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.
Petróleos de Venezuela, S.A.: The Right-Hand Man of the Government
Petróleos de Venezuela, S.A. (PDVSA), the national oil company (NOC) of Venezuela, is a major energy producer. Vertically integrated, the company conducts large-scale domestic exploration and production activities in both oil and natural gas, operates domestic and international refining facilities, and sells gasoline products to consumers both at home and abroad.
The Venezuelan government has relied on PDVSA to fund and implement a heavily interventionist strategy with several aims. The influx of large hydrocarbon revenues has funded Venezuelan government projects to improve social conditions, particularly for the poor. These revenues have also enabled the government to cement patronage networks and nationalize those economic sectors that might otherwise threaten its rule.
This study provides a descriptive account of how the company operates under the considerable mandates of the Venezuelan state including a brief history of PDVSA, chronicling its development from nationalization, a snapshot of PDVSA as a company today, describing its production, refining, and other operations. Following these preliminaries, the study concentrates on PDVSA's framework today, suggesting three models: PDVSA as a government revenue-provider, implementer of political objectives, and viable business. The paper also outlines PDVSA's role as an important revenuecollecting actor for the Venezuelan government and how PDVSA has become an implementing agent for the state, delivering revenues to government-selected beneficiaries and making business decisions in support of government objectives. Finally, the paper addresses PDVSA as a business.
Ngai-Chi Chung
Program on Energy and Sustainable Development
Encina Hall East, E420
Stanford, CA 94305-6055
Ngai-Chi Chung manages PESD's efforts on investigating the developing industry of carbon storage. His focus is on investigating the commercial viability of carbon storage projects and the business models, and the management of financial and regulatory risks behind the carbon storage projects.
Ngai-Chi Chung joined PESD in October 2007. He has a B.S. with distinction in Civil Engineering and a M.S. in Management Science and Engineering from Stanford University. He has worked as an Associate Consultant for Marakon Associates, with client experience including a major U.S. automotive manufacturer and a major European energy utility.
Indian gas study findings released
PESD has concluded a two year collaborative study on the Indian natural gas market with three India research groups- A.T. Kearney, Indian Institute of Management - Ahmedabad, and Integrated Research and Action for Development (IRADe). The study explores gas demand to the year 2025 in the three main gas consuming sectors within India - electricity generation, nitrogenous fertilizer production, and industrial applications - under a range of different policy and economic scenarios.
Regional air pollution constraints in the power sector - already underway in certain parts of India could reduce carbon dioxide emissions by over 100 million tonnes per year. Reforms underway in the Indian coal sector, however, could bring a surge in new supplies, which would undermine the opportunities for gas in the power sector.
From an international supply standpoint, India doesn't appear able to guarantee the offtake of a proposed large natural gas pipeline from Iran within the next 10-15 years, making the project very difficult to justify from a financial risk standpoint.
Regulating Competition in Wholesale Electricity Supply
Abstract
The experience of the past ten years suggests that the potential benefits from electricity industry restructuring are small relative to those that can be achieved from introducing competition into other network industries such as telecommunications and airlines. In addition, the probability of a costly market failure in the electricity supply industry, often due to the exercise of unilateral market power, appears to be significantly higher than in other network industries.
A major theme of this chapter is that electricity industry re-structuring is an evolving process that requires market designers to choose between an imperfectly competitive market and an imperfect regulatory process to provide incentives for least-cost supply at various of stages of the production process. The fundamental goal of the market design process in the wholesale market regime is to limit the ability of suppliers to exercise unilateral market power either explicitly through market price-setting mechanisms or implicitly through the regulatory price-setting process.
There are a number ways the regulator can limit the ability of suppliers to exercise unilateral market power-namely, (1) alter the market structure, (2) change market rules, (3) impose penalties and sanctions on market participants for their behavior, and (4) even explicitly set the prices that market participants receive for their production. This chapter provides a theoretical framework for understanding how to make these choices in order to design a wholesale market that benefits consumers relative to the former vertically-integrated utility regime. The paper uses this framework to understand the causes of the disappointing experience with wholesale electricity restructuring in the US. This discussion points to a number of ways to increase the likelihood that restructuring in the US will ultimately benefit consumers.
