Energy Economics. Markets, History and Policy. Roy L. Nersesian. Ö Routledge jjj^ Taylor&Frands Group LONDON AND NEW YORK

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1 Energy Economics Markets, History and Policy Roy L. Nersesian Ö Routledge jjj^ Taylor&Frands Group LONDON AND NEW YORK

2 Contents List of Figures List of Tables List of Online Material Preface xm xvu xix xxm 1 Energy Economics and Policy 1 What Is Energy? 1 Energy and Economics 2 Energy and the Environment 3 Air Pollution 4 Energy and Policy 5 Measuring Energy 7 The Problem Is the Size of the Problem 8 Forecasting Energy Demand 14 Short Cut fbr Projecting Energy Demand 17 A Model to Project Total Energy Demand 26 Problems and Projects 2 7 Notes 29 2 Electricity and Utility Industry 32 Electricity Is Derived Energy 33 System Operation 34 Methods of Rate Regulation 37 Operating Models in an Era of Deregulation/Liberalization 42 Smart Meters/Smart Grids 49 Utility Pools 51 It Takes Energy to Make Energy 54 Projects and Problems 57 Notes 70 3 Biomass 72 Yesterday's Fuel 72 Today's Fuel 73

3 viii Contents Around the World with Biomass 74 Biomass for Electricity Generation 76 Not All Favor Biomass for Electricity 77 Biomass Fuels for Electricity Generation 78 Biogas 84 Disposal of Biowaste 86 Tapping Biomass for Electricity Generation 88 Biofuels 89 History of Ethanol as a Motor Vehicle Fuel 93 Brazil The Great Leap Forward for Biofuels 95 The US The Great Leap Forward for Com Growers 102 The Great Sugar-Com Debate 103 Other Developments in the World of Ethanol 112 Cellulosic Ethanol 114 Biodiesel 116 Palm Oil as a Biodiesel Feedstock 119 Other Biodiesel Feedstocks 123 Biodiesel Development 131 Biodiesel Prospects 134 BiofuelRisks 135 Projects and Problems 138 Notes Goal Types of Coal 154 Coal Mining 156 Coal in the Twenty-First Century 159 Coal Reserves 161 Coal Prices 163 Case against Coal 164 Clean Coal Technologies 165 Coal Gasification 166 Carbon Capture 168 Ash Disposal 170 Eliminating Coal Not So Easy 170 Problems and Project 172 Notes The Story of Big Oil History of Oil 180 Early Attempts at Oil Price Controls 180 Enter Saudi Arabia and Kuwait 182 Exit the Key Players 182 Development of Saudi Arabia's Oil Fields 184

4 Shoes Begin to Fall 185 Birth of OPEC 187 zfyjoücfüü First Occasion for High Oil Prices 194 Era of Moderate Oil Prices 200 Second Occasion for High Oil Prices 201 Geopolitical Risks 214 Oil and Diplomacy 217 Oil and Environmentalists 218 Role of Oil Companies öfter the Oil Crisis 220 A Changing World 222 Future Role of Oil Companies 224 Projects and Problems 226 Notes Oil Oil Resetves 235 Is Hubbert's Peak Oil Dead? 238 Oil Consumption and Production 244 Oil Trade Pattems 247 Changing Nature of US Oil Imports and Middle East Exports 251 Oil Shale Game Changer 253 Synthetic Crude 257 Bitumen 258 Shale Oil 265 Challenge of Oil: The Automobile 266 Automobile Population 268 Fuel Savings with Piggybacking 278 Internalizing an Externality 279 Problems and Project 281 Notes Natural Gas Background 302 Road to Deregulation 304 European Road to Liberalization 309 From Source to Consumer 311 Natural Gas as a Fuel 314 Natural Gas in the US 316 Natural Gas in Europe 318 Pacing the Geopolitical Risk of Natural Gas 319 Natural Gas in Asia 324 Natural Gas in the Rest of the World 325 Transforming Natural Gas to Electricity 326

