Energie : papiers de recherche moissonnés (9/02/2016)

Ensuring capacity adequacy during energy transition in mature power markets / Marie Petitet, Dominique Finon and Tanguy Janssen. Chaire European Electricity Markets, Paris Dauphine, Feb. 2016, 32 p. (Working Paper #20) http://www.ceem-dauphine.org/working/fr/ENSURING-CAPACITY-ADEQUACY-DURING-ENERGY-TRANSITION-IN-MATURE-POWER-MARKETS-A-Social-Efficiency-Comparison-of-Scarcity-Pricing-a

This paper analyses how a capacity market mechanism can address security of supply objectives in the case of an energy transition scenario which combines both high energy efficiency efforts which stabilise demand in a context of mature markets and rapid increase of renewables share. The exogenous entry of variable renewables introduces a new challenge in matter of security of supply during peak hours. To analyse this situation, power markets are simulated on the long term with a model based on System Dynamics modelling which integrates both new investment and closure decisions. This last trait is an originality of the model which is very relevant to study market maturity. The addition of a capacity mechanism in a market architecture with price cap is compared to scarcity pricing in different situations. Simulations are performed for two different cases: a case without any exogenous closure of existing power plants and a case with exogenous retirements which create a need of new investments. Under the assumption of a risk-neutral investor, the results indicate that compared to an energy-only market with price cap set at €3,000/MWh, energy-only with scarcity pricing and capacity mechanism are two efficient market designs to reach an acceptable level of loss of load. Besides, the results highlight that the advantage of one design on the other in terms of social efficiency depends on the future scenarios which are simulated. Moreover, the results illustrates that the three market designs lead to different level of risk for peaking units, suggesting that including risk aversion is a relevant further step in the modelling.

Energy Subsidies at Times of Economic Crisis: A Comparative Study and Scenario Analysis of Italy and Spain / Arjun Mahalingam and David Reiner. Energy Policy Research Group, Jan. 2016, 33 p. (EPRG working paper ; 1603) http://www.eprg.group.cam.ac.uk/eprg-working-paper-1603/

From 2005-2012, Spain and Italy saw significant investment in renewable energy, most notably in onshore wind and solar, driven by generous subsidies, the expectation of rising carbon prices and falling renewables (especially solar panel) costs. As a result of the Global Financial Crisis, both countries were faced with massive fiscal deficits and were forced to curtail their renewable support schemes, although these efforts took several years to take effect after the onset of the initial crisis. Ironically, both Spain and Italy incurred the lion’s share of their liability for renewables support after the onset of the crisis particularly because of the rapid drop in costs of solar PV panels, while subsidy levels remained high. In spite of changes to their support regimes, Italy is likely to meet its 2020 climate and renewable targets, whereas Spain is unlikely to meet its 2020 renewables target based on current trajectories. Following a comparative historical survey of the two large EU member states, we present a scenario analysis that contrasts alternative futures of 2030 where renewable support remain at current levels (essentially zero) or is revived and where carbon prices stay at current low levels (€5/t CO2) or rises to levels needed to accomplish the proposed 40% EU 2030 reduction target…

The U.S. Oil Supply Revolution and the Global Economy / Kamiar Mohaddes and Mehdi Raissi. Energy Policy Research Group, Jan. 2016, 34 p. (EPRG working paper ; 1604) http://www.eprg.group.cam.ac.uk/eprg-working-paper-1604/

This paper investigates the global macroeconomic consequences of falling oil prices due to the oil revolution in the United States, using a Global VAR model estimated for 38 countries/regions over the period 1979  to 2011 . Set-identi…cation of the U.S. oil supply shock is achieved through imposing dynamic sign restrictions on the impulse responses of the model. The results show that there are considerable heterogeneities in the responses of different countries to a U.S. supply-driven oil price shock, with real GDP increasing in both advanced and emerging market oil-importing economies, out-put declining in commodity exporters, in‡ation falling in most countries, and equity prices rising worldwide. Overall, our results suggest that following the U.S. oil revolution, with oil prices falling by 51 percent in the …rst year, global growth increases by 0.16 to 0.37 percentage points. This is mainly due to an increase in spending by oil importing countries, which exceeds the decline in expenditure by oil exporters.

The Future of the Canadian Oil Sands: Growth potential of a unique resource amidst regulation, egress, cost, and price uncertainty / J. Peter Findlay. Oxford Institute for Energy Studies, Feb. 2016, 81 p. (OIES paper: WPM 64) http://www.oxfordenergy.org/2016/02/the-future-of-the-canadian-oil-sands-growth-potential-of-a-unique-resource-amidst-regulation-egress-cost-and-price-uncertainty/

Though the Canadian oil sands may have been overlooked in recent years, due to the impressive story of North American tight oil growth, their massive bitumen deposits still comprise a major portion of the world’s crude resources. With an estimated 170 billion barrels of economically proven reserves (amidst the 1.7-2.5 trillion barrels of oil in place in this northern region in the province of Alberta), the oil sands region itself represents approximately 10% of global reserves.

Oil sands are among the world’s sources of ‘difficult oil’ and are comparable in some respects to deep water, ultra-deep water, Arctic, and light tight oil (LTO). What difficult oil plays have in common are high supply costs (often above $60 per barrel) and an undeniable dependence on technological advances to remain economically attractive. Though Canada’s oil sands, like other unconventional plays, will likely play an increasingly prominent role in meeting future global demand to 2035 and beyond, substantial improvements in production and processing technologies, or a return to sustained high crude prices (or likely both), are required to deliver similar capacity additions as the last decade.

This research examines Canadian oil sands production economics, long term growth forecasts, and how the outlook could change when confronted with regional and global trends in price, transportation, environmental policy, and production technology.

Russia and OPEC: Uneasy Partners / James Henderson and Bassam Fattouh. Oxford Institute for Energy Studies, Feb. 2016, 8 p. (Oxford energy comment) http://www.oxfordenergy.org/2016/02/russia-and-opec-uneasy-partners-2/

On Wednesday January 27th Russian Energy Minister Alexander Novak met with a group of Russian oil companies to discuss the domestic and global energy markets, following which he announced that Russia would be prepared to discuss an output cut of 3-5% at a meeting with OPEC in February. On the face of it this would seem to imply that Russia might reduce production by 300,000-500,000 b/d, and indeed the immediate reaction of the oil market suggested that some credibility had been given to the statement as the oil price surged by 8% in the immediate aftermath of the comments. However, subsequent comments by other Russian and OPEC observers, combined with the history of Russia’s relationship with OPEC, which has achieved little of substance, suggests that an agreement is a long way from being concluded and has limited chances of success. A more interesting conclusion is that Russia, perhaps not surprisingly, has revealed its growing economic and corporate desperation to see oil prices rise.

Energy Consumption and the Size of the Informal Economy / Mustafa Metin Basbay, Ceyhun Elgin, and Orhan Torul. Kiel Institute for the World Economy, Feb. 2016, 27 p. (Economics Discussion Papers, No 2016-6) http://www.economics-ejournal.org/economics/discussionpapers/2016-6

The authors empirically investigate the relationship between energy consumption and the size of the informal economy. Relying on panel data regression models, their results show that at the aggregate level, energy intensity is inversely related to the size of the informal sector, providing actual empirical evidence on the presence of high labor and low capital intensity in the informal economy. Furthermore, the authors also find some support towards the presence of non-linearity and asymmetry in this relationship.

Danièle Revel

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