Published on EME 444: Global Energy Enterprise D7 (https://www.e-education.psu.edu/eme444)

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Lessons

1 Nonmarket Analysis

Introduction

Did you complete the course orientation?

Before you begin this course, make sure you have completed the Course Orientation.

Stop sign with the word 'consuming' added to it, so that it reads 'STOP consuming'
STOP CONSUMING
Credit: mermaid [1] via flickr CC BY-NC-ND 2.0 [2]

Overview of Lesson 1

Effective analysis of non-market issues requires a framework for evaluating those issues. This lesson provides a systematic set of considerations that are useful for characterizing and analyzing issues that may result in non-market activity.

Lesson 1 also introduces a Case Study that will carry over for several lessons. The Case Study demonstrates nonmarket analysis related to legislation regarding Renewable Portfolio Standards (RPS) policy. RPS programs are widely used to promote the use of renewable energy. This case study will help you understand and master both the structure and mechanics of RPS programs and the step-by-step analysis of nonmarket issues. In this lesson, we will learn the fundamentals of nonmarket analysis and delve in to the details of how RPS programs work.

What will we learn?

By the end of this lesson, you should be able to:

  • clearly explain nonmarket environments and the lifecycle of nonmarket issues;
  • identify nonmarket issues, stakeholders, and initial policy positions;
  • know how to acquire and/or generate the information necessary for non-market issue analysis;
  • assess demand for nonmarket action (per capita benefits, aggregate benefits, substitutes);
  • assess supply of nonmarket action (cost of organizing, number of members, coverage, resources);
  • understand fully renewable portfolio standard (RPS) structure, terminology and mechanisms.

By the end of this lesson, you should have an initial understanding of how to:

  • organize and tabulate information to facilitate drawing conclusions from your analysis;
  • predict a stakeholder's likelihood of taking nonmarket action;
  • be able to state and defend a prediction from your analysis (how the issue is likely to turn out) and identify key stakeholders (the stakeholders most important for driving the issue to its predicted resolution).

What is due for Lesson 1?

The table below provides an overview of the requirements for Lesson 1. For details, please see individual assignments.

Please refer to the Calendar in Canvas for specific time frames and due dates.

To Do List for Lesson 1
REQUIREMENT SUBMITTING YOUR WORK
Read Lesson 1 content and any additional assigned material Not submitted.
Weekly Activity 1 Yes—Complete Activity located in the Modules Tab in Canvas.
Review list of current Case Study Issues and complete survey. Yes - See Course Calendar for Case Study Issue Interest Survey due date. There is a lot of information to digest, so please start reading through the Case Study descriptions sooner than later this week.  Don't forget that this counts toward your final grade!  Note that this is located in the Modules tab under "Case Study Assignments."

 

Introduction to Nonmarket Analysis

What is Economics?

Economics is the study of allocation of scarce resources.

Resources yield benefits through their use in consumption or production. And resources are scarce when making use of them in one way removes the opportunity to make use of them in another.

For example, we use our time for play or work. And the organizations where we work ask us to perform different tasks in order to fulfill their objectives. For example, a corporation’s objective is to earn profits for its owners by creating a product valued by their customers. Advocacy groups may have some objective other than profitability. But in a way similar to corporations, they serve their objective by providing a service valued by their constituents. These organizations receive payments--revenues or donations--that they use to invest in equipment and to pay workers. And workers use the income derived from work to buy a house, or heat a house, or buy a car, or put gasoline in the tank. And then we decide where to go, to play or to work.

All of these decisions require tradeoffs. How much equipment will an organization forgo in order to hire another worker? How much income will we forego in order to play? How much heat will we forgo in order to travel? Economics provides a framework for thinking about these choices.

Economics and Energy

Worldwide demand for energy is growing rapidly. In the International Energy Outlook 2016 [3] (the most recent version available as of August 2017), the U.S. Energy Information Administration (EIA) projects that, in 2040, world marketed energy consumption will have increased by 48% from 2012 levels. See Figure 1.1. Most of this increase will occur in non-OECD countries. Remember (from previous courses) who they are? See the Organisation for Economic Co-operation and Development (OECD) [4].

This energy is going to come from a wide and changing mix of fuel types, see Figure 1.2. In general economic terms, Figure 1.1 is the demand forecast and Figure 1.2 is the supply forecast.

Finally, to provide some important perspective, keep in mind that there is an important difference between total energy use and per capita (per person) energy use.  The chart at the bottom of the page demonstrates this, especially when compared to Figure 1.1.

Graph showing Non-OECD vs OECD energy consumption from 1990 to 2040. See link in caption for details.
Firgure 1.1: World energy consumption, 1990-2040
Click for a text description of Figure 1.1
This is a bar chart that shows the world energy consumption in quadrillion Btus from OECD and Non-OECD countries.  The content is detailed in a table below.

World energy consumption, 1990 -2040
Year OECD energy consumption Non-OECD energy consumption
1990 200.5 154.4
2000 234.5 171.5
2010 242.3 281.7
2020 254.6 375.3
2030 269.2 460.0
2040 284.6 535.1
Credit: International Energy Outlook 2016. U.S. Energy Information Administration [3].
Graph showing world-marketed energy use by fuel type from 1990 to 2040. See link in caption for details.
Figure 1.2: World energy consumption by fuel type, 1990 - 2040
Click Here for a text description of Figure 1.2
This is a series of line graphs with the date in years across on the x axis and quadrillion (Q)Btus on the y axis. Numbers are approximate.

  • Nuclear stayed around 25 Q Btus’ from 1990 - 2010 with a small drop around 2012 and then a steady increase to about 55 Q Btu’s in 2040.
  • Renewables Went from around 40 Q Btu’s in 1990 to about 55 in 2010.  It is projected to rise steadily to about 120 Q Btu’s in 2040.
  • Natural Gas.  Started at around 75 Q Btu’s in 1990, rose steadily to 110 in 2008, dropped to about 105 Q Btu’s in 2009 and is now projected to increase to 190 Q Btu’s by 2040.
  • Coal:  Started at 90 quadrillion btus in 1990, stayed steady until about 2002 and then rose to 150 Q Btu’s in 2010.  It is expected that it will continue to rise to about 225 in 2035 and then level off
  • Liquids: Started at about 140 Q Btu’s in 1990 and increased to about 175 in 2010.  Liquids are projected to increase to about 230 by 2040.
     
Credit: International Energy Outlook 2016. U.S. Energy Information Administration [3].
Graph showing per capita energy use from 1980 through 2011 of the U.S., the EU, the world, OECD nations, non-OECD nations, India, and China. See link in caption for details.
Figure 1.3: Per capita energy use of countries and groups analyzed in this course, 1980 - 2011. (Data through 2011 are currently available.) Click here [5] for a version that can be resized.
Click Here for a text description of Figure 1.3

This is a line chart that has seven lines with the date in years across on the x-axis (19800 through 2011) and million Btu’s per person on the y-axis. The lines on the chart represent the per capita energy consumption of the following geographic areas: the world, OECD nations, non-OECD nations, the EU, the United States, China, and India. Numbers below are approximate.

  • The U.S. has maintained an emission rate of between 300 and 350 million btu's per person since 1980
  • OECD nations maintained an emission rate of approximately 200 million btu's per person since 1980
  • The European Union has maintained an emission rate of approximately 150 million btu's per person since 1980
  • World averages have maintained a relatively steady 60 million btu's per person since 1980
  • Non-0ECD nations averaged approximately 25 million btu's per person from 1980 through 2002, then slowly increased to approximately 50 million btu's per person in 2011
  • China slowly increased from around 20 million btu's per person in 1980 to about million btu's per person in 2002, then had a sharp increase to approximately 75 million btu's per person in 2011. This is by far the most dramatic increase over a short period of time in this chart
  • India has increased at a very gradual rate from approximately 5 million btu's per person in 1980 to less that 25 million btu's per person in 2011
Credit: Copyright Dan Kasper.  Data source: International Energy Statistics chart builder [6].

In the wild scramble to meet soaring demand with limited resources (ah ha, “scarce resources”!), the situation is made far more complicated by volatile external issues such as those involving the environment (from emissions and climate change to land use and biodiversity), security (energy independence) and local health and economies. Issues such as these, which are addressed outside of normal market transactions ("external to the market"), are called externalities or nonmarket factors and are the subject of this course.

Nonmarket Environment

To Read Now

At this point, please complete Reading Assignment 1-- Market and Non-Market Environments.  This is located under the Lesson 01 subheading in the Modules tab in Canvas. (Read everything through "Change in the Nonmarket Environment.")

The market environment includes interactions between firms, suppliers, and customers, where the interactions are voluntary economic transactions, governed by markets and contracts.

The nonmarket environment, on the other hand, refers to the domain of concerns that cannot be controlled or managed through an individual's or organization's market-based interactions. These are social, political, regulatory, and legal considerations that affect an organization’s and/or individual's fortunes but occur outside of the market environment.

Hummer Limo
GM ended production [7] of its much loved, and much hated, Hummer in May of 2010. Demand dropped for many reasons outside of the manufacturer's market control, including rising fuel prices and public sentiment. As The Independent [8] Motoring news colorfully put it, "There was a time when the greed of the Hummer didn't bother many people. Its fans liked it precisely for the unabashed obesity of its styling. But it doesn't take a social scientist to realise that in these greener, poorer days, obesity spells obscene; the Hummer has become garish and anachronistic. Its demise was all but guaranteed."
Credit: Hummer limousine [9] / Franco Folini [10] / Creative Commons [11]

The Life Cycle of Nonmarket Issues

To Read Now

At this point, please complete Reading Assignment 2-The Nonmarket Issue Life Cycle.

Nonmarket issues have the potential to evolve through various stages, which can be understood as a life cycle. Once an issue is identified, interest groups often form based upon their interests in potential outcomes. Some issues will evolve to a legislative stage, where lawmakers are lobbied to address the issue. Issues resulting in legislation will eventually be administered through a regulatory framework. And finally, in cases where there are disputes over the application of that regulatory framework, interested parties may seek enforcement through the regulatory framework and the court system.

 

Introduction to Nonmarket Analysis

Nonmarket environments refers to the domain of concerns that cannot be controlled or managed exclusively through an individual’s or organization’s market-based interactions. For example, many of us are concerned with climate change, environmental damage from energy resource extraction, electric power reliability, worker safety and fair wages, and energy affordability, to name a few! These are concerns we cannot always effectively address with conventional transactions or contracts.

Our non-market concerns are associated with a set of issues which can be resolved in a number of ways. Based upon our beliefs, we develop expectations about how our nonmarket concerns are affected by these alternative resolutions. And based on our individual and/or organizational objectives, we have preferences over the set of possible outcomes for each issue. For example, a particular carbon cap-and-trade proposal is an issue associated with at least two nonmarket concerns: climate change and energy affordability. Any individual or organization concerned with climate change or energy affordability will likely have preferences for or against a particular carbon cap-and-trade proposal.

Take a Look!

For those of you have taken EGEE 401, this may look familiar (it should!). Either way, spend four minutes to take a look. This is an entertaining and very good explanation of the principles of cap and trade. Please watch the following (3:29) video:

Click for a transcript of "Cap and Trade" video.

HANK GREEN: I just ran across a rather disturbing statistic. Apparently, Americans have no idea what cap and trade is. When Rasmussen asked Americans what cap and trade was, most of them had no idea, and 29% of them said that it had something to do with regulatory reform on Wall Street. Only 24% said that it had anything to do with environmental issues. I thought maybe this EcoGeek could be of some service. Now you probably know what cap and trade is, but maybe you need a refresher course. And maybe you just want to share it with your friends and family, so they too can have some idea about the most important environmental legislation ever.

So cap and trade, in its simplest form-- basically, the government says to all of the companies in the country, we can only have this much of a certain pollutant. That's the cap. We simply cannot have more than that much pollution. And if we do, we're going to fine the crap out of all of you.

Then the government distributes credits for the release of those pollutants to all of the companies that produce those pollutants. Ideally, they give the companies credits for less pollution than they're already polluting with, so then the companies either have to reduce their pollution or buy credits from someone else. If the company is able to reduce its pollution below its current credit level, then it can sell or "trade away" those credits to companies that are having a harder time.

So basically, the government creates an artificial economic market in pollution. So then the amount of money that the companies are willing to spend decreasing their pollution is directly proportional to the amount of money it would cost them to buy the credits if they weren't able to reduce their pollution. Success! We have a new economic market, and everyone wants to reduce their pollution!

But wait. There are problems. We run into the first problem when we say that the credits are "distributed." How are they distributed? There are two ways. Basically, there's grandfathering, in which you get credit based on the amount of pollution you're already producing-- which seems kind of lame to me. I mean, it's like, oh, you're the biggest polluter! Here, have the largest number of credits!

Or two, they can be auctioned off. That's the way that the Obama administration is looking at doing it. They're actually hoping to have huge amounts of money generated by the auctioning off of these carbon credits. But economists are kind of like, wait a second. So you created an artificial market and you're selling nothing for billions of dollars? Also, the polluting corporations don't like it at all. But to me, it seems like a fairly fair way to do things.

The second problem with cap and trade is that, yes, the money has to come from somewhere. So whatever sectors of the economy are doing all that pollution, the prices of their services are going to go up. So yes, gasoline prices and energy prices would increase. And if gasoline and energy prices are increasing, what we have is not a cap and trade system. It's a tax. It's a tax! Boo, taxes! Rah, rah, rah! I like my money. Don't take my money away!

But it's certainly more popular than a straight carbon tax, and with good reason. First, we don't have to call it a "tax," and people like that. Second, say there's one coal power plant that can reduce its emissions relatively easily, and there's another in which it would be extremely expensive to reduce its emissions. The coal plant that has an easy time can reduce its emissions twice over, and the coal plant that's having a hard time doesn't have to do it. So you get the same amount of reduction in the end, but the costs are much lower.

Cap and trade systems have actually been used in America for a long time, mostly on sulfur dioxide, which is the stuff that causes acid rain. And since cap and trade legislation went into place on sulfur dioxide, energy prices have not increased substantially, but the emission of sulfur dioxide has gone down like 50% despite huge increases in power generation. So yes, it works!

Well, it works for sulfur dioxide, anyway. The question is, will it work for greenhouse gases? Hopefully, we will find out soon. The Obama administration hopes to have cap and trade legislation on the books by 2012. And from then on, the government can continually lower the cap, and that strong market in carbon credits should spur innovation in wind power, carbon sequestration, solar power, electric cars, and who knows what else.

And that, my friends, is why I as an EcoGeek am excited about cap and trade, and why America should, yeah, have some idea what I'm talking about. This is Hank Green from ecogeek.org. 

Any issue will involve a set of stakeholders' concerns that are sufficient to justify expending resources to influence the ultimate outcome. In the case of carbon cap-and-trade, stakeholders primarily concerned with energy affordability and believing that such a policy would increase energy costs will likely prefer that a cap-and-trade scheme not be implemented. In contrast, stakeholders primarily concerned with climate change, and who believe that such a policy will mitigate climate change will likely prefer that the cap-and-trade scheme succeed.  Keep in mind that it is usually not so cut-and-dry.  As you will see moving forward, most stakeholders have a range of nonmarket concerns with varying degrees of intensity and priority, and so deciding which side of an issue one is on can be complicated. You didn't think this would be easy, did you?

Non-market analysis summarizes the set of stakeholders in a way that facilitates evaluating the range of potential outcomes for each issue.

 

Information Collection

Nonmarket analysis requires a limited but particular set of information about each issue. The issue is specified uni-dimensionally (more on this below). The analysis identifies the stakeholders who have preferences that vary among the potential outcomes within this issue dimension. The stakeholders are characterized according to four attributes that determine their influence on the issue outcome.

In this course, we will use the words issue, stakeholders, and effectiveness as defined below. These concepts, however, are often expressed in other ways, depending on the author and context. For example, Baron in Business and the Environment (source of earlier assigned readings), refers to our "stakeholders" as "interests."

Issue

An issue is the basic unit of consideration for nonmarket analysis. Issues arise when stakeholders have preferences that vary over alternative methods for achieving a business or policy objective. Through these issues, stakeholders affect the likelihood of achieving organizational objectives. For purposes of analysis, an issue is defined as a specific policy question with a uni-dimensional set of possible policy alternatives (outcomes). Examples of issues include: What should be allowable concentrations for particulate emissions? At what legal age should we be able to vote? At what levels shall we set climate change agreement emissions targets? How often should we report on progress in meeting climate change emissions targets?

Bueno de Mesquita provides a useful definition:

An issue is any specific policy question for which different individuals, organized groups, or informal, interested parties i.e., stakeholders, have preferences regarding [an] outcome. The range of preferred outcomes on an issue must be capable of being represented along a single line or continuum. Be sure to define carefully the precise policy question you want to analyze. The … ends of [a] policy continuum should specify the most extreme outcomes actually supported by any [particular stakeholder]. Of course, these extreme outcomes need not refer to a resolution that anybody believes will be achieved, but refer only to the fact that there is at least one stakeholder that currently seems to support such an outcome.

de Mesquita, B. (n.d.) The Predictioneer's Game. Retrieved March 17, 2010 from Predictioners Game [12]

Graph comparing noise created by hybrid vs. conventional vehicle. See link in caption for details.
Figure 1.4: Comparison of noise created by conventional and hybrid vehicles.
Click here for text description of Figure 1.4

This following text precedes a graph. A hybrid vehicle produces an immeasurable amount of sound idling or traveling at a low speed. Engine power kicks in as it accelerates, creating nearly the same amount of noise as a conventional car.

The graph has mph on the x axis and decibels on the y axis.The hybrid car starts at zero decibels while it idles and goes to 50 decibels by the time it hits 6.2 mph. From 6.2 mph to 12.4 mph it rises from 50 - 60 decibels.

The conventional car idles at 50 decibels, moves to about 58 decibels at 6.2 mph and then rises to 61 decibels by the time it reaches 12.4 mph.

Credit: Society of Automotive Engineers. Whorlskey, Peter. (2009, September 23). The deadly silence of the electric car. The Washington Post. Retrieved August 10, 2011 from Washington Post [13].

Consider the case of hybrid and all-electric cars. Good for the environment and pocketbook (in many cases), what's not to love? Of all things, they may be too quiet. In fact, in the eyes (well, ears) of many, these cars are so quiet they are unsafe--a danger to pedestrians. Nearly 10 years after the first release of production hybrids in the USA, a study showed that electric vehicles were 50% more likely than cars with noisy combustion engines to be involved in an accident during certain low-speed maneuvers. We have an issue, folks: Should manufacturers be required to add noise to these otherwise quiet vehicles? (For source of this info and more background see The Deadly Silence of the Electric Car [13].)

A Note on Uni-Dimensionality

You probably have a general idea what uni-dimensionality means, but just to clarify in case it is needed: "Uni-dimensional" is what Mesquita referred to when he noted that issues "must be capable of being represented along a single line or continuum" (emphasis added).  In other words, the choice(s) presented in an issue must be a matter of degrees. The easiest example is a simple "yes or no" question, e.g.: "If a presidential election revote were held today, would you vote for Hillary Clinton to be President or not?" The two extremes of this choice are "yes" and "no". A related continuum-based question would be: "If the election were today, how likely would you be to vote for Donald Trump on a scale of 1-10, with 1 meaning extremely unlikely and 10 meaning extremely likely?" This time, the extremes of the choice are 1 and 10. Each of these questions can be visually represented on a single line (a continuum), and the latter question presents choices that are varying degrees of the same option. A multi-dimensional question cannot be represented on a single line. For example: "If the election were held today, would you most likely vote for Hilary Clinton, Donald Trump, Gary Johnson, or Jill Stein?"  Even though there are a discrete number of choices, they are not a varying degree of a single choice, and thus do not represent a single issue as we define it.

Stakeholders

Stakeholders are the individuals or groups that act to influence the ultimate resolution of a particular issue.

Bueno de Mesquita again provides a useful definition:

A stakeholder … is any individual or group with an interest in trying to influence the outcome on the issue being analyzed. … [T]he list of [stakeholders should not be limited] to those who will ultimately make the decision. ... [Stakeholders also include those who will] weigh in, trying to influence the decision makers. All who try to influence the outcome should be represented in the stakeholder list.

de Mesquita, B. (n.d.) The Predictioneer's Game. Retrieved March 17, 2010 from Predictioners Game [12].

