receive feedback from practitioners using their data in tight financial times and reorganization at the EIA where they are looking to streamline and focus their efforts. Understanding where the EIA has made a difference is something to look for in the future by focusing its efforts. Participants at the breakfast were asked to complete a worksheet that asked questions about their use, frequency and other recommendations on the majority of the EIA’s data products (e.g., Annual Energy Outlook, International Energy Outlook, Oil & Gas Markets work, etc.). It was mentioned that the EIA needs help identifying products that may have outlived their need, and focus their resources on the more useful products for the research community. Ben Schlesinger mentioned to the ‘Town Hall’ participants that he feels private industry doesn’t want to collect this data, and if the EIA doesn’t develop its data this leaves an undesirable opportunity for people to make up the data to meet their interests. Additionally, he believes the EIA provides a timely and consistent framework for all people throughout the country to measure their work against. Additionally, Howard K. Gruenspecht said that some of the reorganization efforts within the EIA were to create an Assistant Administrator for statistics, and then under that position would fall programs to collect information. They are moving towards a more uniform, electronic toolset across all of these programs to streamline the collection and development efforts. David Greene (Oak Ridge National Laboratories) suggested collecting end use data for vehicles like they used to some years ago. In his opinion, the best defense is a good offense to figure out if the vehicle energy use goals are doing what they planned to do across the vehicle fleet. Thomas Drennen suggested that in his view, the frequency of some data collection and reporting efforts may not be as necessary such as quarterly data for uranium and that developing the International Energy Outlook every other year may meet the needs of researchers. Others in the audience asked whether a user fee could be developed to maintain data collection solvency with the EIA, and how many users in the research community may be accustomed to this type of pay-as-you-go mechanism. Howard K. Gruenspecht explained there are some legal restrictions to have a user fee at the EIA, however, he suggested that creative ideas are good.
The concurrent sessions continued on Tuesday morning to include topics ranging from the oil sector to emerging technologies in the electricity markets. Eric Hittinger presented his team’s work on describing and analyzing the important properties of energy storage on the grid. These properties include frequency regulation, peak shaving, integration (e.g., wind) for baseload as well as for load-following abilities. From their view the capital costs are the most important aspect to address given the cost targets of various institutions including the U.S. DOE ($250/kWh), American Electric Power (AEP) ($500/kWh) and the ARPA-E GRIDS program ($100/kWh). In a different session, Jens Krause (University of Oxford) described the market risks and salient issues with the European Union Emissions Trading Scheme (EU ETS). Several of his key points included the use of allocations and auctions for permit allowances for CO2, how we may only see real auctioning in the power sector where the prices can be adjusted accordingly, and that when studying the carbon market, it may not be possible to separate it from its specific political environment. He suggested a few paths forward and acknowledged that one would have to coordinate both national and European markets which may prove to be very difficult to address across policy goals. In another concurrent session, Karen Palmer (Resources for the Future) presented her team’s modeling work on the Clean Energy Standard (CES) for electricity. Using the EIA’s Annual Energy Outlook base case assumptions, they forecasted that cumulative CO2 emissions in the U.S. may decrease by 30%, a portfolio of clean energy technologies and fuels could displace conventional coal generation, average electricity prices would rise 11 - 15% in 2035, and imposing an Alternative Compliance Payment (ACP) scheme may lower costs to consumers among other effects.
During the plenary session entitled “Changing Realities of Energy Supply,” presided over by Shirley J. Neff (EIA), several key speakers described their vision of energy supply and portfolio transitions over the coming decades. Thomas Helbling (International Monetary Fund) described his view of energy’s role in Gross Domestic Product (GDP) such that global primary energy is largely carried by developed countries. However, he believes that emerging countries will become important in the years to come. He also described how primary energy consumption and GDP almost grow 1:1 in his view, and that market prices should, but don’t necessarily take opportunity cost into account.
Sara Banaszak (America’s Natural Gas Alliance (ANGA)) described that, in her view, the U.S. may be “just at the beginning” of the shale gas revolution. On the demand side, she believes that compared to the U.S., many developing countries’ markets have a higher percentage of natural gas demand in their industrial sectors, but there are still opportunities in the U.S. to increase natural gas’ share in the electricity sector. Domestic supplies may increase to the point in 10 years that portions of the natural gas supply currently considered “unconventional” may receive a new label due to the scale of production and their price effects on supplies currently known as “conventional.”
