Energy economics applies the tools of economics to analyse supply and demand of energy.
Price is the balance of supply and demand.
As long as energy products are siloed the price of them, in theory, can be controlled.
Normative and positive statement. Something like letting the market react to carbon tax (or other incentive based
policies) would be, in theory, using a positive statement. Setting goals on how things should be is a normative
analysis.
We want the price to reflect all the costs.
If the producer does not bear all the costs then the market cost is not the actual cost(?).
The accuracy of cost benefit analysis is dependent on the
Economist (or person performing analysis) knowledge about all the costs.
Humanities knowledge of all the costs
An accurate monetary assessment of those costs.
A functioning global market (?).
Things like full cost factor (CO2 pollution), actual cost factor (euro/tonne) and then cost owner (producer).
Emphasis on the notion that markets have inertia in understanding information, it’s not instant.
The price is trying to reflect, private efficiency, social efficiency, equity, social welfare and sutainability.
Private efficiency: mainly profit
Social efficiency: ‘externalities’ how it’s affecting others in society.
Equity: Is wealth being redistributed equally, or is the benefit ‘fair’.
Social welfare is just a mix of these two things .
Sustainability, intergenerational equity, nature etc. The quaility of being able to continue over a long period of
time.
Carbon crediting is a way to incentivised the ‘right’ things withou destabilising existing techonologies through
taxes. Issues tradable units for implementing emission reduction activities.
Implemented in cap and trade scheme with carbon taxes. So that actors can by these units to offset tax. There’s a way
out essentially but still has to be abided by.
Energy intensity: a measure of the energy efficiency of an economy. Energy utilisation to GDP.
Cost of production function must now include energy (along with capital and labour).
23/09/22 10:00:37
Showing that energy increases standard of living but with the negative externalities of climate change
Is GDP per capita still close to energy usage per capita (assignment)
Slope of the graph shows the energy intensity of economy. How much energy the use to increase GDP.
Hold 90 days of energy reserves for economy. IEA entry requirement
Producer vs exported of oil. US biggest Producer, Saudi Arabia biggest exporter
”proven reserves” where the oil will eventually come from
Bunker: storage, the 90 day reserve
28/09/22 10:11:04
Large portion of gasoline is taxes
Law of demand is an aim to determine behaviour
Economies of scale are important in determining tech.
03/10/22 14:17:24
Have a general statement, then caveats
speculation effects markets on top of the intrinsic value of an item. Say, security of supply for natural gas
puts the price up
This is where you get the multiplicative effect in gas prices. Russia only occupied 12% of gas supply but
caused a ‘run’ on market
There’s inertia to that inflation too for it to return back
Energy Economics
pick a policy document
05/10/22 10:00:19
Raising prices by taxation can effect income distributions differently
10/10/22 14:14:30
How markets play a role in decisions. Looking at the current UK as a case study in that something fungible like
‘gas molecules’ has this knock on effect where market speculation on top of this has far reaching affects, say,
changing UK government
2hr for presentations 22nd Oct.
12/10/22 10:06:53
Taking oil out of the economy also erodes the tax base it provides
Litre about 0.26 of gallon.
Government have been reducing VAT on petroleum products. Roughly 60c of price of fuel in Ireland
Owner of resource became first person to capture, incentivised speed of drilling, innovation in technology.
Optimises economic efficiency, maybe not social efficiency. Produces optimal private efficiency
’Hotelling rent’, lift up the price of the competing resource we want to disincentivise
Oil started out as a replacement for lighting
Rockefeller decommissioned electricity networks
Invested very heavily on extraction tech.
Economist use the notion of relative scarcity, can something be produced in line with demand, can I extract it for
a reasonable cost
Have 120 more years at out current consumption left
Peak oil is a rate rather than an absolute quantity could be used as an argument against the ‘lack of scarcity’
Oil crisis of 1970 creates market for natural gas.
17/10/22 11:12:24
Natural gas, 4 to 1 carbon to hydrogen
The transition fuel
Much more evenly distributed geographically, making it more secure (?)
Where there is oil, there is almost always natural gas.
The population density of Europe might promote a notion of NIMBY for natural gas production
Large amount of flaring globally. More profitable at the moment, or in some contexts to do so
Jeffrey Sacks views on gas explosion
Regulation seems to work fine under a fixed supply and demand scenario
19/10/22 11:05:22
Situtation not changing much, uncertainty is low for a broad category of power generation.
Well understood technologies also change the uncertainty of it’s costs
This is all in relation to levelised cost for electricity
There’s always intermittency to renewable’s because they’re not using a consistent fuel. There fuel is some
function of the environment
The more renewables used for electricity the more regular dependent fuels needed for the intermittency issues.
Would it increase overall demand though?
Price stability is important too, how does the price scale for demand? For instance, the price of Solar PV is
reducing but are we sure it wont increase with more demand down the line?
Rate of return regulation is about security of supply
Difference between electricity and energy
EU keeps setting more ambitious goals as it wants to be a world leader in this tech, so it can start exporting.
That the future Europe is a leader in these things