In the case of the too-quiet electric vehicles (EVs), numerous stakeholders emerge: EV manufacturers (e.g., Toyota, Tesla, Nissan, GM, Ford), National Highway Traffic Safety Administration (NHTSA), Alliance of Automobile Manufacturers, and National Federation of the Blind, among others.

Initial Policy Position

Each stakeholder can be associated with an initial policy position. An initial policy position refers to the policy preference that a stakeholder is willing to proclaim at the outset of bargaining with other stakeholders. “The initial policy position is the position the stakeholder favors or advocates within the context of the situation. When a player’s position has not been articulated, it is best thought of as the answer to the following mind experiment: If the stakeholder were asked to write down his or her position, without [necessarily] knowing the values being written down by other stakeholders, what would he or she write down as the position he or she prefers on the issue continuum?”

In our example, EV manufacturers, at least initially, were described as a "nascent industry divided over whether safety sounds should be added to the quiet cars and, if so, what those noises should be." Whereas some manufacturers began to experiment with adding sound, and testing for customer preference, others were less enthusiastic. Officials at Tesla are quoted as saying they had "no intention of implementing 'fake noises.'" Other stakeholders, such as the National Federation of the Blind were clearly in favor of a mandate. The NHTSA was ready to act, given sufficient data. Each stakeholder had an initial position on a policy that would require adding "noise."

Determining Stakeholder Groups

It can be difficult to determine the boundaries of a stakeholder when it is a group of people or organizations.  For example, "EV manufacturers" could possibly be considered a single stakeholder, but only of they are likely to take unified action. What if Tesla and GM have different perspectives on the issue of artificial noise and thus would not act in a unified manner?  You would have to treat them as separate stakeholders.  Even if they did have the same perspective and/or initial policy position, they are not likely to take action together, thus should be treated as separate stakeholders regardless.

A group can be considered a stakeholder if they are seen as likely to take unified nonmarket action. For example, there may be some individuals that belong to the National Federation for the Blind (NFB) that would prefer to not have artificial noise, but the NFB will act as a single, unified group, so the NFB is considered a single stakeholder. The approximate percentage of individuals within a group that support a position or course of action can affect the strength of a position and likelihood of a stakeholder taking action. This will become clearer when we go over supply of and demand for nonmarket action later in this lesson, but this should make intuitive sense. For example, the likelihood of the NFB taking action is higher if nearly all of its members are in favor of artificial noise than if barely a majority are. Of course there are a near infinite number of degrees in-between these positions.  

When performing nonmarket analysis, you must take into consideration the (dis)unity of stakeholders within a group.  Be warned that this often involves well-informed, but imperfect calculations and considerations. Reality can be a messy place, especially when human behavior is involved!

Demand for Nonmarket Action

So now we have an issue, and we have stakeholders, and each of those stakeholders has a position on the issue. What is the likelihood of these stakeholders taking nonmarket action? That is, of participating in activities such as "lobbying, grassroots and other forms of constituent activity, research and testimony, electoral support and public advocacy?" (Baron, 2010, p. 155).

To understand the likelihood of a stakeholder participating in nonmarket activities, we use the concepts of supply and demand. Baron (2010) describes it well:

The extent of these [nonmarket] activities is a function of their costs and benefits, and the optimal amount of nonmarket action maximizes the excess of benefits over costs for the interest [stakeholder].

To assess the nonmarket actions of interests [stakeholders], the supply-and-demand framework from economics can be used. The demand side pertains to the benefits associated with nonmarket action on an issue, and the supply side pertains to the cost of taking, or supplying, nonmarket action. An increase in the benefits results in more nonmarket action, and an increase in the costs results in less nonmarket action (Baron, 2010, p. 155).

The Demand for Nonmarket Action

The demand for nonmarket action comes from the consequences of the issue outcome on the various stakeholders. "For firms, those consequences are reflected in sales, profits and market value. Employee interests are measured in terms of jobs and wages. For consumers, the consequences are measured in terms of the price, qualities and availability of goods and services" (Baron, 2010, p. 155).

Demand for nonmarket action can be understood in terms of three factors:

  • Per capita benefits are benefits to an individual stakeholder (a person or firm). For example, benefit of changes in tax code to an individual tax payer. 
  • Aggregate benefits are the total, or sum, of the per capita benefits across a stakeholder group. For example, benefits to all "taxpayers" from a change in tax code. When "aggregate benefits are widely distributed, per capita benefits can be small, providing little incentive for market action" (Baron, 2010, p. 156).
  • For some issues, "the benefits of nonmarket action can be obtained through other means, referred to as substitutes. The benefits from nonmarket action are lower when there are other means of generating them, and the closer these substitutes come to replicating the benefits, the smaller are the incentives to act. Substitutes may be available in the market environment or nonmarket environment" (Baron, 2010, p. 156). For example, taxpayers in favor of funding a rebate program promoting energy efficiency and renewables may instead accept a policy that would increase electricity rates during peak demand and lower them during off peak. This policy would be seen as a substitute means of accomplishing the same (or nearly the same) benefits as the original issue (the rebate program).  Note that the state rebate program is its own issue. Changing electricity rates represents a separate issue, but can affect the strength of a stakeholder's position on the rebate program. Regarding the hybrid car issue, a substitute for artificial noise could be automatic braking, which could avoid pedestrian accidents. Interestingly, back when the aforementioned study was done (2009) this was not a viable option, but as of 2017 it is a very strong substitute and would likely limit the demand for action on the issue.

Note that per capita and aggregate benefits can be related to the (dis)unity of the group noted in the previous page. Some members within a group may not receive any benefits, or very little, a lot, and all points between. This may be a cause or effect of disunity, but either way should be taken into consideration.

Demand for nonmarket action--the benefits motivating a stakeholder to take action--are a result of the individual (per capita) benefits, the aggregate benefits, and the presence (or lack of presence) of a substitute way to achieve the same benefits.

Supply of Nonmarket Action

Woman with justice sign around neck and another sign with illegible words in her hand
Woman holding "Justice" sign
Credit: girl with Justice sign [14] / barb howe [15] / CC BY 2.0 [16]

The supply of nonmarket action depends on the cost of taking the action and the ability of the stakeholder to be effective in taking action. To make a difference on an issue, a stakeholder needs to have the resources necessary to execute and have enough influence to be effective.

The cost of organizing includes those costs "associated with identifying, contacting, organizing, motivating and organizing those with aligned interests. If the number of affected individuals or groups is small, the costs of organizing are likely to be low. When the number is large, those costs can be high. Taxpayers are costly to organize because they are numerous and widely dispersed, whereas pharmaceutical companies are relatively easy to organize. The costs of organization can be reduced by associations and standing organizations. Labor unions, the Sierra Club and business groups such as [Chambers of Commerce] reduce the cost of organizing for nonmarket action." (Baron, 2010, p. 156)

Effectiveness is the impact a stakeholder's nonmarket action will have on the outcome of an issue. Nonmarket action is more effective when a stakeholder group has more members, their resources are greater and when the group has extensive coverage of legislative districts.

Effectiveness can be understood in terms of three factors:

Importance of Coverage in Nonmarket Action

Automobile assembly plants are concentrated in a relatively small number of congressional districts, but the coverage of the auto companies' dealer and supplier networks is extensive. General Motors CEO Rick Wagoner attended the national auto dealers convention in 2008 to deliver a message and generate coverage of state political jurisdiction. The issue of concern to Wagoner was the possibility that states would enact their own regulations on greenhouse gases emissions to force large increases in automobile and truck fuel economy. Wagoner's message was, "We need to work together to educate policymakers at the state and local levels on the importance of tough but national standards." Wagoner explained why dealers were important in implementing General Motor's strategy at the state level, "Dealers are very effective in the political process because we don't have a plant in every state. We have dealers in every state." (San Jose Mercury News, February 10, 2008) The greater the coverage by members of an interest group, the more effective is its nonmarket action. (Baron, 2010, p. 157)

  • The greater the number of members in a stakeholder group, the greater its potential effectiveness.
  • Coverage is a measure of the geographic location of interest group members. Particularly for issues addressed in legislative arenas, the effectiveness of nonmarket action depends on the geographic location of interest group members. "Nonmarket strategies based on the constituency connection between voters and their representatives are more effective the greater the number of political jurisdictions covered by the group. Although small businesses do not have the resources of large businesses, they are politically effective because they are numerous and located in every political jurisdiction" (Baron, 2010, p. 157).
  • And finally, effective nonmarket action requires resources to fund research, lobbying, legal services, grassroots campaigns and the group's administrative staff. The greater a group's stake in an issue (the more it stands to win or lose), the greater are the resources that potentially can be contributed to a nonmarket strategy.

A stakeholder's effectiveness--ability to impact the outcome of an issue--depends on the number of members, their geographic location and resources available to support nonmarket activities.

Nonmarket Analysis

Nonmarket analysis refers to how we organize and draw inferences from the information we’ve assembled about the issue and for each stakeholder. Working in a structured manner, this analysis involves five fundamental steps.

  1. Define the issue. A specific one-dimensional issue.
  2. Collect background on issue. Document key terms and concepts, historical context, status and timeline.
  3. Identify and profile stakeholders.  Name of stakeholder (firm, association, group or individual), type of organization and mission. Establish initial position on the issue and explain benefits stakeholder expects to realize from taking this position on this issue.
  4. Assess demand for and supply of non-market action across stakeholders. For each stakeholder, evaluate demand for nonmarket action (available substitutes, aggregate benefits, per capita benefits) and supply for nonmarket activities (effectiveness and cost of organizing).
  5. Predict amount of nonmarket action that a stakeholder can be expected to take. This is established by weighing the demand (benefits) of taking action with the supply (resources required) to take action.  The greater the benefits, the more likelihood of taking action. The greater the cost (and considering available resources), the less likelihood of taking action.

In the following lessons and accompanying case study, we will work through each step of nonmarket analysis and demonstrate a framework for organizing and presenting a nonmarket analysis summary.

RPS Case Study, Part 1

The following Case Study is written by Vera Cole, one of the course developers. The framework of this Case Study reflects actual Pennsylvania policy and data. All information about stakeholders, especially assessments related to the likelihood of participation in nonmarket action and the strategy that may or may not be evoked is the author's opinion and presented in a manner to best demonstrate the lesson content of this course. This Case Study does not necessarily represent the actual position or strategy held or planned by any named stakeholder.

ISSUE

Support or oppose PA House Bill 1580 [17]?

Background

In 2004, Pennsylvania enacted the Alternative Energy Portfolio Standards (AEPS) Act [18], which provides “for the sale of electric energy generated from renewable and environmentally beneficial sources, for the acquisition of electric energy generated from renewable and environmentally beneficial sources by electric distribution and supply companies and for the powers and duties of the Pennsylvania Public Utility Commission.” Here [19]is the full text of the Public Utility Commission's Implementation Order, if you are so wonkily inclined.

The type of policy covered by the AEPS Act exists in other states where it is most often called “Renewable Portfolio Standards.” For a full description of RPS programs across the country, including definitions, data and summary maps, see the Database of State Incentives for Renewable and Efficiency (DSIRE) website [20](You can search for RPS under "program type.") [21]

Among other things, the AEPS Act established that a certain percentage of the electricity sold in Pennsylvania must come from renewable energy sources and a specific percent must come from solar energy. (This is called a “Solar Carve Out.”)

The exact percentages that must come from solar are shown here.

*Graph shows % increase in required solar from 2007 to 2021 (: 0-.5%). Gradual slope gets steeper as % in the PA AEPS Act increase.
Figure 1.5: Percentages of solar required by the AEPS
Credit: Copyright ©2011 Vera Cole. Used with Permission.

To comply with the Act, businesses that sell electricity in Pennsylvania are required to submit Alternative Energy Credits (AECs) corresponding to the currently required percentage. (The term “AEC” is specific to PA and means the same thing as Renewable Energy Credit or “REC”, the more widely used terminology.)

A REC is an electronic certificate indicating that 1,000 kWhs (1,000 kWh = 1 MWh) of electricity has been generated from renewable fuel source. When the fuel source is solar, it is an SREC.

Solar electric systems have a power rating that indicates their capacity to generate electricity from the sun. Power ratings are given in Watts. A kilowatt (kW) equals 1,000 Watts and a megawatt (MW) equals 1,000,000 watts. Electricity that is generated is energy measured in watt-hours, often kilowatt hours (kWh) or megawatt-hours (MWh). (For a review of energy and power, feel free to re-engage with the EGEE 102 course website [22]).

For example, a home in Pennsylvania with a 5 kW solar electric system will likely generate about 6,000 kWh per year (this depends on a lot of factors such as shading and orientation/azimuth). The owners of this system will earn six SRECs per year since 6,000 kWh = 6 MWh. These owners can sell their SRECs to the businesses (utilities) in PA that must comply with the AEPS. As long as the system is grid-tied (connected to the electrical grid), the owners are entitled to earn and trade SRECs. It does not matter where the electricity is used or by whom. Please note that partial SRECs are rarely accepted for sale. Annual SREC totals from an individual supplier are thus rounded down to the nearest whole SREC. (So even if the above mentioned system generated 6,200 kWh or even 6,900 kWh, they would only get credit for 6 SRECs.)

When a utility is forced (by the AEPS Act) to buy SRECS, it adds to the cost of the electricity because they must be allowed to recover these extra costs. This causes the price of electricity to rise for all customers (“rate payers”), however minimal. The more SRECS the business must purchase and the higher the cost of the SRECs, the greater the increase in electricity prices for all rate payers. (Keep in mind that this rate increase is almost certainly minimal, significantly less than $0.01 per kWh.) 

SRECs are most often traded on the open market, though some special SREC incentive programs exist in some states. They are essentially auctioned off to businesses who need to purchase them. [For more detail about how this process works, see PJM EIS [23], the administrator of the Generation Attribute Tracking System (GATS)].

Solar electric system owners want to get as high a price as possible for their SRECs. The businesses that must comply with the AEPS want to pay as low a price as possible. The actual price (“settlement price”) is set by supply and demand.

The percentages in the AEPS (the carveouts) drive demand. The higher the percentage, the greater the number of required SRECs for compliance. This demand, in turn, drives supply. If a small business owner is thinking of putting in solar, the prospect of being able to sell SRECs may make the owner more inclined to pony up the significant capital that is required to install a solar electric system. The potential for SREC revenue may also make the bank more likely to approve a loan for the installation.

In 2008, the average settlement price in Pennsylvania for an S-REC was $230. In 2009, the average was $260. In 2010, the average was $325. In January 2012, the settlement price was $20 and by December of 2016 it had dropped to $7! (The price has been hovering in the $3 - $4 in the summer of 2017 [24]. For real time pricing, see Flett Exchange [25] or SRECTrade [26].) The images below provide a snapshot of prices in 2010 when prices were good, and in 2016, when they were significantly lower.

Graph showing the Flett Exchange SREC Settlement Prices going down from 2010 to 2011 from $300 to $50.
Figure 1.6: Flett Exchange 2011 SREC Settlement Prices
Credit: Flett Exchange. Retrieved January 13, 2012 from Flett Exchange [25]
Pennsylvania SREC prices from August 2016 to August 2017. In In August 2016 the price started at $10 then ended at $5 in Aug 2017
Figure 1.7: 2016 - 2017 SREC Settlement Prices. Note that the high bid in this time period was $10 in August of 2017!
Credit: Flett Exchange. Retrieved August 12, 2017 from Flett Exchange [27]

What happened? In 2009, Pennsylvania opened a rebate program for solar projects (solar electric and solar hot water). Along with other temporary factors, this caused the industry in Pennsylvania to surge—installing 46.5 MW in 2010. (In 2009, 4.4 MW were installed.) In fact, according to the Interstate Renewable Energy Council [28], Pennsylvania was 6th in the country in 2010 for newly installed solar electric capacity.

This surge in supply swamped the percentage of solar electricity required by the AEPS and SREC prices plunged. The consequences of this were widespread. Consumer interest in buying and installing new systems dropped considerably. With SREC returns this low, lenders would not finance projects. Solar installers closed shop or moved out of state. Existing solar installations were in trouble with revenue from SRECs falling far below expectations.

In response, a Bill was proposed in the state House of Representatives that would accelerate the ramp-up of required percentages for solar electricity. The proposed increase for years June 2012 - May 2013 to June 2015 - June 2016 is shown in the figure below.

Graph showing increases in the solar carve-out percentages as proposed by HB1580. Values increase only in reporting years 7 thru 9.
Figure 1.8: Solar carve-out percentages proposed by HB1580
Credit: Copyright ©2011 Vera Cole. Used with Permission.

In addition to increasing the RPS percentages in the near term, the bill would also “close” PA borders. Under the original policy, electricity retailers can buy SRECs from a solar generation facility anywhere within the PJM region, which includes all or parts of Delaware, Indiana, Illinois, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia. House Bill 1580 requires that SRECs used to comply with AEPS policy must come from solar generators located in Pennsylvania.

Status

Sponsored by Chris Ross (R-Chester), PA House Bill 1580 had 111 co-sponsors [29]. However, neither the House or Senate was able to put it to vote before the legislative session ended and the 2012 election took place. (Since then, several new bills have been announced to revise the RPS but as of yet, none have been put to vote. In principle, this "issue" remains alive in PA.)

A Short Note Regarding Energy and Financial Calculations

Most of this should be a review from EGEE 102, but this will help provide some perspective on this case study (and help you with this week's assignment!).

  • If electricity costs $0.15/kWh and you use 100 kWh, it will cost you:  $0.15/kWh x 100 kWh = $15.00
  • There are 1000 kWh in a MWh
  • A commonly-used economic indicator in renewable energy and energy efficiency projects is "simple payback."  Simple payback indicates how long something will take to pay for itself, ignoring ongoing costs such as maintenance.  To calculate simple payback, you simply (no pun intended) divide the upfront cost (after incentives) by the annual savings you will realize by implementing the measure. For example, let's say I spend $5 to buy an LED to replace an incandescent bulb. I calculate that it will save me $4/yr in electricity costs.  My simple payback would thus be: upfront cost/annual savings = $5/$4 per yr. = 1.25 years.
  • As indicated above, SRECs add value to your solar PV array.  Let's say you have an array that will generate ~6,000 kWh/yr, which is 6 MWh and thus 6 SRECs.  Because Pennsylvania has a "net metering [30]" law, the utility must pay you the same for electricity generated by your system that you pay them for electricity that they supply. (This varies a bit by state, but most net metering states require the utility to pay at or near the full retail price that you pay). So if you pay $0.12/kWh, they pay you $0.12/kWh for each kWh your system generates. (The power company will not actually "pay" you for this. It will just take this off of your monthly bill.) Net metering also means that if you generate more electricity than you are using - say, on a nice summer day or sunny winter day - then that extra electricity will be used to compensate for times when you are using more electricity than you are generating.
  • Net metering is a very important (and increasingly controversial in some states) incentive for solar, but remember that SRECs provide an additional incentive. In the glory days of 2008, you would have gotten: 6 SRECs x $230/SREC = $1,380 in addition to your savings (this does usually come as a check). But in 2015 you would have probably received: 6 SRECs x $20/SREC = $120. Quite a big difference, eh? That is why SRECs are such an important policy mechanism. They can substantially alter the financial calculation for renewable energy systems.

When the SREC prices were so high in PA soon after the AEPS was adopted, it was common to get paybacks in the range of 7-10 years. But now, even with low SREC prices, a building with good solar exposure can usually expect to have a simple payback of 7-10 years or less, depending on financing, state incentives, and a few other considerations. This is mainly due to lower prices for solar panels.  In a good SREC market, simple paybacks can be in the sub-5 year range, which was unheard of a few years ago. It is a very dynamic marketplace, due to a mixture of market and nonmarket forces!

Lesson 1 Assignment

Weekly Activity 1

Please review Canvas calendar for all due dates related to your Nonmarket Analysis Case Study.

Deliverable

Complete "Weekly Activity 1," located in under the Modules tab in Canvas. The activity may include a variety of question types, such as multiple choice, multiple select, ordering, matching, true/false, and "essay" (in some cases these require independent research and may be quantitative). Be sure to read each question carefully.

Unless specifically instructed otherwise, the answers to all questions come from the material presented in the course lesson. Do NOT go "googling around" to find an answer. To complete the Activity successfully, you will need to read the lesson, and all assigned readings, fully and carefully.

