US Energy Sector Research Articles

Dynamic conditional correlation between green and grey energy ETF markets using cDCC-MGARCH model

ABSTRACTUsing the cDCC form of the multivariate GARCH models (MGARCH), this paper examines the time-varying conditional correlations among green renewable, grey non-renewable, and the conventional investment strategy in the exchange-traded funds (ETFs) markets. Daily excess returns for the largest energy ETFs are used as proxies for the US energy sector over the period of 25 June 2008 to 9 May 2023. The empirical results find that the AR(1)-GARCH(1, 1)-cDCC model with t-distribution to be the best fit. The results indicate that the time-varying correlations between green and grey energy ETFs are between 0.42 and 0.55 and statistically significant at 10%, with lesser degree of persistence in green energy, while there is a high significant co-movement between the grey energy and the traditional investment strategy. This, in turn, implies that investing in green energy ETFs provides better diversification. These results provide important implications for policymakers, portfolio managers and investors on the benefits of portfolio diversification in energy markets amid the current global energy crisis.

Cash flow investment, external funding and the energy transition: Evidence from large US energy firms

We examine the relationship between cash flow and investment in the US energy sector from 1988 to 2020. Our analysis incorporates firms’ financial constraints and the type of energy production in which they are engaged, distinguishing between brown and green generation. Our findings reveal a positive relationship between investment and cash flow for green energy firms, which behave similarly to constrained energy firms. While traditional brown energy firms tend to use higher cash flow to increase dividend payments and repurchase equity, green and constrained firms use it to repay debt and to fund investment. Our results suggest that policies aimed at strengthening the linkages between financial intermediaries and green firms could unlock cash flow resources for investment and innovation, facilitating the scaling up of operations during the energy transition. To ensure the sustainability of the transition, it is critical to reduce the reliance of green energy firms on internally generated cash flow, which is subject to volatility and cyclical macroeconomic conditions.

Solar events and the US energy sector: a novel sectoral spillover GVAR approach introducing indirect GIRFs (IGIRF)

Solar events and the US energy sector: a novel sectoral spillover GVAR approach introducing indirect GIRFs (IGIRF)

Climate Change and The Inflation Reduction Act: Recommendations for Job Seekers in US Energy

The onset of the global climate crisis has caused many to consider potential impacts on the United States economy, particularly those on the energy sector. Currently dominated by traditional means of production such as coal and fracking, the sector is set to shift towards more sustainable forms such as solar, wind, hydroelectric, and nuclear as stakeholders seek to keep warming below 1.5℃. Accelerating this shift is the recently passed Inflation Reduction Act (IRA), which promises new green incentives, but also leaves questions unanswered regarding the true scale of US divestment from fossil fuels. This paper seeks to combine data regarding projected employment in carbon-intensive/neutral industries with examination of provisions in the IRA, in order to make recommendations for those considering jobs in the US energy sector.

Assessing the performance of exchange traded funds in the energy sector: a hybrid DEA multiobjective linear programming approach.

This paper proposes a two-step approach to build portfolio models. The first step employs the Data Envelopment Analysis (DEA) to select assets attaining efficient financial performance according to a set of indicators used as inputs and outputs. The second step builds interval multiobjective portfolio models to obtain the optimal composition of efficient portfolios previously identified with respect to investor preferences. The usefulness of this proposed methodology is illustrated through a selected sample of diversified Exchange Traded Funds (ETFs) operating in the US energy sector. Our results with respect to all models and time horizons mainly show that: (i) ETFs related to nuclear energy are more often viewed as efficient according to all DEA models considered; (ii) the efficient portfolios do not contain any ETFs related to the renewable energy sector; and (iii) natural gas and oil are the sectors that have the most ETFs represented in efficient portfolios.Supplementary InformationThe online version contains supplementary material available at 10.1007/s10479-021-04323-6.

