Course Description
This course introduces students to the Economics of Energy at the micro level. It is geared to providing the basic knowledge and introductory skills required as the foundation for research in the area of energy analysis and policy. It will cover themes such as:· Energy Statistics
· The demand for and supply of renewable and non-renewable energy , i.e. fossil fuels (viz. crude oil, natural gas, coal ), electricity and renewables. In terms of supply, the course will cover the issues associated with the exploration, production, transportation, processing or refining and marketing of fossil fuels and production of renewable energy
· Energy pricing and markets ,
· Introduction to Energy and the Economics of the Environment
Purpose of the Course
It is designed to introduce students to basic energy issues, and to allow them to better understand the energy business and introduce students to the tools required for energy analysis and provide its microeconomic foundationsInstructor information
§ Name of instructor(s)- Michael John§ Office address and phone Mobile 771-0904
§ E-mail address : ,
§ Office hours: To be advised
§ Communication policy – preferred method of contact - E-mail
Dear Student,
Welcome to Energy Economics I. In this course we seek to provide you with the tools required for energy analysis at the micro level. We will cover a fair amount of material but be assured that the outcomes are rewarding. I expect that your views on energy issues will change as you come to a greater appreciation for the role of energy in our lives. Treat the course as a learning opportunity and do enjoy the experience.
Michael John
Content
In order to appreciate the issues involved in the economics of the Supply and Demand for energy, it is necessary to commence with an understanding of Energy Statistics. While there are some similarities with other economic statistics, there are significant differences and practices. With this foundation it is possible to address the issues associated with Energy Markets including those for renewable energy. Finally we will examine the economics of Energy’s impact on the environment and selected policy responses.
Goals/Aims
To provide students with the analytical tools to facilitate the overall understanding of the energy sector.General Objectives
At the end of the course students should:
· Have a greater awareness of the micro issues associated with energy
· Appreciate the critical contribution of energy to our domestic economy
· Appreciate the role of the energy industry in the global economy
Themes/Topic and Unit Objectives
Overview and Introduction to Energy Economics
Students should be able to :
· Define Energy Economics
· List factors accounting for the complexity of the energy sector
· List the multi-dimensional interactions energy of the energy industry.
Readings
Bhattacharyya S.C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag., 2011 Chapter 1
______Energy Sector Management Issues: An Overview, International Journal of Energy Sector
Management 1(1):13-33.
Stevens P.J : An Introduction to Energy Economics in Stevens (ed) The Economics of Energy Vol. 1
Edward Elgar, Cheltenham also Journal of Energy Literature, Vol 6 (2) December 2
000 and Vol. 7(1) June 2001.
Unit 1 Introduction to Energy Demand Analysis
Theme - Energy Basics, Energy Statistics and Energy Balances
Students should be able to :
· Classify the energy on the basis of sources
· List the components of the energy supply chain
· Outline the energy accounting framework
· List components of a country’s Energy Account ,
· Analyze energy balances
· Compile simple energy balances
· Use energy conversion factors,
· Identify energy balance entries requiring special treatment or information
Readings
Bhattacharyya S.C: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag, 2011
Chapter 2
Karbuz, S Conversion Factors and Oil Statistics, Energy Policy; Jan 2004, Vol. 32 Issue 1, 41-45
IAEA (2005) Energy indicators for sustainable development, Austria (see http://www.iea.org/
textbase/nppdf/free/2005/Energy_Indicators_Web.pdf. Also see IAEA website) Chapter 3
IEA (1998) Biomass energy: data, analysis and trends, conference proceedings, International
Energy Agency, Paris, 23–24 March, 1998
IEA(2004) Energy Statistics Manual http://www.iea.org/stats/docs/statistics_manual.pdf Chapters1 7
Annexes 1,-3
UN (1982) Concepts and methods in energy statistics, with special reference to energy accounts
and balances: a technical report, Series F No. 29, Department of International Economic and
Social Affairs, UN, New York (see http://unstats.un.org/unsd/publication/SeriesF/
SeriesF_29E.pdf) Chapters I-V.