Each week a few questions may involve research beyond the material presented in the course lesson. This "research" requirement will be made clear in the question instructions. Be sure to allow yourself time for this! You will be graded on the correctness and quality of your answers. Make your answers as orderly and clear as possible. Help me understand what you are thinking and include data where relevant. Remember, numbers should ALWAYS be accompanied by units of measure (not "300" but "300 kW"). You must provide ALL calculations/equations to receive full credit - try to "talk me through" how you did the analysis.

This Activity is to be done individually and is to represent YOUR OWN WORK. (See Academic Integrity and Research Ethics [31] for a full description of the College's policy related to Academic Integrity and penalties for violation.)

The Activity is not timed, but does close at 11:59 EST on the due date as shown in Canvas.

If you have questions about the assignment, please post them to the "Questions about EME 444?" Discussion Forum. I am happy to provide clarification and guidance to help you understand the material and questions (really!). Of course, it is best to ask early.

Summary and Final Tasks

In this lesson, we learned about the nonmarket environment and a framework for collecting information for nonmarket analysis. The framework includes an issue, stakeholders, and assessment of the demand for and supply of nonmarket action. We applied the begging phases of the nonmarket analysis process to a Case Study where the issue is related to a Renewable Portfolio Standard (RPS) program. The information collection process provided hands on experience with the structure and mechanics of RPS programs, an important policy type for renewable energy development.

You learned:

  • the meaning of nonmarket environment;
  • to identify nonmarket issues, stakeholders, and initial policy positions;
  • a framework for organizing information collection related to nonmarket analysis;
  • how to assess demand for and supply of nonmarket action;
  • the structure, terminology, and mechanisms related to renewable portfolio standard (RPS) programs.

Have you completed everything?

You have reached the end of Lesson 1! Double-check the list of requirements on the first page of this lesson to make sure you have completed all of the activities listed there.

2 Public Politics

Introduction

Overview of Lesson 2

Nonmarket strategy includes all of the interesting and creative activities a stakeholder may perform in an effort to create a nonmarket environment that best serves it's interest. A firm may challenge a law that makes it expensive or difficult to do business or compete with others, for example. An individual may organize a boycott of products or services that violate the individual's interests or principles--hey, don't buy from them, they donate to cause/candidate that we disagree with! Protesters may march in the streets or write letters to elected officials. A firm may commission a study, with likely positive outcomes in a field related to its business, for distribution to the public and policy makers. These are all attempts to use forces outside of the market to influence what happens in the market--where the money changes hands!

In this lesson, we will look at strategies that apply to nonmarket action that takes place in government arenas. This is called public politics. In the following lesson, we will consider strategies for nonmarket action that takes place outside of public arenas, called private politics.

What will we learn?

By the end of this lesson, you should be able to...

  • explain the difference between public politics and private politics;
  • list and describe three general approaches to nonmarket strategy in government arenas;
  • demonstrate a range of specific strategies for nonmarket action in government arenas;
  • understand the role of lobbying and related nonmarket action in the overall performance of many firms and nonprofits;
  • complete all steps of a nonmarket issue analysis;
  • apply data and analytics to a standard renewable portfolio standard structure and related policy implications.

What is due for Lesson 2?

The table below provides an overview of the requirements for Lesson 2. For details, please see individual assignments.

Please refer to the Calendar in Canvas for specific time frames and due dates.

To Do List for Lesson 2
REQUIREMENT SUBMITTING YOUR WORK
Read Lesson 2 content and any additional assigned material Not submitted.
Weekly Activity 2 Yes—Complete Activity located in the Modules Tab in Canvas.
Case Study--work with others on your Team to prepare Case Study, following course guidelines Check Canvas calendar for all Case Study Due Dates. Plan your Team's work schedule accordingly.

Nonmarket Strategy

In the last lesson, we introduced a framework for the analysis of nonmarket issues.

  1. Define the issue. A specific one-dimensional issue.
  2. Collect background on issue. Document key terms and concepts, historical context, status, and timeline.
  3. Identify and profile stakeholders.  Name of stakeholder (firm, association, group, or individual), type of organization, and mission. Establish initial position on the issue and explain benefits stakeholder expects to realize from taking this position on this issue.
  4. Assess demand for and supply of non-market action across stakeholders. For each stakeholder, evaluate demand for nonmarket action (available substitutes, aggregate benefits, per capita benefits), and supply for nonmarket activities (effectiveness and cost of organizing).
  5. Predict amount of nonmarket action that a stakeholder can be expected to take. This is established by weighing the demand (benefits) of taking action with the supply (resources required) to take action.  The greater the benefits, the more likelihood of taking action. The greater the cost (and considering available resources), the less likelihood of taking action.

In part 1 of the RPS case study, we accomplished steps 1 and 2. At the the end of this lesson, the case study will continue through steps 3, 4, and 5. We will illustrate how the framework is used to present a summary of an issue and the positions of stakeholders. This information (the outcome of nonmarket analysis) is used as the basis for forming a nonmarket strategy.

mock photograph of street signs: lane ends, lead, follow
Lead, follow, or get out of the way!
Credit: Seeing Blue: A new strategy for business success. (2008, August). Knowledge Resource Centre, London Management Centre. Retrieved from Centre London Management [33]

Nonmarket Strategy

An effective business strategy is an integrated strategy that guides a firm’s actions in both market and nonmarket environments.

“When a firm chooses a market strategy, that strategy competes with the strategies of other participants in the market. Similarly, when a firm chooses a nonmarket strategy, that strategy competes with the strategies of others, including other firms, interest groups, and activists. That competition shapes the nonmarket environment and often the market environment as well. The nonmarket environment thus should be thought of as competitive, as is the market environment. Nonmarket competition focuses on specific issues, such as a bill to increase fuel economy standards, as well as on broader issues, such as open access to the Internet” (Baron, 2010, p. 36).

Market strategies position a firm to be competitive in the market place; to take advantage of market opportunities. Nonmarket strategies, on the other hand, work to shape the market environment in which a firm does business (the marketplace). For example, nonmarket strategies may affect regulation and public opinion.

In a market, firms compete with other firms. In the nonmarket environment, however, there are many other players. Motivated by self-interest or broader concerns, these other players may include individuals, activists, unions, advocacy groups, and non-government organizations (NGOs). We’ll refer to these nonmarket players collectively as interest groups.

Both firms and interests groups have nonmarket strategies. A nonmarket strategy addresses the issues on the agenda of a firm or interest group. The strategy has objectives and a plan of action that takes into account the strategies of all stakeholders engaged on an issue. This includes the strategies of those aligned with and opposed to the objectives of the firm or interest group developing the strategy.

So, the nonmarket environment includes both firms and interest groups competing for advantage on issues. When this competition takes place in the context of the institution of government, it is called public politics. When the competition between firms and other stakeholders takes place outside of the context of the institution of government, it is called private politics.

This lesson and the next lesson are about nonmarket strategy. In this lesson, we focus on public politics. The next lesson will address private politics.

Nonmarket Strategy Approaches for Public Politics

Minnesota legislative chambers. Many chairs and desks with a raised head seating area and a podium in the center of the room.
Legislative Chambers
Credit: Minnesota State House of Representatives Chamber [34] / J. Stephen Conn [35] / Creative Commons [36]

Objectives

The objectives of a nonmarket strategy accomplish two things: they focus attention on the issue and they help clarify alignment between stakeholders (those who are on the same side, who have the same or similar objectives). It is often helpful to specify a primary objective (stop this bill from getting passed!) but also a contingency objective (if it does pass, attempt to get, or avoid, some key wording). "For example, the domestic auto industry abandoned its primary objective of preventing higher fuel economy standards and adopted its contingent objective of obtaining flexibility in meeting the standards and measures to protect U.S. jobs" (Baron, 2010, p. 191).

Institutional Arena

Government arenas exist at many levels, including local, state, federal, and international, and they may take many different forms, from legislative to judicial and all the oversight agencies in between. Often, stakeholders may have some say in the arena where the issue will be addressed. Determining the desired arena can be a significant step in the development of a nonmarket strategy for resolving an issue.

Usually nonmarket issues are initiated by interest groups. For example, in the case of electric vehicles that are too quiet, the issue was raised by consumer complaints. And typically the stakeholder(s) that initiate an issue are the ones that determine where the issue will be addressed. But this is not always the case. Sometimes other stakeholders, including firms, may have an opportunity to drive the selection of an institutional arena.

Baron (2010, p. 191) cites an interesting example, summarized here:

Cemex, one of the world’s largest cement producers, sought to overrun an antidumping order in the institutional arenas of the International Trade Commission, the International Trade Administration, the U.S. Court of International Trade, the General Agreement on Tariffs and Trade, the North American Free Trade Agreement (NAFTA) and, finally, US Congress. (“Dumping” is when a company sells a product for less than its actual cost, or less than fair value. Antidumping rules impose duties on imports, or evoke similar regulation, intending to provide for fair trade.)

To Read Now

Since the election of Donald Trump as U.S. President, tarrifs have become a topic of discussion, though they have died down somewhat as of the summer of 2017. Regardless, this is a topic that that must ultimately be addressed through public politics.  Trump has repeatedly threatened tariffs on U.S. companies that manufacture goods outside of U.S. borders, e.g., a threat of a "border tax" [37] (a version of a tariff) on GM for building cars in Mexico that he made in January of 2017. It is likely that this will continue to be a contentious issue.

  • Please read "Is Trump's Tariff Plan Constitutional? [38]" by Rebecca M. Kysar in the New York Times (January 3, 2017) (Download the .pdf version here [39] if necessary.) This provides some insight into some of the intricacies of U.S. tariff policy. This is an opinion piece, but note the different institutional arenas mentioned in the article.

Nonmarket Strategies Approaches

There are three general approaches to nonmarket strategy in institutional (government) arenas: Representation, Majority Building, and Information Provision. Each type of strategy involves its own set of tactics, or activities, to execute the strategy.

  • Representation Strategies are strategies that build on the connection between elected officials and their constituents. The elected official seeks to represent the “will” of the voters and wishes to be reelected. In this type of strategy, the stakeholder (a firm or interest group) takes action to mobilize voters in support of candidates that are favorable to the stakeholder. A firm may establish a presence in a region or district—for example, by building a facility contributing to the local economy and creating jobs or by forming an alliance with another stakeholder with constituents in the area.
  • Majority Building Strategies are strategies that directly recruit the votes of public officeholders. This may be done through a variety of means, including vote trading between legislators (I’ll vote this way on A, if you’ll vote that way on B), stakeholder pledges of electoral support (voter mobilization and volunteers), other endorsements and advertisements, and campaign contributions.
  • Informational Strategies are strategies that use advanced data, insights, or understandings that a firm or an interest group has about an issue. For example, a report that shows hydraulic fracturing (“fracking”) for natural gas is costly to local municipalities may be used by fracking opponents to argue for a tax on fracking. The strategic use of information is a principal component in lobbying, legislative or regulatory proceedings, and public advocacy.

Strategies of Public Politics

Lobbying

When a stakeholder seeks to influence the vote of an elected official, it is called “lobbying.” The people who do it are called lobbyists or just “the lobby,” (e.g., “the coal lobby”). Lobbying is a major tool for both representation and informational strategies. In fact, the Center for Responsive Politics reports [40] that firms, labor unions, and other organizations spent over $3.1 billion (with a "b!") in 2016 to lobby Congress and federal agencies. This probably seems like a huge number, but spending was actually down slightly in 2016.  Regardless, every year since 2008 has had spending levels been above $3.1 billion!

Effective lobbying involves access to lawmakers or administrative officials, and, once you get there, strategic information. Two types of information are involved: technical and political. Technical information is about the issue—data and predictions. Political information pertains to the effects of the alternatives on constituents (voters) of the office holder. (If you pass this bill, prices will rise/fall, jobs will be gained/lost, the environment will be saved/damaged).

Either way, to be effective, the information needs to be credible. To establish credibility, the officeholder may seek to verify the information with a third party (ideally by an opposing interest) or seek information from a source that is widely trusted by constituents. When data is backed by studies or data, it is more effective.

Of course, it is “both allowed and commonplace” for stakeholders to use information in a way that advocates their side of an issue! However, there are times when it would be immoral and possibly illegal to withhold information or make false claims. Responsible stakeholders remain highly mindful of this line.

Electoral Support

Electoral support activities focus on providing resources that help candidates during elections. For example, endorsements, volunteer workers, help with get-out-the-vote campaigns, campaign contributions, and funding for political advertisements (for and against candidates) are all electoral support activities. Activities of this nature are widely used by unions and many interest groups but less so by firms, which tend to spend more on lobbying.

A major Supreme Court ruling in 2010 has worked to change this, however, at least for Federal Elections. As reported by the Center for Responsive Politics [41]:

In a 5-4 ruling in the case of Citizens United v. Federal Election Commission, the court overturned a ban on corporate and union involvement in federal elections that had been in effect since the early 1900s. The ruling allows corporations, unions and other organizations to spend unlimited sums from their own treasuries to fund political advertisements advocating the election (or defeat) of specific federal candidates.

The money can only be used for independent expenditures -- not direct contributions to the candidates' campaigns. And whatever ads are produced can't be coordinated with the candidates -- though policing that is not an easy thing to do.

Months before the election, numerous groups on the left and right announced intentions to raise millions of dollars to run independent campaigns to help elect their preferred candidates. Some formed new "super PACs" whose donors were fully disclosed, but many corporations and wealthy individuals funneled the money through non-profit front groups that kept the identity of donors secret. Attempts by Democrats in Congress to require disclosure of those hidden donations were defeated, so the sources of that money may never be known.

By election day, outside groups reported raising and spending nearly $300 million -- more than 40 percent of which came from undisclosed sources. That unprecedented surge of outside money -- which favored conservative candidates by a 2:1 margin -- helped to topple Democratic incumbents all across the country and bring about the biggest GOP sweep on Capitol Hill since 1948.

Not required, but if you are interested, see OpenSecrets.org [42] for more detail about PACs and current data related to PAC campaign contributions, broken down by sector, industry, and unique PAC.

Grassroots

Grassroot campaigns are based on the connection between constituents and their elected officials and may be used as part of an informational or representation strategy. Grassroots activities include letter writing campaigns (e-mail, post cards, letters), phone calling and grassroots lobbying (where individual stakeholders participate in lobbying efforts).

The effectiveness of grassroots activities depends largely on the supply-side of our analysis framework—numbers, coverage, resources and cost of organizing. The recent advent of low-cost, widely distributed mobile technology, however, has changed this equation dramatically. With no paper or postage, mass e-mail communications and social media campaigns are fast and without significant cost. With online blogs and surveys, information collection and dissemination is rapid and cheap. With social media, widespread organizing and information sharing is instantaneous and free.

Barack Obama’s 2008 campaign is widely viewed as revolutionizing presidential digital organization in the U.S., and he utilized social media with great success in 2012 as well. The success of Donald Trump's 2016 campaign was made possible by social media, particularly through Twitter communication and news sharing on Facebook. Grassroots organization on social media played a major role in the surprising success of the "Brexit" campaign in 2016 that resulted in Britain's decision to exit the European Union. Researchers from Oxford University determined that [43]:

...the campaign to leave had routinely outmuscled its rival, with more vocal and active supporters across almost all social media platforms. This has led to the activation of a greater number of Leave supporters at grassroots level and enabled them to fully dominate platforms like Facebook, Twitter and Instagram, influencing swathes (sic) of undecided voters...

Social media famously played a starring role [44] in fomenting and publicizing the "Arab Spring" that began in 2010 and sent shockwaves through many Middle-Eastern countries.

From Obama's and Trump's top-down approach to the (mostly) bottom-up organizing of the “Arab Spring” and Brexit, technology has unleashed nonmarket forces as never seen before!

Coalition Building

This component of a nonmarket strategy involves forging a coalition with other stakeholders. Sometimes these coalitions may be longstanding and formalized, like trade associations or a Chamber of Commerce. Other times they may be ad hoc, joining together for a particular issue. Even with a coalition, however, the alignment of the stakeholders may not be ideal and may require negotiation. A well planned coalition can increase the effectiveness of the individual stakeholders on an issue by combining their numbers and resources.

Hindi women sitting at a table. One of the women is talking into a microphone.
Policy forum to demand legislation for Hindus' rights in Islamabad
Credit: Pakistan Hindu Post [45]

Testimony

Stakeholders may testify before regulatory agencies, congressional committees, administrative agencies, and courts. This testimony is “important not only because the information presented can affect regulatory decisions, but also because it creates a record that may serve as a basis for judicial review” (Baron, 2010, p. 236).

In the public processes of regulatory agencies, stakeholders are given an opportunity to comment or otherwise contribute information to the process. The Pennsylvania Public Utility Commission (PUC) for example routinely “asks for comments” on policy. In The PUC Rate Making Process and the Role of Consumers [46], the PUC explains the many ways interested parties are invited to provide input into the rate making process:

Individual ratepayers may become formal parties by filling out a formal complaint form. Ratepayers may speak for themselves, or an attorney may represent individual ratepayers or groups of ratepayers. Consumers also can have their say informally by writing or calling the PUC or completing the objection/comment form. Consumers also may testify at public input hearings. By providing testimony, consumers place their views in the official record on the case. Public input hearings are conducted by the ALJ [Administrative Law Judge] in the utility’s service territory. Consumer testimony becomes part of the record on which the PUC will base its decision.

The right to comment on public sector action is fundamental to rulemaking at local, state, and federal levels, and allows all citizens to engage in public politics. For example, all regulations issued by federal agencies must be made available for public comment [47] for at least 30 days (except under extenuating circumstances), and all substantive comments are to reviewed before the the final reguation is published.

Public Advocacy

Public advocacy is communication directly to the public conveying a particular position on an issue. How a message is framed can be important. For example, “cap and trade,”dubbed by opponents as “cap and tax,” may be better served by the alternative “cap and dividend.” The "Clean Coal" campaign is a strong example of a carefully framed and well-funded message targeted directly at the general public. Firms, politicians, and interest groups can and often do engage in public advocacy. Perhaps the most prevalant and common example now is the way President Trump uses Twitter to reach out directly to the general public, frequently framing issues ("dangerous immigrants," "job-killing taxes," etc.). At no time in the history of the U.S. has a U.S. President engaged in so much public advocacy.

Judicial Actions

Judicial actions are cases where a stakeholder is either a defendant or an initiator of legal action as part of a nonmarket strategy. The purpose of these cases may be to enforce or protect rights, obtain damages, or address unfair competitive practices. Lawsuits are often very costly, but rewards can be high, too. Judicial strategies may be used in courts, governed by statutory and common law, and in regulatory and administrative agencies, which are governed by administrative law.

In a landmark ruling in June 2011, for example, the Supreme Court ruled [48] that climate change regulation is the business of the federal government (the Environmental Protection Agency, or EPA) and barred states from using public nuisance laws to try to force major utilities to cut greenhouse gas emissions from power plants. In doing so, the "high court sided with five large utilities in a suit brought by several states and three nonprofit land trusts over the facilities' emissions. The utilities--American Electric Power Co., Southern Company, Xcel Energy, Cinergy Corp., and the Tennessee Valley Authority--together release about 650 million tons of CO2 per year. That's a quarter of the CO2 emissions from the U.S. electricity-generating sector."  

Ironically, though the utilities were technically victorious in this institutional arena in the abovementioned case, this ruling provided the authority for the Obama Administration's Clean Power Plan (CPP) [49], which is a regulation propagated by the EPA that is projected to reduce the carbon pollution from U.S. power plants 32% below 2005 levels by 2030 [50].  The CPP was a nonmarket public political action that, if it were to be revived and come to fruition, would likely have a significant impact on the national power market for the foreseeable future. The CPP's implementation was blocked by a 5-to-4 margin in the U.S. Supreme Court in February of 2016, and is currently awaiting judgment [51] (as of August 2017) in the District of Columbia Circuit of the U.S. Court of Appeals. The U.S. EPA is currently reviewing [52] the CPP (this is outside of the judicial arena, of course).

This authority granted by the Supreme Court has also played a prominent role in the U.S.'s negotiations in, and ultimate adoption of, the 2015 Paris Agreement [53], which will have far-reaching impacts on energy markets worldwide.  In fact, the Paris agreement (which is also not supported by the Trump Administration) also took place in an international institutional arena (though not judicial), under the auspices of the United Nation's Framework Convention on Climate Change (UNFCC) [54].

