The Program on Energy and Sustainable Development is part of the Freeman Spogli Institute for International Studies.
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.
Over 1 billion people around the world lack access to electricity, and over 2 billion still cook with traditional biomass fuels, which cause significant mortality through respiratory disease. We study the factors affecting uptake of “modern” forms of energy like grid-supplied electricity, solar lanterns and solar home systems, and LPG (liquefied petroleum gas) as a substitute for biomass fuel. We also run randomized, controlled trials (RCT) to study the effect of these new energy sources on social welfare outcomes—like health, income, and educational attainment.
The ability of an electricity-generating firm with market power to influence the market price depends strongly on the volume the firm has pre-sold in the forward, or hedge, markets. However, the choice of hedge level may be a strategic decision in itself. In this analysis we show that the profit-maximizing choice of the hedge level depends on the extent to which the hedge price varies with the firms hedging decision, which relates to the transparency of the forward market. A lack of transparency results in the hedge price being independent of the firms hedge level. In this case, the optimal choice of hedging is an all-or-nothing decision and there was no equilibrium level of hedging in pure strategies. This outcome may explain an observed lack of hedge market liquidities in wholesale electricity markets with substantial market power. We perform the analysis for the monopoly and oligopoly cases and extend it by realistic cost functions and various degrees of competitiveness in the market. These results contribute to the extensive body of research on the price formation and strategic behavior in electricity forward and spot markets, as well as providing implications for transparency initiatives in market design.
Looking for a research opportunity this summer? Already have an internship? No problem! Join us on an exciting field research trip to use skills learned in the classroom to tackle a real-world problem: fossil fuel production and its effects on climate change. This trip is intended to align with other summer opportunities. Come learn about the Energy Production and the Environment in Canada trip details at our info session. Lunch will be served.
Find out more on our website here.
International Policy Studies Kitchen, Ground floor, Encina Hall (616 Serra St.)
Stanford University
Economics Department
579 Jane Stanford Way Stanford, CA 94305-6072
Website: https://fawolak.org/
Frank A. Wolak is a Professor in the Department of Economics at Stanford University. His fields of specialization are Industrial Organization and Econometric Theory. His recent work studies methods for introducing competition into infrastructure industries -- telecommunications, electricity, water delivery and postal delivery services -- and on assessing the impacts of these competition policies on consumer and producer welfare. He is the Chairman of the Market Surveillance Committee of the California Independent System Operator for electricity supply industry in California. He is a visiting scholar at University of California Energy Institute and a Research Associate of the National Bureau of Economic Research (NBER).
Professor Wolak received his Ph.D. and M.S. from Harvard University and his B.A. from Rice University.
Looking for a research opportunity this summer? Join us on an exciting adventure to use skills learned in the classroom to tackle a real-world problem: fossil fuel production and its effects on climate change. Come learn about the Energy Production and the Environment in Canada trip details at our info session. Lunch will be served.
Find out more on our website here.
International Policy Studies Kitchen, Ground Floor, Encina Hall (616 Serra St.)
6th Annual PESD Conference
Tuesday, December 15th, 2015
Stanford Institute for Economic Policy Research/Gunn Building
366 Galvez Street, Stanford University
G7 leaders committed this summer to phasing out fossil fuels by the year 2100. Actually making good on commitments to decarbonize will require an energy supply mix that is very different from today’s. A number of sources of energy have significant potential in theory to reduce the carbon content of the global energy supply. These include nuclear power (fission and fusion), carbon capture and sequestration of CO2 from fossil fuel combustion, enhanced geothermal, methane hydrates, biofuels, wave or tidal power, solar thermal, and off-shore wind. However, these options are “risky” in the sense that their long-term economic and political viability is difficult to assess given current information.
This uncertainty comes from various sources. Prospective investors may be unable to determine the ultimate cost of deploying a technology at scale because not enough projects have been built. Public perceptions of the environmental impacts and health and safety risks of a technology may block such crucial early implementations—whether or not these perceptions are justified by data. The location of an energy resource and its characteristics may require the cooperation of multiple geographic and administrative jurisdictions if it is to achieve an efficient scale of production. Geopolitical factors or instability in countries possessing key energy resources or raw materials may make international coordination difficult.
These sources of uncertainty will need to be managed if we are to meet aggressive carbon targets. This conference seeks to identify the non-technological issues of today that are holding back development of the energy technologies of tomorrow and to discuss what policymakers can do right now to increase the likelihood that at least some of these technologies will be economically and politically viable in time. Experts in each of these technologies will be asked to address the following questions and to present policy strategies that historical experience with other technologies suggests might be effective in overcoming the various barriers:
Ten Uncomfortable Facts about Energy and the Environment
Doug Kimmelman, Senior Partner and Founder, Energy Capital Partners
Nuclear Power (Fission and Fusion)
Burton Richter, Former Director, Stanford Linear Accelerator Center (SLAC)
Carbon Capture and Sequestration
Mark Zoback, Stanford University
Solar and Wind Power
Frank O’Sullivan, MIT
Advanced Biofuels
Christopher Knittel, MIT
Geothermal Energy
Michal Moore, University of Calgary
Pilot program was designed to first ground students in the basics of empirical research, then provide an opportunity to apply that knowledge while conducting fieldwork in an international setting.