Financing Energy Innovation: The Need for New Intermediaries in Clean Energy

This study aims to advance the understanding of and address the valley of death that is significantly widening in the clean energy domain due to its financing challenges. We conduct a case study on three new investment vehicles in the US energy sector (First Look Fund by Activate, Prime Impact Fund by Prime Coalition, and Aligned Climate Capital), which set their missions to contribute to bridging the valley of death in clean energy. While three cases focus on different technological development phases, they raise a consistent point that investment opportunities (and risks) are not assigned to the appropriate investors. We argue that current financial intermediaries have failed to effectively channel funding sources to entrepreneurs, as we evidence network fragmentation and information asymmetries among investor groups and companies. Therefore, we propose three intermediary functions that can facilitate intelligent and effective information flow among investors throughout the entire energy technology development cycle. Our findings highlight the emergence of collaborative platforms as critical pillars to address financing issues among new energy ventures.

Financing Energy Innovation: The Need for New Intermediaries in Clean Energy

This study aims to advance the understanding of and address the valley of death that is significantly widening in the clean energy domain due to its financing challenges. We conduct a case study on three new investment vehicles in the US energy sector (First Look Fund by Activate, Prime Impact Fund by Prime Coalition, and Aligned Climate Capital), which set their missions to contribute to bridging the valley of death in clean energy. While three cases focus on different technological development phases, they raise a consistent point that investment opportunities (and risks) are not assigned to the appropriate investors. We argue that current financial intermediaries have failed to effectively channel funding sources to entrepreneurs, as we evidence network fragmentation and information asymmetries among investor groups and companies. Therefore, we propose three intermediary functions that can facilitate intelligent and effective information flow among investors throughout the entire energy technology development cycle. Our findings highlight the emergence of collaborative platforms as critical pillars to address financing issues among new energy ventures.

Technological revolution in the US energy sector, understanding the implications for the US dependency on fossil energy imports

AbstractDuring various periods, the United States (the US) has adopted diverse policies for achieving self‐sufficiency in supplying its required energy. Technological revolution that has begun from a decade ago pursues the goal of energy independency. Using new technologies for developing its unconventional oil and gas resources, the United States has taken steps in line with the accomplishment of its objective of energy independence. Numerous articles have examined the various technical, economic and political aspects and consequences of the US technological revolution. This paper, in a new and innovative approach based on theoretical framework of neorealism, aims to show the implications of technological revolution in energy sector on the US dependency on fossil energy imports. Efforts will be made to find an answer to this main question as to what effects have the technological revolution occurrence in energy sector had on the US dependency on the fossil energy imports? In response, the study's main hypothesis is that, the US policy to exploit the unconventional oil and gas resources through technological revolution can be elaborated within the framework of the self‐sufficiency strategy for energy production in line with the reduction of the threats stemming from dependency on the oil and gas imports.

Corporate Management in Companies with State Participation in the US Energy Sector

Corporate Management in Companies with State Participation in the US Energy Sector

THE VIRTUAL POWER PLAN INTERACTION AND ACTIVE CONSUMERS ANALYSIS, IN THE FRAMEWORK OF THE HIERARCHICAL SYSTEM WITH THE LIBERALIZED LIMITATIONS

Ukraine's energy development is under review in the regime of reform and legislative forces. The path toenergy liberalization will not be a new process in the development of the EU and US energy sectors, but it will notbe fully implemented in Ukraine. The liberal energy main features are the guarantee of a secure overall system,efficient operation and electricity vacancies use for competitors. The success of the electricity market, not usingadequate regulatory policies, and the participating entity's profitability. Offered by virtual power plants andconcepts of energy collaboration - a global trend that is actively promoted and implemented in their regions. It canactually be used for the domestic development of the energy sector. As a result, the state and main stages ofreforming the Ukrainian energy market are analyzed. The stages, transitional, criterion and possible conservationin enterprises and liberalized energy markets are evaluated. The main factors that should make the implementationof energy market liberalization are described. For the active consumers, who are the main element of the transitionand placement of the larger-scale libero, the energy market remains negative, experiencing and experiencing aconscious and active energy value in the world.

