IGA-410 OVERVIEW
Energy Policy: Technologies, Systems, and Markets
Henry Lee
Fall 2012
M/W 2:40 – 4:00, L140
IGA-410 introduces students to the design, implementation and assessment of energy policy from the United States and global perspective. Energy influences every facet of our economic and social fabric, affecting international security, economic development, and human health. This course covers a wide range of topics, including oil and natural gas, coal, electricity policy, renewable energy, nuclear power, energy efficiency, and climate change. It also introduces students to the basic tools used to analyze and assess energy options. The course’s purpose is to expose students to the fundamental factors that drive energy markets, the causes of market failures, and how government interaction can mitigate those failures. It also addresses the political context, both domestic and international, where government energy policies are designed and implemented.
The syllabus briefly describes each class, assigns the required readings, and lists additional readings that are optional. While most of the early classes will be lectures, to ensure that students understand the fundamentals of energy markets, many of the classes during the second half of the course will be case or issue discussions. Students will be expected to participate in these discussions. There will be five short take home assignments that will provide students an opportunity to 1) use the analytical skills covered in class, and 2) assess specific energy policy issues.
Requirements are: 1) Five short take home assignments (50) points, 2) Class participation (10 points); and 3) Final exam (40 points). All assignments will be submitted as hardcopies in the drop box outside Professor Lee’s office, Belfer 302B.
This course will require students to apply basic microeconomic concepts and will cover methodologies that will allow students to quantitatively assess and compose energy options. While no prerequisites are required, familiarity with microeconomic concepts will be helpful.
The class size is limited by the number of seats in the classroom.
Henry Lee will hold office hours on Tuesdays, 10:30am – 11:50am, and Wednesdays 1:00pm – 2:00pm, course assistants’ office hours will be posted in early September.
IGA-410 SYLLABUS
Energy Policy: Technologies, Systems, and Markets
Henry Lee
Fall 2012
M/W 2:40 – 4:00, L140
Henry Lee, Belfer 302, 617-495-1350,
Faculty Assistant, Natalie Rios, Belfer 302A, 617-495-8850,
Course Assistant, Avi Zevin,
Course Assistant, Cuicui Chen,
Class # Date Day Topic
1 9/7 FRI Motivation, Organization, Introduction to the Issues
Aims and structure of the course; links between energy and important dimensions of human well-being: energy & economy (development, growth, jobs, trade); energy & environment; energy & international security; survey of tools and approaches for the study of energy issues.
Reading:
(R = REQUIRED, O = OPTIONAL; assignments to be read before the indicated class):
· R: GEA, 2012: Global Energy Assessment – Toward a Sustainable Future, Cambridge University Press, 2012, Summary for Policymakers, pp 1-30, http://www.iiasa.ac.at/web/home/research/researchPrograms/Energy/GEA-Summary-web.pdf (on course webpage)
2 9/10 MON The Economics of Energy Supply and Demand
Will review demands on capital and labor, patterns of energy use, elasticity, tariff setting, and trade impacts; introduction to market failures (excessive concentration of market power, lack of information, externalities, public goods, and inequality). This class aims to familiarize students with the basic economic concepts that we will use to assess the effectiveness of energy policies in subsequent classes.
Reading:
· R: Tom Tietenberg, Environment and Natural Resource Economics, Addison Wesley, sixth edition, 2003, pp. 151-165. (in course packet 1)
· R: N. Gregory Mankiw, Principles of Economics, 5th edition, South-Western College Pub, 2009, pp 89-105. (in course packet 1)
3 9/12 WED World Oil & Gas Markets I
Where oil and gas resources and reserves are found, the economics of oil exploration, production and refining, how oil and gas markets work, and the politics of oil and gas, both domestic and international. Political and security implications of world patterns of oil and gas supply and demand.
Reading:
· R: William Leffler, Petroleum Refining for the Non-Technical Person (PennWell, 1979) Chapters 2 & 3 pp. 3-25. (in course packet 1)
· R: Leonardo Maugeri, Beyond the Age of Oil: The Myths, Realities, and Future of Fossil Fuels and Their Alternatives, pp. 3-36 (on course webpage)
· R: Ian W.H. Parry and Joel Darmstadler, “The Cost of U.S. Oil Dependency”, Resources for the Future, Nov. 2004, prepared for the National Commission on Energy Policy, http://www.bipartisanpolicy.org/sites/default/files/I.1.a_-_Cost_of_Oil_Dependency_44ce6838a8cd5.pdf (on course webpage)
· O: Suzanne Maloney “Energy Security in the Persian Gulf: Opportunities and Challenges” in Carlos Pascual and Jonathan Elkind, ed. Energy Security (Brookings Press, 2010) p.37-58. (in optional course packet)
4 9/17 MON World Oil & Gas Markets II
This class will continue the discussion of oil policy and introduce the factors shaping national gas markets, including the implications of shale gas.
