Energy

This image is having trouble loading!FSI researchers examine the role of energy sources from regulatory, economic and societal angles. The Program on Energy and Sustainable Development (PESD) investigates how the production and consumption of energy affect human welfare and environmental quality. Professors assess natural gas and coal markets, as well as the smart energy grid and how to create effective climate policy in an imperfect world. This includes how state-owned enterprises – like oil companies – affect energy markets around the world. Regulatory barriers are examined for understanding obstacles to lowering carbon in energy services. Realistic cap and trade policies in California are studied, as is the creation of a giant coal market in China.

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Conventional wisdom holds that oil sector nationalizations are rooted in political motives of the petroleum states, which perceive value in the direct control of resource development though a state enterprise.  State motives are inarguably important.  At the same time, we argue in this paper that constraints of risk significantly affect a state's choice of which agent to employ to extract its hydrocarbons.  Implicit in much current debate is the idea that private, international oil companies (IOCs) and the state-controlled, national oil companies (NOCs) are direct competitors, and that the former may face threats to their very existence in an era of increased state control. 

In fact, IOCs and NOCs characteristically supply very different functions to governments when it comes to managing risk.  For reasons we discuss, IOCs excel at managing risk while NOCs typically do not.  IOCs, NOCs, and a third type of player, the oil service company, will all continue to exist because their distinct talents are needed by states seeking to realize the value of their petroleum resources.  However, the relative positions of these different players have changed substantially over time, and will continue to do so, in response to the shifting needs of oil-rich states.

In the first part of this paper, we explore the nature and sources of risk in the petroleum industry, how these risks change over time, the task of managing petroleum risks, and the variable capacity of state and private companies to manage them.  In the second part, we apply qualitative and quantitative approaches to test the idea that risk significantly affects the state's choice of which agent to use for petroleum extraction.  First, we review the events leading to the cluster of nationalizations that occurred in the early 1970s and assess whether they were significantly affected by considerations of risk.  Second, we explore how well variation in risk and state capacity for risk can explain changing ownership over time within a particular oil province - the UK and Norwegian zones of the North Sea.  Third, we use data from energy research and consulting firm Wood Mackenzie to quantitatively test our hypothesis about the key role of risk, looking in particular at the case of oil and gas company exploration behavior.  

In all three cases, our observations are broadly consistent with the hypothesis that risk significantly affects the state's choice of hydrocarbon agent, although, as expected, other factors emerge as important drivers of outcomes as well.

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Mark C. Thurber
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China's coal market is now in the midst of a radical restructuring that has the potential to change how coal is produced, traded and consumed both in China and the rest of the world.  The restructuring aims to integrate the coal and power sectors at giant "coal-power bases" that combined would churn out more coal annually than all the coal produced in the entire United States. 

Coal-power integration is now a focal point of the Chinese government's energy policy, driven by the dramatic "coal-power conflict".  Coal prices are market-based, but power prices are tightly controlled by the government.  This has caused massive losses for Chinese power generators in 2008 and 2010 and triggered government intervention in the coal market with attempts to cap the price of coal.  The pervasive conflict between coal and power is now driving the Chinese government to remake these markets.

Coal-power base policy aims to establish upwards of 14 major coal-power bases, each producing over 100 mt of coal with consuming industries on-site.  The plan envisions that roughly half of China's coal production would be produced at a handful major coal-power base sites that are controlled by key state-owned enterprises (SOEs) and the central government.    

PESD's new research analyzes China's coal-power base reforms and how they will impact Chinese and global coal markets.  Several key findings are:

First, the implementation of coal-power bases would enhance central government's control over the coal sector and over coal prices.  The government could control coal pricing in a large share of the market and mitigate power sector losses by mandating lower coal transaction prices within integrated SOEs.  Using this kind of internal transfer pricing at below market prices for up to half of China's coal would represent a meaningful shift in how coal is priced in China.  If a large share of China's coal were transacted in this manner, it might create an unofficial two-tiered pricing structure in the coal market.

Second, coal-power base policy would bring about modernization and mechanization of a larger share of China's coal production, in theory bringing larger economies of scale to the sector.  While up-front capital investment per ton produced will certainly increase, the marginal cost of coal production should decrease, all other things equal. 

