Variable Energy Prices Research Articles

Regions at Risk of Energy Poverty: The Case of Apulia. Between Potential and Limitations of the Regional Planning for the 2007-2013 Programming Cycle

At the Community level, in recent years, the issues on poverty and energy efficiency as well as the socio-economic impacts are the basis of several political debates. The development of the European territory is having to deal with different mega trends and impacts of policies, in particular the increase in energy prices and the emergence of a new energy paradigm have significant territorial impacts. In fact, some regions are more vulnerable than others because of their socio-economic, climatic and geographic conditions and transportation. However variations in energy prices can offer significant development opportunities for regions able to exploit their potential for renewable energy production and/or to introduce innovations in related industries. The main research themes of the ReRisk project (Regions at Risk of Energy Poverty) are the impacts of the new European energy policy and of prices on economic competitiveness and social cohesion in Europe. The project instead of focusing on energy infrastructure, which is mostly at the heart of studies in the field of energy, looks to a large extent on the consumption side of energy. The policy recommendations of ReRisk do not limit only on energy policy, but the energy is a cross-cutting issue at the regional level. The aim is to reduce the vulnerability of regions in the short term and improve their adaptive capacity in the medium-long term. Starting from ReRisk research, the paper analyses the case of Apulia. The region is characterized by a strong dependence on fossil fuels, by a social, infrastructural, economic and problematic situation, but at the same time it has good potential on a national scale for solar and wind power system which if valued and supported by appropriate policies could represent a significant turning point. Starting from a general description of the Italian context, by searching and combining data from official sources and the main regional plans for 2007-2013 cycle programming, the paper describes the Apulia’s context and at last summarize the results in a SWOT Analysis to evaluate intervention policies still in progress, showing their strengths, weaknesses, limitations, but also future opportunities.

Impacts of variable energy prices on the financial sustainability of water facilities: case from Ghana

Water is conveyed to consumers through systems that generally rely heavily on energy. The dependence on energy is a major challenge to utility providers because of frequent variation in energy prices. This paper assesses the effect of energy price changes on the financial sustainability of water facilities. It further investigates the proportion of energy cost to total costs of water supply. The study is based on a field survey that targeted five small town water systems and 15 water systems existing under the urban water sector in the Greater Accra and Ashanti regions of Ghana. The results show that energy (diesel and electricity) expenditure forms substantial component of water supply cost. The proportions of energy to total supply costs for small town and urban water systems are 31% and 29%, respectively. The total operational costs per water supply stand at 1.19 US$/m3 and 0.44 US$/m3 for small town and urban water systems respectively. The energy costs per water supply for small town and urban water systems are 0.40 US$/m3 and 0.13 US$/m3, respectively. Results further show that diesel-driven water systems are more sensitive to energy price changes than those of electricity-driven systems; therefore making financial profit from diesel-driven systems is highly elastic to diesel price changes. The results thus indicate that urban water systems are more efficient than small town water systems in terms of both energy and operational costs.

How do Various Risk Factors Influence the Green Certificate Market of Norway and Sweden?

The EU renewable energy directive sets a target of increasing the share of renewable energy used in EU to 20% by 2020. The Norwegian goal for the share of renewable energy in 2020 is 67.5%. The most important policy instrument for reaching this national target is the introduction of the common market for green certificates between Norway and Sweden. This new market mechanism is promoting new, renewable power projects until 2020, and is expected to generate 26.4 TWh from 2020.The market mechanism is neutral regarding renewable technologies, and the two countries share the same level of ambition regarding production increases of the common market. In the green certificate market the power producers receive electricity certificates from the authorities, and these can be sold to electricity suppliers and certain electricity users. The electricity customers cover the costs of the system, as the costs of purchasing certificates are added to the electricity bill. The price of electricity certificates is determined by supply and demand.A new energy system model covering Norway and Sweden is developed to analyze the impact of the green certificate market. The model covers five Norwegian and four Swedish regions, with exchange of electricity between adjacent regions and neighboring countries. Various scenarios are analyzed, focusing especially on various risk factors (e.g. grid expansion, delays of new power plants, transmission grid limitations, coordination issues between grid and power projects, licensing issues, etc), as well as the impact of variations in energy demand, energy prices and certificate prices. The analyses indicate the choice of power plant technology being installed depending on the scenario assumptions, as well as the timing and the geographical location of the various plants.