UN (1987) Energy statistics: definitions, units of measure and conversion factors, Series F No. 44,
Department of International Economic and Social Affairs, UN, New York (see
http://unstats.un.org/unsd/publication/SeriesF/SeriesF_44E.pdf)
UN (1991) Energy statistics: a manual for developing countries, UN, New York (see
http://unstats.un.org/unsd/publication/SeriesF/SeriesF_56E.pdf)
Theme - Energy Demand Analysis
Students should be able to :
· Trace the evolution of demand analysis,
· Differentiate the economic foundations of
a) consumer energy demand from
b) producer energy demand,
· List alternative approaches for energy demand analysis
· Organize demand into sectoral components
· Evaluate leading selected demand models
ReadingsBhattacharyya, S.C: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag,
2011 Chapter 3-4
Bhattacharyya, S C. and Timilsina, G R. Energy demand models for policy formulation : a Comparative
Study of Energy Demand Models, World Bank Policy Research Working paper WPS
4866 (2009)
Bhattacharyya, S C. and Timilsina, G R. A Review of Energy systems models International Journal of Energy
Sector Management 4(4) 2010, 494-518
EIA : Model Documentation http://www.eia.gov/tools/models/models.cfm
IAEA Model for Analysis of Energy Demand, www. ub.iaea.org/MTCD/publications/PDF/
CMS 18_web.pdf 2006
IEA World Energy Model http://www.worldenergyoutlook.org/docs/weo2010/
World_Energy_Model.pdf
SEI Long range Energy Alternatives Planning System (LEAP) http://sei-us.org/
Energy Modeling
Ryan, David L and Plourde Andre : Energy Demand Models and Modelling, Canadian Building Energy End-
use Data and Analysis Centre, April 2008 , http://www.cbeedac.com/publications
/documents/energydemand_002.pdf
Theme - Demand Forecasting
Students should be able to :
· List approaches to demand forecasting
· Evaluate the different approaches to energy demand forecasting
Readings
Bhattacharyya, S.C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag,
2011 Chapter 5
Mehra M, Bharadwaj A. (2000) Forecasting the Demand for Electricity
http://www.teriin.org/upfiles//pub/papers/ft30.pdf
Shell Scenarios: An Explorer’s guide http://www-static.shell.com/static /public/
downloads/brochures /corporate_pkg/scenarios/explorers_guide.pdf
Swisher et al : Tools and Methods for Integrated Resource Planning ;Improving energy efficiency and
protecting the environment http://uneprisoe.org/IRPManual/IRPmanual.pdf
Theme - Demand management
Students should be able to :
· Define demand side management (DSM),
· Critique the justification for DSM,
· Summarize the concept of Load management,
· Define Energy efficiency,
· List the challenges associated with energy efficiency,
· Identify and discuss the energy saving opportunities,
· Assess the cost effectiveness of energy saving opportunities
· Summarize the concept of the rebound effect
Readings
Bhattacharyya S.C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag,
2011 Chapter 6
Greening, Lorna A, Greene, David L.,& Difiglio Carmen : Energy Efficiency and consumption –the rebound Effect-
a Survey, Energy Policy 28 (2000) pp.389-401.