Shareholder Advocacy

Interest groups may use a firm’s annual shareholders meeting as an opportunity to question the company in a venue where the exchange will be reported to the public. (This would be considered private politics, because it does not take place in a government institutions.) Taking these actions an additional step, however, an interest group that is a shareholder may make a more formal filing with the Securities and Exchange Commission (SEC). This would be a move to public politics and is called a shareholder resolution.

To Read Now

  • Visit The Forum for Sustainable and Responsible Investing [55] and read "Shareholder Resolutions". (If you have a few minutes, explore this site more.)
  • Read a summary of proxy materials [56] by Broadridge, an investment consulting firm. (Also note the description of proxy statements.)

Organizing for Nonmarket Effectiveness

To be effective in government arenas, firms (and other organizations) need to stay "in the know" about what's going on--trends, information, changes, priorities, people, and personalities. They must stay in close touch with the political winds around topics of concern to the organization. Baron explains how this may be done:

Firms that expect to be involved in issues addressed in government arenas must anticipate rather than simply react to developments. Consequently, they need to organize and be prepared for action. It is essential to monitor issues, and for many firms this means full-time representation in Washington and in the capitals of key states. For other firms, associations can be a cost effective means of providing intelligence, although this may not be sufficient if the firm’s interests differ from those the association represents. Most large firms also have a government affairs department that provides expertise and monitors the development of issues. A department may include lawyers, communications experts, former government officials, lobbyists, and analysts.

Washington offices serve as the eyes and ears of firms. They provide information on developing issues and are a locus of expertise about issues, institutions, and office holders. Because nonmarket issues are often episodic in nature, many firms on occasion engage the services of political consulting firms, Washington law firms, or public relations firms. Similarly, lobbyists may be hired for a specific issue. The size of a firm’s permanent staff thus is determined relative to the cost and effectiveness of outside alternatives.

Because lobbying is the centerpiece of most firms’ interactions with government, most employ lobbyists who are either political professional or experienced managers responsible for presenting the firm’s concerns to government officials. Their responsibilities typically include maintaining relationships with members of Congress, executive branch officials, and government agencies. Access is a necessary condition for lobbying, so many firms make a practice of maintaining contact with those members of Congress in whose districts they have their operations and with the committees that regularly deal with issues on the nonmarket agendas. Firms also provide training for their managers who are involved in nonmarket issues. That training often emphasizes sensitivity to the public reaction to the firm’s activities and the development of personal skills for participating effectively in government arenas.

Source: Baron, p. 239

 

RPS Case Study, Part 2

The following Case Study is written by the course author. The framework of this Case Study reflects actual Pennsylvania policy and data. All information about stakeholders, especially assessments related to the likelihood of participation in nonmarket action and the strategy that may or may not be evoked, is the author's opinion and presented in a manner to best demonstrate the lesson content of this course. This Case Study does not necessarily represent the actual position or strategy held or planned by any named stakeholder.

Case Study, Continued...

In the first part of this Case Study, we identified the issue and provided background, including a full description of the principles of Renewable Portfolio Standards (RPS) policy. With this groundwork, we are now prepared to consider the issue from the viewpoint of a wide range of stakeholders. Using an orderly format and presentation, we continue our nonmarket analysis with an examination of each stakeholder, including a description of the stakeholder, initial position, and an assessment of all factors related to the demand for and supply of nonmarket action.

We will use the following scales, as suggested by Baron (2010, p. 169).

Aggregate and Per Capita benefits: small, moderate, considerable, large, substantial

Numbers: few, small, considerable, large, substantial

Coverage: little, extensive, complete

Resources: limited, small, moderate, large, huge

Cost of Organizing: very low, low, moderate, high, very high

Prediction: limited, little, moderate, large

A couple of notes before you read through this: First, when analyzing the substitutes for nonmarket action, make sure to consider potential substitutes to the position that the stakeholder takes, and whether or not they are within the stakeholder's power to impact. Substitutes can change from stakeholder to stakeholder.  So if a stakeholder is opposed to the RPS, consider substitutes that would have the same or similar effect as the RPS policy not passing, and is an action they can influence.  If a stakeholder supports the RPS, consider substitute actions that would have the same or similar result as the RPS passing. Effectively you ask yourself: "Does the stakeholder have any other options that could take the place of the outcome that they want and can they influence that outcome?"

Also, when analyzing the coverage of the stakeholder, there are a few important considerations. First, consider the scale of the nonmarket issue. In our example here, the RPS is a state law, so you should consider how much of the State of Pennsylvania is covered by the stakeholder. For national issues, you should scale up accordingly. Second, be careful when estimating the extent of coverage. For example, a non-profit having an office in every U.S. state does not necessarily result in complete, or even extensive coverage of a national issue. You should think about whether or not each office oversees membership in every part of the state, whether it reach dozens or tens of thousands of members, and so forth.

Finally, keep in mind that prediction of nonmarket action is not an exact science, but predictions must be justifiable. The goal is to analyze as much relevant supply and demand information as possible and make a prediction based on that information. A good analysis will take all factors into consideration and have a strong, logical justification based on the available information.

Stakeholders

Mid-Atlantic Renewable Energy Association (MAREA) [57]

“a nonprofit organization, dedicated to informing and educating the public on renewable energy production, energy efficiency, and sustainable living through meetings, workshops, educational materials, and energy fairs.” Position: SUPPORTS

  • Substitutes: Many MAREA members, both individuals and businesses, have a financial interest in solar. But all members share a primary commitment to principles related to sustainability, including efficiency, agriculture, and other technologies. Advances in electricity pricing (“time of use”) that would benefit solar and encourage conservation would be somewhat of a substitute. TOU Pricing
  • Aggregate: Benefits are large for MAREA. The solar industry has a large and important presence at MAREA’s annual energy festival. Solar events of all types are highly attended.
  • Per Capita: On average, benefits are small for individual MAREA members, many of whom are not in the solar business and do not yet own their own solar electric system.
  • Numbers: Typically, 6,000 to 10,000 attend the annual PA Renewable Energy Festival. MAREA doesn’t release data regarding the number of members or extent of its e-mail circulation. considerable
  • Coverage: Mostly eastern PA, some in central and western PA, some out of state. extensive
  • Resources: Limited finances. Other than a few paid services, MAREA is managed by all volunteers. limited
  • Cost of Organizing: MAREA has a strong e-mail list, active website, and established social media presence (Facebook and Twitter), and face-to-face contact at monthly meetings and with large audience at annual energy festival. Cost of Organizing is low.
  • Predicted amount of nonmarket action: Aggregate benefits to organization are high and cost of organizing is low, but per capita benefits are small and resources are limited. moderate

Pennsylvania division of Solar Energy Industries Association (PA-SEIA) [58]

“organization of manufacturers, developers, contractors, installers, architects, engineers, consultants and other industry professionals dedicated to advancing the interests of solar energy and to developing a strong local PA industry offering high quality installation and professional services to business and residential customers in the region we serve.” Also, at the time it published a public blog for the PA division of MSEIA [59] Position: SUPPORTS

  • Substitutes: For this industry association, there is no good substitute for action that would stabilize AEC prices. Because of the poor AEC market conditions, many solar projects are on hold or canceled across the state.
  • Aggregate: Benefits are substantial for PA-SEIA. Without this bill passing, or similar legislative action, solar businesses will flee PA for more favorable business environments. These businesses are the PA-SEIA membership.
  • Per Capita: Benefits are substantial for individual PA-SEIA members. Passing this bill will restore markets and demand for solar installations. Many would say this bill is necessary to stay in the business in PA, at least for the next few years.
  • Numbers: As of 2011, the regional SEIA website [60] listed 75 member businesses in PA. This represents about 15% of the total number of installers on the PA DEP’s Approved Installer List. small
  • Coverage: Majority are in eastern PA, some in central PA, very few in western PA. little
  • Resources: Organization has highly qualified lobbyist available, but resources must be covered by member dues. small
  • Cost of Organizing: Members are available electronically. Resources needed to administer website, manage e-mail lists, and develop messaging. Limited presence on social media. moderate
  • Amount of Nonmarket Action: Stakes are high but PA-SEIA resources are limited. moderate

Owners of Small Solar Electric Systems in PA

Individuals, typically homeowners, with small scale solar installations (<15 kW) in PA used to offset personal usage. Position: SUPPORT

  • Substitutes: For most, AEC income is an essential component in recovering cost of investment. Advances in electricity pricing (“time of use” or TOU) that would be a weak substitute. They may also be able to sell their AECs into other regional markets.
  • Aggregate: Benefits are large, directly financial. This bill will increase the demand for AECs (higher percentages) and reduce the supply (close PA borders), increasing PA AEC prices.
  • Per Capita: Benefits are large, directly financial. As described above.
  • Numbers: As of July 2011, there were 4,028 solar generators (capacity less than 15 kW) located in PA, registered with the PA AEPS. large
  • Coverage: Statewide complete
  • Resources: Because of capital investment involved for solar electric installation, presumably individuals in this group are reasonably well resourced. moderate
  • Cost of Organizing: Currently, contact info for homeowners with solar electric installations is unavailable. Must be reached through other organizations or broad media. high.
  • Amount of nonmarket action predicted: Stakes are high, yet very difficult to reach and inform this group. limited

Owners of “Larger” Solar Electric System in PA

Owners of solar electric installations in PA with capacity greater than 15 kW, typically small businesses or institutions. In PA, as of July 2011, includes facilities up to 3.5 MW. Position: SUPPORT

  • Substitutes: For most, AEC income was a critical component in securing financing. May be able to sell AECs elsewhere, but not a strong substitute.
  • Aggregate: Benefits are substantial, directly financial. This bill will increase the demand for AECs (higher percentages) and reduce the supply (close PA borders), increasing PA AEC prices.
  • Per Capita: Benefits are substantial, directly financial. Same as described above.
  • Numbers: As of July 2011, there are 530 solar generators located in PA, with capacity greater than 15 kW, registered with the PA AEPS. small
  • Coverage: Mostly eastern PA, some in central and western PA. extensive
  • Resources: Mostly well-resourced small businesses and institutions, but small in number. limited
  • Cost of Organizing: high. Currently, contact info is unavailable or difficult to ascertain. Must be reached through other organizations or broad media.
  • Amount of nonmarket action predicted: Again, difficulty reaching and informing this group though stakes are high. As an organized group, limited likelihood of action. Because of the commercial nature of many of these projects,however, some owners may be aware and act independently. So overall, little.

Owners of Small Solar Electric System (not in PA, in PJM)

Individuals, typically homeowners, with small scale solar installations (<15 kW) used to offset personal usage. Located outside of PA, but still within PJM territory and currently able to sell RECs into PA market. Position: OPPOSE

  • Substitutes: Sell RECs elsewhere.
  • Aggregate: Benefits are small. If bill doesn't pass, REC values stay low. If bill does pass, PA borders are closed. Either way, no significant benefit.
  • Per Capita: Benefits are moderate, for same reason.
  • Numbers: About 1,300 (>15kW) not in PA currently registered with AEPS. considerable
  • Coverage: Outside of PA, otherwise unknown. little
  • Resources: Because of capital investment involved for solar electric installation, presumably individuals in this group are reasonably well resourced. moderate
  • Cost of Organizing: Very high. Currently, contact info is unavailable or difficult to ascertain. Presumably located in multiple states. Must be reached through other organizations or broad media. very high
  • Amount of nonmarket action predicted: Limited, because of small benefits, difficulty reaching and informing this group and available substitute.

Owners of “Larger” Solar Electric System (not in PA, in PJM)

Owners of solar electric installations not in PA with capacity greater than 15 kW, typically small businesses or institutions. As of July 2011, includes facilities up to 10 MW. Located outside of PA, but still within PJM territory and currently able to sell RECs into PA market. Position: OPPOSE

  • Substitutes: For some, AEC income based on PA markets was an important component in securing financing. Selling into other markets may be an acceptable substitution.
  • Aggregate: Benefits of opposing the bill are small. If the bill doesn’t pass, AEC prices are expected to stay very low for near term (3 years). If bill does pass, borders will be “closed,” and will have no access to market at all.
  • Per Capita: Benefits are small. Same as for aggregate.
  • Numbers: As of July 2011, there were 102 solar generators located outside of PA, with capacity greater than 15 kW, registered with the PA AEPS. small
  • Coverage: Outside of PA, otherwise unknown. little
  • Resources: Mostly well-resourced small businesses and institutions, but small in number. small
  • Cost of Organizing: Currently, contact info is unavailable or difficult to ascertain. Must be reached through other organizations or broad media. very high
  • Amount of nonmarket action predicted: Difficult and costly to organize with small benefits per capita and in the aggregate. limited

Solar Installers

Any person or business that installs solar electric systems in Pennsylvania. Position: SUPPORT

  • Substitutes: For most customers, AEC income is critical to obtain financing and/or cost justify the investment. For installers, if solar business dries up, option is to close up or relocate. No acceptable substitute for what AEC prices do for market.
  • Aggregate: Benefits are substantial, directly financial (increased customer activity)
  • Per Capita: Benefits are substantial, directly financial (increased customer activity)
  • Numbers: As of July 2011, the DEP list of Approved Photovoltaic Installers [61] included 629 names, 462 located in PA. small
  • Coverage: All PA and some other states. complete
  • Resources: Not formally organized, includes many small business, new start-ups. moderate
  • Cost of Organizing: Full contact info is published, but difficult to work with. Hard to get installers attention with e-mail only; other contact (phone, mail) are resource intensive. moderate
  • Amount of nonmarket action predicted: High, benefits are high per capita and across group, readily identified group, cost of organizing moderate but appears worth it, no good substitute.

PennFuture [62]

A nonprofit organization that “enforces environmental laws and advocates for the transformation of public policy, public opinion and the marketplace to restore and protect the environment and safeguard public health. PennFuture advances effective solutions for the problems of pollution, sprawl and global warming; mobilizes citizens; crafts compelling communications; and provides excellent legal services and policy analysis.” Position: SUPPORT

  • Substitutes: Many members have a financial interest in solar. But all members share a primary commitment to principles related to the environment, including water, air, climate, and other natural resources (natural gas). For solar specifically, however, no direct substitute. Progress on other environmental issues would be suitable substitute.
  • Aggregate: Benefits are moderate for PennFuture, no direct benefit to group but of significant benefit to some members.
  • Per Capita: Overall, benefits are moderate for individual PennFuture members, because of financial benefit to some and environmental benefit for all.
  • Numbers: Data are unavailable. PennFuture website reports, “The Philadelphia Inquirer called PennFuture "Pennsylvania's leading environmental advocacy organization." large
  • Coverage: Statewide complete
  • Resources: PennFuture is a well funded non-profit, based on donations. Group maintains paid staff of policy analysts. large
  • Cost of Organizing: PennFuture has an active website and holds many well-attended public events. Cost of Organizing is low.
  • Amount of nonmarket action predicted: High, benefits are medium for group and per capita, and group is concerned with additional issues, but resources are large and cost of organizing is low.

Pennsylvania Coal Association [63] (Now called the Pennsylvania Coal Alliance)

A “trade organization representing surface and underground coal operators that produce bituminous coal mined in the Commonwealth. In addition, PCA represents companies whose livelihood depends in whole or in part on a robust coal industry by providing essential services to the coal industry, ranging from engineering and consulting to financial, insurance and the sale of mining equipment.”

The PCA has successfully opposed similar initiatives in the past [64], citing rising electricity prices for consumers. Solar, of course, is a competitive energy source. Currently, coal is used to generate almost half [65] of the electricity in PA. Solar is less than 0.05%. Position: OPPOSE

  • Substitutes: Any other issue involving alternative fuel sources or industry regulation.
  • Aggregate: Overall, benefits are moderate. At this point, due to relative scale, solar poses no real threat but issue carries weight on principle with organization and its members.
  • Per Capita: Benefits of defeating this bill are small to individual PCA members.
  • Numbers: At the time, about 150 members. few
  • Coverage: Statewide, but mostly western PA extensive
  • Resources: Resources of prominent members of regional coal industry. huge
  • Cost of Organizing: Well organized, established channels, experienced. very low
  • Amount of nonmarket action predicted: Large, benefits are small to moderate, but resources are huge and cost of organizing is very low.

Rate Payers

Any individual or business in PA that pays for electricity. Position: OPPOSE

For ratepayers who oppose this bill, the benefits are avoiding possible small increase in electricity prices.

  • Substitutes: Energy efficiency and conservation, but not perceived as a viable replacement for low electricity prices.
  • Aggregate: Overall, benefits of opposing the bill are small
  • Per Capita: For individual ratepayer, benefits of opposing the bill are small. But for some, principle of "less government" is important, and bills of this nature have symbolic importance. moderate
  • Numbers: 4,970,057 Residential + 680,045 Commercial/Industrial = 5,650,102 Total Customers [66](not all are opposed—unclear how many support/oppose/have no opinion) substantial
  • Coverage: Statewide complete
  • Resources: Resources of all businesses and individuals that pay for electricity in PA and oppose this bill. huge
  • Cost of Organizing: No organization or focused medium for reaching all rate payers. very high
  • Amount of nonmarket action predicted: Limited, benefits are small per capita and for group, and cost of organizing is very high. On symbolic grounds, however, some possibility of action.

Rate Payers

Any individual or business in PA that pays for electricity. Position: SUPPORT

For ratepayers who support this bill, the benefits are reduced reliance on fossil fuels and energy imports.

  • Substitutes: The opportunity to purchase electricity from “green” generators would be a good substitute.
  • Aggregate: Overall, benefits are small.
  • Per Capita: Unless you are a ratepayer with an installed solar electric system, benefits are indirect (environmental, principled) and small.
  • Numbers: 4,970,057 Residential + 680,045 Commercial/Industrial = 5,650,102 Total Customers [66] in 2011 (not all are supporters—unclear how many support/oppose/have no opinion) substantial
  • Coverage: Statewide complete
  • Resources: Resources of all businesses and individuals that pay for electricity in PA and support this bill. huge
  • Cost of Organizing: No organization or focused medium for reaching all rate payers. very high
  • Amount of nonmarket action predicted: Limited, benefits are small per capita and for group, substitutes exist and cost of organizing is very high.

Pennsylvania Chamber of Business and Industry [67]

The “largest broad-based business association in Pennsylvania. Thousands of members throughout the Commonwealth employ greater than 50 percent of Pennsylvania’s private workforce. Headquartered in Harrisburg, the PA Chamber serves as the frontline advocate for business on Capitol Hill by influencing the legislative, regulatory, and judicial branches of state government. In 1995, the Pennsylvania Chamber of Business and Industry became one of only five state chambers in the nation to be accredited by the U.S. Chamber of Commerce for meeting the highest standards of performance and effectiveness.”

The PCA has successfully opposed similar (broader) initiatives in the past [68], stating “the legislation would destroy Pennsylvania’s historic energy strengths, including coal, nuclear (a CO2-free energy), and one of the Commonwealth’s most promising developing industries – natural gas“ and “consumers would be forced into paying for more costly energy sources.” Position: OPPOSE

  • Substitutes: Other issues involving regulation and overhead for businesses in PA. However, particular sensitivity to issues related to energy costs.
  • Aggregate: The benefits to the Pennsylvania Chamber of Commerce and its members of opposing this bill are: avoiding small possible increase in electricity prices and avoiding competition from alternative energy sources. But, on principle, this issue rates high. Overall, benefits are moderate.
  • Per Capita: Benefit is avoiding possible small increases in electricity prices. small.
  • Numbers: Exact data unavailable, but this from the Chamber's Web site [69], “The Pennsylvania Chamber of Business and Industry is the largest broad-based business association in Pennsylvania. Thousands of members throughout the Commonwealth employ greater than 50 percent of Pennsylvania’s private workforce.” large
  • Coverage: Statewide complete
  • Resources: Resources of all Chamber members. huge
  • Cost of Organizing: Experienced, structured, well organized. very low
  • Amount of nonmarket action predicted: Well-funded and experienced operation ready to roll, though direct benefits are small to moderate, but on principle, issue is significant. large

Framework

As a final step to our Nonmarket Analysis, we build a table, as shown below, to present a summary of our findings. This table is the Nonmarket Analysis Summary Framework. Ta da!!

