bluuebunny/crossref_metadata_2025 huggingface dataset:
HISTORICAL LESSONS FOR NUCLEAR DECOMMISSIONING TRUST FUND INVESTMENT
Authors: Didi Weinblatt M. , D’Elia Salvatore , Havell Theresa A.
Published: May 2011

One way we can attempt to judge the best investment strategy for nuclear decommissioning trust funds (NDTs) is to examine past after-tax returns of various investment options. The authors of this chapter make such an evaluation. They note that no passively managed asset class allowed in qualified NDTs has produced real after-tax returns. They conclude that an active, rather than a passive, investment strategy is necessary, and they stress the advisability of short- and intermediate-term fixed-income securities such as municipal bonds. However, when the authors applied the hypothetical 15 percent tax rate proposed in a new Congressional bill (HR 4653), several asset classes did provide real aftertax returns.
CONFRONTING UNCERTAINTY: CONTINGENCY PLANNING FOR DECOMMISSIONING
Authors: Biewald Bruce , Bernow Stephen
Published: May 2011

Contingency factors are a standard ingredient in all types of estimated costs. The actual contingency figure used, however, is always open to question. Given the absence of large-scale decommissioning projects, the long future time reference, the history of early shutdowns, and possibility of accidents, there continues to be a substantial controversy regarding the contingency level that is most appropriate. In this chapter, Bruce Biewald and Stephen Bernow present a critical review of the matter of contingency factors, arguing that current common levels in the neighborhood of 25 percent are too low.
DECOMMISSIONING AND NUCLEAR WASTE POLICY: COMPREHENSIVE OR SEPARABLE?
Authors: Chapman Duane
Published: May 2011

Waste handling is one of the tasks most likely to drive up decommissioning costs. This expense is derived from the large volumes of waste involved, from public apprehensions about its safe and prudent disposal, and from the uncertainties associated with long-term on-site storage of waste as is the current practice. Current U.S. nuclear policy addresses low-level waste (LLW) separately from high-level waste (HLW), military waste separately from civilian waste, and even has different packaging requirements for different types of LLW. These differences mean that there are different disposal sites, different transportation routes, and reduced economies of scale. In this chapter, Duane Chapman argues for a more comprehensive consideration of this waste.
DECOMMISSIONING COSTS AND BRITISH NUCLEAR POLICY
Authors: MacKerron Gordon
Published: May 2011

The topic of decommissioning ecommics is not an isolated activity. As Gordon MacKerron shows in this chapter, decommissioning economics are linked to other, often national considerations. The advanced age of the British reactors, plus the government's desire to privatize the entire electrical utility industry, brought decommissioning to the front of public debate unexpectedly early in Britain. As decommissioning estimates have come under closer attention, they have tended to rise from early estimates. Today, the estimated costs are much higher than in the U.S. So far, the funds for this activity are only paper provisions. It appears that one source of higher costs will be increased regulatory requirements. Thus, nonengineering factors are beginning to affect decommissioning costs, as they have other nuclear costs in Britain and elsewhere. MacKerron concludes that the final costs of decommissioning are likely to be higher than estimated originally.
THE COST OF DECOMMISSIONING U.S. REACTORS: ESTIMATES AND EXPERIENCE
Authors: Heinze Fry Gene R.
Published: May 2011

Decommissioning is in its infancy, but our cost experience includes several dozen small, experimental reactors plus the 72 MWe Shippingport reactor. Decommissioning is only beginning at large reactors, but the insights already accumulated allow some use of this experience in future estimates. In this chapter, Gene Heinze Fry compares generic cost estimates plus the data for a total of 21 closed U.S. reactors. Despite the common assumption about the efficiencies that will come with more decommissioning experience, Fry finds a complete lack of scale economies. This could have implications for rates of collection, sufficiency of accumulated funds, and equity issues tied to future generations.
GREENFIELD DECOMMISSIONING AT SHIPPINGPORT: COST MANAGEMENT AND EXPERIENCE
Authors: Murphie William
Published: May 2011

Although there are many indications that nuclear power plants are likely to stay on site for a period of 60 to 100 years after closure, there are also several reasons to remove the facility from the landscape, such as the desire to use the site for a new power plant or other purpose, safety, and aesthetics. Such removal is underway in several countries including Japan, the United Kingdom, and Germany. In this chapter, William Murphie gives us a unique look at the internal cost management and engineering planning experience acquired during the first U.S. commercial-size plant removal, recently completed at the Shippingport Atomic Power Station near Pittsburgh. The project was especially valuable as it provided a detailed comparison between estimated and actual costs. Some of the more important findings were that (1) detailed advance planning is cost effective, (2) labor costs can result in significant increases in total costs, (3) waste disposal costs can bring about substantial discrepancies between planned and realized costs, and (4) actual costs were within 10 percent of the estimated costs. Although there are several differences between the Shippingport reactor and other power plants, this project afforded the nuclear community an early opportunity to gain insights into many of the contingencies that may occur with full dismantlement.
The Hotelling Principle: Autobahn or Cul de Sac?
Authors: Watkins G.C.
Published: May 2011