IEA : Energy Efficiency Governance (2010)
CSPM Economic Analysis Of Demand-Side Programs and Projects Califonia Standard Practice
Manual, Califonia USA. 2001 http://www.energy.ca.gov/greenbuilding/ documents/
background/07J_CPUC_STANDARD_PRACTICE_MANUAL.PDF
CRA : Primer on Demand side management, With special emphasis on price responsive
programmes Charles River Associates, Califonia (2005) http://siteresources.worldbank.org
/INTENERGY/Resources/PrimeronDemand-SideManagement.pdf
EC : GREEN PAPER on Energy Efficiency or Doing More With Less http://eur- lex.europa.eu/
LexUriServ/LexUriServ.do?uri=COM:2005:0265:FIN:EN:PDF
Swisher et al : Tools and Methods for Integrated Resource Planning ;Improving energy efficiency and
protecting the environment http://uneprisoe.org/IRPManual/IRPmanual.pdf
Unit 2 Supply Economics
Theme - Energy Investment Analysis
Students should be able to :
· Explain the main characteristic of energy projects
· Distinguish between Economic and Financial Investment Analysis
Readings
Asian Development Bank : Key Areas of Economic Analysis of Projects, ADB 2003
______: Guidelines for the Economic Analysis of Projects , ADB, 1977
Bhattacharyya S. C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag, 2011
Chapter 7-11
IEA Overseas Investments by Chinese National Oil Companies: Assessing the drivers and
impacts http://www.iea.org/papers/2011/overseas_china.pdf
Themes: Economics of fossil fuel supply
· Exploration
· Development
· Production
· Fossil fuel production economics
· Resource rents
· Exhaustible Resources and depletion
Students should be able to :
· Explain the activities involved in the non-renewable energy supply system
· Describe the risk involved in exploration projects
· Illustrate the use of decision trees in exploration investment decisions
· Summarize the alternative legal arrangements for resource exploration
· Critique the methods for resource classification
· Distinguish between field level and industry level economics
· Define the concept of resource rent
· Outline the simple model of extraction of exhaustible resources
Readings
Bhattacharyya S C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag,
2011 Chapter 7-11
Boopsingh, Trevor; Oil and Gas Development – A View from the South 1988 Chap 3,4.
French Institute for Petroleum Publications; Oil and Gas Exploration and Production. 2001 Chap.3 , 4 and
5.
Abdel –Al, Hussein and Schmelzlee , Robert K.– Petroleum Economics and Engineering ; An Introduction
1978 Chap, 2,6 and 7
The Energy Value Chain UTC Investment series Trinidad and Tobago Unit Trust
Corporation http://www.ttutc.com/news/article/energy/value_chain.pdf
Tordo S. Fiscal Systems for Hydrocarbons, Design Issues, W orld Bank Working Paper No 123
Tordo S, David Johnston and Daniel Johnston :Petroleum Exploration and Production Rights Allocation
Strategies and Design Issues World Bank Working Paper No. 179
Otto, James;et al: Mining Royalties: a Global Study of their Impact on Investors, Government, and Civil
Society (Vol. 1 of 2)
Van Meurs P. Government Take and Petroleum Fiscal Regime www.krg.org/.../ Government_Take_and_Petroleum_Fiscal_Regimes__2008_06_30_h14m7s53.doc
SPE Petroleum Resources Management System Guide for Non-Technical Users,
http://www.spe.org/spe- app/spe/industry/reserves/index.htm
Historical Facts on the Petroleum Industry of Trinidad and Tobago – GSTT
www.gstt.org
WCI The Coal Resource :A Comprehensive Overview of Coal, World Coal Institute , 2009
Centre for Liquefied Natural Gas www.lngfacts.org
Natural Gas Supply Association – Natural gas .org- www.naturalgas.org Section 1, 2,5
Foss, Michelle M: Introduction to LNG, Centre for Energy Economics, University of Texas at Austin
http://www.beg.utexas.edu/energyecon/lng/documents/CEE_INTRODUCTION_TO_LNG_FINAL.pdf
Theme :Refining and Transportation of fossil fuels
Students should be able to :
· Classify refineries
· Evaluate the issues affecting refinery profitability
· Perform simple valuations of crude delivered to a refinery
· Compare and contrast transportation options
· Summarize the operation of the tanker market
· Explain the determination of freight rates
Readings
Cornot-Gandolphe The Challenges of Further Cost Reductions for New Supply Options (Pipeline, LNG,
GTL) 22 World Gas Conference 2003, www.cedigaz.org/Fichiers/pdf_papers/challengesof
further.pdf.