ISSUE: Pass HB 1580 to Accelerate Alternative Energy Portfolio Standard Schedule for Solar
Supporting Stakeholders
  Demand Side Supply Side Prediction
Stakeholders - SUPPORTING Benefits from Supporting HB 1580 Ability to Generate Nonmarket Action Amount of Nonmarket Action
Substitutes Aggregate Per Capita Effectiveness Cost of Organizing
Numbers Coverage Resources
MAREA TOU elec prices large small considerable (~8,000) extensive limited low moderate
PA-SEIA none substantial substantial small (~75) little small moderate moderate
Small System Owners (in PA) TOU elec prices, sell RECs elsewhere large large large (4,000) complete moderate high limited
"Larger" System Owners (in PA) sell RECs elsewhere substantial substantial small (530) extensive limited high little
Solar installers none substantial substantial small (629) complete moderate moderate high
PennFuture other environmental issues (gas) moderate moderate large complete large low high
Ratepayers (supporting) buy green generation small small substantial complete huge very high limited

 

ISSUE: Pass HB 1580 to Accelerate Alternative Energy Portfolio Standard Schedule for Solar
Opposing Stakeholders
Stakeholders - OPPOSING Benefits from Opposing HB 1580 Ability to Generate Nonmarket Action Amount of Nonmarket Action
Substitutes Aggregate Per Capita Effectiveness Cost of Organizing
Numbers Coverage Resources
Pennsylvania Coal Association other renewable energy issues moderate small few (150) extensive huge very low large
Ratepayers (opposing) none small moderate substantial complete huge very high limited
PA Chamber of Business and Industry other regulation issues moderate small large complete huge very low large
Small System Owners (not in PA) sell RECs elsewhere small moderate considerable (~1,300) little moderate very high limited
"Larger" System Owners (not in PA) sell RECs elsewhere small small small (~100) little small very high limited

Lesson 2 Assignment

Weekly Activity 2

Please review Canvas calendar for all due dates related to your Nonmarket Analysis Case Study.

Deliverable

Complete "Weekly Activity 2," located in the "Weekly Activities" folder under the Modules tab in Canvas. The activity may include a variety of question types, such as multiple choice, multiple select, ordering, matching, true/false and "essay" (in some cases these require independent research and may be quantitative). Be sure to read each question carefully.

Unless specifically instructed otherwise, the answers to all questions come from the material presented in the course lesson. Do NOT go "googling around" to find an answer. To complete the Activity successfully, you will need to read the lesson, and all assigned readings, fully and carefully.

Each week a few questions may involve research beyond the material presented in the course lesson. This "research" requirement will be made clear in the question instructions. Be sure to allow yourself time for this! You will be graded on the correctness and quality of your answers. Make your answers as orderly and clear as possible. Help me understand what you are thinking and include data where relevant. Remember, numbers should ALWAYS be accompanied by units of measure (not "300" but "300 kW"). You must provide ALL calculations/equations to receive full credit - try to "talk me through" how you did the analysis.

This Activity is to be done individually and is to represent YOUR OWN WORK. (See Academic Integrity and Research Ethics [31] for a full description of the College's policy related to Academic Integrity and penalties for violation.)

The Activity is not timed, but does close at 11:59 pm EST on the due date as shown in Canvas.

If you have questions about the assignment, please post them to the "Questions about EME 444?" Discussion Forum. I am happy to provide clarification and guidance to help you understand the material and questions (really!). Of course, it is best to ask early.

Summary and Final Tasks

In this lesson, you learned about general types of nonmarket strategy and specific strategies for activities in institutional (government) arenas. The cast study, continued from the previous lesson, demonstrated the final steps of a nonmarket issue analysis. The findings of the analysis were presented in a tabular Nonmarket Analysis Summary Framework. The continuation of the Case Study information collection process provided additional in-depth experience with the structure and mechanics of renewable portfolio standards (RPS) programs.

You learned:

  • the meanings pf public politics and private politics;
  • three general types of nonmarket strategy for government arenas;
  • details of many specific strategy types for use in nonmarket arenas;
  • through the RPS Case Study, how to assess demand for and supply of nonmarket action;
  • to apply data to the nonmarket analysis of issues related to renewable portfolio standard (RPS) programs.

Have you completed everything?

You have reached the end of Lesson 2! Double-check the list of requirements on the first page of this lesson to make sure you have completed all of the activities listed there.

3 Private Politics

Introduction

Overview of Lesson 3

In the previous lesson, we learned about public politics, strategies that apply to nonmarket action that takes place in government arenas. In this lesson, we consider strategies for nonmarket action that takes place outside of public arenas, called private politics.

What will we learn?

By the end of this lesson, you should be able to...

  • explain the motivations behind private politics;
  • list four ways that private politics affects the issues, interests, institutions, and information that comprise the nonmarket environment;
  • demonstrate a range of specific strategies for nonmarket action in non-government arenas;
  • apply a three-step strategy for evaluating nonmarket strategy alternatives;
  • describe seven "tests" for evaluating alternatives and ethical decision making;
  • list the ISOs seven core subjects for Social Responsibility;
  • make a recommendation for nonmarket strategic action based on the outcomes of a nonmarket analysis.

What is due for Lesson 3?

The table below provides an overview of the requirements for Lesson 3. For details, please see individual assignments.

Please refer to the Calendar in Canvas for specific time frames and due dates.

To Do List for Lesson 3
REQUIREMENT SUBMITTING YOUR WORK
Read Lesson 3 content and any additional assigned material Not submitted.
Weekly Activity 3 Yes—Complete Activity located in the Modules Tab in Canvas.
Case Study--work with others on your Team to prepare Case Study, following course guidelines Check Canvas calendar for all Case Study Due Dates. Plan your Team's work schedule accordingly.

 

Private Politics

an old chevrolet Corvair sitting on the side of the road.
Corvair advertisement from 1960s
Credit: Corvair 1960 [70] / JOHN LLOYD [71] / Creative Commons [16]

In the previous lesson, we dealt with nonmarket strategy in the arena of public politics, where firms and interest groups compete in the context of the institution of government for advantage on an issue. In this lesson, we will focus on private politics, when the competition between firms and other stakeholders takes place outside of the context of the institution of government

In this lesson, we will also carry forward with the RPS Case study. In parts 1 and 2 we established the issue and background, identified stakeholders, and assessed the demand for and supply of nonmarket action for each. In part 3 of the RPS Case Study, we will consider nonmarket strategy options based on the results of our issue analysis.

An Introduction to Private Politics (Baron, 2010, p. 90-91)

the cover of the book "Unsafe at Any Speed", by Ralph Nader
Cover of Nader's 1965 book exposing the resistance of automobile manufacturers to safety equipment.
Credit: flickr [72] / Matthew Bradley [73] / Creative Commons [74]

Many nonmarket issues are addressed in public institutions, …, which deal with lawmaking, regulation, and the legal system. The competition between firms and other interests [stakeholders] over the resolution of these issues in the context of the institutions of government is called public politics. Other nonmarket issues are addressed largely outside, but often in the shadow of, public institutions. These issues are advanced by the strategies of individuals, firms, interest groups, activists, and NGOs [non-government organizations] and range from direct pressure, as in the case of consumer boycotts, to attempts to influence public sentiment. The competition between a firm and these other groups over the resolution of issues outside of government institutions is called private politics.

Private politics can be motivated by self-interest as well as by broader concerns. In some cases it arises because an individual becomes concerned about an issue, as in the instance [...] of the person who telephoned Larry King and said that his wife had died from brain cancer caused by radiation from heavy use of a cellular telephone. More often, private politics originates from interest groups, as when the U.S. labor unions act to demand higher wages and improved working conditions in the overseas factories supplying the apparel and footwear industries. [ …] Private politics is also initiated by activists, advocacy groups and NGOs that serve the interests of others in addition to the interests of their members. The causes these individuals, interest groups, and NGOs pursue are important components of the nonmarket environments, and the issues on their agendas are frequently thrust onto the agendas of firms. Understanding their concerns, organization, and strategies is essential for formulating effective strategies to address the issues they advance and the pressures they generate.

Private politics affects the issues, interests, institutions, and information that comprise the nonmarket environment. First, those initiating private politics can identify issues about which management either is unaware or has not understood as important to others, as in the case of the possible health risks from cellular telephone radiation. Similarly, the actions of Greenpeace calling attention to Shell UK’s plan to sink the oil storage platform, Brent Spar, in the North Atlantic generated intense private politics in Europe even though the plan had been approved by the UK government. Individuals and interest and activist groups thus play an important role in setting the nonmarket agendas of firms and in advancing issues through their life cycles. Oil companies now involve stakeholders as well as governments in developing disposal plans for oil platforms. Moreover, the issues these groups raise and the concerns they express may point in the direction of more effective and responsible management.

Second, these groups can affect the organization of interests by forming watchdog and advocacy groups and by mobilizing people to work for causes. These groups have been instrumental in advancing the causes of environmental protection, health and safety protection for consumers, and civil and human rights. These organizations are an increasingly important component of the nonmarket environment.

Third, the pressure these groups exert can affect the institutional configuration of the nonmarket environment. In public politics their actions have led to new laws, expanded regulatory authority, court orders, legislative oversight activities, and executive branch initiatives. These groups were the prime movers behind the creation of the Environmental Protection Agency and the Consumer Products Safety Commission, and organized labor worked for the creation of the Occupational Safety and Health Administration [OSHA]. In private politics, activists have spurred the formation of private governance organization such as the Fair Labor Association and the Forest Stewardship Council, which govern the private regulation of labor practices in overseas apparel and footwear factories and in timber harvesting and forest management, respectively. This private regulation has been growing as an alternative to government regulation.

Fourth, individuals, interest groups, and activists provide information that influences public and private politics. Rachel Carson’s Silent Spring [a book, published in 1962 and credited by many as starting the environmental movement] spurred the environmental movement by calling attention to the harmful effects of DDT. Activists at the Earth Island Institute spurred a public outcry and boycotts of tuna products when they produced a film showing dolphins drowning in nets used to catch tuna.1The news media plays a major role in disseminating this information, and an important component of private politics strategies is to attract media coverage. […]

Regardless of whether these groups are right in their causes, their actions can damage a firm, its reputation, and its constituents. Some products, rightly or wrongly, have been doomed by the actions of activists. Ralph Nader’s attacks on the safety of the General Motors Corvair, for instance, contributed to the car’s elimination. Activists have been vocal opponents of agricultural biotechnology, causing delays in new products and increased costs. The strength of activists groups varies across countries. The opposition to agricultural biotechnology has remained moderate in the United States as more products have been brought to market without the harmful effects claimed by their critics. Opposition to agricultural biotechnology, however, remains strong in much of Europe. Because of private politics, a major Swiss pharmaceutical company located biotechnology units just over the French border and connected those units by pipeline to its plant just inside Switzerland. In effect, the plant lies on both sides of the border with the biotechnology components located in France.

1Putnam, Todd. (1993). “Boycotts are Busting Out All Over.” Business and Society Review, 47-51.

Strategies of Private Politics

To Read Now

At this point, please complete Reading Assignment 3--Private or Public Politics? (Baron, 2010, 95-96), located in the Lesson 3 module in Canvas.

In private politics, stakeholders work to advance their position on an issue by using a strategy of direct pressure on one another, most often this is interest groups putting pressure on firms.

Boycotting

A boycott is a “concerted refusal to have dealings with (as a person, store, or organization) usually to express disapproval or to force acceptance of certain conditions” (Merriam Webster [75]). Boycotts may be made on an individual scale (e.g., there are stores where I don’t shop because of their politics) or by a group (e.g. the mining town in Colorado that boycotted [76] a nearby brewery for supporting a local environmental group that wanted to shut down a local mine in 2015). Boycotts may be organized from the bottom up or top down, with the cost of organizing greatly reduced by today’s technology.

However, do boycotts really have an effect on either the performance of firms or on their policies? Baron (2010, p. 22) reports that “nearly all targets [of boycotts] state that a boycott had no significant effect on their performance,” and that results overall vary by issue. However, as you will see below, boycotts can be impactful in some ways. In addition, even if the boycott does not achieve the desired goal, significant benefit may come to the organizer in terms of media coverage and publicity.

To Read Now

  • Boycotts can be tricky business! Read "As BP Backlash Grows, So Do Calls For Boycott [77]," which provides details about a boycott related to the infamous Deepwater Horizon oil spill in 2010.
  • For a short explanation of some implications of the power of social media regarding boycotts, please read "The Trump Era Boycott [78]" from The New Yorker magazine.

Naming and Shaming

This tactic identifies a specific firm that has an objectionable activity, product, or service and provides information about the perceived harm to the public. The objective is “to harm the target firm by damaging its brand, its reputation or the morale of its employees.” In dealing with interactions of this nature, a “trust gap” often comes into play where one party has greater credibility with the public than another. In a global survey [79] published in 2017, Edelman (a public relations firm) found that more of the public trusts non-governmental organizations (NGOs) (53%) than businesses (52%), the media (43%), and the government (41%). All of these percentages have been declining in recent years, according to Edelman. (Feel free to explore the data in this survey - there is some fascinating info in there!)  A 2007 survey highlighted the trust gap between consumers and corporations, reporting that “Sixty-eight percent of executives say that large corporations make a generally or somewhat positive contribution to the public good. Yet only 48% of consumers agree” (Bonini, Sheila M. J., McKillop, Kerrin and Mendonca, Lenny T., The McKinsey Quarterly, 2007, Number 2, pp 7 – 10). 

Methods for applying pressure to a named “target” seek to get word out to the public by attracting media to an issue. This may include print, cable, and broadcast media, as well as social media (e.g., Facebook, Twitter) and other Internet-based channels (e.g., YouTube, e-mail, blogging). To attract attention, groups may hold events such as demonstrations or press conferences to release data, studies, or allegations. 

Naming and shaming can be done alone, for example when Donald Trump threatened GM [80] with a border tax if it continued to build its Chevy Cruze in Mexico.  But keep in mind that any publicized boycott effectively constitute naming and shaming as well. Any number of examples could be cited, but this is a campaign from Marcellus Drilling News (MDN) [81] urging readers/members to boycott the clothing company Patagonia because it advocated against (among other things) a proposed natural gas pipeline in the Eastern United States. MDN names and shames Patagonia while explaining its rationale for a boycott. In short, it's difficult to run an effective boycott campaign without naming and shaming, but naming and shaming can be done without boycotting. (In related nonmarket news, Patagonia boycotted Utah's outdoor trade show [82] in 2017 over a disagreement about Bears Ears National Monument.)

The party that initiates such an action will have a first-mover advantage, giving it the opportunity to frame an issue and make allegations that often take the target off guard, unprepared to make a quick and effective public response. In the GM example above, it was difficult for the firm to counteract Trump's argument because he had successfully framed the issue as one of GM killing American jobs, even though the Cruze model that they manufacture in Mexico is for foreign markets. Often, by the time the "named and shamed" responds, the issue is already framed. 

Shareholder Advocacy

Interest groups may use a firm’s annual shareholders meeting as an opportunity to question the company in a venue where the exchange will be reported to the public. This may also be followed by a more formal filing of a shareholder resolution with the Securities and Exchange Commission (a move to public politics), as discussed in the previous lesson. We'll address this more in this week's Lesson 3 questions.

Cooperation

In some cases, interest groups and firms will choose to work together to improve practices. What a novel idea! Baron (2010, p 98) cites the example of the Sustainable Forestry Initiative [83] (SFI) which was developed by the timber industry in cooperation with Conservation International and the Nature Conservancy. Admirable to some, but to others, SFI is a case of the “fox watching the hen house.” The Forest Stewardship Council (FSC) was also formed by a mix of "businesses, environmentalists, and community leaders [84]" and continues to be governed by a mix of firms and interest groups. The Marine Stewardship Council, formed in the United Kingdom in 1996, has a similar history [85]. This organization is still very active, and was formed by a mix of private- and non-profit stakeholders that came together to address the sustainability of the world's fisheries.

Advocacy Science

An effective way to call attention to an issue is to “release” scientific data that supports a group’s position on an issue. To do this, a group may design and conduct a study or an investigation, then compile and announce the findings, or the group may seize on the release of studies done by others. Information in this form can add credibility to the claims being made, draw considerable public attention, and encourage sympathetic legislation.

This is a common strategy for many organizations of all political stripes.  For example, the Union of Concerned Scientists (UCS) released a report [86] in 2015 that analyzes the risk to U.S. states based on over-reliance of natural gas. UCS is known as a socially progressive organization.  The World Resources Institute [87] is a "global research organization" that publishes a variety of sustainability-based research reports, with a global focus.  The CATO Institute [88] is a well-known libertarian think tank, and publishes reports supporting "free market" principles, while the Heritage Foundation [89] is a think tank that "promote(s) conservative public policies," and is often the go-to organization for conservative politicians in the U.S.  Note that most of these organizations engage in other nonmarket activity, both public and private.

Target Individuals

In an effort to apply pressure related to an issue, a group may target an individual for activities related to the individual’s professional or personal roles. For example, a CEO who personally donates to or otherwise supports a group on the other side of an issue.

In a particularly public targeting, Eric Schmidt, CEO of Google, was targeted for his professional role by the privacy advocacy group Consumer Watchdog [90]. The group launched an attack on Schmidt in response to what the group perceived as Google's intrusions on privacy. Consumer Watchdog ran a 15-sec clip on a large screen in Time Square that promoted a longer video, featuring a “ghoulish” character of the CEO in a creepy interaction with children (which many found offensive). Text stating "He is collecting your personal information" flashes across the screen. Viewers are then given a number to text to send a message to Google, telling them to stop collecting private information. You can see the (:15) video below:

Protesters in the Philippines advocate for the divestment of fossil fuels by the Vatican Bank
Protesters advocating for the divestment from fossil fuels by the Vatican Bank, prior to Pope Francis' visit in 2015.
Credit: 350.org [91]/ CC BY-NC-SA 2.0 [92]

Check Your Understanding

The image above is from a protest in the Philippines in 2015. This was part of a campaign [93] by the anti-climate change environmental organization 350.org. The goal of this campaign is to have the Vatican Bank "divest" from fossil fuels, i.e., pull investments from fossil fuel-based industries. The divestment movement has been happening worldwide, mostly on college campuses, with mixed success.

Can you name the private nonmarket strategies being employed?

Click for answer

ANSWER:There are at least two strategies evident here. The Vatican is being "named and shamed," and thought it's being done in a relatively benign way, the protesters "targeted" Pope Francis (note the sign calling him out by name). If a firm (e.g., a solar company or other business) were involved in the protest, then "cooperation" was likely taking place between the firm and 350.org, which is an interest group.

To Read Now

One nonmarket movement that has picked up steam in the past few years is "divestment." The main targets have been university endowments [94], which are investment funds run by universities that can run into the billions of dollars. The top 10 endowments in U.S. colleges alone had nearly $200 billion [95] in 2016. However, as you'll see in the articles below, many other instutions - pension funds, cities, non-profits, and some banks - have joined this movement. The main goal of this movement has been to convince endowment holders to divest from industries and firms that interest groups see as socially- and/or environmentally-irresponsible, the primary focus being the fossil fuel industry.

  • "An Introduction to Fossil Fuel Divestment [96]." Clean Technica, March 2017.
  • "Fossil fuel divestment funds double to $5tn in a year [97]." The Guardian, December 2016.

Nonmarket Strategy and Ethics

The information analysis framework described in previous lessons is used to guide the formulation of nonmarket strategy. Initially, multiple possible nonmarket strategies are generated for consideration--which nonmarket action(s) best serve our interests? Baron (2010, p 50) recommends that these alternative strategies be evaluated in three stages: Screening, Analysis, and Choice.

The screening stage identifies and eliminates nonmarket strategy alternatives that are a) against the law, b) contrary to company/organization policy or c) violate widely accepted ethics principles.

The analysis stage relies on economics, political science, and other social sciences to predict the actions and reactions of other stakeholders. The analysis stage also takes into account moral motivations of nonmarket behavior and how others may react to the actions taken.

In the third stage, a choice is made. The objective for making the selection is typically value creation, measured in terms of the impact on stakeholder(s). However, if the issue involves moral concerns, then principles of well-being, rights, and justice must be considered.

Ethics

One reason a strategy may be screened out is because it violates accepted ethics. But what does this mean? Ethics is a systematic (or codified) approach to moral judgments. Ethics deals with matters of human well being, liberty, and freedom and is based on moral standards that are impartial, universal, and independent of governments and authoritative bodies. But making an "ethical" decision is often easier said than done. For example, drug testing in the workplace is ethical in one sense, if it keeps society safe. But unethical in another sense if it violates a worker's right to privacy. These questions can be particularly challenging for energy industries where corporations compete in a marketplace under a long shadow of powerful nonmarket forces loaded with uncertainty--involving the environment, regulation, and customers who themselves are struggling to balance their energy needs, pocketbooks, and moral compasses. Are any of us driving the car we think is most "right"? More likely, we are driving a car we can afford and that is "right enough."