Third, the massive rebalancing of China's coal market implied by coal-power bases is poised to have important impacts on the globally traded coal market.  Since 2009, China's import behavior has become a dominant factor determining the price of globally traded coal.  In simple terms, when Chinese domestic prices are higher than global prices, the country imports.  The development of coal-power bases could radically alter coal price formation in China and directly impact China's appetite for imports, and therefore has the potential to alter coal price formation globally.

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Gang He

CURRENT INSTITUTION:
Program on Democracy, Yale MacMillan Center for International and Area Studies

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CDDRL Fellow 2010-2011
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Liz Carlson is a 2010-2011 pre-doctoral fellow at CDDRL and a PhD candidate in the department of Political Science at UCLA (to be completed in 2011). While at CDDRL, she will work on her dissertation which uses experimental and survey methods to investigate whether ethnic voting in Uganda is fundamentally expressive or has its roots in the experience or expectation of ethnic patronage. She will also work on projects on the distribution of electrification in Kenya and a panel study on the impact of new oil on democratic consolidation in Ghana and Uganda. Her research has been funded by the National Science Foundation, among other sources.

CISAC's Siegfried Hecker presented the findings of his recent trip to North Korea, where he was given a tour of a nuclear facility reportedly capable of enriching uranium. In his remarks he described two new nuclear facilities, a small light-water power reactor in early stages of construction, and a "modern, clean centrifuge plant" for uranium enrichment. Following his presentation he and Robert Carlin, a CISAC visiting professor, spoke about North Korean nuclear programs and the international reaction to North Korea's nuclear ambitions. This event occurred the day after North Korean military attacks on the South Korean island of Yeonpyeong.


Dr. Hecker's Nov. 23, 2010 Presentation at the Korea Economic Institute (C-Span video)




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Siegfried S. Hecker is a professor emeritus (research) in the Department of Management Science and Engineering and a senior fellow emeritus at the Freeman Spogli Institute for International Studies (FSI). He was co-director of CISAC from 2007-2012. From 1986 to 1997, Dr. Hecker served as the fifth Director of the Los Alamos National Laboratory. Dr. Hecker is an internationally recognized expert in plutonium science, global threat reduction, and nuclear security.

Dr. Hecker’s current research interests include nuclear nonproliferation and arms control, nuclear weapons policy, nuclear security, the safe and secure expansion of nuclear energy, and plutonium science. At the end of the Cold War, he has fostered cooperation with the Russian nuclear laboratories to secure and safeguard the vast stockpile of ex-Soviet fissile materials. In June 2016, the Los Alamos Historical Society published two volumes edited by Dr. Hecker. The works, titled Doomed to Cooperate, document the history of Russian-U.S. laboratory-to-laboratory cooperation since 1992.

Dr. Hecker’s research projects at CISAC focus on cooperation with young and senior nuclear professionals in Russia and China to reduce the risks of nuclear proliferation and nuclear terrorism worldwide, to avoid a return to a nuclear arms race, and to promote the safe and secure global expansion of nuclear power. He also continues to assess the technical and political challenges of nuclear North Korea and the nuclear aspirations of Iran.

Dr. Hecker joined Los Alamos National Laboratory as graduate research assistant and postdoctoral fellow before returning as technical staff member following a tenure at General Motors Research. He led the laboratory's Materials Science and Technology Division and Center for Materials Science before serving as laboratory director from 1986 through 1997, and senior fellow until July 2005.

Among his professional distinctions, Dr. Hecker is a member of the National Academy of Engineering; foreign member of the Russian Academy of Sciences; fellow of the TMS, or Minerals, Metallurgy and Materials Society; fellow of the American Society for Metals; fellow of the American Physical Society, honorary member of the American Ceramics Society; and fellow of the American Academy of Arts and Sciences.

His achievements have been recognized with the Presidential Enrico Fermi Award, the 2020 Building Bridges Award from the Pacific Century Institute, the 2018 National Engineering Award from the American Association of Engineering Societies, the 2017 American Nuclear Society Eisenhower Medal, the American Physical Society’s Leo Szilard Prize, the American Nuclear Society's Seaborg Medal, the Department of Energy's E.O. Lawrence Award, the Los Alamos National Laboratory Medal, among other awards including the Alumni Association Gold Medal and the Undergraduate Distinguished Alumni Award from Case Western Reserve University, where he earned his bachelor's, master's, and doctoral degrees in metallurgy.

