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Methodological Advances in Energy Modelling: 1970-1990

James M. Griffin

Year: 1993
Volume: Volume 14
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No1-5
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Abstract:
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.



Swiss Residential Demand for Electricity by Time-of-Use: An Application of the Almost Ideal Demand System

Massimo Filippini

Year: 1995
Volume: Volume16
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol16-No1-2
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Abstract:
This study examines the residential demand for electricity by time-of-use in Switzerland. For this purpose, an almost ideal demand system (AIDS) model for peak and off-peak electricity consumption is estimated using panel data coveting the years 1987 to 1990 and 21 cities. The empirical analysis characterizes the Swiss residential electricity market as rather price responsive. The own partial price elasticities are estimated to range between -1.29 and -1.50 during the peak period and between -2.36 and -2.42 during the off-peak period. These elasticities show a high responsiveness of electricity consumption to changes in peak and off-peak prices. Moreover, the positive values of the partial cross price elasticities and substitution elasticities show that peak and offpeak electricity are substitutes.



The Relationship Between Energy Intensity and Income Levels: Forecasting Long Term Energy Demand in Asian Emerging Countries

Rossana Galli

Year: 1998
Volume: Volume19
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol19-No4-4
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Abstract:
This paper analyses long-term trends in energy intensity for ten Asian emerging countries to test for a non-monotonic relationship between energy intensity and income in our sample. We estimate energy demand functions during 1973 1990 using a quadratic function of log income. We find that the long-run coefficient on squared income is negative and significant, indicating a change in trend of energy intensity. We then use our estimates to evaluate a medium-term forecast of energy demand in the Asian countries, using both a log-linear and a quadratic model. We find that in medium to high income countries the quadratic model performs better than the log-linear, with an average error of 9% against 43% in 1995. For the region as a whole, the quadratic model appears more adequate with a forecast error of 16% against 28% in 1995. These results are consistent with a process of dematerialization, which occurs as a result of a reduction of resource use per unit of GDP once an economy passes some threshold level of GDP per capita.



Interfuel Substitution within Industrial Companies: An Analysis Based on Panel Data at Company Level

Thomas Bue Bjorner and Henrik Holm Jensen

Year: 2002
Volume: Volume23
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No2-1
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Abstract:
In this paper we estimate two models for interfuel substitution between electricity, district heating and (other) fuels using a micro panel data set containing information for most Danish industrial companies in the period between 1983 and 1997. The main finding of the study is that interfuel substitution is low within the companies, especially between electricity and other fuels. The partial own-price elasticities estimated are small (between -0.04 and -0.13) both for electricity and other fuels, while it is between -0.44 and -0.50 for district heating. The partial own-price elasticity for electricity is smaller than generally found in macro studies. One explanation may be that the macro studies, in addition to technical substitution, capture some derived demand effect (i.e., aggregation bias).



Energy Price, Environmental Policy, and Technological Bias

Abbas A. Taheri and Rodney Stevenson

Year: 2002
Volume: Volume23
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No4-4
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Abstract:
This paper investigates input biasing characteristics of technology, environmental compliance, and changing energy prices. In particular we wish to investigate whether input biases of technology and environmental compliance are induced by changes in relative fuel prices, or whether there are price induced technology and environmental compliance biases. Using a two-stage optimization, we estimate a truncated third-order translog model by its associated (second order) cost share equations. The model uses two-digit SIC data panel for the period 1974-- 1991. We find evidence of significant fuel-saving technological bias, while environmental compliance has been significantly fossil fuel using. The results indicate that technology and environmental compliance biases are, in part, induced by changes in relative fuel prices and such induced biases are mainly fuel saving. Finally, our demand elasticity estimates indicate that industrial demand for most fossil fuels and purchased electricity is significantly price inelastic. Policy implications of these results are also briefly discussed.



Econometric Benchmarking of Cost Performance: The Case of U.S. Power Distributors

Mark Newton Lowry, Lullit Getachew, and David Hovde

Year: 2005
Volume: Volume 26
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No3-4
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Abstract:
Benchmarking of cost efficiency has growing use in energy utility regulation. The state of the art has been limited in many countries by the small size of available national data sets and poor data on capital cost. Data available in the United States place fewer constraints on benchmarking methods. This paper develops an econometric cost benchmarking model for power distribution that is based on U.S. data. The model can address total cost and its major components. Numerous cost drivers are identified. Statistical tests of efficiency hypotheses are performed. The cost performances of utilities are compared to the industry norm. The suitability of the alternative frontier standard in regulatory applications is discussed.



Valuation of International Oil Companies

Petter Osmundsen, Frank Asche, Bard Misund, and Klaus Mohn

Year: 2006
Volume: Volume 27
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No3-4
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Abstract:
According to economic theory, exploration and development of new oil and gas fields should respond positively to increasing petroleum prices. But since the late 1990s, stock market analysts have focused strongly on short-term accounting return measures, like RoACE , for benchmarking and valuation of international oil and gas companies. Consequently, exaggerated capital discipline among oil and gas companies may have reduced their willingness to invest for future reserves and production growth. Based on panel data for 14 international oil and gas companies for the period 1990-2003, we seek to establish econometric relations between market valuation on one hand, and simple financial and operational indicators on the other. Our findings do not support the general perception of RoACE as an important valuation metric in the oil and gas industry. We find that the variation in company valuations is mainly explained by the oil price, oil and gas production, and to some extent reserve replacement.



Energy Prices and Turning Points: The Relationship between Income and Energy Use/Carbon Emissions

Amy K. Richmond and Robert K. Kaufmann

Year: 2006
Volume: Volume 27
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No4-7
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Abstract:
Models used to test whether an environmental Kuznets curve (EKC) can be used to describe the relationship between GDP and energy use and/or carbon emissions may be biased by the omission of energy prices. Here we include real energy prices and fuel shares in models that describe energy use and carbon emissions. We test if these models show a turning point in OECD countries. Results indicate that including energy prices eliminates statistical support for a turning point and suggest that the relationship between income and both energy use and carbon emissions is represented most accurately by diminishing returns. These results imply that economic growth per se will not reduce energy use or emissions that cause global climate change.



Habit Formation and Consumption of Energy for Heating: Evidence from a Panel of Danish Households

Soren Leth-Petersen

Year: 2007
Volume: Volume 28
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No2-2
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Abstract:
In this paper we ask if consumption of energy for space heating by households is habit forming. A model of intertemporal consumption allocation allowing for habit-forming preferences is estimated on a register-based panel data set with high quality information about consumption of natural gas for a sample of Danish households. Results indicate that preferences are weakly habit forming.



Economies of Scale and Scope in Multi-Utilities

Mehdi Farsi, Aurelio Fetz and Massimo Filippini

Year: 2008
Volume: Volume 29
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No4-6
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Abstract:
This paper explores the economies of scale and scope in the electricity, gas and water utilities. These issues have a crucial importance in the actual policy debates about unbundling the integrated utilities into separate entities, a policy which has often been supported by the ongoing reforms in the deregulation of network industries. This paper argues that the potential improvements in efficiency through unbundling should be assessed against the loss of scope economies. Several econometric specifications including a random-coefficient model are used to estimate a cost function for a sample of utilities distributing electricity, gas and/or water to the Swiss population. The estimates of scale and scope economies are compared across different models and the effect of heterogeneity among companies are explored. While indicating considerable scope and scale economies overall, the results suggest a significant variation in scope economies across companies due to unobserved heterogeneity.




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