Reading:
· R: National Petroleum Council, Hard Truths: Facing the Hard Truths about Energy, Chapter 2: Energy Supply, pp. 131-170, http://www.npchardtruthsreport.org/download.php (on course webpage)
· R: David Rotman, “Natural Gas Changes the Energy Map” MIT Technology Review, November 1, 2009, http://ezp1.harvard.edu/login?url=http://proquest.umi.com.ezp-prod1.hul.harvard.edu/pqdweb?did=2063100731&sid=1&Fmt=6&clientId=18857&RQT=309&VName=PQD (on course webpage)
· R: MIT Energy Initiative, “The Future of Natural Gas: An Interdisciplinary MIT Study”, Executive Summary, June 2010, http://www.cleanskies.org/pdf/mit_natgas_exec_summary.pdf (on course webpage)
· R: Pietro Nivola, “Making Sense of Energy Independence” in Carlos Pascual and Jonathan Elkind, ed. Energy Security (Brookings Press, 2010) pp. 105-118. (in course packet 1)
· O: Bailey, Jonathan and Lee, Henry. “North American Oil and Gas Reserves: Prospects and Policy” Discussion Paper 2012 – 11, Belfer Center for Science and International Affairs, Harvard Kennedy School, July 2012. http://belfercenter.ksg.harvard.edu/files/Shale%20Workshop%20Rapporteur%20Report%20May%202012.pdf (on course webpage)
Take Home Assignment 1 due 9/21 by 5 PM
5 9/19 WED Mineral Development – A Producing Country’s Perspective
(Guest Speaker: Professor Francisco Monaldi)
This class will look at economic and political issues relating to oil and gas production from the perspective of a producing countries, including subsidies, oil wealth management, Dutch disease, volatility, and fiscal voracity.
Reading:
· R: Naazneen Barma et al, Rents to riches? : the political economy of natural resource led development (World Bank, 2012) pp. 1-30, http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2011/12/08/000333037_20111208233949/Rendered/PDF/659570PUB0EPI10737B0Rents0to0Riches.pdf (on course webpage)
· R: Emily Sinnott et al, Natural resources in Latin America and the Caribbean : beyond booms and busts? [World Bank 2010] pp. 1-4 and 57-69, https://openknowledge.worldbank.org/bitstream/handle/10986/2482/555500PUB0Natu1EPI1991501801PUBLIC1.pdf?sequence=1 (on course webpage)
6 9/24 MON Cost Comparison Methodologies & Energy Finance
Methodologies for evaluating and comparing the costs of energy projects. This class will provide the analytical methods for comparing different electricity generation options and sets the stage for the classes on electricity options that follow. If time permits, students will be introduced to some of the fundamentals of energy finance.
Reading:
· R: Robert S. Pindyck, Microeconomics [7th edition], Upper Saddle River: Prentice Hall, 2009. "Investment, Time, and Capital Markets," pp. 573-577. (on course webpage)
· R: Congressional Budget Office, “The Economics of Climate Change: A Primer,” US Congress, Washington, DC. April 2003, pp. 23-34. (in course packet 1)
· R: Edith Stokey and Richard Zeckhauser, A Primer for Policy Analysis, Norton, Chapter 10, pp. 159-176. (in course packet 1)
Course Packet 1 Ends
Take Home Assignment 2 due 10/1 by 5 PM
7 9/26 WED Climate Change: Science and Impacts
(Guest Speaker: Professor Daniel Schrag)
The science of energy-related global climate-change and climate-change impacts; strategies for reducing the risks of energy-related climate change; the IPCC Report and the implications of recent scientific studies.
Reading:
· R: Daniel P. Schrag, “Confronting the Climate-Energy Challenge,” Elements, June 2007, pp 171-178, (on course webpage)
· R: U.S. National Academy of Science: “Understanding and Responding to Climate Change,” 2008, pp. 1-28, http://dels-old.nas.edu/basc/climate-change/climate_change_2008_final.pdf (on course webpage)
8 10/1 MON Electricity Policy I
The economics of electricity markets and their component parts, models for competitive pricing at the wholesale and retail level, transmission pricing and sitting, and the new role for regulation.