Michael Lynch (SEER, Inc.) described his views on energy models, natural gas, oil, and other fuel and technology issues. Beginning with the Energy Modeling Forum (EMF) 6 from 1980, his forecast for the price of oil at that time was four times higher than the actual price in the year 2000. His point was that forecasting technological opportunities is difficult. He sees globally we may have several identified 100 billion barrel deposits of oil in place, with a rough recovery factor of 1 - 3%, minimum. On the other hand, he also pointed out that many technologies that were believed to have become commercially-viable by now (such as fuel cells) have not realized the technology and/or cost improvements forecasted back in 2005. Questions from the audience for this session asked about the future of energy technology surprises, fuels, and related issues. The panel addressed these questions by reiterating that forecasting surprises is difficult and some technologies (like batteries) have had a long research history so big surprises may be less likely (Lynch), that having timely information is an issue for surprises (Neff), and new markets may develop with new technology surprises like shale gas supplies may provide opportunities in the petrochemistry industry’s products (Banaszak).
During Tuesday’s awards luncheon, Charles Rossmann (Southern Company) was given an award for his tireless work as the 2010 President of the USAEE. Additionally, participants in the Dennis J. O’Brien Best Student Paper Award Competition were recognized and included Alisha R. Fernandez (Pennsylvania State University) for her award-winning work, “Evaluating Ecosystem and Wind-following Services for Hydroelectric Dams in PJM,” as well as others selected for the Best Student Paper Session including Erkan Erdogdu (University of Cambridge), Johannes Mauritzen (Norwegian School of Economics), and Mostafa Sahraei-Ardakani (Pennsylvania State University). Additionally, Chi Kong Chyong (University of Cambridge), Chen-Hao Tsai (Pennsylvania State University), and Jan Schäechtele (EBS Universität für Wirtschaft und Recht i.Gr.) were selected for the Paper Award. The winner of the first poster presentation cash prize awarded by the USAEE was Lucy Y. Qiu (Stanford University) for her work entitled, “Energy Demand of U.S. Commercial Buildings: An Econometric Approach.”
The Tuesday luncheon keynote speaker, Masakazu Toyoda (Institute of Energy Economics), gave his presentation, “The New Challenges for Japanese Energy Policy after the Great Earthquake.” He pointed out that one nuclear power plant accident could stop the reoperation of other plants. This may have the rolling effects to shift electricity supply to oil-fired or LNG that would increase CO2 emissions, as well as have negative impacts on Japan’s GDP and employment figures. He also described how no energy supply is perfect from the perspective of energy security, economic cost, environmental effect, safety and macroeconomic impact. His calls for the future are to publish the results of the events and findings of Fukushima. This, he described, may help to develop appropriate safety schemes to balance responsibility between the government and industries themselves. The audience asked questions regarding the future of nuclear in Japan’s energy portfolio, the role of renewables, and the notion to connect the two halves of Japan’s electricity grid. These were addressed by noting that approximately 25% of Japan’s electricity came from nuclear and at the moment needs to be replaced with other supplies (e.g., importing electricity from other countries poses challenges), that through technological progress renewables may play a more sizable role, and that Japan has been exploring harmonizing the cycles of the two different electricity grids, but with an approximate $2 billion cost other strategies are being considered.