The economics of relations between prices and resource stocks has been dominated by the Hotelling Principle. But seemingly little attention has been given to the Principle by the oil and gas industry itself. In this paper the Principle is appraised, some new empirical results based on the value of oil and gas reserves sales are introduced, models which relax more of the Hotelling assumptions are reviewed, and the industry milieu in the context of a Hotelling style framework is discussed. The Principle is seen as affording fundamental theoretical insights, but is not found to cope well with industry realities.
Climate Control Efficiency
Authors: Ferrier G.D. , Hirschberg J.G.
Published: May 2011

This paper presents an application of Data Envelopment Analysis (DEA) to energy audit data by defining climate control systems as production processes. This method is proposed as an alternative to the use of regression based models which have been used in previous analyses of this type of data. The advantage of this method is the ability to compute relative efficiency measures for each observation in the data and to define these values without the assumption of a particular specification of the technology. Furthermore, this method can be used with a large number of inputs and outputs.
CETA: A Model for Carbon Emissions Trajectory Assessment
Authors: Peck Stephen C. , Teisberg Thomas J.
Published: May 2011

We present an economic growth and energy use model incorporating representations of greenhouse gas accumulation, global mean temperature rise, and the damage cost associated with this temperature rise. Under alternative assumptions about the damage cost function, we find optimal time paths of CO2 emissions control and associated optimal carbon taxes. Our work indicates that with plausible assumptions, an optimal carbon tax will rise over time, in contrast to the “hump-shaped” carbon taxes implied by CO2 reduction policies currently being discussed. Our work also suggests that the damage cost function would have to be both high and nonlinear in order to justify the general level of CO2 control and carbon taxes implied by these policies.
What Use the IEA Emergency Stockpiles? A Price-based Model of Oil Stock Management
Authors: Okogu Bright E.
Published: May 2011

Although the International Energy Agency (IEA) has had a program of maintaining strategic oil stockpiles since 1974 in order to cope with unforeseen interruptions to supplies, it has failed to prevent the worst effects of the 1979 and recent interruptions. This paper develops a price-based model of stock management which is then used to simulate the management of an actual supply interruption. It is argued that such a system is more appropriate for the kind of net supply shortfalls that have been, or are likely to be, experienced than the current IEA program. The IEA program relies rigidly on a predetermined net quantity shortage to activate it -- a condition which almost guarantees that it will never be used in a real crisis. By contrast, the subtrigger approach proposed in this study has the advantage of flexibility and promptness of response which would make it relevant in a real supply interruption.
Rent Taxes on Norwegian Hydropower Generation
Authors: Amundsen Eirik S. , Andersen Christian , Sannarnes Jan Gaute
Published: May 2011

In Norway, two obstacles to the introduction of a hydro rent tax are about to vanish, the old accounting system for public utilities and the system of administered non-rent prices. The tax authorities are now searching for a viable rent tax system. In this paper we consider detailed effects of six tax systems on realistically modelled marginal and highly profitable power plants. In addition to the existing “percentage system” we examine the ordinary corporate tax system, a special electricity income tax, a higher rate of proportional income tax, an excise tax and a resource rent tax. These systems are compared and evaluated with respect to neutrality, sensitivity to the amount of economic rent generated in a plant, cost-consciousness, stability of tax rates, stability of taxes paid, uncertainty of tax revenues and administrative costs. We conclude that the existing Norwegian tax system for electricity generation is not suited for taxing hydro rent since it seriously violates several of these criteria. The existing system ought to be replaced by a resource rent tax either as a pure system or in combination with a corporate income tax system.
Vehicle Use and Fuel Economy: How Big is the “Rebound” Effect?
Authors: Greene David L.
Published: May 2011

By reducing the fuel costs of travel, motor vehicle efficiency improvements tend to increase the demand for travel, thereby offsetting some of the energy-saving benefit of the efficiency improvement and creating a “rebound” effect. The key factor is the elasticity of vehicle travel with respect to fuel cost per mile. Past studies offer a wide range of estimates depending on model formulation and time period, with more recent analyses indicating that travel is insensitive to fuel costs and efficiency. This paper analyzes U.S. light-duty vehicle miles travelled from 1966-89, examining a variety of statistical issues that bear on the size of the “rebound” effect, including error structure, functional form, and possible lagged effects. The results consistently confirm that the “rebound” effect has been quite small, about 5-15%, or less; and that short-run (one year) adjustments accounted for essentially all of the change in travel due to fuel price and fuel economy changes. The findings imply that the energy savings of technical fuel economy improvements to cars and light trucks will be only slightly reduced by increased vehicle travel. They also imply that gasoline taxes would need to be very large in order to stimulate significant reductions in travel.
Energy and Economic Interaction in Thailand
Authors: Sheerin John C.
Published: May 2011