Reading:
· R: Timothy Brennan, et. al. Alternating Currents: Electricity Markets and Public Policy, Washington DC: Resources for the Future, 2002, pp. 1-12, 33-45, 81-91. (in course packet 2)
· R: Paul Joskow, “Markets for Power in the United States”, The Energy Journal, 2006, vol. 27, no 1, pp. 1-36, http://econ-www.mit.edu/files/1184 (on course webpage)
· R: United States Department of Energy, “Electricity 101”, http://energy.gov/oe/information-center/educational-resources/electricity-101 (on course webpage)
9 10/3 WED Electricity Policy II
This class will focus on the California electricity crisis. What went wrong and what could California officials have done differently? What lessons can one take away from the restructuring reforms that swept the globe in the late 90s and early part of the last decade?
Reading:
· R: “Disaster by Design: California’s Experience with Electricity Restructuring“, HKS Case Study A & B, CR 14-01 1632, CR 14-01 1633. (on course webpage)
· R: Paul Joskow, “Lessons Learned from Electricity Market Liberalization,” Energy Journal: Special Issue on the Future of Electricity 2008, pp. 9-42, http://ezp-prod1.hul.harvard.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=45388868&site=ehost-live&scope=site (on course webpage)
Take Home Assignment 3 due 10/11 by 5 PM
Monday, October 8th is Columbus Day, no class.
10 10/10 WED Coal: Supply, Demand, and Pollution Abatement Options
Coal is the most plentiful energy resource in the US, China and India, but it is also among the most carbon-intensive. Class will cover supply and consumption patterns, environmental effects, liquefaction, and carbon capture sequestration technologies.
Reading:
· R: MIT Interdisciplinary Study, “Future of Coal”, MIT, 2007, Executive Summary, Chapter 2 and 3, http://web.mit.edu/coal/The_Future_of_Coal.pdf (on course webpage)
· R: J. Fellows, “Dirty Coal, Clean Future,” (Atlantic, Dec. 2010), http://www.theatlantic.com/magazine/archive/2010/12/dirty-coal-clean-future/8307/ (on course webpage)
· R: U.S. Environmental Protection Agency, "Air Pollution and Health Risk." June 6, 2007 Web. http://www.epa.gov/ttn/atw/3_90_022.html (on course webpage)
· R: U.S. Environmental Protection Agency, "Pollutants in the Ambient Air." January 29, 2010Web. http://www.epa.gov/apti/course422/ap2.html (on course webpage)
11 10/15 MON Nuclear Technologies
(Guest Speaker: Prof. Matthew Bunn)
This class will focus on nuclear power --- its potential and the risks inherent in expanding its development.
Reading:
· R: How a Nuclear Power Plant Works - http://www.youtube.com/watch?v=VJfIbBDR3e8 (on course webpage)
· R: WEA, 2000, Chapter 8, section on “Advanced nuclear energy technologies,” pp. 306-318 http://www.ss.undp.org/content/dam/undp/library/Environment%20and%20Energy/Sustainable%20Energy/wea%202000/chapter8.pdf (on course webpage)
· R: Keystone Center, Nuclear Power Joint Fact-Finding, 2007, Executive Summary, pp. 9-18, http://www.nuclear.gov/pdfFiles/rpt_KeystoneReportNuclearPowerJointFactFinding_2007.pdf (on course webpage)
· R: Matthew Bunn, “Managing Risks From a Nuclear Energy Revival,” presentation, January 2009, http://belfercenter.ksg.harvard.edu/files/bunn-goresummit-08.pdf (on course webpage)
· O: President’s Committee of Advisors on Science and Technology, “Nuclear Energy: Fission and Fusion,” chapter 5 in Federal Energy Research and Development for the Challenges of the 21st Century, Executive Office of the President of the United States, November 1997, pp. 5-1 to 5-24, http://belfercenter.ksg.harvard.edu/files/pcast97_ch5.pdf (on course webpage)
12 10/17 WED Renewable Energy – An Overview
This class starts a three class segment on renewable energy with an overview of key renewable technologies, including wind, solar, biomass and geothermal energy. The subsequent two classes will explore the policy challenges confronting wind and solar energy options.
