Thursday, March 23, 2017

Two New Working Papers

We have just posted two new working papers: Technology Choices in the U.S. Electricity Industry before and after Market Restructuring and An Analysis of the Costs of Energy Saving and CO2 Mitigation in Rural Households in China.

The first paper, coauthored with Zsuzsanna Csereklyei, is the first to emerge from our ARC funded DP16 project.  Our goal was to look at the factors associated with the adoption of more or less energy efficient electricity generating technologies using a detailed US dataset. For example, combined cycle gas turbines are more energy efficient than regular gas turbines and supercritical coal boilers are more efficient than subcritical. Things are complicated by the different roles that these technologies play in the electricity system. Because regular gas turbines are less energy efficient but have lower capital costs they are mainly used to provide peaking power, while combined cycle turbines contribute more to baseload. So comparing combined cycle gas to subcritical coal makes more sense as a test of how various factors affect the choice of energy efficiency than comparing the two types of gas turbine technologies.

Additionally, some US regions underwent electricity market reform where either just wholesale or both wholesale and retail markets were liberalized, while other regions have retained integrated regulated utilities, which are typically guaranteed a rate of return on capital. Unless regulators press utilities to adopt energy efficient technologies there is much less incentive under rate of return than under wholesale markets to do so.

The graph shows that following widespread market reform at the end of the 20th Century there was big boom in investment in the two main natural gas technologies. More recently renewables have played an increasing role and there was a revival of investment in coal up to 2012. These trends are also partly driven by the lagged (because investment takes time) effects of fuel prices:

We find that electricity market deregulation resulted in significant immediate investment in various natural gas technologies, and a reduction in coal investments. However, market deregulation impacted less negatively on high efficiency coal technologies. In states that adopted wholesale electricity markets, high natural gas prices resulted in more investment in coal and renewable technologies.

There is also evidence that market liberalization encouraged investments into more efficient technologies. High efficiency coal technologies were less negatively affected by market
liberalization than less efficient coal technologies. Market liberalization also resulted in increased investment into high efficiency combined cycle gas. In summary the effect of liberalization is most negative for the least efficient coal technology and most positive for the most efficient natural gas technology.

The second paper is based on a survey of households in rural China and assesses the potential for energy conservation and carbon emissions mitigation when energy saving technologies are not fully implemented. In reality, appliances do not always survive for their designed lifetime and households often continue to use other older technologies alongside the new ones. The effect is to raise the cost of reducing energy use and emissions by a given amount. The paper computes marginal abatement cost curves under full and partial implementation of the new technologies.

The graph shows the marginal abatement cost curve for rural households in Hebei Province, scaled up from the survey and our analysis. Full-Scenario is the curve with full implementation of new technologies and OII-Scenario is with actual partial implementation. This analysis does not take into account any potential rebound effect of energy efficiency improvements.

The first author, Weishi Zhang, is a PhD student at the Chinese University of Hong Kong. She contacted me last year about possibly visiting ANU, and I supported her application for a scholarship to fund the visit (which unfortunately she didn't get), because I thought her research was some of the more interesting research on Chinese energy use and pollution that I had seen. I helped write the paper (and responses to referees in our revise and resubmit).

Monday, March 13, 2017

March Update

Just realized that we are already in the third month of the year and I haven't posted anything here yet! Things have been very busy with both work and family, so there hasn't been time to put out the blogposts only indirectly related to my research that I used to do - instead I'll usually tweet something on those topics - and research-wise things have either been at the relatively early research stages or the final publication stages. But there will soon be some new working papers going up and some blogposts here discussing them!

On the research front, in January we were mainly focused on putting the final touches on our climate change paper in time for the deadline for the special issue of the Journal of Econometrics. My coauthors want to wait for some feedback before posting a working paper on that. Then in February my collaborators Stephan Bruns and Alessio Moneta visited Canberra to work with me on modeling the economy-wide rebound effect as part of our ARC DP16 project. I spent the first half of the month working hard on the topic to prepare for their visit. We made good progress but it will be at least a few months till we have a paper on the topic ready. So far, it seems robust that the rebound effect is big. Then since they left, I've been catching up.

Recently, Paul Burke said: "You've already got three papers accepted this year - are you going to keep that pace up? ;)" He'd been keeping better count than me! Our original paper on the growth rates approach to modeling emissions and economic growth was accepted at Environment and Development Economics. Two related papers were also accepted - at Journal of Bioeconomics and Climatic Change. I also have three revise and resubmits to be working on... though one of those came in 2016... I'll put out one or two of those as working papers when we resubmit them.