David E. Dismukes

Cogeneration and electric power industry restructuring

In 1978, Congress passed the Public Utilities Regulatory Policies Act (PURPA) in response to the energy crisis of the early 1970s. One of the unintended results of PURPA has been to show that electric generation was not a natural monopoly and could be opened to competition. Both the theoretical and empirical determinants of cogeneration and how they may be affected by future electric power industry restructuring are important for future industrial generation decisions. This paper explores these determinants and identifies differences between industrial cogenerators which sell power back into the electricity grid (commercial generators) and those which keep all of their electricity generation for internal purposes (self generators). The empirical results indicate that increases in industrial firm technical capabilities tends to increase their probabilities of both commercial and self generating. In addition, the models indicate that increases in retail electricity prices and industrial output increases industrial generation probabilities. The ability to switch fuels enhances industrial generation probabilities, as does a decrease in the price of natural gas. The results also imply that under electric restructuring a number of industrial generators may find that they face a stranded cost problem much like the one faced by their electric utility counterparts.

Capacity and economies of scale in electric power transmission

Abstract Historically, most analyses of electric utility cost structures have focused almost exclusively on the generation sector of the industry. Electric restructuring raises a number of new questions which require analysis of electric utility operations in other sectors of the industry. Most restructuring proposals call for continued regulation of the transmission sector of the industry based upon the presumption that it is a natural monopoly. The presumption, however, is based upon little empirical evidence. We present a modified translog cost model which examines whether economies of scale genuinely exist in the provision of electric transmission service. We find strong economies over all relevant ranges of capacity and across all regions of the USA. The result is timely since it supports existing restructuring policies calling for continued regulation of the transmission portion of the industry.

Modeling impacts of sea-level rise, oil price, and management strategy on the costs of sustaining Mississippi delta marshes with hydraulic dredging

Over 25% of Mississippi River delta plain (MRDP) wetlands were lost over the past century. There is currently a major effort to restore the MRDP focused on a 50-year time horizon, a period during which the energy system and climate will change dramatically. We used a calibrated MRDP marsh elevation model to assess the costs of hydraulic dredging to sustain wetlands from 2016 to 2066 and 2016 to 2100 under a range of scenarios for sea level rise, energy price, and management regimes. We developed a subroutine to simulate dredging costs based on the price of crude oil and a project efficiency factor. Crude oil prices were projected using forecasts from global energy models. The costs to sustain marsh between 2016 and 2100 changed from

Modeling Lost Production in the Gulf of Mexico—I. Redevelopment Economics and Impact Assessment

128,000/ha in the no change scenario to ~

Modeling Lost Production in the Gulf of Mexico—II. Framework and Assumptions

1,010,000/ha in the worst-case scenario for sea level rise and energy price, an ~8-fold increase. Increasing suspended sediment concentrations, which is possible using managed river diversions, raised created marsh lifespan and decreased long term dredging costs. Created marsh lifespan changed nonlinearly with dredging fill elevation and suspended sediment level. Cost effectiveness of marsh creation and nourishment can be optimized by adjusting dredging fill elevation to the local sediment regime. Regardless of management scenario, sustaining the MRDP with hydraulic dredging suffered declining returns on investment due to the convergence of energy and climate trends. Marsh creation will likely become unaffordable in the mid to late 21st century, especially if river sediment diversions are not constructed before 2030. We recommend that environmental managers take into consideration coupled energy and climate scenarios for long-term risk assessments and adjust restoration goals accordingly.

Understanding the challenges of industrial carbon capture and storage: an example in a U.S. petrochemical corridor

Abstract The oil and gas industry in the Gulf of Mexico has the greatest weather exposure in the world, and is vulnerable to a range of losses that include physical damage, destruction, business interruption, and pollution liability. During the 2004 and 2005 hurricane seasons, a number of offshore facilities, drilling rigs, and pipelines were destroyed and extensively damaged. In total, Hurricanes Ivan, Katrina, and Rita destroyed 122 structures and severely damaged 76 others. Owners of destroyed assets are faced with a difficult decision: Should the property be abandoned along with its remaining reserves or should the asset be redeveloped? The purpose of this three-part series is to examine the destroyed infrastructure from the 2004 and 2005 hurricane seasons and the likely contribution this collection of assets would have made to future production in the Gulf of Mexico. In Part 1, we describe the weather risk that operators encounter and review the factors that are involved in redevelopment decisions. The impact of the 2004 and 2005 hurricane seasons on the infrastructure and production in the Gulf of Mexico are summarized.

Modeling Lost Production in the Gulf of Mexico—III. Results and Limitations

Abstract During the 2004 and 2005 Gulf of Mexico hurricane seasons, hurricanes Ivan, Katrina, and Rita destroyed 122 offshore structures and severely damaged 76 others. Most of the destroyed infrastructure was mature assets low on their production curve with limited remaining reserves. These assets are unlikely to meet the economic thresholds to support redevelopment, and in the majority of cases, the production from these structures will be “written off” by owners. In Part 2 of this 3 part series, we develop a model framework to forecast the production and revenue streams associated with the collection of destroyed assets. The general framework of analysis is outlined along with the assumptions employed to value lost production.

Competitive Bidding in the Electric Power Industry

ABSTRACT Industrial carbon capture and storage (CCS) is carbon capture from non-power, stationary emissions sources, typically involving high-purity emissions from a non-combustion exhaust stream. Industrial CCS activities represent a significant opportunity for reducing carbon emissions in concentrated geographic locations and a potential ‘bridge’ to more widespread CCS. This paper provides a summary of the opportunities for industrial CCS and market-based revenue streams, like those associated with enhanced crude oil recovery (EOR). The use of EOR changes the nature of carbon from being a pollutant to a valuable commercial input, which requires a judicious understanding of the technical industrial sequestration process, historic oil and gas operations, and the specific location and types of industrial carbon sources that can facilitate this type of carbon emissions mitigation strategy. We review literature on costs and summarise geospatial data to provide an overview of the potential for an integrated industrial CCS-EOR system in a petrochemical corridor.

STRANDED INVESTMENT AND NON-UTILITY GENERATION

Abstract In extreme weather, damage to offshore facilities is unavoidable and can take many forms. To better understand the scope of weather risk and catastrophic loss in the Gulf of Mexico (GOM), and the factors that impact the redevelopment decisions of operators, we quantify the value of lost production associated with the 2004–2005 hurricane seasons. We estimate that the value of lost production from the 2004–2005 hurricane seasons range from

Economies of scale, learning effects and offshore wind development costs

1.3 billion to