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Energy Journal Issue

The Energy Journal
Volume 31, Number 3



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The Value of Plug-In Hybrid Electric Vehicles as Grid Resources

Ramteen Sioshansi and Paul Denholm

DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-1
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Abstract:
Plug-in hybrid electric vehicles (PHEVs) can become valuable resources for an electric power system by providing vehicle to grid (V2G) services, such as energy storage and ancillary services. We use a unit commitment model of the Texas power system to simulate system operations with different-sized PHEV fleets that do and do not provide V2G services, to estimate the value of those services. We demonstrate that a PHEV fleet can provide benefits to the system, mainly through the provision of ancillary services, reducing the need to reserve conventional generator capacity. Moreover, our analysis shows that PHEV owners are made better off by providing V2G services and we demonstrate that these benefits can reduce the time it takes to recover the higher upfront capital cost of a PHEV when compared to other vehicle types.




Structural Change and U.S. Energy Use: Recent Patterns

Hillard G. Huntington

DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-2
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Abstract:
The role of structural change in energy use patterns is evaluated using a recently developed data set based upon the NAICS codes for the United States. Shifts between 65 industries in the commercial, industrial and transportation sectors account for almost 40 percent of the reduction in the US economy�s aggregate energy intensity over the 1997-2006 period. Excluding the transportation industries, these shifts account for 54 percent of the total effect. These estimates are more than twice the magnitude of those due to shifts between five major sectors of the economy. Since all these estimates use the preferred Fisher index, the results are more likely due to the most recently available data than to methodological issues like the decomposition approach.




Arbitrage in Energy Markets: Price Discrimination under Congestion

Bert Willems and Gerd Kupper

DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-3
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Abstract:
During the last decades the production of electrical energy has been liberalized. This paper studies the effect of using a market mechanism to allocate scarce transmission capacity when the incumbent producers remain dominant. We show that granting exclusive use to an incumbent producer is preferred to trading access to this essential facility if interregional production-cost differences are significant and transmission capacity is scarce. This result counters the intuition on third degree price-discrimination, that arbitrage will improve the social surplus when there is no output contraction. The reason is that with arbitrage the incumbent can still charge different regional prices as long as it creates congestion on the transmission lines. As a consequence, welfare will be lower, since the incumbent distorts production decisions to congest the lines. We recommend that a market-oriented access to scarce transmission capacity should be accompanied by additional regulatory or structural measures to address market power.




Bilateral Forward Contracts and Spot Prices

Nodir Adilov

DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-4
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Abstract:
Allaz and Vila (1993) have shown that forward markets could mitigate market power and improve efficiency. This paper shows that efficiency-improving effect of forward markets is sensitive to the assumption that market participants behave like rational expectations agents when forecasting prices. The existence of forward contracts could increase spot prices and hurt efficiency if buyers engage in bilateral forward contracts and forward rates are influenced by historic prices. These findings have important policy implications for the electricity industry.




Price Signals in "Energy-only" Wholesale Electricity Markets: An Empirical Analysis of the Price Signal in France

Philippe Vassilopoulos

DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-5
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Abstract:
This paper analyzes the price signals of the French wholesale electricity market. We build a model of electricity prices that takes into account several key features of the French electricity market in order to assess the capacity of the price signal to guide investments. Wholesale prices should reflect the imbalances in the generation mix but the signal can be distorted if monopoly rents and/or �missing money� are present. We simulate over the 2003-2005 period theoretical perfectly competitive prices with the installed capacity and with the optimal mix to estimate the capacity imbalances and scarcity rents. We then compare the investment signal sent by observed electricity prices and the theoretical prices with the installed capacity. Although there are signs of market contestability for the mid-merit load, through market integration with the other continental markets, observed prices are too high for the baseload and too low for the peakload, as a result distorting the signal.




The Effect of Feedback by Text Message (SMS) and Email on Household Electricity Consumption: Experimental Evidence

Maria Gleerup, Anders Larsen, Soren Leth-Petersen, Mikael Togeby

DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-6
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Abstract:
This paper analyzes the effect of supplying feedback by text messages (SMS) and email about electricity consumption on the level of total household electricity consumption. An experiment was conducted in which 1,452 households were randomly allocated to three experimental groups and two control groups. Feedback was supplied throughout 2007 to members of the experiment groups who accepted the invitation, and data on consumption of electricity for 2006 and 2007 collected for all participants and control group members. 30% of the households invited to receive feedback accepted the invitation. Results suggest that email and SMS messaging that communicated timely information about a household�s �exceptional� consumption periods (e.g. highest week of electricity use in past quarter) produced average reductions in total annual electricity use of about 3%. The feedback technology is cheap to implement and therefore likely to be cost-effective.




Why Do States Adopt Renewable Portfolio Standards?: An Empirical Investigation

Thomas P. Lyon and Haitao Yin

DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-7
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Abstract:
Renewable portfolio standards (RPSs) for electricity generation are politically popular in many U.S. states although economic analysis suggests they are not first-best policies. We present an empirical analysis of the political and economic factors that drive state governments to adopt an RPS, and the factors that lead to the inclusion of in-state requirements given the adoption of an RPS. Although advocates claim an RPS will stimulate job growth, we find that states with high unemployment rates are slower to adopt an RPS. Local environmental conditions and preferences have no significant effect on the timing of adoption. Overall, RPS adoption seems to be driven more by political ideology and private interests than by local environmental and employment benefits, raising questions as to when environmental federalism serves the public interest.




A Note on the Oil Price Trend and GARCH Shocks

Jing Li and Henry Thompson

DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-8
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Abstract:
This paper investigates the trend in the monthly real price of oil between 1990 and 2008 with a generalized autoregressive conditional heteroskedasticity (GARCH) model. Trend and volatility are estimated jointly with the maximum likelihood estimation. There is long persistence in the variance of oil price shocks, and a GARCH unit root (GUR) test can potentially yield a significant power gain relative to the augmented Dickey-Fuller (ADF) test. After allowing for nonlinearity, the evidence supports a deterministic trend in the price of oil. The deterministic trend implies that influence of a price shock is transitory and policy efforts to restore a predictable price after a shock would be unwarranted in the long run.




Oil and Petroleum Product Armington Elasticities: A New-Geography-of-Trade Approach to Estimation

Edward J. Balistreri, Ayed Al-Qahtani and Carol A. Dahl

DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-9
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Abstract:
Exploiting the structural developments suggested by the geography-of-trade literature, we estimate the elasticity of substitution across regional varieties for six crude grades and seven refined products using fixed-effects gravity regressions. We use unique data, compiled by Al-Qahtani (2008), that include global coverage of bilateral trade and transport costs for the crude grades and refined products. We find that the point estimates of elasticities of substitution across import varieties exceed those commonly reported in the literature and those adopted in simulation analysis. Our estimates indicate that there may be far less hysteresis in the pattern of petroleum trade than previously forecast.




International Steam Coal Market Integration

Raymond Li, Roselyne Joyeux and Ronald D. Ripple

DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No3-10
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Abstract:
This paper examines the hypothesis that there is a single economic market for the international steam coal industry and investigates the degree of steam coal market integration over time. A regression test of convergence is employed to test for group convergence within a panel of steam coal exporting countries. The long-run relations between international steam coal prices are tested through cointegration analysis and the Kalman Filter analysis is employed to examine the convergence path of the price series. Monthly Free on Board (F.O.B.) prices for Australia, China, Colombia, Indonesia, Poland and South Africa between January 1995 and July 2007 are used. Considering the outcomes of the three econometric techniques as a whole, we conclude that the international steam coal market is generally integrated.