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PESD workshop tackles electricity market challenges in a highly-renewables world

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Program on Energy and Sustainable Development (PESD) Director Frank Wolak, Associate DIrector Mark Thurber, and doctoral candidate Trevor Davis led an Electricity Market Simulation Workshop as part of the 2018 Western Electricity Market Forum September 20-21 in Boise, Idaho.  The audience was comprised of regulators and regulatory staff as well as policy makers representing states from across the western U.S.

The workshop used the PESD-developed Energy Market Game to explore timely questions about how electricity markets with a high share of renewable resources might function. “The Energy Market Game allows people of diverse backgrounds to understand market dynamics,” Thurber explained. “It can help policy makers and regulators set up incentives for market participants which naturally align with desired outcomes.”

The PESD team ran games with two contrasting policy approaches aimed at ensuring resource adequacy, with workshop participants playing the role of generating companies (“gencos”). In a high-renewable world, the specific resource adequacy concern is that thermal power plants won’t run enough to be profitable, and gencos therefore won’t build or keep enough thermal power plants to back up renewables when wind and sun aren’t available.

In the first game scenario, capacity markets were used to spur gencos to build enough gas-fired power plants to meet demand. Capacity markets straight-out pay gencos for holding generation capacity. They are used in a number of real-world electricity markets, but the games suggested they may not result in the cheapest power for consumers.

 

wemf 18 PESD Director Frank Wolak helps a workshop participant set up an Energy Market Game scenario.

PESD Director Frank Wolak helps a workshop participant set up an Energy Market Game scenario.
Photo Credit:  Maury Galbraith, Western Energy Board

 

In the second game scenario, forward contracts for electricity created the incentive for gencos to build power plants. If a genco doesn’t produce enough electricity to cover its forward contract, it risks having to buy the shortfall out of the spot market at high prices. Forward contracts therefore encourage gencos not only to build adequate generation capacity, but also to bid that capacity into the market at competitive prices. As this second game scenario showed, that can mean cheaper power for consumers.

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PESD team members Frank Wolak, Mark Thurber, and Trevor Davis lead an Electricity Market Simulation Workshop in Boise, Idaho, September 2018.
Maury Galbraith, Western Energy Board
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Retail Pricing to Support the 21st Century Distribution Grid

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As an increasing number of California households install solar panels, the current approach to retail electricity pricing makes it harder for the state’s utilities to recover their costs. Unless policymakers change how they price grid-supplied electricity, a regulatory crisis where a declining number of less affluent customers will be asked to pay for a growing share of the costs is likely to occur.

 

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Stanford Institute for Economic Policy Research (SIEPR)
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Frank Wolak
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Rural energy access through solar home systems: Use patterns and opportunities for improvement

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Solar photovoltaic (PV) products are touted as a leading solution to long-term electrification and development problems in rural parts of Sub-Saharan Africa. Yet there is little available data on the interactions between solar products and other household energy sources (which solar PVs are often assumed to simply displace) or the extent to which actual use patterns match up with the uses presumed by manufacturers and development agencies. This paper probes those questions through a survey that tracked approximately 500 early adopters of solar home systems in two off-grid markets in Africa. We find that these products were associated with large reductions in the use of kerosene and the charging of mobile phones outside the home. To a lesser extent, the use of small disposable batteries also decreased. However, solar home systems were, for the most part, not used to power radios, TVs, or flashlights. We also did not observe adopter households using these solar products to support income-generating activities.

 

 

 

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Journal Articles
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Energy for Sustainable Development, Volume 37
Authors
Ognen Stojanovski
Mark C. Thurber
Frank Wolak
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Assessing Opportunities for Solar Lanterns to Improve Educational Outcomes in Rural Off-Grid Regions: Challenges and Lessons from a Randomized Controlled Trial

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Solar lanterns are promoted across rural Sub-Saharan Africa to improve both lighting in homes and educational outcomes. We undertake a randomized controlled trial in Zimba District, Zambia, to evaluate whether solar lanterns help children study more effectively and improve academic performance. Our research design accounts for potential income effects arising from the giveaways of lanterns and also “blinds” participants to the study’s purpose. We find no evidence that receipt of a lantern improved performance on important national examinations (even though an ex poststatistical power analysis demonstrates that the research should detect economically significant impacts, if present). We also do not observe impacts on self-reported study habits. Several features of Zimba District that are likely to exist in other developing regions appear to drive our results. First, flashlights are the dominant lighting source in rural Zambia rather than traditional options like kerosene lamps or candles. In such environments, solar lights may hold only limited appeal for prospective users. Second, our survey data suggests that other major barriers to educational attainment likely render improved energy access (whether through solar lanterns or otherwise) a relatively unimportant educational input. 

