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The Energy Journal
Volume 28, Number 3

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Energy Economics: A Place for Energy Poverty in the Agenda?

Fatih Birol

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-1
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The global energy system faces three major strategic challenges in the coming decades: the growing risk of disruptions to energy supply; the threat of environmental damage caused by energy production and use; and persistent energy poverty. The first two challenges have attracted a lot of attention from the energy-economics community, much less so the need to address the problem of energy under-development. On current trends, the number of people in poor countries relying primarily on traditional biomass for their energy needs will continue to rise, while the number lacking access to electricity will barely fall. To change this course, decisive policy action is needed urgently as part of the broader process of human development. Meeting basic human needs, such as food and shelter, must be at the heart of any strategy to alleviate poverty. Modern energy services help enable those needs to be met. In practice, concrete improvements in human welfare can be realised quickly at modest short-term cost. Strong political will and commitment on the part of the governments of the world's poorest countries will be crucial. Rich industrialised countries have an important role to play in this process too. In addition to moral issues involved, we have obvious long-term economic, political and energy-security interests in helping developing countries along the path to energy development. The cost of providing assistance to poor countries may turn out to be far less than that of dealing with the instability and insecurity that poverty creates.

Nonlinear Dynamics in Energy Futures

Mariano Matilla-García

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-2
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This paper studies the possible nonlinear and chaotic nature of three energy futures: natural gas, unleaded gasoline and light crude oil. Nonlinearity is analyzed using the generalized BDS statistic, along with Kaplan�s test. The results show that nonlinearity cannot be rejected. The null hypothesis of chaos is then investigated via the stability of the largest Lyapunov exponent. Evidence of chaos is found in futures returns. Global modelling techniques, like genetic algorithms, have been used in order to estimate potential motion equations. In addition, short term forecasts in futures price movements have been conducted with these estimated equations. The results show that although forecast errors are statistically smaller than those computed with other stochastic approaches, further research on these topics needs to be done.

The Supply of Storage for Natural Gas in California

Rocío Uría and Jeffrey Williams

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-3
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Do natural gas storage decisions in distant California respond to NYMEX futures price spreads? Daily data about flows into and out of storage facilities in California over 2002-2006 and daily spreads on NYMEX are used to investigate whether the net injection profile is consistent with the supply-of-storage curve first observed by Working for wheat. Storage decisions in California do seem to be influenced by a price signal that combines the intertemporal spread and the locational basis between California and the Henry Hub, in addition to strong seasonal and weekly cycles that determine net injections to a considerable extent. The timing and magnitude of the price response differ across storage facilities. Regulatory requirements and operational constraints also limit the response to short-lived arbitrage opportunities.

Technical Change Theory and Learning Curves: Patterns of Progress in Electricity Generation Technologies

Tooraj Jamasb

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-4
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Better understanding of the role of learning in technical progress is important for the development of innovation theory and technology policy. This paper presents a comparative analysis of the effect of learning and technical change in electricity generation technologies. We use simultaneous two-factor learning and diffusion models to estimate the effect of learning by doing and learning by research on technical progress for a range of technologies in four stages of development. We find learning patters broadly in line with the perceived view of technical progress. The results generally show higher learning by research than learning by doing rates. Moreover, we do not find any development stage where learning by doing is stronger than learning by research. We show that simple learning by doing curves overstate the effect of learning in particular for newer technologies. Finally, we find little substitution potential between learning by doing and research for most technologies.

CO2 Prices, Energy and Weather

Maria Mansanet-Bataller, Angel Pardo and Enric Valor

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-5
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One of the main objectives of the European Union Emission Trading Scheme is the establishment of a market price level for allowances that show to European CO2 emitting installations the environmental impact of their polluting activities. The aim of this paper is to focus on the daily price changes during 2005 in an attempt to examine the underlying rationality of pricing behaviour. Specifically, we study the effect of those weather and non-weather variables that academic and market agents consider as the major determinants of the of CO2 price levels. The results show that the energy sources are the principal factors in the determination of CO2 price levels, and that only extreme temperatures influence them.