Business ethics is the application of ethics principles to issues that arise in business. ...business ethics pertains to situations in which individuals are in an organizational position and act as agents of the company and its owners. [...] In an organization role, a manager must reason about situations in which virtue is not always present, conceptions of what is good or right differ among individuals, and interests are in conflict. [...] Good ethics is not necessarily beneficial to an individual or profitable for a firm; however, good ethics is good for society and is a requirement of good management. Although good ethics may not always be profitable, unethical behavior can result in substantial losses (Baron, 2010, p. 655).

The following are four reasons (Baron, 2010, p. 711) why it is important that decision makers maintain a sensitivity to moral dimensions of an issue:

  • It can help managers avoid wrongs that may otherwise result from a narrow focus on the firm's interests.
  • It can help management anticipate nonmarket actions and pressures.
  • It can render managers more likely to make decisions that serve the long-run interests of society and ultimately of business itself.
  • It addresses the context of corporate social responsibility found in ethics principles.

But making ethical choices, even by even the most well intended, can be difficult. Many of us have personally been in situations where we wanted to do the "right" thing, but really didn't know what the right thing was. Tell, don't tell? In business, decisions need to be made in situations where there are competing moral claims that require judgments about the effects of decisions on individuals, their rights, and their well being. How does one do this?

Davis (1999) recommends seven "tests" for evaluating alternatives and ethical decision making:

  • Harm test: Does this option do less harm than alternatives?
  • Publicity test: Would I want my choice of this option published in the newspaper?
  • Defensibility test: Could I defend choice of option before congressional committee or committee of peers?
  • Reversibility test: Would I still think choice of this option good if I were adversely affected by it?
  • Colleague test: What do my colleagues say when I describe my problem and suggest this option is my solution?
  • Professional test: What might my profession's governing body for ethics committee say about this option?
  • Organization test: What does the company's ethics officer or legal counsel say about this?

A particularly egregious (and illegal) breach of corporate ethics was revealed in 2015 when it was found that Volkswagen had installed so-called "defeat devices" in millions of their vehicles. These devices were pieces of software that would alter the operational characteristics of the engine when they determined that an emissions test was being run. When this happened, the emissions (e.g., carbon dioxide and nitrogen) would be lower than they would be under standard operating conditions.  Note that this precipitated both nonmarket (e.g., fines by the U.S. EPA) and market (car sales slumping) activity.  Read the following summary, which is the best I've found of this major international scandal.  Can you identify any of Davis' ethical tests that were not violated? Seriously - go through them one-by-one and think about it! (Note that the firm is still dealing with consequences of this action, and that new details [98] of unethical and illegal behavior have been surfacing.)

  • "Volkswagen: The scandal explained [99]." BBC, December 2015.

Corporate Social Responsibity

Many companies now have well-publicized "Corporate Statements of Social Responsibility," "Codes of Ethics," and even positions with a title such as Ethics Officer. Baron (2010, p. 724) cites two factors contributing to the spread of statements of social responsibility:

  • a belief by some firms that they should be accountable for conduct beyond profit maximization, and
  • a defensive motivation intended to avoid private politics led by interest groups or to preempt public politics and additional government regulation.

What does this mean, exactly, a "corporate statement of responsibility?" The International Standards Organization (ISO) has set forth a voluntary standard for social responsibility in an international setting. The figure below illustrates the content addressed in the standard, including seven core subjects of social responsibility: organizational governance, human rights, labour practices, the environment, fair operating practices, consumer issues, and community involvement and development.

ISO's voluntary standards for social responsibilty in an international setting. explained above and in additional materials
Figure 3.1 — Schematic overview of ISO 26000 [100]
Credit: International Organization for Standardization. Retrieved January 2017 from International Organization for Standardization [101].

To Read Now

Visit the International Organization for Standardization (ISO) [102]

Read the landing page and watch the short video, "What ISO standards do for you." (transcript of video [103])

Read the page ISO 26000 - Social Responsibility [104] (transcript of Social Responsibility video [105]) (not required, but watch video if you have 47 seconds!)

On the right-hand side of the ISO 26000 page, click the link below "Preview our standards." Read first few paragraphs of "Introduction" closely (you can stop at Box 1), and scan the remainder.

RPS Case Study, Part 3

The following Case Study is written by the course designer. The framework of this Case Study reflects actual Pennsylvania policy and data. All information about stakeholders, especially assessments related to the likelihood of participation in nonmarket action and the strategy that may or may not be evoked is the author's opinion and presented in a manner to best demonstrate the lesson content of this course. This Case Study does not necessarily represent the actual position or strategy held or planned by any named stakeholder.

Case Study, Continued...

In the first part of this Case Study, we identified the issue and provided background, including a full description of the principles of Renewable Portfolio Standards (RPS) policy. In the second part, we considered the issue from the viewpoint of a wide range of stakeholders. Using an orderly format and presentation, we formulated a description of each stakeholder, initial position, and an assessment of all factors related to the demand for and supply of nonmarket action. In this part 3, we will now present an analysis of our findings and suggest strategy options.

The following nonmarket strategy is prepared from the point of view of the Mid-Atlantic Renewable Energy Association (MAREA), which supports the passing of HB 1580.

I. Arena

The arena has been decided. It is the Pennsylvania House of Representatives.

II. General Strategy

First we will consider the three general strategies (of public politics):

Representation strategy (mobilizing voters). MAREA has low cost of organizing and extensive coverage, this may be a good option.

Majority building strategy (direct recruiting of public office holders). MAREA has some experience in this area, but doesn’t have established access to or relationships with many Representatives (especially those opposed). As a nonprofit, MAREA is also limited in its political activities. These limitations will be considered carefully later in this case study as we evaluate individual strategies.

Informational Strategies (data and understanding about an issue). Within its membership and board, MAREA has deep experience and knowledge with the issue at hand. However, this bill is not very complicated so there may be limited opportunity to sway votes with “new” information.

III. Consideration of Individual Strategies

Lobbying: In a lobbying strategy, MAREA would seek to influence the votes of Representatives by accessing the lawmakers directly and providing strategic information. Because MAREA is an IRS Section 501(c)(3) Organization (a type of non-profit), it is limited in how much lobbying action it is allowed to take. This strategy will be screened out because it is “contrary to the law.”

Electoral Support: In an electoral support strategy, MAREA would focus on providing resources that help candidates during elections. Again, because of its Section 501(3)(c) status, MAREA is prohibited from taking these actions.

Grassroots: A grassroots strategy would build on the connection between voters and their elected officials, and may be used as part of an informational or representation strategy. With its considerable number (8,000), extensive coverage and low cost of organizing, this is a good strategy. Again, however, restrictions apply and the nature of the communication would need to be primarily educational and non-partisan.

Coalition Building:

In a coalition building strategy, MAREA would work with other stakeholders who support the bill. To this end, MAREA has recently established a reciprocating relationship with PA-SEIA, where the two organizations provide one another with “honorary” memberships. PA-SEIA is a section 501(c)(6) nonprofit with far fewer restrictions on its legislative and political activities.

PennFuture, another nonprofit supporting passage of this bill, is much larger than MAREA and PA-SEIA and has a broader focus. MAREA works with PennFuture analysts on relevant policy issues as they arise and directs MAREA members to PennFuture resources and events. The opportunity for a more formalized coalition is limited by the different size and focus of the organizations.

System owners in PA (large and small) are assessed to be highly motivated (a “large” to “substantial” demand for market action) but the predicted level of actual market action is low due to the high cost of organizing. Opportunities for coalition with these promising stakeholders appear limited.

Solar installers are also a promising group but without structure or organization. The possibility of forming an effective coalition seems limited.

Ratepayers supporting the passage of HB1580 have a low demand for action and very high cost of organizing, making them, all in all, a poor option for coalition building.

Testimony: Opportunities for testimony on this issue are limited and will not be part of the planned strategy. If opportunities arise, they will be considered on a case by case basis.

Public Advocacy: In a public advocacy strategy, MAREA would communicate directly to the public conveying a particular position on an issue. Again, activities of this nature are limited by MAREA’s IRS standing; however, non-partisan educational communications can be done without restraint.

Judicial Actions: Judicial strategies are not applicable to this issue at this point.

Proposed Strategy: Regarding its ability to participate in public politics, MAREA is constrained by its IRS categorization as a Section 501(3)(c) nonprofit. It may carry out some activities that attempt to influence legislation, but these may not be a “substantial” part of the organization’s activities. Other activities, however, such as educational meetings, the preparation and distribution of educational materials, or other efforts related to public policy issues in an educational manner may be performed without violating the rules for a 501(3)(c) organization.

IV. Proposed Strategy

Recognizing this, and the untapped potential demand for action on the part of system owners in PA, MAREA proposes the following strategy:

  1. Conduct Statewide Research of Solar Electric System Owners and Installers
    • A state rebate program for solar was started in May of 2008 and led to the installation of thousands of new solar electric systems. As part of the application process, system owners were required to provide details about the installed system, including technology, design, address, and contact info. This information is collected and held by the PA Department of Environmental Protection (DEP). It is currently unavailable to the public. MAREA will use the Right to Know Law (RTKL) to request and hopefully receive access to this data.
    • Assuming that contact info for system owners in PA is successfully acquired through the RTKL, MAREA will prepare and execute a survey of each of these owners. The survey will cover a variety of issues, including how the owner is currently selling RECs and issues the owner may be having or anticipates having on this front.
    • Simultaneously, MAREA will prepare and execute a survey of solar installers. This survey will also cover many issues, including the impact the declining S-REC market is having on their business and jobs.
    • The combined survey results will be compiled into a report, “The State of Solar in PA, 2011.” To the extent possible, results will be tabulated geographically.
    • A press release will be issued announcing the availability of the report and a highlight of findings. A press conference will be held to announce the findings. Copies of the report will be distributed to state-level policy makers. The report and its findings will be published on the MAREA web site, along with a webinar interpreting the results.
    • Without overreaching 501(3)(c) status, a simple campaign will be developed to educate on the content of HB1580 and instruct those who wish to take action how to do so: legislative contact info, links to PA-SEIA, and PennFuture. The campaign will use both e-mail and social media to reach out to MAREA members, system owners, and solar installers.
    • The report will be repeated on a yearly basis.
  2. Collect and disseminate information from third party sources to policy makers. For example, the recent (at that time) study Solar Power Generation in the US: Too expensive, or a bargain? [106], which looks at benefits of solar to public (ratepayers and taxpayers).
  3. Report on status of all solar policy at monthly meetings and in monthly newsletter.
  4. Through events, white papers, and speaking invitations, work to educate MAREA members and interested public on topics related to solar technology, policy, markets, rules, and issues.

    If contact info for system owners in PA is successfully acquired through the RTKL, the cost of organizing will drop considerably. This will change the nonmarket analysis for this stakeholder. With the easier mobilization of this large group that has complete regional coverage, the predicted amount of nonmarket action will go from limited to high.

V. Status

The Right to know request was filed, but was originally denied by the DEP. An appeal was made to the state Office of Open Records (OOR). The DEP requested a bifurcation and argued that the OOR did not have jurisdiction. The OOR ruled that it does have jurisdiction and extended the comment period. A final decision is awaited.

Jan 2012 Update: The OOR ruled in favor of MAREA and ordered the DEP to turn over all requested records. The DEP responded by appealing the case to the Court of the Commonwealth. The DEP was required to file a full briefing by Jan 9, 2012 but requested and received a 30-day extension. The DEP's full briefing is now due by Feb 9, 2012. Once received, MAREA will have 30 days to respond.

Sept 2012 Update: On Sept 12, the Court ruled [107] affirming MAREA's Right to Know, upholding the Office of Open Records decision ordering the DEP to release the records within 30 days. At this point, it appears the DEP can either ask the Court to reconsider, appeal to the PA Supreme Court, or provide the requested data.

Oct 2012 Update: The DEP complied with the Court order and provided MAREA will all requested data, however, the opportunity to work in support of HB 1580 had passed.

January 2013 Update: MAREA is working to develop project plan and attract funding to begin the longitudinal study described above. This will establish a community of solar system owners in PA that can be reached and mobilized to support future opportunities for solar and distributed generation.

January 2014 Update: The Solar Rebate Program ended in Dec 2013 (all funds were distributed). A new Right To Know Request was filed with the DEP and on Jan 13, 2014, MAREA received the full records for ALL solar electric systems (7,000) funded under this 4-1/2 year program. Meanwhile, a new bill HB 100 [108] has been introduced (Representative Greg Vitali) to revise the PA AEPS. MAREA will use the data awarded through the Right to Know Request, to contact and organize solar electric system owners.

January 2016 Update: HB 100 was reintroduced [109] by Rep. Vitali, and has been referred to the Consumer Affairs Committee. It has not been brought up for a vote. MAREA has not issued a report.

August 2017 Update: No action has been taken on the bill since the last update.

Lesson 3 Assignment

Weekly Activity 3

Please review Canvas calendar for all due dates related to your Nonmarket Analysis Case Study.

Deliverable

Complete "Weekly Activity 3," located in the "Weekly Activities" folder under the Modules tab in Canvas. The activity may include a variety of question types, such as multiple choice, multiple select, ordering, matching, true/false, and "essay" (in some cases these require independent research and may be quantitative). Be sure to read each question carefully.

Unless specifically instructed otherwise, the answers to all questions come from the material presented in the course lesson. Do NOT go "googling around" to find an answer. To complete the Activity successfully, you will need to read the lesson, and all assigned readings, fully and carefully.

Each week a few questions may involve research beyond the material presented in the course lesson. This "research" requirement will be made clear in the question instructions. Be sure to allow yourself time for this! You will be graded on the correctness and quality of your answers. Make your answers as orderly and clear as possible. Help me understand what you are thinking and include data where relevant. Remember, numbers should ALWAYS be accompanied by units of measure (not "300" but "300 kW"). You must provide ALL calculations/equations to receive full credit - try to "talk me through" how you did the analysis.

This Activity is to be done individually and is to represent YOUR OWN WORK. (See Academic Integrity and Research Ethics [31] for a full description of the College's policy related to Academic Integrity and penalties for violation.)

The Activity is not timed, but does close at midnight EST on the due date as shown in Canvas.

If you have questions about the assignment, please post them to the "Questions about EME 444?" Discussion Forum. I am happy to provide clarification and guidance to help you understand the material and questions (really!). Of course, it is best to ask early.

Summary and Final Tasks

In this lesson, you learned about general types of nonmarket strategy and specific strategies for activities in non-government arenas (private politics). The case study continued from the previous lessons, and concluded here developed a nonmarket strategy based on the outcomes of the nonmarket analysis. The case study introduced new concepts related to non-profit organizations and their role in the nonmarket arena.

You learned:

  • the motivations behind private politics;
  • four ways that private politics affects the issues, interests, institutions, and information that comprise the nonmarket environment;
  • a range of specific strategies for nonmarket action in non-government arenas;
  • a three-step strategy for evaluating nonmarket strategy alternatives;
  • seven "tests" for evaluating alternatives and ethical decision making;
  • the ISO's seven core subjects for Social Responsibility;
  • how to make a recommendation for nonmarket strategic action based on the outcomes of a nonmarket analysis;
  • the roles and limitations of organizations classified by the IRS as section 501(c) nonprofits.

Have you completed everything?

You have reached the end of Lesson 3! Double-check the list of requirements on the first page of this lesson to make sure you have completed all of the activities listed there.

4 Energy Sector Special Topics

Introduction

Overview of Lesson 4

In the previous lessons, we have learned about nonmarket analysis, public politics (nonmarket action that takes place in government arenas) and private politics (nonmarket action that takes place outside of public arenas). In this lesson we are going to examine several specific nonmarket developments of special significance to energy companies: shifts in corporate reporting of externalities (including physical impacts of climate change on energy industry), social cost of carbon (SCC), and energy return on energy invested (EROI).

What will we learn?

By the end of this lesson, you should be able to...

  • describe the relationship between climate change, corporate reporting, and investor risk;
  • explain the SEC's interpretive guidance related to corporate reporting requirements triggered by climate change;
  • define the social cost of carbon (SCC) and explain its application;
  • discuss the political and business ramifications of SCC;
  • apply the SCC to policy assessment;
  • define and calculate energy return on investment (EROI);
  • give examples, and apply, EROI to analysis for purposes of nonmarket and market strategic action.

What is due for Lesson 4?

The table below provides an overview of the requirements for Lesson 4. For details, please see individual assignments.

Please refer to the Calendar in Canvas for specific time frames and due dates.

To Do List for Lesson 4
REQUIREMENT SUBMITTING YOUR WORK
Read Lesson 4 content and any additional assigned material Not submitted.
Weekly Activity 4 Yes—Complete Activity located in the Modules Tab in Canvas.
Case Study--work with others on your Team to prepare Case Study, following course guidelines Check Canvas calendar for all Case Study Due Dates. Plan your Team's work schedule accordingly.

 

Climate Change Risk

Reporting Climate Change Risk

To Read Now

At this point, please complete Corporate Reporting and Externalities, an essay by Jeff Honhensee in the book, Is Sustainability Still Possible? State of the World 2013 [110], by the WorldWatch Institute. (In case you are not familiar with it, the "State of the World" series is great! I highly recommend it.)  You will find this reading under the Lesson 4 tab in Canvas.

In the reading above, Honhensee makes a strong case for corporate reporting of externalities as a company's responsibility to the public, which by definition bears the costs, as well as to its investors. Remember, externalities are the costs (or benefits) from economic activity that are borne by someone who did not play a role in said activity. Positive and negative externalities are not fully reflected in the price of products or services.

Disclosure of Climate Change-Related Business Risks

Upfront acknowledgment of risks to the business can help management anticipate, and plan for, future developments and increases investor confidence. In other words, what may have been once seen as a pure externality can, with a turn of events, cost a company and its investor's real money. For energy companies, many externalities fall into the category of risks that may suddenly become costly to the business, but probably none more so than externalities related to climate change. Perhaps more importantly in the near term, potential nonmarket action - particularly in the public sector, but also via private political action - can pose significant business risk(s) to a firm. Most of these actions are related to climate change externalities.

The Securities and Exchange Commission (SEC) is tasked with assuring firms provide reasonable disclosure of business risks to their shareholders.  In 2010, the SEC issued the first (voluntary) Interpretive Guidance on Disclosure Related to Business or Legal Developments Regarding Climate Change [111]. The guidelines did not create new legal requirements but provide guidance on existing disclosure rules that may require a company to disclose the impact business or legal developments related to climate change may have on its business.

To Read Now

Read the SEC's January 27, 2010 Press Release regarding disclosure of climate change-related risks. This guidance is still seen as a major turning point in climate disclosure initiatives in the U.S.:

  • "SEC Issues Interpretive Guidance on Disclosure Related to Business or Legal Developments Regarding Climate Change [111]." U.S. Securities and Exchange Commission, Jan. 27, 2010
  • (Optional) You may have the desire to read through the thick, but descriptive, legalese of the full SEC Guidance in the Federal Register. [112]

From the press release:

Specifically, the SEC's interpretative guidance highlights the following areas as examples of where climate change may trigger disclosure requirements:

  • Impact of Legislation and Regulation: When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material. In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.
  • Impact of International Accords: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.
  • Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products. As such, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate change related regulatory or business trends.
  • Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.

Why did the SEC decide to issue these new guidelines? A press release [113]from Ceres [114] and the Environmental Defense Fund [115] (both 501(c)(3) non-profits),  described it this way, "Today’s decision comes after formal requests by leading investors for the SEC to require full corporate disclosure of wide-ranging climate-related business impacts – and strategies for addressing those impacts – in their financial filings. More than a dozen investors managing over $1 trillion in assets, plus Ceres and the Environmental Defense Fund, requested formal guidance in a petition filed with the Commission in 2007, and supported by supplemental petitions filed in 2008 and 2009." Addressing the way risks of externalities related to climate change are being included in corporate reporting is seen as a matter of protecting investors. For many, protecting the public and the environment would be sufficient cause. But here, the winning nonmarket strategy in the regulatory arena was the one that built a successful case, in the eyes of the SEC, by connecting the need to disclose climate-change risks with the need to protect investors.