The rapid rate of economic growth experienced in Thailand through the mid 1980s has been associated with an even more rapid use of energy as a factor input. This paper decomposes total change in energy into output, structural change and conservations effects. In the industrial sector, the rate of expansion in total energy inputs has been sharply reduced due to a structural change away from agricultural and manufacturing dominance and by a significant increase in the efficiency of energy use. In the household sector, the energy impacts of the expansion in the use of appliances were more than offset by the economies associated with delivered energy forms, and by other apparent adjustments in connection with higher energy costs.
Unit Root Behavior in Energy Futures Prices
Authors: Serletis Apostolos
Published: May 2011

This paper re-examines the empirical evidence for random walk type behavior in energy futures prices. In doing so, tests for unit roots in the univariate time-series representation of the daily crude oil, heating oil, and unleaded gasoline series are performed using recent state-of-the-art methodology. The results show that the unit root hypothesis can be rejected if allowance is made for the possibility of a one-time break in the intercept and the slope of the trend function at an unknown point in time.
Woodfuel Use and Sustainable Development in Haiti
Authors: Hosier Richard H. , Bernstein Mark A.
Published: May 2011

This paper examines energy use and environmental deterioration in Haiti. It applies linear programming to the national energy balance to analyze whether or not the substitution of kerosene or other petroleum fuels for charcoal is economically beneficial and whether it will result in a reduction of pressure for deforestation. It concludes that because of the inefficiencies in the production of charcoal, the substitution of kerosene for charcoal is an economically beneficial option. However, if stimulated through price incentives alone, it is unlikely to lead to an overall reduction in the quantity of wood used for fuel. Energy and environmental policy, therefore, must focus on interfuel substitution, improved efficiency and rural afforestation, in addition to "getting the prices right".
Energy Policy in the European Community: Conflicts Between the Objectives of the Unified Single Market, Supply Security and a Clean Environment*
Authors: Surrey John
Published: May 2011

Policies for energy and the environment in Europe were previously the preserve of national governments, but the Commission of the European Community has gained a role in both policy areas in the past few years. This was due to the 1987 Single European Act which, in effect, extends the writ of competition law throughout the energy and other previously "excluded" sectors, the desire to reduce acid rain and greenhouse gas emissions, and reaffirms Europe's renewed concern for long-term oil and gas supply security after the Gulf War and the disintegration of the USSR. The Commission's proposals for the unified internal energy market were driven by concern for competition and free market forces, and seemed to exclude any scope for long-term policy considerations. This paper argues that the implementation of those proposals will be uneven and protracted, and that the Commission's more recent proposals for reducing CO2 emissions and the European Energy Charter appear to mark positive steps towards a long-term strategy for a clean environment, energy efficiency, and oil and gas supply security.
Developing Futures Markets for Electricity in Europe
Authors: Amunadsen Eirik Schrder , Singh Balbir
Published: May 2011

Risk sharing instruments, which allow consumers and producers to hedge their price-risk, are additional essential elements of the electricity reorganization process presently taking place in Europe. This paper involves tin analysis of the feasibility of establishing futures markets in the electricity sector in general and with special emphasis on steps undertaken in the United Kingdom and Norway. Even though there seems to be sufficient price uncertainty to warrant the development of futures markets, there remains the question of whether the underlying new spot-markets are yet sufficiently competitive and well-functioning. Monopolistic elements in electricity generation make it doubtful whether efficiency can be obtained through the intended (Bertrand) price competition in the spot-market. Additional problems may arise from the potential adverse response of dominant multi-objective public enterprises to the new futures markets.
The Power Equipment Industry in Transition
Authors: Ninni Augusto
Published: May 2011

This paper deals with the expected effects of the EEC Commission decision to open up EEC public procurement markets within the Single Market initiative. These effects are viewed on the behavior of European utilities and on the power equipment supplying sector. Both price and non-price effects are analyzed. The new market configuration should require a new kind of supplier, able to add the advantages of being "domestic" to the advantages of being part of a large, transnational group. Thus, such an institutional initiative can explain a large part of the general turmoil which hit the international power equipment industry in the late 1980s. However, the increasing concentration of the supply sector-also stimulated in part by the success of gas turbine technology-reduces the expectation that EEC utilities will take advantage of the opening up of their procurement markets, at least in terms of lower equipment prices.
Analysis of Unilateral CO, Control in the European Community and OECD
Authors: Peuey John
Published: May 2011