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Bob Carlin is a Visiting Scholar at CISAC. From both in and out of government, he has been following North Korea since 1974 and has made 25 trips there. He recently co-authored a lengthy paper to be published by the London International Institute of Strategic Studies, entitled "Politics, Economics and Security: Implications of North Korean Reform."

Carlin served as senior policy advisor at the Korean Peninsula Energy Development Organization (KEDO) from 2002-2006, leading numerous delegations to the North for talks and observing developments in-country during the long trips that entailed.

From 1989-2002, he was chief of the Northeast Asia Division in the Bureau of Intelligence and Research, U.S. Department of State. During much of that period, he also served as Senior Policy Advisor to the Special Ambassador for talks with North Korea, and took part in all phases of US-DPRK negotiations from 1992-2000. From 1971-1989, Carlin was an analyst at the Central Intelligence Agency, where he received the Exceptional Analyst Award from the Director of Central Intelligence.

Carlin received his AM in East Asian regional studies from Harvard University in 1971 and his BA in political science from Claremont Men's College.

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The TomKat Center for Sustainable Energy has awarded four research grants totaling $1.2 million to Stanford University researchers for smart power grid related studies.  One of the four grants went to a PESD-led project that will help regulators overcome barriers to the development of electricity transmission lines needed to facilitate renewable energy deployment.  At present, the lack of adequate transmission infrastructure makes it difficult to connect generators in regions with rich wind or solar potential to major population centers.

One of the biggest challenges in the current transmission planning process is accurately characterizing the benefits of transmission lines to build a case for their development.  "Our research will develop key analytical tools to help regulators and policymakers assess the economic and environmental benefits of transmission expansions to support renewable generation," Wolak said. Such tools can ultimately be built in to grid planning, expansion, and pricing methodologies.

 

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The Freeman Spogli Institute for International Studies (FSI) at Stanford University has awarded six seed grants in the first round of funding from the Global Underdevelopment Action Fund. The grants are intended to jumpstart early-stage multidisciplinary research projects that tackle persistent problems of global underdevelopment. The Action Fund, which is supported by expendable gifts from FSI donors, matching funds from the Office of the President, and FSI, grew out of the Institute's spring 2010 conference on Technology, Governance, and Global Development, which featured keynote speaker Bill Gates, together with leaders from business, government, and nonprofit organizations, the media, and the academic community, to examine novel integrative approaches to poverty alleviation and human development around the world. The Action Fund projects range across disciplines, focusing primarily on problems in developing and transitioning societies. The majority of the projects have a health dimension, reflecting the degree to which poor health outcomes mirror a country's development status.

"Stanford is uniquely placed among American universities to bring cutting edge research to bear on practical problems of development.  No other institution has lower barriers to multidisciplinary work.  The Action Fund award recipients are drawn from many different parts of the university but united in their concern for promoting development," said Stephen D. Krasner,  the Graham H. Stuart Professor of International Relations, Senior Associate Dean of the Social Sciences at H&S, and deputy director of FSI.

Six multidisciplinary research teams led by Stanford faculty from across the university will receive a total of $236,000 in seed grants. The projects were selected by a faculty committee chaired by Stephen Krasner, with a focus on early-stage, multidisciplinary, policy-relevant research. All, projects are required to have a training component for Stanford undergraduate or graduate students.

The award-winning projects and their principal investigators are:

  • Explaining and Improving U.S. Global Health Financing
    Eran Bendavid, assistant professor of medicine and affiliate in FSI’s Center for Health Policy. Co-investigator: Rajaie Batniji, postdoctoral fellow, Department of Medicine. With a sharp divergence between justifications for global health funding and the countries and diseases to which funding is disbursed, this study will conduct a quantitative analysis of the determinants of U.S. financing for the 171 countries receiving development assistance for health in 2009. The project seeks to identify the key drivers for U.S. global health financing by country and facilitate research on how to make global health financing work better. 
  • Peasants into Democrats: Evaluating the Impact of Information on Local Governance in Mali
    James D. Fearon, professor of political science. Co-investigator and trainee: Jessica Gottlieb, PhD student in political science. Recent research suggests that enhancing voter information holds promise for increasing government accountability in new democracies. This project will undertake a field experiment in Mali, a model of an underperforming new democracy, to test the theory that information that sufficiently raises citizen voter expectations of government performance can have an important effect on governance. It will examine the impact of an intervention that provides citizens with a civics course on voter and government behavior.
  • Effects of “Best Buy Health and Nutrition Toolkit” for Improving Educational Outcomes in Rural China
    Scott Rozelle, FSI Senior Fellow. Co-investigator and trainee: Paul H. Wise, professor of pediatrics, FSI senior fellow, and Patricia Foo, MD/PhD student, economics. Studies show high levels of anemia, nearsightedness, intestinal worms, and poor health and sanitation among children in China’s rural boarding schools. This project will measure initial health and nutrition levels of students in a randomized control setting, and deploy a set of affordable and sustainable interventions in treatment schools that includes multivitamins, eyeglasses, deworming medication, and nutrition and sanitation training. The project will then assess what works and what does not by comparing improvements in academic performance in treatment and control groups. The results of this experiment are intended to inform education and nutrition policy in China at the central and provincial levels.
  • Controlling Drug-Resistant Tuberculosis: A Cooperative Agenda for China and North Korea
    Gary K. Schoolnik, professor of medicine and microbiology and immunology, and FSI senior fellow. Co-investigator: Sharon Perry, senior research scientist, Department of Medicine and FSI/CISAC. Rates of tuberculosis, a disease that thrives on poverty, malnutrition, and interrupted medical care, are now among the highest in the world in the Democratic People’s Republic of Korea (DPRK, North Korea), elevating the risk of an epidemic of drug-resistant strains and a spread into China. This project represents a unique historical opportunity to examine the relationship between food security, malnutrition, and the epidemiology of tuberculosis in a present-day famine.

  • Political Causes of Russia’s Public Health Crisis
    Kathryn Stoner, FSI senior fellow. Co-investigator: Rajaie Batniji, postdoctoral fellow, Department of Medicine. In spite of the economic advances and increases in GDP since the collapse of communism, Russia suffers from a range of dismal public health outcomes reminiscent of a much poorer country. This study seeks to understand what role political factors play in the country’s high adult mortality rate and declining life expectancy by mining World Bank and World Health Organization data and examining how Russians access healthcare services and information

  • Factors Affecting Adoption and Ongoing Use of Improved Biomass Stoves in Karnataka and Maharashtra, India
    Frank Wolak, professor of economics and FSI senior fellow. Co-investigator: Mark C. Thurber, research scholar, FSI/Program on Energy and Sustainable Development. Burning of biomass in traditional stoves is associated with a host of ills among an estimated 2.5 billion people around the world, even though cleaner and more efficient technologies exist that could mitigate the problems. This study will examine what factors affect cooking mode choice and utilization, with the objective of developing an econometric model that is useful for efforts that encourage the adoption of improved biomass stoves. The project also seeks to offer insights on poorly understood processes of technology adoption among poor populations and to understand the magnitude of health, development, and environmental benefits that might be achievable.
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Varun S. Sivaram, a CISAC undergraduate honors student writing his thesis about the viability of solar power as an alternative energy source at U.S. military bases, has been awarded a Rhodes Scholarship. Sivaram is majoring in engineering physics and international relations. He plans to pursue a doctorate in solar energy materials at Oxford.
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In the wake of the 2008 financial crisis and with the advent of a new Japanese government, the long-simmering concept of an East Asian Community (EAC) has come to a boil. Trilateral discussions among China, Japan, and South Korea--the "Plus Three"--have accelerated, including early steps toward formation of a trilateral free trade area. The Obama administration has responded with new interest in regionalism, including discussion of new trans-Pacific trade agreements and a bid to join the budding East Asia Summit process. In November 2010, the trans-Pacific APEC will convene in Japan, and the next annual meeting, in 2011, will take place in Hawaii.

This period could shape the future of regionalism in East Asia, but many questions have yet to be answered. Will former Prime Minister Yukio Hatoyama's initiative to build a new regional order on the core of Japan-China-ROK ties bear fruit? How does this concept of an EAC compare to other visions of regional integration, from APEC to the ASEAN-plus process? Will the ASEAN member nations cede leadership of the drive for tighter integration to Northeast Asia? Will the gravitational power of China's booming economy overwhelm concerns about its political system, military nontransparency, and possible ambition for regional hegemony? What role will the United States seek to play in Asian regionalism, and what will Asia's response be?