5 x Contents Carbon Emissions of Natural Gas 328 Selection Procedura for Electricity Generating Plants 329 Fracking 333 Horizontal Drilling 335 Case against Fracking 338 LPG: Prelude to LNG 341 Western Way of Conducting Business 343 Japanese Way of Organizing Business 344 Evolution of the International LPG Business 345 International Natural Gas Pipeline Trade 347 Natural Gas Reserves 347 International Trade ofliquefied Natural Gas 348 Historical Development of LNG 349 LNG Projects 350 Commodization of LNG 356 LNG Carriers 358 LNG Pricing 362 Outlook for LNG Projects 363 Natural Gas as a Transportation Fuel 364 LNG as a Ship's Fuel 364 LNG/CNG as a Railroad Locomotive Fuel 366 LNG/CNG as a Truck Fuel 367 CNG as an Automobile Fuel 368 Transformational Technologies 369 Gas to Liquids (GTL) Technology 370 Sweetening Sour Gas 371 Mediane from Coal Beds 372 Methane Hydrates 373 Problems 375 Notes Nuclear and Hydropower Promise of Nuclear Power 388 Contribution of Nuclear Power to Satisfying Energy 389 Subsidizing Nuclear Power Plants 393 Comparing Nuclear with Coal 395 Uranium 396 Weapons Proliferation 398 Disposal of Spent Fuel 399 Commercial Reactors 401 Fast Neutron and Fast Breeder Reactor 402 European Pressurized (Evolutionary Power) Reactor 403 Pebble Bed Reactor 404 Other Advanced Reactor Designs 407

6 Fusion Power 410 Hydropower 412 History 412 Birth of the Environmental Movement 415 Hydropower: Today and Tomorrow 415 Major Dams 418 Dams Affect International Relations 421 Turkey versus Iraq 421 Egypt versus Nile River Riparian Nations 422 Indus River 423 Hydropower for Peace 424 Problems and Project 425 Notes Solar and Wind Power and Their Storage Solar Power 436 PV Solar Energy 437 Supports for Solar Power 445 Economics of Solar Power 449 Wind Power 452 From Tiny Acorns to Mighty Oaks 452 Small Can Be Beautiful 464 Objections to Wind Power 465 Evaluating a Potential Site 467 Financial Incentives 467 Source ofemployment 468 Electricity Storage 469 Non-Flow or Solid State Batteries 470 Flow Batteries 473 Gravity Batteries 475 Compressed Air Energy Storage 476 Flywheels 477 Hydrogen 477 Problems and Projects 480 Notes Hydrogen Economy, Geothermal and Ocean Power, and Climate Change Hydrogen Economy 495 Hydrogen as a Motor Vehicle Fuel 496 Hydrogen Economy Tomorrow 498 Geothermal Power 500 Geothermal Power for Heating 500 Geothermal Power for Electricity 501

7 xii Contents Enhanced Geothermal System (EGS) 504 Climate Change 506 Climate Daring 507 How Long Has Man Been Influencing Climate? 509 Carbon Dioxide and Temperature over Geologie Time 510 Climate Changes during Recorded History 512 Whither Thou Goest Climate? 516 Problems and Projects 531 Notes Environment and Energy Sustainability Environment 543 Cap-and-Trade Emissions Trading 545 Montreal Protocol 547 Kyoto Protocol 548 Efficiency and Conservation 556 Sustainable Energy 557 Native American View of Sustainability 557 Founding Fathers View on Financial Sustainability 558 Easter Island 558 We Need to Identify the Relevant Goal 562 Population 563 Towards an Energy Sustainable Society 566 Biofuels 566 Coal 568 Oil 569 Natural Gas 573 Nuclear Power 574 Hydro Power 575 Solar Power 576 Wind Power 578 Geothermal Power 584 Tidal and Wave Power 584 Efficiency and Conservation 584 Utility Adaptation 585 Summary of Disruptive Challenges Pacing the Utility Industry 591 Technology Developments 593 Taxing Carbon 594 The Essential Problem Is the Magnitude of the Problem 596 There Is Always an Alternative 596 Problems 598 Notes 600 Index

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