Whalley and Wigle (1991b) use a static, six-region, perfect competition, general equilibrium model to explore various global carbon tax policies designed to cut CO2 emissions. Their program is used here to model unilateral carbon taxes applied by large regions such as the EC or the OECD. Sample model results suggest that a 20% unilateral cut in EC carbon-based energy consumption achieves a 0.7% cut in world consumption in equilibrium; the ECs production of energy-intensive goods falls by 8.3%; but EC welfare is hardly changed, thanks to a shift in consumption towards nonenergy-intensive goods and to cheaper carbon-based energy imports. Unilateral action, even by large economies, therefore seems to be environmentally ineffective but economically neutral overall. However, international leadership effects or induced technical progress might change these conclusions. Also, Perroni and Rutherford (1991) find less extreme results for similar policies, probably because they model world energy markets very differently.
Input-Output Analysis and Pollutant Emissions in France
Authors: Breuil Jean-Martial
Published: May 2011

This paper deals with the principle of pollutant emissions defined by Leontief in 1971, based on a fixed coefficient model. I have tested the plausibility of this model by attempting to replicate data on French emissions of SO2 and NOx by combustion and processes.
What Does a Negawatt Really Cost? Evidence from Utility Conservation Programs
Authors: Joskow Paul L. , Matron Donald B.
Published: May 2011

We use information reported by ten utilities about their electricity conservation programs to calculate the life-cycle cost per kWh saved - the cost of a "negawatt " -- associated with these programs. These computations indicate that the cost associated with utilities "purchasing" negawatthours is substantially higher than implied by standard sources such as Amory Lovins (Rocky Mountain Institute) and EPRI. The costs calculated for residential programs, in particular, are much higher than conservation advocates have suggested. However, 80% of the expected savings from these programs are attributed to commercial and industrial customers rather than residential customers. We find substantial variation in costs between utilities for similar programs as well as significant intra-utility variation in the cost associated with various sub-programs. We proceed to examine whether or not there are any systematic biases in the reporting of costs and energy savings by the utilities in our sample. In many cases, utilities fail to report all relevant costs, rely on engineering projections of savings rather than applying methods to measure savings based on actual experience, and fail to make appropriate adjustments for free riders. Further biases may result firorn adopting measure lives that are too long. As a result, on average the cost of a negawatthour computed from utility reports significantly underestimates the true societal cost of conservation achieved this way. Mile it is difficult to compute the underestimate with any precision, the evidence that we have suggests that computations based on utility expectations could be underestimating the actual societal cost by a factor of two or more on average. Better utility cost accounting procedures and the application of more sophisticated methods to estimate actual energy savings achieved are clearly necessary before large sums of money can be expended wisely on these programs.
Fiscalite Pétrolière et Risque
Authors: Rodriguez-Padilla Victor
Published: May 2011

Cet article analyse la relation entre la fiscalitépétroliere et le partage des risques entre les gouvernements des pays hôtes et les compagnies internationales. L 'analyse met en évidence que la taxation a une influence sur les risques géologique et politique. Ces deux manifestations sont estimées dans le cas des pays producteurs d’Afrique de I’Ouest. Il se degage que les fiscalités trop lourdes et régressives augmentent fortement le risque supportépar les deux partenaires. La progressivitéde la taxation est une condition neécessaire mais non suffisante pour réduire les risques public et privé. Un fardeau fiscal bien équilibré entre petits et grands gisements est la meilleure manière de réduire le risque dû a Vimposition. Les pays producteurs de cette region ont fait des progres importants dans la construction des systèmes fiscaux neutres a I’égard du risque, mais dans la plupart des cas, il reste des progrès a faire.
The Khazzoom-Brookes Postulate and Neoclassical Growth
Authors: Saunders Harry D.
Published: May 2011

In a disturbing assault on intuition and conventional wisdom, Khazzoom and Brookes have asserted that energy efficiency improvements might increase, rather than decrease energy consumption. If true, policies aimed at encouraging conservation could worsen rather than ameliorate global warming and would accelerate the need for offshore drilling rather than provide a substitute for it. More generally, this result would pit conservation against environmental goals, in direct contradiction to many countries ‘ energy plans (which see conservation as an environmental solution).

Yet neoclassical growth theory confirms this possibility given certain fairly reasonable conditions—conditions that recent work by Hogan and Jorgenson indicates may hold in the U. S. economy. By no means proving the postulate, this analysis appears to make it much more difficult to dismiss.

In fact, the effect can be more dramatic than even Khazzoom and Brookes may appreciate. Energy efficiency gains can increase energy use even more directly by increasing the economic growth rate, not only by decreasing the effective cost of energy. Efficiency gains for other factors (capital and labor) can also increase energy use.
The Application of the Divisia Index to the Decomposition of Changes in Industrial Energy Consumption
Authors: Liu X. Q. , Ang B. W. , Ong H.L.
Published: May 2011

We review a number of methods that have recently been proposed to decompose changes in industrial energy consumption. We then propose two parametric methods based on the Divisia index, where the integral path problem in the Divisia index is transformed into a parameter estimation problem. It is shown that there can be an infinite number of sets of decomposition results, each corresponding to a particular combination of parameter values, and that several recently proposed methods are in fact special cases of these two methods. We then introduce an approach to estimate the parameter values uniquely. Referred to as the Adaptive Weighting Divisia Method, this method is supported by vigorous mathematical analysis and does not involve arbitrary guesses of parameter values as is the case for the existing methods. We also discuss the application and the associated statistical problems of the various decomposition methods, and present the results of a study using the data for Singapore industry.
Comparing Greenhouse Gases for Policy Purposes
Authors: Schmalensee Richard
Published: May 2011