The concurrent sessions continued Tuesday afternoon including topics ranging from OPEC supply issues to the economics of emissions control options. Mark D. Hutson (George Washington University) presented their work in the “Electricity Demand Modeling and Capacity Planning” session on U.S. electricity consumption forecasting. Their main findings indicate fuel switching to natural gas may occur in the coming years and that electricity demand responds to changes in real disposal income and real electricity price. Pierre-Olivier Pineau (HEC Montreal) then presented his team’s work on experimental evidence that some customers in Quebec may be willing to pay more for electricity to increase welfare of a public good to society, but that ambiguity on the environmental payoff decreases the observed willingness to pay. Braeton J. Smith (Oregon State University and Sandia National Laboratories) followed by presenting his work on “The Role of Fuel Type on the Residential Price of Electricity” as it relates to the Energy Policy Act of 2005 in the U.S. His main findings indicate that electricity prices increased after 2005 while accounting for the Energy Policy Act of 2005 to provide incentives to develop renewables, clean energy and exempted select fossil fuel companies from certain environmental standards. The price increase may be attributed to shifts in the energy supply portfolio, changing residential demand, increases in the price of natural gas around that time, and other factors beyond the scope of the current study. Finally, the concurrent session ended with a presentation by Nidhi R. Santen (Massachusetts Institute of Technology) on her team’s work entitled “U.S. Electricity Generation Capacity Planning Under Endogenous Learning-by-Searching Technology Change.” In their work, she finds there is both a tradeoff and interaction for technologies between adoption and innovation with strong learning potentials when comparing different model methodologies and parameters (including R&D, knowledge stock, and top-down vs. bottom-up models). However, more research needs to be completed to understand the sensitivities of the R&D, learning and other parameters and to model the effect of uncertainty of returns to research (as compared with more traditional knowledge stock formulations) as they relate to near-term regulatory and R&D decisions.
The dual plenary sessions on Tuesday afternoon covered both “Energy Technologies: From Development to Deployment” and the “Changing Face of Electricity: Smart Grid, Renewables, Natural Gas and Energy Efficiency.” Douglas Arent (Joint Institute for Strategic Energy Analysis, National Renewable Energy Laboratory) presided over the latter session, and introduced Mark Fulton (Deutsche Bank) and his work entitled “Natural Gas and Renewables in the U.S. Post-Fukushima.” A few of the key messages included his insights that before Fukushima, net nuclear power was expected to increase with 56% of this capacity in China (36%), the EU (10%) and Russia (10%). Additionally, he explained that in his view, shale gas may have manageable water footprint issues with best practices such that this, and other fuel-substitution of coal with natural gas, may aid in a transition from 24% natural gas today in the U.S. electricity supply mix to approximately 38% in 2030. Michael Sachse (OPOWER) then discussed his view as a trained lawyer to examine energy issues with “more words than numbers.” He believes that with additional information, energy customers may use less energy given energy is invisible, cheap, and the usage fluctuates. Finally, Bryan Mignone (U.S. DOE) discussed his views of energy supply and demand in the U.S. over the coming decades. He discussed how tax incentives will expire in the coming years and how it is important to not forget about the long term planning horizon due to energy research, development and demonstration (RD&D) policy. The projected retirements of existing coal capacity do not yield large changes in the generation mix and small changes in electricity prices reflect small changes in natural gas generation. He also noted that the CES may look to double the share of clean electricity in the generation mix over the next 25 years while trying to protect consumers from rising energy bills where possible.
The evening’s reception took place at the Mexican Cultural Institute, a richly-decorated venue that housed the Embassy for over six decades until 1989. The guests were treated to a lovely evening filled with good food, company, and speeches from various USAEE/IAEE representatives and our hosts at the Mexican Cultural Institute.
The final day of the conference began with the plenary session, “Energy Policy in an Era of Chronic Budget Deficits.” Robert McNally (The Rapidan Group) began the session by asking the audience to think about energy policy, the “demise of cap-and-trade” and how different parts of Washington look to different parts of energy policy (e.g., mandates, ethanol work within the U.S., and other items such as CAFE standards). He pointed out how quickly changes can occur and asked, “Who would have thought, unlike several years ago, that corn ethanol would receive opposition in D.C.” Michael E. Canes (Logistics Management Institute) continued the presentations with “Energy Policy in a Nutshell.” He described how competing views of increasing supply and decreasing demand while adhering to a policy objective of keeping energy prices low presents economists with a quandary. He suggested combining energy taxes with other taxes, but mentioned that reducing breaks in other areas, maintaining the current strategy, or waiting for an “event” to drive policy change may all be viable strategies. His message to the audience was to “be ready” for changes in policy so that we as a profession will have the analyses to address change. Finally, Sarah Ladislaw (CSIS) completed the plenary session by describing her views using a “bad news and good news ledger.” She explained that one could look at fiscal austerity as a good news item, yet it may be seen as bad news for renewable energy. Additionally, most renewable energy is still driven by mandates and other items (PTC, ITC, CES) yet all of these items may speak to bad news for renewable energy because in the U.S. they may not translate into long-term efforts where it remains to be seen how state and local work on renewable energy efforts may change these trends. Additionally, during the discussion period with the audience, she mentioned that the shape of the shale gas industry is still developing (small vs. large companies). Michael Canes pointed out that some larger companies may use the regulatory system to “knock out” the competition such as the smaller companies via the paperwork and compliance work required and it may be something to “keep an eye on” as the scene is constantly evolving.