E&P Notes (March 2020)

E&P Notes (March 2020)

Have greenhouse gas emissions from US energy production peaked? State level evidence from six subsectors

Analyses of the Environmental Kuznet’s Curve (EKC) hypothesis have largely focused on economy level data with occasional analyses exploring sector level data. This paper exploits a new data set which contains sector level data on greenhouse gas emissions from the US energy sector as well as subsector data from six disjoint subsectors which together comprise the entire energy sector. The data contained in this data set is annual data at the state level from 1990 through 2011. Using differenced data, we specify an econometrically sound EKC model and compare it against a model containing only a linear GDP per capita term. We find that using a subsector level modeling approach, evidence for the EKC hypothesis is virtually nonexistent. Moreover, we find that aggregated subsector level estimates outperform sector-level estimate on in-sample accuracy. These estimated models are then used to forecast emissions for the energy sector. We find evidence that US greenhouse gas emissions from energy production are at or near a peak.

State policies for collaborative local renewable integration

New technologies are transforming the US energy sector. Unprecedented opportunities lie ahead for local renewable energy development. Proper system and resource integration is therefore an economic imperative. Technical and economic integration will require policy alignment and collaboration among cities, counties, energy utilities (both gas and electric), and state government. There is also a potentially invaluable role for higher education in support of local planning and integration. State policy interventions in support of collaborative local renewable integration will be a necessary supplement to existing market and regulatory structures.States can affirm fundamental property rights that empower communities and citizens to actively support local climate action and adaptation. State policy can drive the evolution of existing market and regulatory structures to account for local differences and provide increased flexibility for local jurisdictions to address their diverse local resource opportunities and usage profiles.In parallel, states can encourage cities and counties to increase their capacity to take on vital new roles. State energy regulators will need to balance public interest in the economic health of the companies against they regulate against the opportunity to secure important benefits of local clean energy resource development and integration. They will need to create new processes for harmonizing and cross-leveraging progress toward diverse local goals with progress toward over-arching state goals.The key enabling factor will be a culture of collaboration between energy service providers and local governments. Collaborative local renewable integration can be empowered by state action that creates new points of coordination, integration and assistance.Through policy interventions, states can reduce or eliminate barriers to collaborative local renewable integration while capturing opportunities to bring together local government and energy utility capacities and data, plus capacities of universities, non-profit and utility training programs.

Are the interdependence characteristics of the US and Canadian energy equity sectors nonlinear and asymmetric?

Nonlinear, symmetric, and asymmetric dependence characteristics in energy equity sectors matter to portfolio investors and risk managers because of the risks and diversification opportunities they entail. Specifically, nonlinear dependence dynamics between assets are harder to predict, monitor, and manage, and can make investment positions go wrong unexpectedly. In this paper, we investigate whether the dependence dynamics of US and Canadian large-capitalized energy equity portfolios are nonlinear, symmetric, or asymmetric. We draw our results by implementing a robust copula approach based on time-varying parameter copulas and vine copula methods. Both time varying parameter and vine-copula methods indicate that the Canadian energy sector portfolio is driven by nonlinear negative tail asymmetric dependence during the global financial crisis and when the full sample period is employed. On the other hand, it displays nonlinear symmetric dependence during the oil price crisis, implying the need for close monitoring and rebalancing and a more continuous assessment of long investment positions. The US energy sector portfolio is driven by positive tail asymmetric dependence, and by symmetric dependence dynamics during crisis and non-crisis periods.

Cost Competitiveness of Electrolytic Hydrogen

Summary Hydrogen is often considered an energy carrier of the future in part because of the costs to implement a hydrogen-based system. However, using 7,182 industrial and commercial US retail electric utility rates, this study dynamically simulates electrolyzer operations under different utility rate structures and shows that electrolysis units can already provide cost-competitive fuel in 20 states operating under 81 retail electricity rates. Our analysis shows that current hydrogen production costs range from US$2.6 to US$12.3 kg−1 and can be significantly reduced through flexible operation if dynamic tariffs are used. Hydrogen production costs for the 81 utility rates in 20 states are already less than US$4.0 kg−1 and competitive with the fuel cost of gasoline vehicles. Thus, under the right conditions, hydrogen fuel is already cost competitive in the US energy sector and has several interesting possible roles to play in future energy and transportation systems.