Optimizing the production scheduling of a single machine to minimize total energy consumption costs

Abstract The rising cost of energy is one of the important factors associated with increased production costs at manufacturing facilities, which encourages decision-makers to tackle this problem in different manners. One important step in this trend is to reduce the energy consumption costs of production systems. Considering variable energy prices during one day, this paper proposes a mathematical model to minimize energy consumption costs for single machine production scheduling during production processes. By making decisions at machine level to determine the launch times for job processing, idle time, when the machine must be shut down, “turning on” time, and “turning off” time, this model enables the operations manager to implement the least expensive production scheduling during a production shift. To obtain ‘near’ optimal solutions, genetic algorithm technology has been utilized. Furthermore, to determine whether the heuristic solution provides the minimum cost and the best possible schedule for minimizing energy costs, an analytical solution has also been run to generate the optimal solution. Next, a comparison between the analytical solution and heuristic solutions is presented; for larger problems, the heuristic solution is preferable. The results indicate that significant reductions in energy costs can be achieved by avoiding high-energy price periods. This minimization process also has a positive environmental effect by reducing energy consumption during peak periods, which increases the possibility of reducing CO 2 emissions from power generator sites.

Concept Development of Optimal Mine Site Energy Supply

This paper reports on early work and concept development for Optimal Mine Site Energy Supply, where the specific energy supply requirements and constraints for mineral production operations are considered against methodologies that have been applied for other sectors and in other energy policy regimes. The primary motivation for this research is to help ensure that Canadian mineral producers will achieve reduced production costs through improvements in the efficiency with which they consume energy resources. Heat has not yet been considered for the mining sector in an integrated manner, which makes polygeneration of great interest. The methodology that optimizes configuration of polygeneration systems for mine sites has not been reported before. The variety of mining circumstances, temporal variations in energy prices, institutional inertia, and conservatism in design for mines are some of the reasons for this. This paper reviews some aspects of precedent energy management practice in mineral operations, which highlights energy challenges characteristic of the sector and sets out the initial formulation of optimal mine site energy supply. The review indicates the additional benefits of energy supply systems for mine sites that concurrently meet all utilities.

Real-Time Density Forecasts From Bayesian Vector Autoregressions With Stochastic Volatility

Central banks and other forecasters are increasingly interested in various aspects of density forecasts. However, recent sharp changes in macroeconomic volatility, including the Great Moderation and the more recent sharp rise in volatility associated with increased variation in energy prices and the deep global recession—pose significant challenges to density forecasting. Accordingly, this paper examines, with real-time data, density forecasts of U.S. GDP growth, unemployment, inflation, and the federal funds rate from Bayesian vector autoregression (BVAR) models with stochastic volatility. The results indicate that adding stochastic volatility to BVARs materially improves the real-time accuracy of density forecasts. This article has supplementary material online.

Irrigation modernization and water conservation in Spain: The case of Riegos del Alto Aragón

This study analyzes the effects of irrigation modernization on water conservation, using the Riegos del Alto Aragon (RAA) irrigation project (NE Spain, 123354 ha) as a case study. A conceptual approach, based on water accounting and water productivity, has been used. Traditional surface irrigation systems and modern sprinkler systems currently occupy 73% and 27% of the irrigated area, respectively. Virtually all the irrigated area is devoted to field crops. Nowadays, farmers are investing on irrigation modernization by switching from surface to sprinkler irrigation because of the lack of labour and the reduction of net incomes as a consequence of reduction in European subsidies, among other factors. At the RAA project, modern sprinkler systems present higher crop yields and more intense cropping patterns than traditional surface irrigation systems. Crop evapotranspiration and non-beneficial evapotranspiration (mainly wind drift and evaporation loses, WDEL) per unit area are higher in sprinkler irrigated than in surface irrigated areas. Our results indicate that irrigation modernization will increase water depletion and water use. Farmers will achieve higher productivity and better working conditions. Likewise, the expected decreases in RAA irrigation return flows will lead to improvements in the quality of the receiving water bodies. However, water productivity computed over water depletion will not vary with irrigation modernization due to the typical linear relationship between yield and evapotranspiration and to the effect of WDEL on the regional water balance. Future variations in crop and energy prices might change the conclusions on economic productivity.