Changes in Electricity Demand in the United States from the 1970s to 2003

Marvin J. Horowitz

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-6
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Gaining a better understanding of how electricity demand has changed over the past three decades, particularly in light of government involvement in influencing electricity demand, is an important step towards shaping energy policy in the U.S. and internationally. This study of U.S. electricity demand finds that those states that have moderate to strong commitment to energy efficiency programs reduce electricity intensity relative to what it would have been with weak program commitment; in the residential sector by 4.4 percent, in the commercial sector by 8.1 percent, and in the industrial sector by 11.8 percent. The findings are similar with respect to levels of electricity consumption in the commercial and industrial sectors, but not the residential sector. Moreover, the evidence in this paper indicates that energy efficiency program commitment in all three sectors of the U.S. economy has transformed electricity demand with respect to three key economic variables; electricity price, income as measured by per capita income or gross state product, and technological change. Also, this study finds that nationwide spillover from energy efficiency programs may be rapid and ubiquitous in the residential sector. Estimates of the impact of California�s energy efficiency programs confirm the speculation that these efforts have dramatically reduced state electricity intensity; to date, these impacts are likely the upper bounds of the impacts of strong state-level energy efficiency program commitment.

Informational Efficiency and Interchange Transactions in Alberta's Electricity Market

Apostolos Serletis and Mattia Bianchi

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-7
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This paper aims to investigate the informational efficiency of the Alberta electricity market and also the issue of whether interchange transactions (power flows between markets) are becoming increasingly significant factors in electric power markets. In doing so, we use hourly data for all hours, peak hours, and off-peak hours over the period from January 1st, 1999 to July 31st, 2005. In testing the efficiency of the Alberta power market, we use a statistical physics approach � namely the �detrending moving average (DMA)� technique, introduced by Alessio et al. (2002) and further developed by Carbone et al. (2004a, 2004b), and recently applied to energy futures markets by Serletis and Rosenberg (2007). In analyzing the relationship between power imports and exports and pool prices, we assess whether regulatory changes have modified the causal relationship between import/export volumes and the pool price. According to our results, the electricity market in Alberta is highly inefficient and cross-border trade of electricity between Alberta and neighbouring jurisdictions helps predict the price dynamics in Alberta�s electricity market.

Price Effects of Boutique Motor Fuels: Federal Environmental Standards, Regional Fuel Choices, and Local Gasoline Prices

W. David Walls and Frank W. Rusco

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-8
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Federal clean air regulations have spawned a proliferation of motor fuel types that have created differentiated markets for motor fuels, increased the cost of supplying these fuels, and reduced the capacity of the supply infrastructure. In this paper we examine wholesale gasoline prices in 99 US cities over a time horizon of 204 weeks using a panel data regression model to explain fuel prices as a function of fuel attributes, the price of crude oil, and seasonal and city-market-specific effects. Our results show that fuel prices are related to the use of a special blend not widely available in the region and more costly to make, and the situation of the particular city market in relation to major refining centers or other sources of supply.

An Oligopolistic Electricity Market Model with Interdependent Segments

Pierre-Olivier Pineau and Georges Zaccour

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-9
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In this paper,we model a two-period electricity market with interdependent demand, where oligopolistic generators make investments in peak-and base-load capacities. Different prices are obtained in the two periods, and residential consumers can react to prices across demand periods. We characterize the Cournot equilibrium obtained as a function of price and cross-price effects and present a numerical illustration based on the Ontario (Canada) electricity market.

Book Reviews

Gas Prices in the UK: Markets and Insecurity of Supply, by Philip Wright - Book Review by: Richard Green

Sustainable Fossil Fuel: The Unusual Suspects in the Quest for Clean and Enduring Energy, by Mark Jaccard - Book Review by: Richard L. Gordon

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-10


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