In order to derive optimal policies for greenhouse gas emissions control, the discounted marginal damages of emissions from different gases must be compared. The greenhouse warming potential (GWP) index, which is most often used to compare greenhouse gases, is not based on such a damage comparison. This essay presents assumptions under which ratios of gas-specific discounted marginal damages reduce to ratios of discounted marginal contributions to radiative forcing, where the discount rate is the difference between the discount rate relevant to climate-related damages and the rate of growth of marginal climate-related damages over time. If there are important gas-specific costs or benefits not tied to radiative forcing, however, such as direct effects of carbon dioxide on plant growth, there is in general no shortcut around explicit comparison of discounted net marginal damages.
Methodological Advances in Energy Modelling: 1970-1990
Authors: Griffin James M.
Published: May 2011

Both the theory and practice of energy modelling have made phenomenal advances over the last 20 years. After providing a brief description of the state of energy modelling circa 1970, this paper identifies four major methodological advances profoundly affecting energy modelling. In the area of energy demand modelling, the translog and other generalized functional forms have proven readily adaptable to questions of interfuel substitution and energy/non-energy substitution. Additionally, discrete choice models, particularly the multinomial logit models, have provided a conceptually appealing framework within which to model appliance choice. The third advance has come in both the frequency and sophistication of use of panel data sets, which offer a much richer set of price and income variation. Finally, in the area of energy supply modelling, dynamic optimization models coupled with greater reliance on engineering information has lead to steady improvements in this area.
OECD Oil Demand Dynamics: Trends and Asymmetries
Authors: Hogan William W.
Published: May 2011

Oil market data of the 1980s reject a simple, symmetric reduced-form model of dynamic oil demand in the OECD countries. Tests of price asymmetric long-run demand models produce ambiguous results. The pooled time series estimations find near unitary output elasticities, and reject linear demand models in favor of constant elasticity formulations. Despite large differences in product prices and crude prices, the data cannot reject use of a crude price model for aggregate oil demand. A reduced-form model symmetric in product prices but with technology trends for non-price oil conservation compares favorably with other formulations, and provides slightly lower projections of future oil demand intensity. However, even these lower econometric projections imply substantial increases in aggregate oil demand, increases which exceed those found in the conventional judgmental estimates.
Energy and Capital: Further Exploration of E-K Interactions and Economic Performance
Authors: Morrison Catherine
Published: May 2011

This paper explores some interactions between energy and capital that affect firms’ productive performance through indirect effects of energy price changes. Different capital stocks (including high-tech capital) and different U.S. manufacturing industries (including high and low energy- and capital-intensive industries) are examined. This allows evaluation of cross-effects, expressed as the impact of changing capital composition on energy conservation (computer-induced energy conservation) and energy price effects on capital returns (including composition, utilization and scale). The resulting effects on productivity growth are then considered, through the impact of energy price changes both on the demand and cost share of energy, and on the measured returns to different types of capital.
Petroleum Property Valuation: A Binomial Lattice Implementation of Option Pricing Theory
Authors: Pickles Eric , Smith James L.
Published: May 2011

We take a simple tutorial approach to explain how option valuation can be applied in practice to the petroleum industry. We discuss a simple spreadsheet formulation, demonstrate how required input data can be extracted from market information, and give several exploration and development examples. Under the market and fiscal conditions described we derive the value of discovered, undeveloped reserves projected to result from offshore licensing in the United Kingdom, and we show how to determine the maximum amount that should be committed to an exploration work program to find those reserves. Lease-bidding and farm-out applications are briefly described. We recommend option valuation as an alternative to discounted cash flow analysis in situations where cash flows are uncertain and management has operating flexibility to adjust investment during the life of the project, and point to further work needed to fully value nested or embedded options.
The Structure and Intensity of Energy Use: Trends in Five OECD Nations*
Authors: Howarth Richard B. , Schipper Lee , Andersson Bo
Published: May 2011

