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Energy Journal Issue

The Energy Journal
Volume19, Number 2

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The Role of Electricity in Industrial Development

Nathan Rosenberg

DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-2
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This paper examines the role played by electricity in the course of industrial development over the past century. The focus is primarily on the American experience. It is commonly observed that industrialization involves increasing energy intensity, but this is not entirely accurate. In the American experience, energy intensity (measured as the ratio of total energy consumption to GNP) rose between 1880 and 1920, but declined thereafter. However, throughout the entire 20th century, electricity's share of total energy consumption has increased. The paper accounts for this rising share in terms of certain unique features of electricity in specific industrial applications, i.e., features for which other energy forms are, at best, highly imperfect substitutes.

Electricity Sectors in Transition

Paul L. Joskow

DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-3
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This paper discusses the structural and regulatory changes that are affecting electricity sectors around the world. The direction of change is toward promoting competition in the supply of generation services, restructuring of electricity supply enterprises to clearly separate the provision of competitive generation services from monopoly transmission and distribution services, and the application of new regulations governing access to the transmission and distribution networks and the associated costs of the services provided by these networks. The potential impacts of these changes on electricity costs and prices, economic development, the distribution of income, the choice of generating technologies, research and development and the environment are discussed. Differences in the current performance and the likely future impacts of electricity sector restructuring on developing and developed countries are discussed.

Technological Options for Power Generation

Ulf Hansen

DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-4
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The demand for electricity is expected to double from 1990 to 2020. This will require 4000 GW of new capacity to be constructed worldwide, both as additions and replacements. Technical progress has made new conventional power plants more efficient and environment friendly than existing ones, and they can be built quicker and cheaper. Fossil fuels already form the basis for two thirds of all electricity and their importance will continue to grow, both as gasfired combined cycle and as coal-fired steam cycle. The technical choice depends on a wide array of considerations, including financial engineering. In liberalised electricity markets with global sourcing the emphasis is on minimum costs and cash-flow. Independent project developers currently fund 30% of all new generating capacity investments and the share is growing. The expanding role of fossil fuels runs counter to policies to reduce the emission of greenhouse gases. To reverse the trend would require strong support for renewables and acceptance of nuclear power.

Global Demand Growth of Power Generation, Input Choices and Supply Security

Kenichi Matsui

DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-5
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The anticipated global demand growth for energy, and electricity in particular, is mapped for the coming 20 years. Five critical issues implied by this forecast are then spelled out: uncertainty, security of energy supply, energy financing, and the role of nuclear and renewable energy. Finally, based on a review of the energy revolutions which the human race has experienced during history, the paper sketches a long term energy future. It suggests the possibility of a new energy era in the 21st century with electricity and hydrogen as the main final energy and nuclear and renewables as the main primary energy, providing, coincidentally, a solution to the CO2 issues that loom so importantly at the end of the 20th century.

The Environmental Challenges of Power Generation

Thomas C. Schelling

DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-6
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In two decades, three momentous changes have occurred that will influence power generation for decades to come. Coal has become a culprit responsible for respiratory disease and acid rain; carbon dioxide has become a culprit widely believed capable of changes in climate greater than any that have occurred in ten thousand years; and nuclear power in many countries has become an outcast. The irony is that nuclear power promised clean air and no greenhouse effect. The great gathering of heads of state in Rio in 1992 was the celebration of a problem; whether it was the beginning of a solution remains to be seen.

Alternatives to the Strait of Hormuz

Dagobert L. Brito and Eytan Sheshinski

DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-9
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In this paper we study the cost of adding additional capacity to transport oil from Saudi Arabia and Kuwait to the Red Sea. If this capacity is obtained by adding power to the existing pipelines, the cost would increase by approximately 14 cents per barrel, but would require large capital expenditures. If this capacity is obtained by using Drag Reduction Agents, the cost would increase by 25 to 65 cents per barrel with minor capital expenditures. Since Arabian oil is inframarginal, these increased costs should have no impact on the supply of oil.

Chaos in Natural Gas Futures?

Victor Chwee

DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-10
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Technical analysis using charting techniques to forecast future price trends can be difficult due to the volatile and unpredictable nature of futures market. Alternatively, the emergence of chaos theory seeks to find order in random looking futures price behavior. Hence, this paper tests for the presence of nonlinearity and chaos using the NYMEX 1 -month, 2-month, 3-month, and 6-month daily natural gas settlement prices, from April 1990 to September 1996. In doing so, we use the BDS statistic of Brock, Dechert, and Scheinkman (1987) for nonlinearity testing and then proceed to compute the Lyapunov spectra to determine to what degree futures data resemble a chaotic system. Although the results indicate the presence of nonlinearity, they fail to provide significant evidence of deterministic chaos.

Weather and Pollution Abatement Costs

Jonathan E. Leightner and CA. Knox Lovell

DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-11
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Mae Moh Mine and Power Plant operates a lignite mine and a minemouth coal-fired electricity generation plant in Lampang province in northern Thailand. Mae Moh is Thailand's largest lignite mine, and Mae Moh Power Plant accounts for nearly 20 percent of Thailand's installed generating capacity The power plant also generates air pollution, principally sulfur dioxide (SO2) emissions, as a byproduct of burning lignite. The plant's ambient concentrations of SO2 have been monitored for nearly a decade, which enables us to incorporate concentrations data with conventional input and output data to calculate the shadow value of being able to generate the SO2 concentrations, or the revenue forgone by having to abate the concentrations. We compare the cost of abating with current technology to the cost of adding new technology in the form of desulfurizaiton plants.

Customer Retention in a Competitive Power Market: Analysis of a 'Double-Bounded Plus Follow-Ups' Questionnaire

Yongxin Cai, Iraj Deilami and Kenneth Train

DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-12
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A model is developed and estimated that forecasts the share of an electric utility's customers who would switch to a competitor under various price discounts and service attributes (reliability, renewable power, energy conservation assistance, and customer service.) The method builds upon previous double-bounded dichotomous choice procedures, extended to account for the multi-attribute nature of electric power service.

The Bias in Price Elasticity Estimates Under Separability Between Electricity and Labor in Studies of Time-of-Use Electricity

Asher Tishler

DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No2-13
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Most time-of-use(TOU) studies of electricity use in the business sector have found little overall response, as measured by price elasticities, to TOU rates. These studies employed the assumption of weak separability between electricity and all other inputs. Here, we use the generalized Leontief cost function to show that when labor is included in the estimation, the electricity price elasticities are larger, in absolute values, than when labor is erroneously excluded. This result is demonstrated with data on electricity and labor for about 400 Israeli business customers. We also show that the omission of labor from the estimation may cause serious underestimation of the net welfare gains that result from changing a flat electricity price to a TOU rate.