Energy Security
This paper discusses the various economic and geo-political dimensions of U.S. energy security. Insofar as possible, it summarizes and critiques recent attempts to estimate the external economic costs of U.S. oil consumption that result from the vulnerability of the U.S. economy to oil price shocks, and from potential U.S. market power. The paper also discusses the extent to which military expenditures, foreign policy constraints, and the flow of petro dollars to rogue nations and unsavory groups might be ameliorated by U.S. efforts to reduce dependence on oil.
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Natural Gas Modeling
This paper examines in detail the representation of natural gas supply and demand in the NEMS model. It may suggest some revisions to the assumptions and/or baseline parameter values in the NEMS natural gas module, which will then be incorporated into the policy analyses of other technical reports and papers as needed.
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Natural Gas Markets
This paper provides an overview of the U.S. natural gas market, with particular focus on the adequacy of future natural gas supply to meet increasing demand. It discusses the expansion of domestic production due to advanced natural gas recovery techniques, and the role that may be played by imported Liquefied Natural Gas (LNG). Possible future price scenarios will also be estimated under different assumptions regarding the likelihood of future supply disruptions, and the integration of the U.S. market with the world gas market.
Natural Gas Vehicles
This paper examines the case for and against natural gas vehicles becoming an important component of the U.S. transportation system. It may suggest revisions to NEMS and may inform the transportation-related Technical Reports.
Technical Report Descriptions
Transportation
The U.S. transportation sector accounts for approximately two thirds of the country’s total oil consumption, and is almost wholly dependent on oil as the source of transportation fuels. It also accounts for over one quarter of all GHGs in the United States. This technical report analyzes a variety of broad policies simultaneously aimed at reducing the use of oil for vehicle fuels and at reducing transportation sector emissions. These include fuel economy standards, low-carbon fuel standards, gasoline taxes, and a feebate system that subsidizes the purchase of fuel efficient vehicles while penalizing the purchase of gas guzzlers. Broader impacts of the policies will also be discussed, such as their impact on local air pollution, the international competitiveness of U.S. auto manufacturers, and their distributional impacts across different household income groups
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Hybrid, Plug-in, and Electric Vehicles
Advanced vehicles provide a particular technological path to reducing oil use and GHGs in the transportation sector. This technical report provides a detailed overview of the representation of hybrid, plug-in hybrid, and electric vehicles in the literature and in NEMS, and may suggest revision of some of the baseline NEMS assumptions about the future costs and feasibility of these technologies. It also assesses the impact on emissions and oil consumption, along with the cost-effectiveness, of several policies specifically targeted at encouraging the deployment of these vehicles. These policies may include a vehicle production mandate, tax credits for consumers, and rebates or incentives for the installation of plug-in and electric vehicle charging infrastructure. This report also discusses broader issues associated with these advanced vehicle technologies, such as consumer preference for these new vehicle types, reliability, and the potential safety issues of new battery chemistries. In addition, the report discusses the possibility of “vehicle to grid” technology, where vehicle batteries are used to store electricity, particularly from intermittent renewable sources, which can then be sent back to the grid as needed. |
Electric Energy and Energy Efficiency
There is substantial potential for improvements in energy efficiency to meet relentlessly increasing demand for electricity. According to one estimate, energy efficiency gains may meet about half of the predicted load growth by 2025, with annual savings in energy costs exceeding $100 billion by the end of this period(NAPEE, 2007). However, the effectiveness of energy efficiency programs may be limited by various market obstacles. These include “principal-agent” problems (e.g., landlords may lack incentives to invest in efficiency upgrades if tenants reap the benefits in terms of lower energy costs), information barriers (e.g., consumers may be unaware of energy saving possibilities), and problems in capital markets (e.g., consumers may face excessive interest rates on loans to finance efficiency investments). Energy efficiency programs include appliance and building code standards, smart grid applications, state regulatory reform, financial incentives for efficiency investments, and information dissemination programs such as LEED (Leadership in Energy and Environmental Design) and Energy Star.