Real-Time Density Forecasts from VARs with Stochastic Volatility

Central banks and other forecasters have become increasingly interested in various aspects of density forecasts. However, recent sharp changes in macroeconomic volatility such as the Great Moderation and the more recent sharp rise in volatility associated with greater variation in energy prices and the deep global recession pose significant challenges to density forecasting. Accordingly, this paper examines, with real-time data, density forecasts of U.S. GDP growth, unemployment, inflation, and the federal funds rate from VAR models with stochastic volatility. The model of interest extends the steady state prior BVAR of Villani (2009) to include stochastic volatility, because, as found in some prior work and this paper, incorporating informative priors on the steady states of the model variables often improves the accuracy of point forecasts. The evidence presented in the paper shows that adding stochastic volatility to the BVAR with a steady state prior materially improves the real-time accuracy of point and density forecasts.

Petrochemicals from oil, natural gas, coal and biomass: Production costs in 2030–2050

Methane, coal and biomass are being considered as alternatives to crude oil for the production of basic petrochemicals, such as light olefins. This paper is a study on the production costs of 24 process routes utilizing these primary energy sources. A wide range of projected energy prices in 2030–2050 found in the open literature is used. The basis for comparison is the production cost per t of high value chemicals (HVCs or light olefin-value equivalent). A Monte Carlo method was used to estimate the ranking of production costs of all 24 routes with 10,000 trials of varying energy prices and CO 2 emissions costs (assumed to be within $0–100/t CO 2; the total CO 2 emissions, or cradle-to-grave CO 2 emissions, were considered). High energy prices in the first three quarter of 2008 were tested separately. The main findings are: • Production costs: while the production costs of crude oil- and natural gas-based routes are within $500–900/t HVCs, those of coal- and biomass-based routes are mostly within $400–800/t HVCs. Production costs of coal- and biomass-based routes are in general quite similar while in some cases the difference is significant. Among the top seven most expensive routes, six are oil- and gas-based routes. Among the top seven least expensive routes, six are coal and biomass routes. • CO 2 emissions costs: the effect of CO 2 emissions costs was found to be strong on the coal-based routes and also quite significant on the biomass-based routes. However, the effect on oil- and gas-based routes is found to be small or relatively moderate. • Energy prices in 2008: most of the coal-based routes and biomass-based routes (particularly sugar cane) still have much lower production costs than the oil- and gas-based routes (even if international freight costs are included). To ensure the reduction of CO 2 emissions in the long-term, we suggest that policies for the petrochemicals industry focus on stimulating the use of biomass as well as carbon capture and storage features for coal-based routes.

Modelling high level system design and unit commitment for a microgrid

This article develops a linear programming cost minimisation model for the high level system design and corresponding unit commitment of generators and storage within a microgrid; a set of energy resources working co-operatively to create a cost effective, reliable and environmentally friendly energy provision system. Previous work in this area is used as a basis for formulation of a new approach to this problem, with particular emphasis on why a microgrid is different to centralised generation or other grid-connected decentralised energy resources. Specifically, the model explicitly defines the amount of time that the microgrid would be expected to operate autonomously, and restricts flow of heat between microgrid participants to defined cases. The model developed is applied to a set of United Kingdom commercial load profiles, under best current estimates of energy prices and technology capital costs, to determine investment attractiveness of the microgrid. Sensitivity analysis of results to variations in energy prices is performed. The results broadly indicate that a microgrid can offer an economic proposition, although it is necessarily slightly more expensive than regular grid-connected decentralised generation. The analysis results have raised important questions regarding a fair method for settlement between microgrid participants, and game theory has been identified as a suitable tool to analyse aspects of this situation.

The rebound effect: Microeconomic definitions, limitations and extensions

The rebound effect results in part from an increased consumption of energy services following an improvement in the technical efficiency of delivering those services. This increased consumption offsets the energy savings that may otherwise be achieved. If the rebound effect is sufficiently large it may undermine the rationale for policy measures to encourage energy efficiency. The nature and magnitude of the rebound effect is the focus of long-running dispute with energy economics. This paper brings together previous theoretical work to provide a rigorous definition of the rebound effect, to clarify key conceptual issues and to highlight the potential consequences of various assumptions for empirical estimates of the effect. The focus is on the direct rebound effect for a single energy service — indirect and economy-wide rebound effects are not discussed. Beginning with Khazzoom's original definition of the rebound effect, we expose the limitations of three simplifying assumptions on which this definition is based. First, we argue that capital costs form an important part of the total cost of providing energy services and that empirical studies that estimate rebound effects from variations in energy prices are prone to bias. Second, we argue that energy efficiency should be treated as an endogenous variable and that empirical estimates of the rebound effect may need to apply a simultaneous equation model to capture the joint determination of key variables. Third, we explore the implications of the opportunity costs of time in the production of energy services and highlight the consequences for energy use of improved ‘time efficiency’, the influence of time costs on the rebound effect and the existence of a parallel rebound effect with respect to time. Each of these considerations serves to highlight the difficulties in obtaining reliable estimates of the rebound effect and the different factors that need to be controlled for. We discuss the implications of these findings for econometric studies and argue that several existing studies may overestimate the magnitude of the effect.