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Working Papers
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Program on Energy and Sustainable Development
Authors
Ognen Stojanovski
Mark C. Thurber
Frank Wolak

The rise in global biodiesel production: Implications for food security

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Policies that promote biofuels in major agricultural economies raise important questions for food prices and food security at local to global scales. Global biofuel output rose from 38 billion liters to 131 billion liters between 2005 and 2015, boosting the demand for annual- and perennial-crop feedstocks such as maize, sugar, soy, rapeseed, and palm oil. Although ethanol volume was three times that of biodiesel in 2015, the share of biodiesel in total biofuel output rose from 10% to almost 25% over the course of the decade (EIA, n.d.; REN21, 2016). Biodiesel production increased 700% between 2005 and 2015 and is expected to rise by another 35% by 2025 (OECD/FAO, 2014). In this paper, we examine the linkages between biodiesel, oil crop, and energy markets, and ask: What are the food security implications of biodiesel policies in major agricultural economies? How do governments adjust biodiesel policies in response to international commodity prices, trade opportunities, and their changing economic and environmental priorities?

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Journal Articles
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Global Food Security
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Rosamond L. Naylor
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The rise in global biodiesel production: Implications for food security
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Impact of a rural solar electrification project on the level and structure of women's empowerment

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Although development organizations agree that reliable access to energy and energy services—one of the 17 Sustainable Development Goals—is likely to have profound and perhaps disproportionate impacts on women, few studies have directly empirically estimated the impact of energy access on women's empowerment. This is a result of both a relative dearth of energy access evaluations in general and a lack of clarity on how to quantify gender impacts of development projects. Here we present an evaluation of the impacts of the Solar Market Garden—a distributed photovoltaic irrigation project—on the level and structure of women's empowerment in Benin, West Africa. We use a quasi-experimental design (matched-pair villages) to estimate changes in empowerment for project beneficiaries after one year of Solar Market Garden production relative to non-beneficiaries in both treatment and comparison villages (n = 771). To create an empowerment metric, we constructed a set of general questions based on existing theories of empowerment, and then used latent variable analysis to understand the underlying structure of empowerment locally. We repeated this analysis at follow-up to understand whether the structure of empowerment had changed over time, and then measured changes in both the levels and likelihood of empowerment over time. We show that the Solar Market Garden significantly positively impacted women's empowerment, particularly through the domain of economic independence. In addition to providing rigorous evidence for the impact of a rural renewable energy project on women's empowerment, our work lays out a methodology that can be used in the future to benchmark the gender impacts of energy projects.

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Journal Articles
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Environmental Research Letters
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Rosamond L. Naylor
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India's National Innovation System

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Dr. Forbes chairs the Steam Engineering Companies of Forbes Marshall, India’s leading Steam Engineering and Control Instrumentation firm. 

Dr. Forbes was an occasional Lecturer and Consulting Professor at Stanford University from 1987 to 2004, where he developed courses on technology in newly industrializing countries. He received his Bachelors, Masters and PhD degrees from Stanford University.

Dr. Forbes is on the Board of several educational institutions and public companies. He is the Chairman of Centre for Technology, Innovation and Economic Research in Pune. He has long been an active member of CII and has, at various times, chaired the National Committees on Higher Education, Innovation, Technology and International Business. He was President of CII from 2016-2017.

 

About the Colloquia:

In 2016, the Walter H. Shorenstein Asia-Pacific Research Center, in collaboration with the Stanford Center for South Asia, launched a series of public lectures to broaden our understanding and discussion of contemporary India — its enormous domestic potential and problems, its place in the region and the world, and the ambitious agenda of the new Modi administration. Building on the strong engagement of those issues from across the university community and beyond, we are continuing the series, with generous support from the U.S. India Business Council, in the 2017-2018 academic year. We will  draw business, political, diplomatic and academic experts from the U.S. and India to explore topics including India’s innovation economy, India-China relations, India’s pivotal role in global health, and U.S.-India relations. 

 

This Colloquia is co-sponsored with 

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Naushad Forbes Co-Chairman, <i>Forbes Marshall</i>
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South Asia Colloquia

What next for climate? Assessing the risks and the options

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Abstract: Over decades, assessment by the Intergovernmental Panel on Climate Change and many others has bolstered understanding of the climate problem: unequivocal warming, pervasive impacts, and serious risks from continued high emissions of heat-trapping gases. Societies are increasingly responding with early actions to decarbonize energy systems and prepare for impacts. In this emerging era of climate solutions, new assessment opportunities arise. They include learning from ongoing real-world experiences and helping close the gap between aspirations and the pace of progress. Against this backdrop, I will consider core challenges in assessment, in particular: (1) integrating diverse evidence; (2) applying rigorous expert judgment; and (3) deeply embedding interactions between experts and decision-makers. Examples span climate risks and portfolios of mitigation and adaptation responses. For climate and broader global change, the presentation will explore how transparent, high-traction assessment can support decisions about contested and uncertain futures. 