Policies assessed in this technical report could take a variety of forms, some of which could build on recent policy innovations at the state level. One approach might involve incentives for states to adopt policies that reward utilities for establishing programs yielding additional energy savings for their customers. Other approaches might be to establish federal energy efficiency standards similar to those adopted in several states, or to provide or extend tax credits to individuals and businesses for the adoption of energy saving technologies. Federal policy might also encourage increased energy efficiency requirements in state building codes for new residential and commercial structures.
Electricity Generation from Renewable Energy Sources
Renewable energy sources for electricity generation include wind, solar photovoltaics, solar thermal, hydroelectric, geothermal (including distributed geothermal), waves, tides, ocean thermal energy, and various types of biomass. Conventional hydroelectric power is by far the most widely utilized renewable technology in the United States, but most viable hydroelectric resources have already been harnessed. Wind energy, while still only accounting for a relatively small fraction of actual electricity generation, is the fastest growing renewable in the electricity sector. Although the potential energy from renewable sources is vast, the current costs of harnessing that energy, especially upfront capital costs, are high relative to the costs of conventional power generation. In addition, concerns exist regarding intermittency and transmission costs.
Possible federal policies to be assessed in this technical report include increased incentives for consuming renewable energy and increased incentives or mandates to make investments in renewable energy, such as with a federal Renewable Energy Production Incentive, and a national Renewable Portfolio Standard. Twenty-five states currently have their own Renewables Portfolio Standards, which require a minimum percentage of electricity sales to come from renewable sources.
Cap and Trade
Intensive public debate over a national program to reduce greenhouse gas (GHG) emissions has centered on the merits of a cap-and-trade system (along the lines of the European Union Emissions Trading Scheme) versus a carbon tax. Carbon taxes have the potential to raise large amounts of federal revenue which, if used to cut taxes that distort labor and capital markets, can generate relatively large gains in economic efficiency. A cap-and-trade system may or may not yield a comparable fiscal dividend, depending on whether allowances are given away freely to firms or whether they are auctioned and, if they are auctioned, how the revenues are used. Another potential advantage of taxes is that they fix the price of emissions, while under a cap-and-trade system emissions prices vary with shifts in energy demand, volatility in fuel prices, etc. Cap-and-trade systems could be designed to largely mimic the effects of carbon taxes in this regard as well though, through price-stabilizing provisions like allowance banking and borrowing. A further important design issue is the scope of the program in terms of which emissions sources are included, either directly or indirectly through emissions offset provisions.
This paper evaluates broad GHG emissions pricing policies at the national level, namely cap-and-trade systems and carbon taxes, against a number of metrics. The policies include both a modest and an aggressive scenario for cutting GHGs in the near term (2020) and the more distant future (2030). The specific policies considered vary in coverage, from one that prices CO2 emissions only to one that covers all GHGs (which also include, for example, methane and nitrous oxides).
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Nuclear Power
Approximately 20 percent of U.S. electricity is generated from 103 nuclear plants currently in operation. However, due largely to public concerns about safety, waste disposal, and nuclear materials proliferation, no new plants having been commissioned since 1978. Recently though, concerns over energy security and climate change, along with relentless growth in demand for new generation capacity, have prompted renewed interest in nuclear power as a relatively secure and low-emissions source of electricity. |
This technical report discusses the policies available to stimulate new nuclear plant development, the impacts of these policies on the costs of power generation, their cost-effectiveness at reducing GHG emissions, and the time at which new plants might become operational. Specific policies assessed may include the expansion of federal loan guarantees, the removal of specific regulatory and/or administrative barriers, and policies that provide short and long term solutions for waste storage. The report will also qualitatively address the broader issues related to nuclear power generation, including accident risks, siting difficulties, and long-term disposal issues.
Technology
Innovation and large-scale adoption of clean energy technologies offer the potential for increased energy security and reductions in GHG emissions. However, it is uncertain which policies and institutions are the most effective and efficient for promoting basic and applied R&D of such technologies. This paper will examine whether the level, and composition, of current public funding for energy-related R&D is efficient or not. It will also evaluate alternative policy instruments to promote R&D at the firm level including, for example, technology prizes, R&D subsidies or tax credits, and strengthened patent protection. The potential benefits of developing technologies to reduce oil use and GHG emissions will also be assessed using the NEMS modeling framework, and compared with the costs of publicly funded R&D, accounting for possible crowding out of R&D elsewhere in the economy.