Joseph A. Doucet

On the bundling of coal and sulfur dioxide emissions allowances

Abstract A new possibility in coal contracting has arisen from the 1990 US Clean Air Act Amendments. Coal suppliers may sell sulfur dioxide emissions allowances together with their coal. This packaging of coal and sulfur dioxide emissions allowances is a new instance of the phenomenon known as bundling or tie-in in the economics of pricing and contracting. Building on Joskows examination of coal suppliers and electric utilities, we examine the motivations for the bundling of coal and sulfur dioxide emissions allowances. We briefly discuss some economic and environmental effects of this bundling.

Efficient self-rationing of electricity revisited

In a recent issue of this Journal, Woo (1990) suggests a mechanism to improve on a pricing scheme initially proposed by Panzar and Sibley (1978). In this paper, we analyze Woos mechanism. Woo claims that by activating rationing fuses only when total demand reaches system capacity, the problem of untimely curtailments is avoided. We show that this is trueonly if all consumers reach their subscribed capacity at the same temperature, which will not occur in general, and clarify the implications of this assumption on Woos improvement of the Panzar-Sibley scheme. A slightly more complex self-rationing mechanism, which addresses the problems that we point out, is suggested.

Sustainable Development and Mining—An Exploratory Examination of the Roles of Government and Industry

A common perception is that the activities of the extractive minerals industry are inconsistent with sustainable development objectives, and that any form of mining is de facto un-sustainable. This paper outlines some of the major issues surrounding sustainability in the context of mineral development, and argues that mining can be sustainable if revenues that are derived from mining are collected and used to promote sustainable objectives at both the local (community) and national (or regional) levels.

Using Dynamic Thermal Rating systems to reduce power generation emissions

Globally, consumption of electricity has increased substantially in recent years, resulting in high pressure on existing power infrastructure. In addition, in most jurisdictions, transmission networks have not seen any significant upgrades nor investment. This problem has been compounded by the increased interest in green energy production, partly as a result of greater climate change awareness and the resulting push for more sustainable energy systems. However, green power needs to be harnessed where it is available and it is often quite far from load centers. Unfortunately, existing power transmission lines were not constructed to incorporate distributed energy sources, and thus are often inadequate to transmit the total amount of power that could potentially be generated. One modern cost-effective approach to minimize the cost of transmission expansion is to utilize Dynamic Thermal Rating (DTR) systems to identify and harness underutilized capacity of existing conductors. This approach would allow the industry to transmit more electricity over power lines by assessing the actual operating conditions, rather than using the currently assumed conservative estimates. This study presents the reduction in power generation emissions that could be achieved by using DTR technology to incorporate more green energy onto the existing power grid. Using a model scenario, it also illustrates the optimal capacity sizing of green generation sources that could be constructed to maximize the amount of clean electricity that could be put onto the existing grid.

Uncertainty and Investment in Electricity Generation with an Application to the Case of Hydro-Québec

The electricity industry is undergoing a substantial process of restructuring, with an emphasis on the introduction of competition in the generation sector. Traditional planning methods are not necessarily appropriate for this new environment. This paper extends a previously developed linear programming model to the problem of optimal expansion planning in the face of uncertainty. The model explicitly accounts for equipment availability and load duration curves in selecting optimal investment. The use of the model is illustrated with a simple 2-region problem calibrated with data from Hydro-Québec and the northeastern United States that suggests how the LP model can help decision makers.

Voluntary environmental decision making in firms: green electricity purchases and the role of champions

This study investigates the corporate decision to voluntarily purchase premium-priced Green Electricity (GE) by examining the internal and external factors which influence environmental decision making. In-depth interviews were conducted with eight paired firms in Alberta, Canada. Firms purchasing GE typically employed a top-down decision-making process, while firms characterised by a participative process did not. An internal driver (environmental champion) was more significant than external factors (regulations, stakeholder pressure) at influencing firms to voluntarily adopt GE purchasing, while organisational culture was found to moderate the effect of drivers. Cost is a common inhibitor to green purchase decisions, but customer (oil industry) perceptions and government regulations were also identified in some cases.

Inertia in the North American electricity industry: is it realistic to think that the Kyoto Protocol objectives can be met?

Abstract It is generally accepted that attainment of the objectives set in the Kyoto Protocol will impose fundamental changes on the structure of North Americas economy. This text highlights the extent of the Kyoto challenge as it pertains to one critical sector of the economy, the electricity industry. The results of the analysis, based on historical trends, suggest that it will be virtually impossible to reach the Kyoto objectives within the North American electricity industry. These results confirm and reiterate the degree of difficulty in meeting the Kyoto objectives and hence help explain the lack of political support for ratification of the Protocol.

Restructuring of Ontario's electricity supply system: an analysis of the proposals

Abstract In November 1995 the Government of the Province of Ontario (Canada) created an independent committee, the Macdonald Committee, to analyse Ontarios electricity industry and provide proposals for a transition to a competitive market. We present an overview and analysis of the proposals. We conclude that two principles are key to the success of the restructuring initiative: vertical separation of generation and transmission, and robust competition in generation.

Metering in Electricity Markets

Worldwide, from England to Australia, with many stops in the U.S., electricity markets are being restructured. Although, as pointed out by Considine and Kleit (2001), “proponents of restructuring have a difficult time articulating why restructuring is a good idea,” economists see the principal goal of these restructuring initiatives to be the increase in market efficiency, in both a static and dynamic sense.1 From the point of view of economists, an important facet of restructuring initiatives is thus the creation of markets to serve as resource allocation mechanisms. Markets allocate resources in a decentralized fashion through the use of prices. Prices act as signals for production, consumption, and investment decisions. The success of markets (in terms of efficiency) as resource allocation mechanisms therefore depends on the clear communication of accurate price signals. Economists therefore generally support the increased use of price signals for production, consumption, and investment decicions in electricity markets.

Residential Dual Energy Programs: Tariffs and Incentives

The problem of efficiently pricing electricity has been of concern to economists and policymakers for some time. A fundamental hurdle in the efficient pricing problem is that electricity is a non-storable commodity with a highly variable demand. Although variations in demand are in fact cyclical, with relatively well known patterns, the effects of peaking demand on required reserve margins and overall system cost and reliability can be significant. Today the problem is compounded by environmental and cost barriers to traditional capacity expansion responses. A natural solution has been to suggest tariffs which in some way smooth demand and thus reduce the need for excessive reserve margins. Time-of-use pricing, marginal cost pricing and peak-load pricing are all variations of this approach, and have been treated extensively in the literature. These principles usually involve some type of differential pricing with the implicit goal of shifting demand away from the peak.