This paper examines trends in the structure and intensity of final energy demand in five OECD nations between 1973 and 1988. Our focus is on primary energy use, which weights fuels by their thermal content and multiplies district heat and electricity by factors of 1.15 and 3.24 to approximate the losses that occur in the conversion and distribution of these energy carriers. Growth in the level of energy-using activities, given 1973 energy intensities (energy use per unit of activity), would have raised primary energy use by 46% in the U.S., 42% in Norway, 33% in Denmark, 37% in West Germany, and 53% in Japan. Reductions in end-use energy intensities, given 1973 activity levels, would have reduced primary energy use by 19% in the U.S., 3% in Norway, 20% in Denmark, 15% in West Germany, and 14% in Japan. Growth in national income parallelled increases in a weighted index of energy-using activities in the U. S., West Germany, and Denmark but substantially outstripped activity growth in Norway and Japan. We conclude that changes in the structure of a nation’s economy may lead to substantial changes in its energy/GDP ratio that are unrelated to changes in the technical efficiency of energy utilization. Similarly, changes in energy intensities may be greater or less than the aggregate change in the energy/GDP ratio of a given country, a further warning that this ratio may be an unreliable indicator of technical efficiency.
A Micro-Econometric Analysis of the Industrial Demand for Energy in NSW
Authors: Woodland Alan D.
Published: May 2011

This paper analyzes an extensive data set consisting of observations on all manufacturing establishments in New South Wales, Australia over an eight-year period. The focus is on the determinants of the demands by manufacturing establishments for different fuels (namely coal, oil, gas and electricity) and, in particular, upon the responsiveness of the demands to changes in the prices of the various fuels, the wage rate, and the rental rate on capital. Particular attention is paid to the facts that (a) establishments have different patterns of fuel consumption and (b) gas and electricity have block-pricing structures. Estimates of own-price elasticities of demand for electricity, gas and oil are higher than appear in the literature.
Oil Shocks and the Demand for Electricity
Authors: Kokkelenberg Edward C. , Mount Timothy D.
Published: May 2011

This paper uses a Structural Econometric Model - Time Series Analysis to forecast the demand for electricity in the United States. The main innovation is to incorporate price shocks for oil into the model. The results show that if forecasts had been made with this model in the mid-1970s, they would have predicted the drop in the growth of demand more promptly than did the electric utility industry forecasts. Using current data, forecasts of demand for the year 2000 from the model are higher than industry forecasts, suggesting a reversal of the situation that existed in the 1970s.
A Stochastic Model for the Measurement of Electricity Outage Costs
Authors: Grosfeld-Nir Abraham , Tishler Asher
Published: May 2011

The measurement of customer outage costs has recently become an important subject of research for the electric utilities. This paper uses a stochastic dynamic model as the starting point in developing a market-based method for the evaluation of outage costs. Specifically, the model postulates that once an electricity outage occurs, all production activity stops. Full production is resumed once the electricity outage is over. This process repeats itself indefinitely. The business customer maximizes his expected discounted profits (the expected value of the firm), taking into account his limited ability to respond to repeated random electricity outages. The model is applied to 11 industrial branches in Israel. The estimates exhibit a large variation across branches.
Priority Pricing of Interruptible Electric Service with an Early Notification Option
Authors: Strauss Todd , Oren Shmuel
Published: May 2011

Priority pricing of interruptible electric service induces each customer to self-select a rationing priority that matches the rank order of its interruption loss. This paper extends the theory by considering the possibility of early notification, an option offered by many electric utilities. The proposed tariff structure allows a customer to choose either early notification and pay a fixed fee, or select no advance notification along with a level of compensation when interrupted. The chosen compensation determines customer service priority and corresponding price. Service priority is interpreted as an externality component of the marginal cost of system shortfall.
The Impact of Natural Gas Imports on Air Pollutant Emissions in Mexico
Authors: Bustani Alberto , Cobas Elisa
Published: May 2011

This paper analyzes the impact that natural gas imports could have on fuel emissions in northern Mexico. We discuss the problem created in the 1980s when a shift from natural gas to residual oil in industrial processes increased emissions of air pollutants significantly. The benefits of substituting leaded for unleaded gasoline in the 1990s are discussed also. In July 1992 the Mexican government announced for the first time since oil nationalization that private companies in Mexico are allowed to directly import natural gas. The transportation of natural gas, however, remains reserved only for Pemex, the national oil company. This opens the possibility of reducing the burning of high-sulphur residual oil in both the industrial and the energy production sectors in Mexico, particularly in the northern region where only 6.7% of the of the country’s natural gas is produced. Natural gas imports have also opened the possibility of using compressed natural gas (CNG) in vehicles in northern Mexico.
The Economics of Natural Gas in Mexico - Revisited
Authors: Foss Michelle Michot , Hernandez Francisco Garcia , Johnson William A.
Published: May 2011

How long will Mexico continue to be a net importer of natural gas? We explore this question and raise the logical corollary—will import volumes increase? During 1992, gas imports by Mexico peaked at 300 to 350 MMcf/d, primarily to serve incremental demand in Mexico’s northern region. We begin our investigation by suggesting that natural gas demand in Mexico is a function of GDP and the real price of gas, the latter being tied to U.S. prices. Low U.S. gas prices have driven Mexico’s import strategies. If downward pressure on U.S. gas prices continues, the import market in Mexico could be preserved through the end of this century. Other factors contribute to the prospects of a long-run import strategy, in particular, capital investment constraints at Pemex; the need to substitute cleaner burning natural gas for the residual fuel oil used widely in Mexico; and a North American free trade zone which may encourage greater gas imports by Mexico. We conclude that it is reasonable for Mexico to remain a net importer of gas for at least the next 10 years.
The North American Free Trade Agreement: Implications for the Parties and World Oil Markets
Authors: Verleger Philip K.
Published: May 2011