Tom Meisner: A Practical Guide to US Natural Gas Transmission Pipeline Economics, Oil and Gas Journal
Research Centre/Penn Energy,2009.
Pirog, Robert L. :Petroleum Refining:Economic Performance and Challenges for the Future,
Congressional Research Service,˜ The Library of Congress.
http://digital.library.unt.edu/ark:/67531/metacrs7271/m1/1/high_res_d/RL32248_2005May09.pdf
______: Conversion Unit Yield Analysis, 2008 Fuels refinery Performance Analysis, February 17,
2010 Solomon & Associates http://solomononline.com/documents /Whitepapers/
CU_YA_WWW .pdf
Okimi H. Comparative Economy of LNG and Pipelines in Gas Transmission , World Gas Conference
2003, Japan http://www.igu.org/html/wgc2003/WGC_pdffiles/
10392_1045815366_9772_1.pdf
Stopford,M. Maritime Economics, Routledge 2nd ed. 2006 Chapters 3 & 4
Emmerson C. & Stevens P.: Maritime choke points in the global energy system: charting a way forward,
Chatham House, 2012
Theme :Economics of Electricity Supply
Students should be able to :
· Explain the basic concepts related to Electricity Systems
· List the challenges associated with energy efficiency,
· Identify and discuss the energy saving opportunities,
· Assess the cost effectiveness of energy saving opportunities
Readings
Srivastava, A.K , Kamlasadan, D.P, Sankar, S. & Al-Olimat K.S. Electricity Markets : An Overview and comparative
Study, International Journal of Energy Sector Management, 2007 Vol. 5 (2) pp. 169-200.
Anderson D. : Electricity Generation Costs and Investment Decisions: A Review UK Energy Research
Centre Working Paper February 2007.
Bhattacharyya Subes C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag,
2011 Chapter 10
Blyth W.: The Economics of Transition in the Power Sector, IEA Information Paper 2010
Heptonstall P : A Review of Electricity Unit Cost Estimates, Working Paper UKERC/WP/TPA/2007/006
IEA : Opportunities to transform the Electricity Sector in Major Economies, IEA, 2010
Meetamehra. Demand : Forecasting for Electricity
Turvey R & Anderson D. : Electricity Economics, World Bank July 1977
Swisher et al : Tools and Methods for Integrated Resource Planning ;Improving energy efficiency and
protecting the environment http://uneprisoe.org/IRPManual/IRPmanual.pdf
Theme: Economics of Renewable Energy
Students should be able to :
· Identify the renewable energy options available
· Explain the economic issues hindering adoption
Readings
Awerbuch S. and Saute R. Exploiting the Oil-GDP Effect to Support Renewables Deployment, SPRU
Electronic Working Paper Series 2005 , http://www.awerbuch.com/shimonpages
/shimondocs/sewp129.pdf
Bhattacharyya S. C.: Energy Economics Concepts, Issues, Markets and Governance, Springer-Verlag, 2011
Chapter 11
Holmgren, J. et al : Opportunities for Bio Renewables, Hydrocarbon Engineering, June 2007 .
http://www.uop.com/wp-content/uploads/2011/01/UOP-Opportunities-for-Renewables-in-
Petroleum-Refineries-Tech-Paper.pdf
IEA : Renewable Energy Essentials: Solar heating and cooling,
: Hydropower
:Geothermal Energy (2010)
:Concentrating Solar Thermal power
_____: Cogeneration and Renewables: Solutions for a Low Carbon Future (2011)
______: Clean Energy Progress Report, (2011) IEA.org
Kaygysuz : The Role of Hydropower for Sustainable Energy Development, Energy Sources Part B
(2009) Taylor & Francis
Unit 3 Energy markets
Students should be able to :
· Trace the evolution of the International Petroleum Industry
· List the major players in the international petroleum market
· Identify the key drivers of energy demand
· Examine the role of OPEC in the petroleum market
· Identify the components of the Natural Gas value chain
· Describe and evaluate the key features of fossil fuel supply contracts (with special emphasis on Natural Gas)