Fresh water by reverse osmosis based desalination: simulation and optimisation

The reverse osmosis (RO) desalination process to make fresh water from seawater has been studied here. First, a model for the process is developed. Sensitivity of different operating parameters (feed flow rate, feed pressure) and design parameters (internal diameter, total number of tubes) on the recovery ratio are studied via repetitive simulation. Finally, an optimisation framework for the process is developed so as to maximize the recovery ratio or a profit function using different energy recovery devices, subjectto general constraints. The optimal operating parameters (feed flow rate, feed pressure) and design parameters (internal diameter, total number of tubes) are determined by solving the optimisation problem using an efficient successive quadratic programming (SQP) based method. The optimal values for the decision variables depend on the constraints introduced, and are also sensitive to variations in water and energy prices, as well as feed concentration. The use ofthe emerging energy recovery devices is widely justified, reporting much higher reductions in operating costs than the traditional technology used for this purpose. Using a pressure exchanger device, it is possible to reduce energy consumption by up to 50%.

Energy Tax and Competition in Energy Efficiency: The Case of Consumer Durables

The purpose of this paper is to analyze the role of anenergy tax on technical improvements and on prices ofconsumer durables induced by strategic competition inenergy efficiency. If the gasoline tax is raised thisdoes in principle not affect the producers of carsbecause the motorist pays for it in terms of a highercost of using the car. This, however, affects the unitsales of car producers because of substitution towardsother modes of transportation. A second element ofreaction to energy price variation is an indirect oneand relates to the effect of energy prices ontechnology. Competition forces car producers todevelop more energy efficient cars in order to reducethe cost of using a car. This indirect effect canpartly offset the direct effect of higher energyprices on demand if it is profitable for theautomobile industry to engineer more energy efficientequipment. We will analyze the impact of an energy taxon energy efficiency and on the price of a durablegood. This will be done within the framework of aduopoly competing in prices and in the energyefficiency of its products. The government chooses awelfare maximizing energy tax as an incentive toinnovate. Then we will analyze a strategic two-stagedecision process in which the duopolists first decideabout energy efficiency and then compete in prices.

Technical note: The heat treatment plant as an energy system

Heat treatment is one of the most energy intensive operations in the engineering industry. Heat treatment plants are complex energy systems with continuous and batch processes and dependencies between processes. Development of new technology and varying energy prices makes it difficult to decide how to invest and schedule the production to reach at the lowest possible system cost.

Optimization Topics Related to Small Power Producing Facilities Operating under Energy Spot Pricing Policies

Small Power Producing Facilities will become more and more common as the various provisions of the Public Utility Regulatory Policies Act (PURPA) are taken advantage of by utility and customers. These facilities incorporate several features which allow the user to increase his operational flexibilty with respect to the local utility. These facilities can be: local generation, local dependent generation, local energy storage facility, and shiftable load schedule. The only true control the utility has over the actual operation of such facilities is through the judicious selection of the energy prices proposed to such users both for the sale and purchase of energy. It is likely that most utilities will react to this novel user-utility relationship by implementing time-varying energy prices to better reflect their own production costs. These time varying energy prices are often referred to as Spot Prices and are rather commonly used in Europe. A key issue is then the simulation of the various SPPF loads under various spot pricing policies and as they would be seen from the utility's point of view. The purpose of the paper is to describe a general and flexible model for a large variety of SPPFs and to demonstrate its use on a number of operations planning and plant design problems.

Incorporating Risk Considerations into the Estimation of Demand for Diesel Fuel by Crop Producers

A quadratic programming model was formulated to estimate diesel fuel demand by a representative risk averse crop producer. Data to estimate the demand function were obtained by varying energy prices, crop prices, and degree of risk aversion. Diesel fuel demand was not very responsive to energy price changes. Wheat and soybean prices as well as producer's attitude toward risk had greater impacts on fuel use than did energy prices. Increases in soybean and sorghum prices tended to increase diesel fuel use while increases in wheat prices and degree of risk aversion decreased diesel fuel use.