To Read Now

As I'm sure you can imagine, the SEC's decision in 2010 has not been embraced by everyone. The article below provides some insight into one nonmarket approach to mitigate its impact.

  •  "A New Debate Over Pricing the Risks of Climate Change [116]" The New York Times, Sept. 26, 2016.

As indicated in the article, assessing the financial risks posed by climate change are not limited to the U.S. In 2016, the Financial Stability Board (FSB) of the Group of 20 [117], usually referred to as the "G20", asked [118]its Task Force on Climate-related Financial Disclosures [119] (TCFD) to "develop a set of voluntary, consistent disclosure recommendations for use by companies in providing information to investors, lenders, and insurance underwriters about the financial risks companies face from climate change." (The G20 is a forum of wealthy and economically emerging countries of the world. The official group is made up of government representative such as finance ministers, heads of state, and central bank governors. At the annual G20 meetings, the representatives consult with many international organizations such as the OECD, the World Trade Organization, International Monetary Fund, as well as private sector businesses, non-governmental organizations, and more. The G20 [120]"traditionally focus on issues concerning global economic growth, international trade and financial market regulation.") It has become apparent to G20 members that issues related to climate change pose risks to businesses worldwide, and the establishment of the TCFD is an attempt to provide guidance on how to manage those risks.

To Read Now

The TCFD released its full report [121]on December 14, 2016; you may be interested in reading it. For a summary of the report, please read the speech by the Chair of the G20 FSB below.

  • "Remarks on the launch of the Recommendations of the Task Force on Climate-related Financial Disclosures [122]," Bank of England, December 14th, 2016.

Planning for Climate Change Risk

With the risks of climate change-related externalities explicitly acknowledged, management is in a position to anticipate, plan for, and manage the risk (physical, policy, regulatory or otherwise). One way to mitigate these risks is by placing a price on carbon emissions, usually expressed in dollars (or whatever the relevant currency) per metric ton (tonne) of emissions. Carbon markets have been established at different scales throughtout the world, but companies are increasingly utilizing an internal cost to reduce risks and spur carbon reductions.  

To Read Now

  • For a glimpse at some of the international movement on internal carbon pricing, please read the Summary and Section 1 ("What is the purpose of assigning an internal price to GHG emissions?") of the Instute for Climate Economics' "Internal carbon pricing: A growing corporate practice [123]" from November of 2016.
  • Please also read "Microsoft Leads Movement to Offeset Emissions With Internal Carbon Tax [124]" to learn about the robust internally-focused actions that Microsoft has taken to reduce emissions (a .pdf link is also available [125] in case you cannot access the link above).

According to the Carbon Disclosure Project (CDP) [126], an English non-profit that publishes environmental impacts of companies across the world, as of the fall of 2016 more than 1,200 companies worldwide utilized internal carbon pricing in some form or another, with almost 150 "embedding a carbon price deep into their corporate strategy." As indicated in the articles above, there are different ways that companies do this. Microsoft actually charges individual units within its company based on their energy-based emissions, then uses these charges (expected to be $20 million in 2015!) to implement energy efficiency (e.g., building efficiency upgrades) and clean energy (e.g., solar, wind) measures in company units. Disney, Shell, Novartis, and Nissan also use this model.

Many other companies [127] are using internal carbon pricing when determining cost-benefit projections of potential projects and investments. This is what the Institute for Climate Economics referred to as a "shadow cost." Some of the world's major companies (including ExxonMobil and Shell!) price carbon internally. Though the price can vary widely by company, it has the effect of making projects that will result in lower emissions look more economically attractive.

Social Cost of Carbon

In policy making, we must consider the cost of a proposed policy against the benefits of the proposed policy. How much would it cost taxpayers? How much would it benefit tax payers?

In the case of policies designed to address climate change, how does government put a value on the benefits of reducing emissions? What is saving a ton of CO2 emissions worth to tax payers? A mechanism used to give a value to emission reductions is called the Social Cost of Carbon (SCC). It puts a dollar value of the costs to society caused by a single ton of carbon dioxide (CO2) emissions. In  other words, the SCC is the cost, in dollars, of the externalities of carbon emissions.

The SCC is set by the federal government [129] (note that this is "note the current EPA website" due to changes from the Trump Administration) and is used to determine the value to tax payers of proposed policies designed to reduce CO2 emissions. As such, it is a matter of public politics with a wide range of highly motivated and engaged stakeholders.

To Read Now

More than Meets the Eye, The Social Cost of Carbon in U.S. Climate Policy, in Plain English [130] (July 2011, World Resources Institute [131], Environmental Law Institute). Read Summary through section 4a How do the SCC Models Work?

Developing a Social Cost of Carbon for US Regulatory Analysis: A Methodology and Interpretation [132] (2013, Review of Environmental Economics and Policy [132]). Read Abstract, Introduction and Conclusions

To Read Now

Calculating and utilizing the SCC is a complicated and controversial topic. The following articles are not meant to be comprehensive, but to provide a snapshot of the science behind, and some competing views of SCC.

  • "Federal Court Rules in Favor of Social Cost of Carbon and Environmental Justice [133]." Triple Pundit, August 17th, 2016.  Note the variety of nonmarket actions.
  • "How Climate Rules Might Fade Away [134]," Bloomberg Businessweek, Dec. 15th, 2016. This article provides a good summary of the impacts of assumptions on SCC models.
  • Also read an update on President Trump's executive order that could have an impact on SCC: "Making Sense of Trump's Order on Climate Change [135]," Cass Sunstein, Bloomerg View, March 29, 2017. (Note that Sunstein is a former Obama official.) 
  • "Estimated social cost of climate change not accurate, Stanford scientists say [136]." Stanford News, Jan. 2015. This is a summary of an oft-cited peer-reviewed study on SCC.
  • Finally, please read the written testimony [137] of Robert P. Murphy of the Institute for Energy Research (IER). The IER is funded by the fossil fuel industry, and it's former president Thomas Pyle led Trump's transition team for the Department of Energy. It provides a window into some arguments presented by stakeholders who are opposed to the SCC.

Energy Return on Investment (EROI)

Energy Return on Energy Invested, usually phrased as "Energy Return on Investment" (EROI) is the ratio of energy returned to society divided by the energy required to get that energy.

EROI = Energy returned to society over energy required to get that energy

What does this mean? Charles A.S. Hall, generally recognized as the father of this concept, explains it this way, "EROI is simply the energy gained from an energy-obtaining effort divided by the energy used to get that energy. For example, one barrel of oil invested into getting oil out of the ground might return fifty, thirty, ten or one barrel, depending when and where the process is taking place." (Synthesis to Special Issue on New Studies in EROI (Energy Return on Investment) [138], Sustainability, Charles A.S. Hall, 2011) EROI is also referred to as "energy profit."

In other words, it takes energy to acquire energy. "To make economic use of a barrel of oil requires not only drilling the well but also transporting the oil to a refinery, concerting it to a variety of petroleum products, and shipping them to end users--as well as expending energy to make the drilling rig, the steel in the refinery equipment, the tank trucks that take gasoline to service stations, the automobiles that burn the fuel, and so on." This is the energy expense, the "energy required to get that energy." (Energy as Master Resource, State of the World 2013, Eric Zencey, p 78) How does this energy expense compare to the energy in the barrel of oil, the "energy returned to society"? This is the ratio, EROI.

The higher the EROI, the higher the energy profit. The higher the EROI, the more energy is returned to society compared to the energy cost of getting that energy.

Many of you may be familiar with the controversy surrounding corn-derived ethanol, does it take more energy to produce than is available in the final product? Many argue yes. If so, the EROI of corn-based ethanol is less than 1.

Background

"The concept of Energy Return on Investment (EROI) is a concept originally derived in ecology but increasingly applied to oil and other industrial energies. It had precedents in the idea of 'net energy analysis' used by Leslie White, Kenneth Boulding, and especially Howard Odum [1,2]. Similar but less explicit and focused ideas can be found in the newer field of 'life cycle analysis' that is better developed in Europe than in the US. The word investment usually means energy investment but sometimes may also include financial, environmental, and/or other kinds of investments. Some people like the term EROEI as a more explicit term, but we find it less useful and harder to pronounce. The term EROI has been around since at least 1970, but it gained relatively little traction until the last five or ten years. Now there is an explosion of interest as peak oil and the general economic effects of increasingly constrained energy supplies are becoming obvious to investigators from many fields." (Introduction to Special Issue on New Studies in EROI (Energy Rertun on Investment) [139], Sustainability, Charles A.S. Hall, 2011)

To Read Now

  • EROI for different fuels and the implications for society. Hall, C.A.S, Lamber, J.G., and Balogh, S.B. Energy Policy, 64, pp. 141-152 [140].  You are welcome to read the entire article, but at least read the following:
    • Highlights
    • Abstract
    • Section 1: Introduction
    • Section 2: Meta Analysis of EROI for various fuel sources
    • Section 7: Policy Implications
  • "The True Costs of Fossil Fuels [141]" Scientific American, April 2013
  • "Behind the Numbers on Energy Return on Investment [142]" Scientific American, March 2013. Read closely the first 8 paragraphs. Scan the remainder as you please.

EROI in the Nonmarket

This is a course called Global Energy Enterprise, with a special emphasis on nonmarket issues for energy industries. How does EROI fit this discussion?

Let's start with this, "EROI analysis reveals the irrationality of making those choices [between different energy systems] according to current market price, which is a human construct dependent on current demand, subsidies, taxes, and the rates at which a flow of energy is extracted from its global stock. At the macroeconomic level, rational policymakers would be trying to maximize total sustainable delivered well-being, which (other things being equal--which they are not) would mean maximizing the EROI of a sustainable energy system for the economy. The effort to use price signals to find and promote that outcome requires that the relative monetary prices of difference kinds of energy reflect their relative social costs and benefits--a project that must begin with their relative EROIs." (Energy as Master Resource, State of the World 2013, Eric Zencey, p 78)

In other words, if we hope to use market forces to move society toward a sustainable energy system, then the prices of different kinds of energy will need to reflect the EROI relative to other options. Though this hasn't happened (yet), momentum and awareness of EROI is building in nonmarkets.

For example, an article by an environmental advocacy group, was simply titled "Oil Sands Mining Uses Up Almost as Much Energy as It Produces [143]." That's EROI. The article explains: "Tar sands retrieved by surface mining has an EROI of only about 5:1, according to research released in 2013. [144] Tar sands retrieved from deeper beneath the earth, through steam injection, fares even worse, with a maximum average ratio of just 2.9 to 1. That means one unit of natural gas is needed to create less than three units of oil-based energy." A peer-reviewed study published in May of 2017 found that though "increasing gradually," the EROI of Canadian oil sands was between 3.2 and 8 from 2009 to 2015 (Wang, et al., Energy Return on Investment of Canadian Oil Sands Extraction from 2009 to 2015. Full text available here [145].)

EROI is also becoming a proxy, of sort, for energy industry externalities. To say that using that kind of energy requires a lot of energy implies not only the cost of the energy inputs but also all of the associated externalities (emissions, environmental destruction, and so forth).

Advocates will argue, effectively, for and against energy choices based on EROI. It's a concept the public gets. Management in energy firms must be cognizant of and prepared to deal with these positions in the nonmarket. Policy makers may be pressured by EROI-based arguments to put a price on carbon, internalizing the externalities of fossil fuels and making energy market price better reflect the true cost to society.

A Final Note about EROI

For those of you who took EM SC 240: Energy and Sustainability in Contemporary Culture, you may remember that EROI was covered.  Some of the content [146]from that course bears repeating because it provides some important considerations of the limitations of EROI.

All this being said, above a certain EROI, there is not much additional benefit in terms of percent energy out. (This article from The Oil Drum [147] has a really good discussion of this.) Let's look at the difference between coal (46:1), hydroelectric (84:1), and diesel from biomass (2:1). To calculate the percent energy out, you simply divide the energy out by the total energy used.

  • For coal: Total energy = 46 + 1 = 47; energy out = 46; percent energy out = 46/47 = 0.979 = 97.9%
  • For hydroelectric: Total = 84 + 1 = 85; energy out = 84; percent energy out = 84/85 = 0.988 = 98.8%
  • Biomass diesel: Total = 2 + 1 = 3; energy out = 2; percent energy out = 2/3 = 0.667 = 66.7%

Do we care if we get 97.9% or 98.8% of the energy out? Probably not. Do we care if we get only 67% out? Probably. What is usually more important is the type of energy we are generating vs. what type we need. For example, the EROI number for coal only indicates the energy in the coal, not necessarily the useful energy you get out of it. So even though coal is efficient on an EROI basis, recall from Lesson 1 that generating electricity from coal is only around 33% efficient. Since hydroelectric dams generate electricity directly at a very high efficiency (up to 90% [148]!), hydroelectric electricity has a higher EROI than coal-based electricity. Finally, the net energy is also an important consideration - if we can get something really efficiently, but there is not a lot of it, then that may not help very much. But all else being equal, a higher EROI is better.

One extremely important thing to note: EROI only describes energy use. It says nothing about the other important impacts. For example, coal has a relatively high EROI, but is the most polluting energy source we use. Hydroelectricity has a very high EROI, but if done the wrong way can have negative impacts as well. Tar sands, on the other hand, have both a low EROI and a very negative impact on the environment. In short, EROI is only one consideration to be made.

Lesson 4 Assignments

Weekly Activity 4

Please review Canvas calendar for all due dates related to your Nonmarket Analysis Case Study.

Deliverable

Complete "Weekly Activity 4," located in the "Weekly Activities" folder under the Modules tab in Canvas. The activity may include a variety of question types, such as multiple choice, multiple select, ordering, matching, true/false, and "essay" (in some cases these require independent research and may be quantitative). Be sure to read each question carefully.

Unless specifically instructed otherwise, the answers to all questions come from the material presented in the course lesson. Do NOT go "googling around" to find an answer. To complete the Activity successfully, you will need to read the lesson, and all assigned readings, fully and carefully.

Each week a few questions may involve research beyond the material presented in the course lesson. This "research" requirement will be made clear in the question instructions. Be sure to allow yourself time for this! You will be graded on the correctness and quality of your answers. Make your answers as orderly and clear as possible. Help me understand what you are thinking and include data where relevant. Remember, numbers should ALWAYS be accompanied by units of measure (not "300" but "300 kW").  You must provide ALL calculations/equations to receive full credit - try to "talk me through" how you did the analysis.

This Activity is to be done individually and is to represent YOUR OWN WORK. (See Academic Integrity and Research Ethics [31] for a full description of the College's policy related to Academic Integrity and penalties for violation.)

The Activity is not timed, but does close at midnight EST on the due date as shown in Canvas.

If you have questions about the assignment, please post them to the "Questions about EME 444?" Discussion Forum. I am happy to provide clarification and guidance to help you understand the material and questions (really!). Of course, it is best to ask early.

Summary and Final Tasks

In this lesson, you learned about significant nonmarket forces that are increasingly creating opportunities for stakeholders to shape the business environment for energy firms: shareholder pressure to report and address risks to the business from climate change, the use of a social cost of carbon (SCC) to assess proposed policy, and an emerging awareness of energy return on investment (EROI).

You learned:

  • about the relationship between climate change, corporate reporting, and investor risk;
  • details of the SEC's interpretive guidance related to corporate reporting requirements triggered by climate change;
  • the definition of social cost of carbon (SCC) and its application;
  • the political and business ramifications of SCC;
  • how the SCC is applied to policy assessment;
  • how to define and calculate energy return on investment (EROI);
  • to use and cite examples of EROI used in analysis for purposes of nonmarket and market strategic action.

Have you completed everything?

You have reached the end of Lesson 4! Double-check the list of requirements on the first page of this lesson to make sure you have completed all of the activities listed there.

5 Nuclear

Introduction

Overview of Lesson 5

With this lesson, we begin our survey of energy industries, based on energy sources. In this lesson, we will review the nuclear energy industry. Additional energy sources will be considered in future lessons.

What will we learn?

By the end of this lesson, you should be able to...

  • explain nuclear energy and the difference between fission and fusion;
  • describe in detail the uranium fuel cycle;
  • recognize and profile major international nuclear agencies;
  • quantify nuclear generation capacity around the world;
  • identify and consider externalities related to nuclear generation including the risk of catastrophe and terrorism but also the advantage of emissions-free generation;
  • explain the technical details and policy implications of March 11, 2011 accident at Fukushima nuclear power plant in Japan;
  • research and report on international nuclear generation estimates;
  • analyze the status of the nuclear energy industry in the U.S.

What is due for Lesson 5?

The table below provides an overview of the requirements for Lesson 5. For details, please see individual assignments.

Please refer to the Calendar in Canvas for specific time frames and due dates.

To Do List for Lesson 5
REQUIREMENT SUBMITTING YOUR WORK
Read Lesson 5 content and any additional assigned material Not submitted.
Weekly Activity 5 Yes—Complete Activity located in the Modules Tab in Canvas.
Case Study--work with others on your Team to prepare Case Study, following course guidelines Check Canvas calendar for all Case Study Due Dates.

Nuclear Energy Overview

Nuclear energy is the energy that holds the protons and neutrons together in the nucleus of an atom. This energy can be released through fusion or fission.

Fusion

In nuclear fusion, two light nuclei combine to form a single larger nucleus. It takes less energy to hold the larger atom together and the excess nuclear energy is released as light and heat. (This is how the sun works--hydrogen atoms combine to form helium, releasing light and heat.) To get the atoms to fuse, however, requires a great deal of energy because there is an electrical repulsion that works to keep the similarly charged nuclei apart. The three requirements for a successful thermonuclear reactor are high particle density, high temperature, and a container that can maintain the temperature and density long enough for the fuel to be fused (Source: Oracle ThinkQuest [149]).

Currently there are no working nuclear fusion reactors, but experiments continue around the world. A consortium including China, the European Union, India, Japan, Korea, Russia, and the United States is working on a project called ITER [150] with the aim of providing each member with the know-how to produce its own fusion energy plant.

To Read Now

Visit the ITER website [150]

  • Under "Science," open and read the pages "What is Fusion?," "Advantages of Fusion," "60 Years of Progress," and "ITER Goals."
drawing of a tokamak, a chamber used for fusion reactions. Further described in caption
Figure 5.1: ITER, the world's largest tokamak. A tokamak is a doughnut-shaped vacuum vessel (chamber) used for nuclear fusion research, where plasma is heated and confined by magnetic fields. For an interactive image with parts identified and explained, visit ITER's The Machine [151].
Retrieved from ITER [151].

Fission

Fusion releases nuclear energy when lighter nuclei join (or fuse) to form heavier nuclei. Fission, on the other hand, releases nuclear energy by splitting atoms into smaller ones. The extra energy is released as heat and radiation.

graphical depiction of fission, where one uranium 235 atom is split into several lighter elements, neutrons and energy
Figure 5.2: In the process of fission, a bombarding neutron causes the nucleus of a uranium atom to split into atoms of lighter weight, releasing energy and neutrons.
Credit: U.S. Department of Energy [152]

In fission, a uranium-235 isotope absorbs a bombarding neutron, which causes the uranium nucleus to split into two atoms of lighter weight. This reaction releases heat and radiation, as well as more neutrons. These neutrons then bombard other uranium atoms, which then split and release more energy and neutrons, This happens over and over again in a chain reaction.

Note that both fission and fusion generate heat, but do not involve combustion. In other words, the atoms are split or fused, not burned.  This is one reason why neither of them emit carbon dioxide or other gases that are associated with the burning of fossil fuels or other carbon-based fuels like wood.  (More on the byproducts of combustion in a future lesson.)

Uranium Fuel Cycle

graphic depiction of uranium fuel cycle. See link in caption for text version.
Figure 5.3: Uranium fuel cycle: Recovery (mining and milling), Conversion, Enrichment, Fuel Fabrication, Used Fuel Storage.
Click link to expand for a text description of Figure 5.1

This is a flow chart from mining to conversion, enrichment, fuel fabrication, and storage.

  • It starts when Uranium ore is mined
  • Uranium ore is then milled into yellowcake
  • Yellowcake is turned into UO2 and then a gas, UF6
  • Gas is enriched to increase the amount of U-235
  • Enriched UF6 is converted back to UO2 and made into ceramic fuel pellets
  • Pellets are put into fuel rods and used to make electricity
  • Used fuel is stored at the power plant site
  • In the future the used fuel may be reprocessed or stored in an underground repository.
Credit: National Energy Education Development Project (NEED). Retrieved from NEED graphics library [153]

The uranium fuel cycle includes all the steps of using uranium to generate electricity (fission), from mining to disposal/storage. These steps are described below.