The proposed North American Free Trade Agreement (NAFTA) has been criticized because it failed to open Mexico’s hydrocarbon reserves to development by private parties. This failure is an economic tragedy. Consumer welfare will clearly be reduced as a consequence. However, the loss is confined to Mexico where economic growth rates may be reduced by as much as one half of one percent per year. Otherwise, the agreement will have insignificant impacts on the world oil market. Future levels of production and prices will be unaffected by the agreement.
Oil Industry Development and Trade Liberalization in the Western Hemisphere
Authors: Randall Stephen J.
Published: May 2011

This paper provides an overview of oil industry developments in the Western Hemisphere with particular emphasis on Latin America since the inauguration of the Enterprise for the Americas Initiative by George Bush. I discuss these developments in the context of the Canada-U.S. Free Trade Agreement (concluded in 1989), and the negotiation in 1992 of the North American Free Trade Agreement (NAFTA). This paper is concerned essentially with the oil industry and does not discuss the importance of natural gas for Canadian producers nor the fact that much of Latin American oil production (notably in Mexico) is associated with natural gas. I examine the shift to trade and investment liberalization and privatization in the 1980s and early 1990s, especially in Latin America—where the most dramatic transformation has occurred. I suggest that investment patterns in the industry have been only marginally related to trade liberalization, and have derived more from considerations of resource availability, exploration and development costs, market factors, and the general state of the international economy—all of which have contributed in the 1980s to significant restructuring and downsizing among a number of major corporations. I also note the important increase in an internal Latin American market, and the role of regional organizations such as ARPEL—the Association of Latin American State Oil Company Producers.
How Might North American Oil and Gas Markets Have Performed with a Free Trade Agreement in 1970?
Authors: Campbell Watkins G. , Waverman Leonard
Published: May 2011

Deregulation on both sides of the U.S.-Canadian border has made certain aspects of trade agreements largely superfluous in the near term. It is over the longer term that the impact of the NAFTA will become apparent. To grapple with this issue, simulations are attempted of oil and gas trade between the United States and Canada as if the NAFTA had been in place before the first oil price shock of 1973. The simulations suggest substantial additional exports of Canadian oil and gas would have enabled the United States to back out volumes of OPEC oil during the critical years of the late 1970s and early 1980s. This would have served to dampen world oil markets during the years of OPEC ascendency—not dramatically, but not negligibly either. By promoting closer integration of energy markets, the NAFTA should lead to more cohesive North American responses to any future world oil shocks.
Markets in Real Electric Networks Require Reactive Prices
Authors: Hogan William W.
Published: May 2011

Differences in locational spot prices in an electric network provide the natural measure of the price for transmission. The ubiquitous problem of loop flow requires different economic intuition for interpreting the implications of spot pricing. The DC-Load model is the usual approximation for estimating spot prices, although it ignores reactive power effects. This approximation is best when thermal constraints create congestion in the network. In the presence of voltage constraints, the DC-Load model is insufficient, and the full AC-Model is required to determine both real and reactive power spot prices.
Pipeline Access and Market Integration in the Natural Gas Industry: Evidence from Cointegration Tests
Authors: Vany Arthur De , David Walls W.
Published: May 2011

This research seeks to determine the extent to which the Federal Energy Regulatory Commission’s policy of “Open Access” to natural gas pipelines has created competition in natural gas markets. We argue that recently developed cointegration techniques are the natural way to evaluate competition between natural gas spot markets at dispersed points in the national transmission network. We test daily spot prices between 190 market-pairs located in 20 producing fields and pipeline interconnections and find that the price series are not stationary and that most field markets were not cointegrated during 1987. By 1991, more than 65% of the markets had become cointegrated. The increased cointegration of prices is evidence that open access has made gas markets more competitive.
Price, Environmental Regulation, and Fuel Demand: Econometric Estimates for Japanese Manufacturing Industries
Authors: Matsukawa Isamu , Fujii Yoshifumi , Madono Seishi
Published: May 2011

In this paper, we analyze interfuel substitution according to Japanese manufacturing sectors. We examine the impact of environmental regulations and technical changes on fuel choice, and the effects of price on fuel substitution, using pooled data on fuel consumption and purchase price for 58 regions in the period 1980-88. The empirical results, based on the estimation of translog unit fuel cost functions by sector, indicate that (1) substitution possibilities were found for most combinations of fuel types in every sector; and (2) environmental regulations and technical changes significantly impact fuel consumption for most sectors, but their effects on fuel demand differ both across sectors and fuel types.
Global Wanning and Urban Smog: Cost-Effectiveness of CAFE Standards and Alternative Fuels
Authors: Krupnick Alan J. , Walls Margaret A. , Collins Carol T.
Published: May 2011