Reading:
· R: Judith Lipp, “Lessons for Effective Renewable Electricity Policy from Denmark, Germany and the United Kingdom” Energy Policy, Vol. 35, No. 11, pp. 5481-5495, 2007, http://www.sciencedirect.com/science/article/pii/S0301421507002091 (on course webpage)
· R: David J.C. Mackey, Sustainable Energy – Without the Hot Air, UIT Cambridge, 2009:
pp. 22-28: http://www.inference.phy.cam.ac.uk/withouthotair/c2/page_22.shtml
pp. 38-49: http://www.inference.phy.cam.ac.uk/withouthotair/c6/page_38.shtml
pp. 50: http://www.inference.phy.cam.ac.uk/withouthotair/c7/page_50.shtml
pp. 81-87: http://www.inference.phy.cam.ac.uk/withouthotair/c14/page_81.shtml
pp. 88: http://www.inference.phy.cam.ac.uk/withouthotair/c15/page_88.shtml
pp. 186-201: http://www.inference.phy.cam.ac.uk/withouthotair/c26/page_186.shtml
· R: International Energy Agency, Harnessing variable renewables : a guide to the balancing challenge (OECD/IEA, 2011) pp. 31-39, http://www.oecd-ilibrary.org.ezp-prod1.hul.harvard.edu/content/book/9789264111394-en (on course webpage)
· R. Boaz Moselle – “Renewable Generation and Security of Supply”, Harnessing Renewable Energy in Electric Power Systems, pp. 51-68. (in course packet 2)
13 10/22 MON Renewable Energy – Policy Options
This class will look at the strengths and weaknesses of various policies to promote solar energy options—including feed-in tariffs and renewable portfolio standards.
Reading:
· R: Leah Stokes and Henry Lee Feed-In Tariffs: The Experience of the Gainesville Regional Utility. (on course webpage)
· R: National Journal, April 25, 2009 “What Exactly is a Feed- In Tariff?” pp. 36-37, http://www.nationaljournal.com/njmagazine/nj_20090425_3763.php (on course webpage)
· O: Summary of Bingaman Discussion Draft – Renewable Portfolio Standard, January 2009, http://www.eei.org/whatwedo/PublicPolicyAdvocacy/washreps/Documents/Bingaman%201-09%20amendment%20summary%20final.pdf (on course webpage)
14 10/24 WED Renewable Energy – Wind
Class will discuss the economic and institutional factors affecting greater penetration of wind power in the US. Specifically it will focus on the nine year debate over the development of a wind farm off the coast of Cape Cod.
Reading:
· R: Richard Vietor: Cape Wind: Offshore Wind Energy in the USA: HBS case 9-708-022. (in course packet 2)
· R: How a Wind Turbine Works - http://www.youtube.com/watch?v=LNXTm7aHvWc (on course webpage)
· R: David J.C. Mackey, Sustainable Energy – Without the Hot Air, UIT Cambridge, 2009:
http://www.inference.phy.cam.ac.uk/withouthotair/c4/page_32.shtml pp. 32-34 http://www.inference.phy.cam.ac.uk/withouthotair/c10/page_60.shtml, pp. 60-67 http://www.inference.phy.cam.ac.uk/withouthotair/cB/page_263.shtml, pp. 263-268
http://www.inference.phy.cam.ac.uk/withouthotair/cC/page_269.shtml, pp. 269
(on course webpage)
· R: Leonardo Maugeri, Beyond the age of oil : the myths, realities, and future of fossil fuels and their alternatives (Praeger, 2010) Ch. 8, pp. 141-154. (on course webpage)
Take Home Assignment 4 due 10/31 by 5 PM
15 10/31 WED Pursuing a Green Agenda II: Iceland’s Energy Policy
Iceland relies almost exclusively on geothermal and hydro energy for its electricity. A majority of its power is consumed by the aluminum industry, which exports 100% of its production. Iceland is now considering building an undersea cable to the Netherlands to provide “green power” to Europe. The class will discuss the merits of both building new power plants to feed additional plants and the merits of exporting power to the European continent.
Reading:
· R: Iceland’s Energy Policy: Finding the Right Path Forward Case (on course webpage)
· R: Geothermal Iceland - http://www.youtube.com/watch?v=kWN5yXCYeXc&feature=related (on course webpage)
16 11/5 MON Pursuing a Green Agenda I: Germany’s Electricity Strategy
In the wake of the Fukushima disaster, Germany has adopted the most ambitious “Green Energy” electricity program in Europe. This class will examine that program and explore its economic, technical, and political sustainability.
Reading:
· R: Hannes Weigt and Florian Leuthold, “Experience with Renewable Energy in Germany,” Harnessing Renewable Energy, pp. 283-308. (in course packet 2)
· R: Friedrich Kunz, Christian Von Hirschhausen, Dominik Möst and Hannes Wiegt, “Security of Supply and Electricity Network Flows after a Phase-Out of Germany’s Nuclear Plants”, EUI Working Papers, RCAS 2011/32, http://cadmus.eui.eu/bitstream/handle/1814/17834/RSCAS_2011_32.pdf?sequence=1 (on course webpage)