Firm strategies and path dependencies: an emerging economic geography of industrial data

ABSTRACT This paper analyses how firms engaged in industrial data production in the power-generation industry operating within the US energy sector produce, collect, store, aggregate, analyse, and ultimately monetize and use industrial data. Industrial data activities are increasingly central to the strategic decision-making of firms in industries from energy to aerospace. This study focuses on whether industrial data production is dispersed and distributed or geographically concentrated. And further, what factors influence the location and concentration of industrial data-production activities. The results indicate that regional factors are affecting industrial data production and that regional policy may not only influence but also largely determine the evolving economic geography of industrial data.

The impact of market competition on CEO salary in the US energy sector1

In this work, we examine the impact of market competition on CEOs' salaries by analyzing a sample of allS&P American firms in the energy sector, in the 1992–2015 time-span, and measuring market competition by means of the so-called Herfindhal-Hirschman-Index. We divide industries into three sub-groups based on small, medium and high market concentration and try to expand our research by exploring the impact of the recent financial crisis. The paper investigates how CEOs' salaries are affected by firm-level determinants, e.g. firm size, returns on assets, returns on equity, capital expenditure, market concentration, Tobin's Q etc, as well as by the individual characteristics of each CEO, e.g. CEOs age, gender. Based on our findings, the market concentration index in the US energy sector has a negative and statistically significant impact on CEO salary for all firms that operate in either a highly monopolistic or a purely competitive environment. The results of this empirical work are robust after examining for different alternative high order fixed effects specifications.

Spillovers between oil and stock returns in the US energy sector: Does idiosyncratic information matter?

This paper investigates the inter-connectedness between WTI oil price returns and the returns of listed firms in the US energy sector. Specifically, we focus on the issue of whether firm-level idiosyncratic information matters. A generalised dynamic factor model is used to separate common components from idiosyncratic components in these energy stocks. Systemic connectedness is then estimated following Diebold and Yilmaz (2014). Our empirical results demonstrate the important role of industrial-level common information in understanding the oil–stock relationship. A number of interesting points include: the US energy sector is the net contributor to WTI price changes, but the effect is mainly driven by industrial-level common information; the oil and gas industry dominates other industries in the energy sector; the dynamic analysis shows that although idiosyncratic information is mostly independent of oil shocks, individual energy stock returns do respond to WTI price movements.

Projecting impacts of carbon dioxide emission reductions in the US electric power sector: evidence from a data-rich approach

Conditional forecasts of US economic and energy sector activity are developed using information from a dynamic, data-rich environment. The forecasts are conditional on a path for carbon dioxide emissions outlined in the US Environmental Protection Agency’s Clean Power Plan (CPP) and are estimated based on a factor-augmented autoregressive framework. Results suggest that overall growth will be slower under the CPP than it would otherwise; however, economic growth and CO2 reductions can be achieved simultaneously. There are little differences between unconditional (business-as-usual) and conditional forecasts of the variables in the early part of the forecast period; the impacts of the CPP are small while the constraints on carbon dioxide are less stringent. The results serve as a data-driven complement to structural analyses of policy change in the energy sector.

Potential impacts of expanded Arctic Alaska energy resource extraction on US energy sectors

This paper examines the potential effects of the expansion of crude oil and natural gas extraction in Arctic Alaska on the U.S. economy, focusing on key energy sectors. Expanded extraction activities are expected to boost the U.S. economy at relatively small rates because the oil and natural gas extraction industries comprise a small share of GDP compared to other U.S. industries. However, this expansion may have substantial implications on energy sectors, with considerable growth expected in the oil and petroleum products manufacturing industry. The U.S. trade balance for energy resources may be improved through increased exports of crude oil (108%), natural gas (26%), and petroleum products (10%). Such increased exports of energy from the U.S. are important supplies to the international energy market given the substantial role of the U.S. in global energy trade. In the domestic market, U.S. households enjoy lower prices of fossil fuels and electricity as a result of expanded extraction.