About the Speaker: Katharine Mach is a Senior Research Scientist at Stanford University, an Adjunct Assistant Professor at Carnegie Mellon University, and a Visiting Investigator at the Carnegie Institution for Science. She leads the Stanford Environment Assessment Facility (SEAF). From 2010 until 2015, Mach co-directed the scientific activities of Working Group II of the Intergovernmental Panel on Climate Change, which focuses on impacts, adaptation, and vulnerability. This work culminated in the IPCC’s Fifth Assessment Report and its Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation. Mach received her PhD from Stanford University and AB from Harvard College.

What next for climate? Assessing the risks and the options
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Katharine J. Mach Senior Research Scientist Stanford University
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The political economy of biodiesel in an era of low oil prices

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Global biodiesel production grew by 23% per annum between 2005 and 2015, leading to a seven-fold expansion of the sector in a single decade. Rapid development in the biodiesel sector corresponded to high crude oil prices, but since mid-2014, oil prices have fallen dramatically. This paper assesses the economic and policy factors that underpinned the expansion of biodiesel, and examines the near-term prospects for biodiesel growth under conditions of low fossil fuel prices. We show that the dramatic increase in biodiesel output would not have occurred without strong policy directives, subsidies, and trade policies designed to support agricultural interests, rural economic development, energy security, and climate targets. Given the important role of policy—and the political context within each country that shapes policy objectives, instruments, and priorities—case studies of major biodiesel producing countries are presented as a key element of our analysis. Although the narrative of biodiesel policies in most countries conveys win-win outcomes across multiple objectives, the case studies show that support of particular constituents, such as farm lobbies or energy interests, often dominates policy action and generates large social costs. Looking out to 2020, the paper highlights risks to the biodiesel industry associated with ongoing regulatory and market uncertainties.

 

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Renewable and Sustainable Energy Reviews
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Rosamond L. Naylor
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SCPKU World Leaders Forum features Nobel laureate Steven Chu on climate change and clean energy

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The Stanford Center at Peking University (SCPKU) held its second annual Lee Shau Kee World Leaders Forum at the center on Oct 13.  This year’s conference, titled “Climate Change and Clean Energy,” was keynoted by Dr. Steven Chu, the William R. Kenan, Jr., Professor of Physics and Professor of Molecular and Cellular Physiology in the Medical School at Stanford University; the 12th U.S. Secretary of Energy; and co-recipient of the 1997 Nobel Prize in Physics for laser cooling and atom trapping.  Two panel discussions with a diverse set of experts from academia, government, and industry were also part of the event.

After welcoming remarks by SCPKU Director Jean C. Oi and Xiamen University Dean of the School of Energy Research Ning Li, the conference kicked off with the first panel, “Paths to Clean Energy” which centered around two questions:  Is renewable energy feasible and how does China move away from coal as a dominant energy source?  The second panel, “Challenges and Opportunities to Clean Energy,” focused on barriers preventing China from being progressive on climate change.   China’s National Energy Advisory Committee, British Petroleum-China, and the U.S. Commission on Natural Resources Protection were among the organizations represented by panelists.

 

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Panelists discuss climate change and clean energy at SCPKU's World Leaders Forum held October 13.
Courtesy of Stanford University

 

Steven Chu’s keynote wrapped up the forum, which touched on new data reflecting the risks of climate change and the need to continue progress on the development of clean energy.  Regarding the pressing issue of pollution, he cited data from a British study inferring that the risk of contracting lung cancer is 29x higher in Beijing than other cities and highlighted Stanford’s research on nano-fiber filtration as a possible solution.  Chu also spoke on the topic of energy storage and how the full cost of renewable energy needs to account for backup generation capacity, transmission and distribution systems, as well as the storage itself.  Two things, he said, will likely play large roles in the future: high voltage lines (HVDC), and machine learning, which will be needed for largely autonomous management of the electrical grid.  Nuclear energy will also be important to mitigate blackouts when transitioning to clean energy.  In closing, Chu shared a poignant phrase from ancient Native Americans: “We do not inherit the land from our ancestors, we borrow it from our children.” 
 

The purpose of the forum is to raise public understanding of the complex issues China and other countries face in the course of development.  Funded by a generous gift from the Lee Shau Kee Foundation, the forum seeks to increase support for Asia-Pacific cooperation and turn ideas into action.  

 

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Steven Chu poses with SCPKU World Leaders Forum attendees after delivering keynote.
Courtesy of Stanford University

 

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Reception following SCPKU's World Leaders Forum featuring the China National Symphony Orchestra Concert Quartet in
the center's courtyard.
Courtesy of Stanford University

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Steven Chu keynotes SCPKU's second World Leaders Forum.
Stanford University
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