On September 9 and 10, 2010, the Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC) at Stanford University convened the second Stanford Kyoto Trans-Asian Dialogue. This distinguished gathering discussed the latest research into the course of regionalism across several dimensions: regional vs. trans-Pacific trade and production networks; traditional and nontraditional security; the intersection of historical memories and national cultures in forging, or thwarting, a new regional identity; and possible futures for the regional order and how it might interact with other transnational institutions.

The goal of the Dialogue was to facilitate discussion, on an off-the-record basis, among scholars, policymakers, media, and other experts from across Asia and the United States, and to establish trans-Asian networks that focus on issues of common concern.

The first Stanford Kyoto Trans-Asian Dialogue was held September 10-11, 2009, in Kyoto, on the theme of "Energy, Environment, and Economic Growth in Asia."

Kyoto International Community House Event Hall
2-1 Torii-cho, Awataguchi,
Sakyo-ku Kyoto, 606-8536
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Excerpt: "On November 12, during my most recent visit to the Yongbyon Nuclear Complex with Stanford University colleagues John W. Lewis and Robert Carlin, we were shown a 25 to 30 megawatt-electric (MWe) experimental light-water reactor (LWR) in the early stages of construction. It is North Korea's first attempt at LWR technology and we were told it is proceeding with strictly indigenous resources and talent. The target date for operation was said to be 2012, which appears much too optimistic."

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Understanding the emotional connection that people have to products inspires the innovative research and work of current Corporate Affiliates Program Fellow Yuichi Moronaga.

Moronaga engaged in policy-related work for Japan's Ministry of Economy, Trade, and Industry (METI) for nearly a decade, and he most recently served as a deputy manager for the Prime Minister's Cabinet Secretariat. As a student, Moronaga, who holds a bachelor's degree in mechanical engineering and a master's degree in biomedical engineering from Keio University in Yokohama, studied universal design--the design of making products, such as drinking fountains, and spaces, such as public parks, accessible to all. Moronaga took universal design one-step further by considering the emotional aspect of design, factoring positive feeling into accessibility.

In his work for METI, Moronaga applied his creativity and knowledge of universal design to numerous projects, including a child-focused policy agenda. Moronaga and his colleagues considered the psychology and physique of children when developing the agenda, noting the curiosity of children for exploring places considered dangerous by adults--those that are high, dark, and enclosed--and the broad range of variations in children's physiques. Mean data is not appropriate for child-focused design, says Moronaga, and so he and his team measured approximately 50 different body parts in order to provide a broad data set for designers to work from. After five years, child-focused design is catching on in Japan. A Kids Design award is now in place and the Kids Design Association, a non-profit organization, monitors products, businesses, and public spaces for child safety. Nearly 80 businesses in Japan are now dedicated to child-focused design. At the recent APEC Forum held in Japan, METI sponsored a booth displaying child-friendly products. Moronaga hopes that the trend will spread to other countries.

At the Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC), Moronaga is now engaging in research about essential value, which he describes as the "background story" behind companies and their products. Marketing based on essential value focuses on such things as a tradition of excellence, quality materials, and careful craftsmanship behind a company or product, which causes consumers to feel good about their purchase. The online shoe retailer Zappos, which emphasizes its customer service, is an example of a company that markets essential value. Moronaga is currently studying how social media enhances essential value, such as the way that positive consumer recommendations raise the value of a product. Already widespread in the United States-especially California, Moronaga says consumer reviews are catching on more in Japan.

Moronaga values the opportunity to speak with people at Stanford University and in local companies about his research and work experience, and about topics ranging from the environment to politics. Amidst the prevalence of hybrid cars and exciting green technology research in California, he was surprised to find that energy-saving technologies, such as solar panels, are not as widespread as in Japan. On the other hand, he appreciates discussions and hearing American perspectives on political topics, such as security issues, that he feels are less commonly discussed in Japan.

Moronaga views the connections with people that he and his family are making while at Shorenstein APARC this year as long term and he hopes that his son, who is four years old, will have a happy adjustment to living in the United States and remember the experience for the rest of his life.

 

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Yuichi Moronaga, 2010-2011 Corporate Affiliates Program fellow
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