In the final concurrent sessions, topics ranged from oil and gas prices to environmental implications of exploration. Jeffrey Hopkins (Rio Tinto) presided over a session that included talks on CO2 storage, policy instruments in Vietnam, and inspections of oil and gas facilities in the Gulf of Mexico. Amongst the presenters, Peter H. Kobos (Sandia National Laboratories) presented his team’s work on linking the uncertainties inherent with geological systems to the cost uncertainty of geologic CO2 storage systems. They used a set of injection rate scenarios to illustrate that as one increases the permeability of a geological system, the injection rates increase and thereby affect the overall project costs favorably. The work by Nhan T. Nguyen (EHESS/CIRED) and Minh Ha-Duong (CIRED/CNRS) “The Relevance of CCS as a Climate Policy Instrument in Vietnam” was presented and focused on the challenges facing scale up and implementation of CCS in this region. Finally, Lucija Muehlenbachs (Resources for the Future) presented her team’s work on the number and frequency of inspectors’ findings on oil and gas facilities in the Gulf of Mexico while asking the question, “Will more inspectors lead to more enforcement?” Their findings suggest enforcement severity increases with the number of inspectors due to increased chance of finding issues, and having more inspectors on site may decrease the likelihood of them succumbing to pressure from those being inspected such as “there goes my bonus.”
The concluding session, entitled “The Last Word - Toward a Secure Energy Future,” expressed the culmination of the week’s many discussions. Ben Schlesinger presided over the session in which he discussed the definition of energy security and its implication for energy supply and efficiency. James L. Sweeney (Precourt Energy Efficiency Center (PEEC), Stanford University) discussed the difficulty associated with updating energy systems in his presentation “Fixing Energy Systems: Why is it so hard?” He explained energy efficiency as an economically efficient reduction in energy use and presented a four-quadrant graph of energy efficient measures. He also commented on barriers to energy efficiency and the principal agent problem. He gave some examples of how people may not see the immediate price of electricity (e.g., on their light switches) as compared to gasoline prices that are visible and immediate. He also discussed the need for more accurate energy dynamic models to help model and ultimately reduce energy loads in buildings. Next, William Blyth (Chatham House) examined European perspectives on security and supply and discussed the problem of politics versus economics. He pointed out that exporters and imports of oil alike face energy security problems as exporters depend upon the value of the export to importing countries. He concluded with the remark that whatever definition of energy security is used, achieving it requires the ability to invest in the necessary infrastructure. Frederick L. Joutz (George Washington University) was the last session speaker at this year’s conference. He broke the concept of energy security down into a timeline of attainable goals. In the short term, he advocated the diversification of energy supply and infrastructure, while in the medium term he mentioned expenditures by firms and consumers may change the energy landscape. He also suggested having access to energy data and information for students may help with their research given library resources are often stretched thin, and perhaps an ‘Energy App’ could be developed for teachers.
Ben Schlesinger closed the session by first joking that like James Sweeney’s mention of the idea to have information on the cost of electricity when you use it, perhaps Ben could charge the electric car he expects to receive shortly only when the electricity comes from natural gas. He thanked all those who participated and is looking forward to the 2012 USAEE/IAEE North American conference in Austin.
* Principal Staff Economist, Earth Systems Department, Sandia National Laboratories, Albuquerque, New Mexico.
** Graduate Student, Oregon State University, and Intern at Sandia National Laboratories.
Sandia National Laboratories is a multi-program laboratory managed and operated by Sandia Corporation, a wholly owned subsidiary of Lockheed Martin Corporation, for the U.S. Department of Energy’s National Nuclear Security Administration under contract DE-AC04-94AL85000. SAND2011-8938P.
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