The Freeman Spogli Institute for International Studies (FSI) and Office of International Affairs (OIA) launched a pilot collaboration last year to provide a rigorous, immersive teaching and training program for students interested in international fieldwork. The result was a program that included a quarter-long course in the spring of 2015 followed by three weeks in Mexico during the summer to design and conduct a field research study. OIA spoke with Frank Wolak, the Holbrook Working Professor of Commodity Price Studies in Economics and Senior Fellow at FSI, to learn more about the project, titled International Field Research Training: Energy Reform in Mexico.
While students at Stanford have many opportunities to pursue independent research projects, they rarely have the opportunity to receive first-hand training in conducting interviews, research design and field implementation. With that in mind, we set out to design a program that would carry the students through the basics of empirical research and then give them the opportunity to apply that knowledge under close faculty supervision. Taking students out of the classroom and giving them the opportunity to see textbook methods in action is invaluable.
Our hope is that this training equips the students with the academic and logistical skills they need to execute their own robust research, be that for an honors thesis, a capstone project or an advanced degree.
The Stanford course taught the basics of the design, implementation and interpretation of social science field research. Building on a basic knowledge of statistical methods and economics, the course first introduced observational field research and compared it with experimental field research. Significant attention was devoted to explaining what can and cannot be learned through each type of field research.
Topics covered included sample size selection, power and size of statistical hypothesis tests, sample selection bias and methods for accounting for it. Examples of best practice field research studies were presented as well as examples of commonly committed experimental design and implementation errors. Practical aspects of fieldwork were also covered, including efficient and cost-effective data collection, data analysis, teamwork and common ethical considerations.
After completing the quarter-long course on statistical research methods, the students, under the guidance of the Program on Energy and Sustainable Development's research team, adapted an education-based research intervention for the Mexican electricity sector. The purpose was to see if providing individuals with information about how their energy bill was calculated and simple ways to reduce household electricity consumption would cause household energy bills to go down.
Research was carried out in the city of Puebla, a city of 1.5 million people about 150 kilometers (93 miles) southeast of Mexico City. The Stanford students collaborated with students from the Universidad Popular Autónoma del Estado de Puebla (UPAEP). For the first few days, the students all met at an UPAEP classroom space to design and review the survey tool, making revisions and conducting practice interviews.
Once oriented in Puebla, the students set out daily in research teams to interview randomly selected households in middle-income neighborhoods in Puebla. The students branched out from a central meeting place in teams of three, pairing two Stanford students with one UPAEP student.
In the field, the students all wore nametags and UPAEP baseball caps to make themselves identifiable as surveyors to households. They worked in the field for eight to 10 hours a day, taking about an hour break for lunch. In the first few days, they were able to collect 15-20 surveys a day, but as they became more comfortable with their pitch and knocking on doors, they were able to increase their yield to a high of 44 surveys in one day. At the end of two weeks, they completed over 260 surveys in just 10 days of fieldwork.
The students were also active on social media documenting their daily activities. For more on the student perspective, their activities and impressions of the project, check out their blog on the FSI website.
There are a variety of situation-specific problems that are hard for any researcher to know fully without being immersed in the field. For example, one of the students' recommendations to improve energy efficiency was to switch household light bulbs from incandescent to compact fluorescents (CFL). This is a valid recommendation in the United States where most people still use incandescent bulbs in their homes, but – surprisingly to the team – most of the people interviewed had already converted to all CFLs in their home.
I was amazed with the students; the level of intellectual curiosity and engagement was impressive with ongoing discussions into the evening at times. The students were not only getting an in-country immersive experience while conducting research, but they were also developing critical thinking skills along the way.
Research aside, the in-country experience gave the students a keen understanding of how local residents live. The methodology employed for gathering data allowed the students to connect with many types of families, ranging from senior citizens living alone to multi-generational families living under one roof. Through direct contact with the community, the students developed an understanding of the local culture and learned local customs.
At FSI, we have a great wealth of experiential knowledge on conducting field research all over the world. In addition to consulting with faculty and research managers at FSI, OIA had been enormously helpful in connecting us with resources across campus and facilitating some of the trickier logistics, such as processing stipend payments to our international collaborators and navigating the human subjects approval process. OIA was also able to discern that Puebla was a viable option as a research site.
The pilot program exceeded our expectations in the best possible ways. Much of its success was due to the work of Elena Cryst ,'10, program manager for FSI's Global Student Fellows Program, who also accompanied us on our trip. She was an invaluable team leader and organizer and worked tirelessly to ensure that both the research and logistical aspects of the trip ran smoothly.
We will definitely be offering the field research course and research project again. We hope to go to another part of Latin America next, such as Chile or Colombia. We are also still active in Mexico, with three of the students that went on the trip working for us as research assistants this academic year, analyzing the data as it comes in and developing a self-administered online version of the survey instrument with which we hope to reach thousands of households in Puebla.
In addition, Elena will be using our experiences from the Mexico pilot to inform other FSI field research programs in China, Guatemala, India and potentially new sites for next year.
This article was originally published in The Stanford Report on October 27, 2015.
Professor Frank Wolak was recently interviewed by Julian Spector of CityLab regarding the use of nuclear energy in a zero-carbon grid. According to Professor Wolak, "It makes very little economic sense to phase [nuclear energy] out, particularly given how successful the U.S. nuclear industry has been over the past 30 years". Professor Wolak also points out that American nuclear generators are safer than ever while still boasting an impressive capacity factor.
Stanford students traded carbon allowances and renewable energy certificates as part of a new web-based simulation developed at PESD. The game taught students how complex energy and environmental markets work while also yielding insights that could help policymakers design better markets.