PESD Annual Review Meeting
The PESD's 2007 Annual Review Meeting, which will be held November 13-14, 2007 at Stanford University, provides the opportunity to take a look at major issues in the world's energy system, as well as PESD's current research and plans for the future.
PESD is a growing international research program that works on the political economy of energy. We study the political, legal, and institutional factors that affect outcomes in global energy markets. Much of our research has been based on field studies in developing countries including China, India, Brazil, South Africa, and Mexico.
At present, PESD is active in four major areas: climate change policy, energy and development, the emerging global natural gas market, and the role of national oil companies.
We have made available the agenda with more detail on the event. The substance of the workshop will begin at 1pm on Tuesday, November 13, with an overview of the program. Then we will focus the rest of the time on a few main research topics, discussing the current state of research for each as well as our plans for the future. We also anticipate discussion of areas where PESD can better collaborate with other institutions. The meeting ends at 1pm on Wednesday, November 14.
Schwab Center
680 Serra Street
Stanford, CA 94305-6090
Wired Magazine interviews Jeremy Carl on Clean Coal
Coal is dirty. But coal is driving the U.S., Chinese and Indian economies. And therefore, coal is not going away. Renewable energy sources like solar and wind generate only 1 percent of the world's electricity. Do the math: Making coal burn cleaner might be the most pressing environmental problem that no one talks about.
Despite recent estimates that pollution from China's booming coal industry reaches U.S. shores in as little as five days, the green-tech investment boom that has funded the rise of biofuels has bypassed coal. Even the head of the World Coal Institute recently proclaimed the last 10 years "a lost decade" for clean coal, saying it's time to play catch-up.
Stanford's Jeremy Carl, a research fellow in the Program on Energy and Sustainable Development, couldn't agree more. He spoke on the phone with Wired News to discuss China, the holy grail of clean coal and how many coal plants he'd trade for Kyoto's accomplishments.
Stanford research fellow Jeremy Carl says, "Coal is as dirty as it gets," but warns against throwing the possibly cleaned-up baby out with the dirty bathwater.
Wired News: Why'd you get into clean coal?
Jeremy Carl: I looked at the numbers. It's a question of where the big sources of emissions are and where we can attack them.
WN: Can you give us an idea of the scale of coal power? Can you put coal in context as an energy source?
Carl: Only oil makes a bigger contribution to global energy. In terms of energy in the industrial world, it's about 40 percent of electricity production.
WN: How dirty is coal?
Carl: Coal is as dirty as it gets. Coal has every element in the periodic table. And depending where in the world you get it from, "coal" can mean 100 different substances. If you sent the sort of coal you might use in a typical Indian plant to a supermodern boiler in Japan, it would shut the place down.
WN: But there's got to be good things about coal.
Carl: It's cheap. And coal doesn't have the kind of extreme risk that nuclear power has. You're not going to build a dirty bomb out of coal. And unlike other fossil fuels, it is really widely distributed, so there is less of a coal OPEC.
WN: And that distribution would seem to make resource wars less likely to break out over coal?
Carl: Yes.
WN: Is there an energy source that could replace coal?
Carl: Natural gas is the only viable replacement, and it's not clear that the natural-gas supply could scale up to replace coal.
WN: So, how can we can make coal cleaner?
Carl: The most-well-known is flue-gas desulfurization, which takes sulfur dioxide out of smoke stacks, and came out of concerns about acid rain. There are other pollution-control devices for nitrogen oxide and mercury filters.
WN: What about up-and-coming technologies like carbon capture and sequestration? Can you tell us about that?
Carl: You're taking carbon from a smokestack and pressure-injecting it into a geological formation of some sort. We actually already do this process at an industrial level. We know how this works.
WN: Seems like we're spending a lot of time on the backend scrubbing pollutants out. Should we be designing in a cleaner process on the front end?
Carl: A lot of people point to integrated gasification-combined-cycle (IGCC) plants, which gasify coal before burning it, as the holy grail because they get you a cleaner process. It gives you a more concentrated stream of carbon that you can sequester underground more cheaply. The capital cost is very high, though, and we don't have a lot of experience in designing them.
WN: We hear a lot about China's coal industry. Can you compare it with the U.S. industry, which ranks second in the world?