In this paper we estimate the cost-effectiveness, in terms of reducing greenhouse gas emissions, of increasing the corporate average fuel economy (CAFE) standard to 38 miles per gallon and substituting methanol, compressed natural gas (CNG), and reformulated gasoline for conventional gasoline. Greenhouse gas emissions are assessed over the entire fuel cycle and include carbon dioxide, methane, carbon monoxide, and nitrous oxide emissions. To account for joint environmental benefits, the cost per ton of greenhouse gas reduced is adjusted for reductions in volatile organic compound (VOC) emissions, an ozone precursor. CNG is found to be the most cost-effective of these alternatives, followed by increasing the CAFE standard, substituting methanol for gasoline, and substituting reformulated for conventional gasoline. Including the VOC benefits does not change the ranking of the alternatives, but does make the alternative fuels look better relative to increasing the CAFE standard. None of the alternatives look cost-effective should a carbon tax of $35 per ton be passed, and only CNG under optimistic assumptions looks cost- effective with a tax of $100 per ton of carbon.
Power Balance and Equilibrium Channel Structure in the Korean Gasoline Market
Authors: Byong-Hun Ahn , Jung Heon
Published: May 2011

This study analyzes how power balance in a vertical channel affects equilibrium channel structure and channel members' profits in an oligopolistic gasoline market. Using a game theoretic analysis, we study an equilibrium channel structure under different power balance scenarios. We show that refiners cannot increase their profits by strategic disintegration when their intermediaries retain more power than they do. We also investigate power balance issues in three-level, unintegrated channels. Finally, we apply our results to the gasoline market in Korea, and discuss policy implications.
Coordination of Non-utility Generation Through Priority Purchase Contracts*
Authors: Doucet Joseph A.
Published: May 2011

This paper proposes the use of priority purchase contracts as a means' to coordinate utility purchases from non-utility generators. It is shown that differentiated contracts should have the potential for attracting more diverse NUG proposals (in terms of technical and economic characteristics). It is also argued that differentiated contracts should permit better integration and. coordination of NUG capacity since they come closer to mimicking the utility's resource allocation problem. Several areas for future research are suggested.
International Trade in Oil, Gas and Carbon Emission Rights: An Intertemporal General Equilibrium Model*
Authors: Manne Alan S. , Rutherford Thomas F.
Published: May 2011

This paper employs a five-region intertemporal model to examine three issues related to carbon emission restrictions. First, we investigate the possible impact of such limits upon future oil prices. We show that carbon limits are likely to differ in their near- and long-term impact. Second, we analyze the problem of “leakage” which could arise if the OECD countries were to adopt unilateral limits upon carbon emissions. Third, we quantify some of the gains from trade in carbon emission rights. Each of these issues have been studied before, but to our knowledge this is the first study based on a multi-regional, forward-looking model. We show that sequential joint maximization can be an effective way to compute equilibria for intertemporal general equilibrium models of international trade.
Three Biases in Cost-Efficiency Tests of Utility Energy Efficiency Programs*
Authors: Braithwait Steven , Caves Douglas
Published: May 2011

Electric utilities in a number of American states devote significant portions of their resources to demand-side management (DSM) programs designed to reduce their customers' electricity consumption. As other jurisdictions consider similar programs, the public policy cost-efficiency criteria for determining how much utilities should pay for DSM remain controversial. This paper develops the appropriate measure of the economic benefits and costs of DSM, using a conventional economic welfare framework, and compares it to the standard cost-effectiveness tests used in most jurisdictions today. The standard tests are found to be incomplete, suffering from three potential biases. Modifications to the standard tests are suggested to address each of the biases. A numerical example is used to illustrate the nature and potential magnitude of the bias in the current tests.
On the Use of 'Adders' by Public Utility Commissions
Authors: Tschirhart John
Published: May 2011

State public utility commissions are developing programs to reduce emissions from electric generation facilities. Programs call for minimizing the total cost of meeting future demands for power, where pollution damages are part of the total cost. In the process of choosing new generation sources, dirtier technologies are handicapped relative to cleaner technologies through the use of “adders ” which are meant to measure damages. However, the damage costs are left at the planning stage; they are not included in electricity rates. This practice coupled with standard rate setting procedures may lead to inferior outcomes.
Oil Price Forecasting in the 1980s: What Went Wrong?*
Authors: Huntington Hillard G.
Published: May 2011

This paper reviews forecasts of oil prices over the 1980s that were made in 1980. It identifies the sources of errors due to such factors as exogenous GNP assumptions, resource supply conditions outside the cartel, and demand adjustments to price changes. Through 1986, the first two factors account for most of the difference between projected and actual prices. After 1986, misspecification of the demand adjustments becomes a particularly troublesome problem.