Carl: We mine about (1.1 billion tons) of coal per year. China was at about 1.4 billion tons seven years ago. Now they are at 2.4 billion tons. So, they essentially took the second-biggest coal industry in the whole world and replicated it in seven years. And if you look at the Chinese plans, they plan to ramp it up even more in the future.
WN: Given the obvious environmental impacts of these plants, why don't we have better answers for these problems than the Kyoto Protocol (which the United States didn't sign, and which exempted China and India from emissions restrictions)?
Carl: I'll give you a speculative, personal answer. It has to do with the politics of the type of people who were negotiating Kyoto. And the pressure put on by environmental groups that were uncomfortable with coal. There was just so much pressure on the symbolic importance of getting a deal done.
WN: What would you have rather seen?
Carl: I think there has been some really good criticism that says, "Was the U.N. really a good forum for this? Or would it have been better to have taken the 10 countries who consume 60 percent of global energy and do something with real teeth in it?" I think that would have been a much better approach.
I would have happily traded every emissions gain from Kyoto for eight clean coal plants sequestering carbon in different countries. Because then we could have a real discussion that says, "This works. Now let's see who has to bear the cost."
WN: Why would that be such a big deal?
Carl: Because right now we're having a conversation with China and India where we're trying to get China and India to build clean coal plants by saying, "Here's this thing that's never been tried before at a mass scale. You should build one." And that's not going to work.
What Resource Wars?
Classic resource wars are good material for Hollywood screenwriters. They rarely occur in the real world.
For further discussion of the below article, also visit Debating Disaster: The World Is Not Enough at the National Interest.
Indian Gas
PESD has concluded a two year collaborative study on the Indian natural gas market with three India research groups- A.T. Kearney, Indian Institute of Management - Ahmedabad, and Integrated Research and Action for Development (IRADe). The study explores gas demand to the year 2025 in the three main gas consuming sectors within India - electricity generation, nitrogenous fertilizer production, and industrial applications - under a range of different policy and economic scenarios.
The study concludes that coal is likely to remain the dominant fuel in the power sector, but opportunities exist for gas in reducing regional air pollution and providing peaking power. For the fertilizer sector, significant opportunities exist to import cheap fertilizer, thereby reducing domestic gas demand, but political constraints will likely buoy gas demand. Industrial consumers will benefit from increased supplies from LNG to displace expensive liquid fuels, but cheap coal remains the dominant fuel for many industrial applications.
Regional air pollution constraints in the power sector - already underway in certain parts of India could reduce carbon dioxide emissions by over 100 million tonnes per year. Reforms underway in the Indian coal sector, however, could bring a surge in new supplies, which would undermine the opportunities for gas in the power sector.
From an international supply standpoint, India doesn't appear able to guarantee the offtake of a proposed large natural gas pipeline from Iran within the next 10-15 years, making the project very difficult to justify from a financial risk standpoint.
The State of Iraqi Oil
The Program on Energy and Sustainable Development and the Department of Energy Resources Engineering host this discussion with Thamir Abbas Ghadhban on the state of Iraqi oil. Mr. Ghadhban will present before a discussion with moderators Lou Durlofsky and David Victor, followed by a Q&A with the audience.
After the fall of the Iraqi regime in April 2003, Mr. Ghadhban took initiative to play a leading role in managing the severely damaged Iraqi oil industry. He became CEO of the Ministry of Oil in 2003 and later Minister of Oil in June 2004 through May 2005.
On January 30, 2005, Thamir Ghadhban was elected for membership to the Iraq National Assembly and became a member of the constitutional and economic committees. The next year he continued his service by becoming advisor to the Vice President in March 2006. Currently, he advises the Iraqi Prime Minister on oil and energy.
Author & co-author of more than fifty studies and technical papers dealing with various aspects of Iraqi oil fields in addition to several published papers about Iraq's oil industry, Thamir Ghadhban holds a B.Sc. in Geology from University College and an M.Sc in Petroleum Reservoir Engineering from the Imperial College, London University. He has worked in Iraqi oil since 1973.
Clark Center Auditorium
James H. Clark Center
318 Campus Drive
Stanford University
David G. Victor
School of International Relations and Pacific Studies
UC San Diego
San Diego, CA