Uranium Recovery

Uranium ore is mined--much like coal--from underground mines or surface mines. In the USA, a ton (2,000 pounds) of uranium ore usually contains about 3 to 10 pounds of uranium. The process of separating the uranium from the ore is called milling. In this process, the ore is crushed and mixed with an acid (typically) that dissolves the uranium out of the ore. This solution is separated out and dried, leaving a powder called "yellowcake." In addition to yellowcake, uranium recovery operations generate waste products, called byproduct materials, that contain low levels of radioactivity.

Conversion

The next step is to convert the yellowcake into uranium hexafluoride (UF6), a gas suitable for use in enrichment operations. In this process, the uranium (yellowcake) is combined with fluorine to create the UF6 gas. This gas is pressurized and cooled to a liquid, then poured into large cylinders, and then cooled for about 5 more days until it solidifies.

Currently, there is one conversion plant operating in the United States (Honeywell International Inc., Illinois). Canada, France, United Kingdom, China, and Russia also have conversion plants.

The conversion process involves strong chemicals to covert the yellowcake into soluble forms, leading to possible inhalation of uranium, and producing extremely corrosive chemicals that could cause fire and explosion hazards.

Enrichment

When uranium is mined, it is nearly all in the form of the isotope uranium-238. All uranium atoms have 92 protons in their nucleus (that's what uranium is!), but they may have different numbers of neutrons. When this happens, the atoms are called isotopes. Uranium-238 has 146 neutrons (92 protons + 146 neutrons = 238, the "atomic mass"). Uranium-235 has 143 neutrons. This form, uranium-235, is commonly used for energy production because the nucleus splits apart easily when it is hit (bombarded) by a neutron.

The purpose of the enriching process is to increase the proportion of U-235. There are three processes for doing this: gaseous diffusion, gas centrifuges, and laser separation. The only commercial enrichment facility currently operating in the USA is a gaseous diffusion plant in Paducah, Kentucky.

In a gaseous diffusion plant, safety risks include the chemical and radiological hazard of a UF6 release and the potential for mishandling the enriched uranium, which could create an inadvertent nuclear reaction (how's that for a phrase you never want to hear uttered?).

Fuel Fabrication

At a fuel fabrication plant, enriched uranium is prepared for use as fuel in a nuclear reactor. The uranium is heated back into a gas and then chemically processed into a powder that is processed into fuel pellets. A single uranium fuel pellet (about the size of a fingertip) contains as much energy as 17,000 cubic feet of natural gas, 1,780 pounds of coal or 149 gallons of oil, according to the Nuclear Energy Institute [154]. The pellets are sealed into metal tubes called fuel rods. Groups of rods are bundled together into fuel assemblies.

There are numerous fuel fabrication facilities in the USA. Safety risks at fuel fabrication facilities are similar to those at enrichment plants.

Use of the Fuel in Reactors

A nuclear reactor is the equipment used to initiate and sustain a controlled nuclear reaction. The fission process takes place in the reactor core. This core is surrounded by a reactor pressure vessel. To prevent radiation leaks, both the core and the vessel are housed in a containment building. It is an airtight structure, made of steel and concrete and several feet thick.

The fuel assemblies are placed in the core where the reaction takes place.

Just like burning coal, oil, or gas, the heat from the nuclear reaction is used to boil water and create steam. The steam turns a turbine generator to produce electricity and then the steam is condensed back into water, often in a structure at the power plant called a cooling tower.

There are several types of commercial nuclear power plants. Currently, commercial operations in the US use either Pressurized Water Reactors or Boiling Water Reactors to generate electricity.

Interim Storage

Because waste products build up on fuel rods, making fission (the chain reaction), more difficult, operators of nuclear generation facilities have to replace the used fuel rods on a regular basis. To keep the plants in continuous operation, usually about one third of the fuel rods are replaced every 12 to 18 months.

Called used (spent) fuel, the rods taken out of the reactor contain radioactive waste products and unused fuel. There are two acceptable storage methods for spent fuel after it is removed from the reactor core:

  • Spent Fuel Pools - Currently, most spent nuclear fuel is stored in specially designed pools at individual reactor sites around the country. The used (spent) fuel rods are under at least 20 feet of water.
  • Dry Cask Storage - If pool capacity is reached, licensees may move toward use of above-ground dry storage casks.

Since 1982, a law has been in place requiring the Department of Energy to build and operate a deep underground facility (repository) for storing nuclear waste. But this has not yet happened. At one point, Yucca Mountain, Nevada was approved as a site for such a facility, but that application was withdrawn in 2010. Currently, nuclear power plants in the USA store all used fuel on site.

Reprocessing

Reprocessing separates unused fuel from waste products in spent fuel rods, so that the fuel can be used again. Currently, reprocessing is more expensive than just making new fuel from uranium ore. Reprocessing is not currently done in the USA.

Transportation of Spent Nuclear Fuel

When spent fuel assemblies are removed from a reactor, the fission process has stopped, but the assemblies still generate significant amounts of radiation and heat. Because of the residual hazard, spent fuel must be shipped in containers or casks that shield and contain the radioactivity and dissipate the heat. Currently, most spent fuel shipments are between different reactors owned by the same utility to share storage space or to a research facility. When an underground waste repository is built, the number of these shipments by road and rail is expected to increase.

International Agencies

Many regional government agencies and regulatory bodies have oversight authority for nuclear energy activities within their borders. Additionally, numerous international agencies also work to advance the safe and peaceful use of nuclear energy. Several of the more prominent ones are described below.

International Atomic Energy Agency (IAEA) [155]

  • Set up as the world's "Atoms for Peace" organization in 1957 within the United Nations family, the IAEA currently has 168 member countries [156].
  • The IAEA Secretariat, a team of over 2500 multi-disciplinary professional and support staff [157] from more than 100 countries, is headquartered in Vienna, Austria. Regional offices are located in Geneva, Switzerland; New York, USA; Toronto, Canada; and Tokyo, Japan.
  • IAEA financial resources include the regular budget and voluntary contributions.
  • Three main areas of work underpin the IAEA´s mission: Safety and Security; Science and Technology; and Safeguards and Verification. To fulfill this mission [158], it "serves as the global focal point for nuclear cooperation;...assists its Member States...in planning for and using nuclear science and technology for various peaceful purposes...and facilitates the transfer of such technology and knowledge in a sustainable manner;...develops nuclear safety standards;...(and) verifies through its inspection system that States comply with their commitments."
  • The IAEA reports annually to the UN General Assembly and, when appropriate, to the Security Council regarding non-compliance by States with their safeguards obligations as well as on matters relating to international peace and security.
  • The Agency's iNFCIS [159] web site  is designed as a "one stop" resource for technical and statistical information about nuclear fuel cycle activities worldwide.

Nuclear Energy Agency [160]

  • The Nuclear Energy Agency (NEA) is a specialized agency within the Organization for Economic Co-operation and Development (OECD), an intergovernmental organization of industrialized countries, based in Paris, France.
  • The mission [161]of the NEA is "to assist its Member countries in maintaining and further developing, through international co-operation, the scientific, technological and legal bases required for the safe, environmentally sound and economical use of nuclear energy for peaceful purposes. It strives to provide authoritative assessments and to forge common understandings on key issues as input to government decisions on nuclear energy policy and to broader OECD analyses in areas such as energy and the sustainable development of low-carbon economies."
  • The NEA's current membership [161] consists of 32 countries, in Europe, North America the Asia-Pacific region. Together they account for approximately 83% of the world's installed nuclear capacity.
  • The NEA works closely with the International Atomic Energy Agency (IAEA) in Vienna - a specialized agency of the United Nations - and with the European Commission in Brussels. Within the OECD, there is close coordination with the International Energy Agency and the Environment Directorate, as well as contacts with other directorates, as appropriate.

World Nuclear Association (WNA) [162]

  • The World Nuclear Association is an International organization that promotes nuclear energy and supports the many companies that comprise the global nuclear industry. Note the difference between the WNA and the organizations above. The WNA is an industry organization, and thus promotes the nuclear industry, while the IAEA and NEA are focused primarily on international safety and management.
  • WNA membership [163]includes (i) "virtually all of the world's uranium mining, conversion, enrichment and fuel fabrication companies;" (ii) "all major reactor vendors;" (iii) "nuclear utilities providing 70 of world nuclear generation;" (iv) "major nuclear engineering, construction, and waste management companies; and research and development organizations;" and (v) "companies providing international services in nuclear transport, law, insurance, brokerage, industry analysis and finance."
  • The WNA focus their activities on three strategic areas [163]:
    • "nuclear industry cooperation"
    • "nuclear information"
    • "nuclear energy communication"
  • Coordinated action through WNA yields both greater efficiency and stronger impact in:
    • IAEA and NEA advisory committees on transport and all aspects of nuclear safety
    • United Nations policy forums focused on sustainable development and climate change
    • CRP and Ospar deliberations on radiological protection.
  • The WNA's information library [164] contains an abundance of information about nuclear technology, generation statistics, safety, and more, including country-level data.
  • WNA publishes the online news service, World Nuclear News [165] (WNN)
  • WNA activities support the global nuclear industry by providing direct benefit to individual member-companies and collective benefit to the industry as a whole.

Nuclear Generation and Fuel Supply

Nuclear Generation

Bar graph of top 10 nuclear generation countries
Figure 5.4 Top 10 Nuclear Generation Countries
Click Here to expand for a text description of Figure 5.4
Top 10 Nuclear Countries (2014)
Country Billion kWh
U.S. 805.3
France 384.0
China 210.5
Russia 179.7
South Korea 154.3
Canada 97.4
Ukraine 81.0
Germany 80.1
UK 65.1
Sweden 60.6
Nuclear Energy Institute [166]

All countries are within 5% - 10% of last year's generation, with the exception of China - which increased from 123.8 billion kWh to 210.5 billion kWh, an increase of over 40% (!) - and Germany, which reduced output by about 13% (91.8 to 80.9 billion kWh).

According to the Nuclear Energy Institute [167], as of April 2017, there were 449 nuclear power reactors operating in 30 countries, and 60 new plants were under construction in 15 countries. They provided about 11% of the world's electricity in 2014 (the latest year global data are available - Nuclear Energy Institute [167]). Interestingly, 13 countries relied on on nuclear energy to supply at least 25% of their electricity in 2016. France (72.3%), Slovakia (54.1%), The Ukraine (52.3%), and Hungary (51.3%) all derive over 50% of their energy from nuclear sources.

To Read Now

Visit the World Nuclear Association and explore Nuclear Power in the World Today [168]

Visit the Nuclear Energy Institute and explore Nuclear Units Under Construction Worldwide [169]

Visit the U.S. Energy Information Administration and read about the U.S. Nuclear Industry [170]

In the USA, there are currently 99 operable commercial nuclear reactors at 61 nuclear power plants. The newest reactor came online in June of 2016 (Watts Bar Unit 2 [171] in Tennessee). Prior to that, the last new reactor to enter commercial service in the United States was in 1996. The Nuclear Regulatory Commission approved construction of four new reactors in 2012. These were the first permits approved in more than 30 years (EIA, Energy Explained [172]).

Since 1990, about 20% of our electricity has come from nuclear power generation, and this rate has stayed fairly steady.

Nuclear Fuel Supply

In Supply of Uranium [173], the World Nuclear Association describes the challenges and subjectivity of estimating uranium reserves. Following are some selected passages from this discussion.

Uranium is a relatively common element in the crust of the Earth (very much more in the mantle). It is a metal approximately as common as tin or zinc, and it is a constituent of most rocks and even of the sea...

An orebody is, by definition, an occurrence of mineralization from which the metal is economically recoverable. It is therefore relative to both costs of extraction and market prices. At present neither the oceans nor any granites are orebodies, but conceivably either could become so if prices were to rise sufficiently.

Measured resources of uranium, the amount known to be economically recoverable from orebodies, are thus also relative to costs and prices. They are also dependent on the intensity of past exploration effort, and are basically a statement about what is known rather than what is there in the Earth's crust...

Changes in costs or prices, or further exploration, may alter measured resource figures markedly. At ten times the current price, seawater might become a potential source of vast amounts of uranium. Thus, any predictions of the future availability of any mineral, including uranium, which are based on current cost and price data and current geological knowledge are likely to be extremely conservative.

The question of uranium supply clearly does not have a simple answer! One could say, that how much we "have" depends on how bad we want it--how much we are willing to pay. (This is true for estimating other types of reserves as well.)

The WNA then introduces the table below by saying, "With those major qualifications the following Table gives some idea of our present knowledge of uranium resources."

Known Recoverable Reserves of Uranium, 2015. Note that 16 countries have 96% of all known Uranium.
Country tonnes U Percentage of World
Australia 1664100 29%
Kazakhstan 745300 13%
Canada 509000 9%
Russian Fed 507800 9%
South Africa 322400 6%
Niger 291500 5%
Brazil 276800 5%
China 272500 5%
Namibia 267000 5%
Mongolia 141500 2%
Uzbekistan 130100 2%
Ukraine 115800 2%
Botswana 73500 1%
USA 62900 1%
Tanzania 58100 1%
Jordan 47700 1%
Other 234000 4%
World Total 5718400 100%
Credit: WNA [174]

The Council on Foreign Relations, Global Uranium Supply and Demand [175] (2010) adds more perspective to our understanding of uranium reserve estimates (FYI, "grade of uranium ore" is % of ore that is actually uranium)

Still, the overall amount of uranium is less important than the grade of uranium ore, according to a 2006 background paper by the German research organization Energy Watch Group. The less uranium in the ore, the higher the overall processing costs will be for the amount obtained. The group contends that worldwide rankings mean little, then, when one considers that only Canada has a significant amount of ore above 1 percent--up to about 20 percent of the country's total reserves. In Australia, on the other hand, some 90 percent of uranium has a grade of less than 0.06 percent. Much of Kazakhstan's ore is less than 0.1 percent.

Toni Johnson. (2010). Global Uranium Supply and Demand [176]. Retrieved February 2017.

The World Nuclear Association [177] (December 2016) offers this conclusion about supply and demand--

Current usage is about 63,000 tU/yr. Thus the world's present measured resources of uranium (5.7 Mt) in the cost category less than three times present spot prices and used only in conventional reactors, are enough to last for about 90 years. This represents a higher level of assured resources than is normal for most minerals. Further exploration and higher prices will certainly, on the basis of present geological knowledge, yield further resources as present ones are used up.

Externalities and Internalized Costs

In the previous lesson of this course, we introduced the idea of externalities--the effects that a transaction has on parties that are external to the transaction. We can think of externalities as the "side effects" that commercial activity has on other parties in a way that isn't reflected in the cost of the goods or services.

For the nuclear industry, major negative externalities have to do with the hazards of radioactive waste and the potential use of nuclear fuel for warfare, though it also has the positive externality of having no greenhouse gas emissions.

anti-nuclear campaign from Greenpeace, image states "Help stop the next Fukushima"
Campaign on Greenpeace International website with link for activists to e-mail targeted banks (BNP Paribas and HSBC) directly
Credit: Greenpeace International [178]

To View Now

The Fukushima nuclear disaster in Japan in 2011 was a stark reminder of the risk posed by nuclear energy, and had a major impact on how many countries view nuclear energy. Though it happened more than five years ago, it's political and energy policy impacts reverberate today.

  • From TIME Video, watch the (4:03) video Japan’s Nuclear Crisis Explained in Four Minutes. [179]
  • "Fukushima five years later: Stanford nuclear expert offers three lessons from the disaster [180]," March 2016.

Cost of Disaster

In the immediate aftermath of the March 2011, Fukushima nuclear disaster in Japan, the Washington Post ran an editorial by Anne Applebaum entitled, "If the Japanese can't build a safe reactor, who can?" [181] Without using the word "externality," the author describes these "costs to others" well,

But as we are about to learn in Japan, the true costs of nuclear power are never reflected even in the very high price of plant construction. Inevitably, the enormous costs of nuclear waste disposal fall to taxpayers, not the nuclear industry. The costs of cleanup, even in the wake of a relatively small accident, are eventually borne by government, too. Health-care costs will also be paid by society at large, one way or another. If there is true nuclear catastrophe in Japan, the entire world will pay the price.

I hope that this will never, ever happen. I feel nothing but admiration for the Japanese nuclear engineers who have been battling catastrophe for several days. If anyone can prevent a disaster, the Japanese can do it. But I also hope that a near-miss prompts people around the world to think twice about the true "price" of nuclear energy, and that it stops the nuclear renaissance dead in its tracks.

One could argue however, that to be fair, if these external costs are to be included in the true "price" cost of nuclear energy, then similarly the costs of externalities, including global climate change from greenhouse gas emissions, should be included in the true "price" of fossil-fuel energy sources. Then how do the risks compare?

These arguments juxtapose the extreme externalities of nuclear generation: the risks of catastrophe from a nuclear accident versus the benefits of emissions-free electricity generation. Environmentalists are split.

Patrick Moore, for example, who 40 years ago helped found Greenpeace as an anti-nuclear group, had a change of heart ten years ago, after he left Greenpeace. In a post -Fukushima NPR interview [182], he explained that nuclear plants can produce dependable power 24-7 and don't produce greenhouse gases, so they can replace the coal-fired power plants that spew so much climate change pollution. And, they have a great safety record compared with other sources of electricity. "In the United States, for example — 104 nuclear reactors operating now for 50 years — no member of the public has ever been harmed by them," he says. "You can't say that about oil or gas or coal."

To Read Now (and/or view video)

  • From PBS, read script and/or watch the (12:08) video "Debating the Safety, Wisdom of New Nuclear Reactors in Georgia [183]," February 2012.
  • From The New York Times, read "The U.S. Backs Off Nuclear Power. Georgia Wants to Keep Building Reactors. [184]" August 2017 (link [185]to .pdf version).

Nuclear Proliferation and Terrorism

Not mentioned in the exchange above is the risk of nuclear proliferation and terrorism. This externality was addressed in a 2010 Department of Energy Report to Congress, Nuclear Energy Research and Development Roadmap [186]. The report included four R&D objectives, one of which is "Understand and minimize the risks of nuclear proliferation and terrorism." This objective (page vii) is described,

It is important to assure that the benefits of nuclear power can be obtained in a manner that limits nuclear proliferation and security risks. These risks include the related but distinctly separate possibilities that nations may attempt to use nuclear technologies in pursuit of a nuclear weapon and that terrorists might seek to steal material that could be used in a nuclear explosive device. Addressing these concerns requires an integrated approach that incorporates the simultaneous development of nuclear technologies, including safeguards and security technologies and systems, and the maintenance and strengthening of non-proliferation frameworks and protocols. Technological advances can only provide part of an effective response to proliferation risks, as institutional measures such as export controls and safeguards are also essential to addressing proliferation concerns. These activities must be informed by robust assessments developed for understanding, limiting, and managing the risks of nation-state proliferation and physical security for nuclear technologies. NE [DOE Office of Nuclear Energy] will focus on assessments required to inform domestic fuel cycle technology and system option development. These analyses would complement those assessments performed by the National Nuclear Security Administration (NNSA) to evaluate nation state proliferation and the international nonproliferation regime. NE will work with other organizations including the NNSA, the Department of State, the NRC, and others in further defining, implementing and executing this integrated approach.

US Department of Energy. (2010). Nuclear Energy Research and Development Roadmap [186]. Retrieved Sept 2011.

A nonmarket action was taken/changed in January of 2016 when the U.S., the European Union, plus China and Russia [187] negotiated and lifted sanctions on Iran after it agreed to largely dismantle its nuclear program [188]. This has a direct link to the externality of terrorism, and though opinions on the deal are mixed, it has had an impact on various aspects of world markets.

To Read Now

  • From the BBC, read "What lifting Iran sanctions means for world markets [189]," January 2016.
  • For an update on this topic, read "Who stands to lose if U.S. hits Iran with sanctions again? [190]" by Zahraa Alkhalisi of CNN Money (April 2017)

Assignments

Weekly Activity 5

Please review Canvas calendar for all due dates related to your Nonmarket Analysis Case Study.

Deliverable

Complete "Weekly Activity 5," located in the "Weekly Activities" folder under the Modules tab in Canvas. The activity may include a variety of question types, such as multiple choice, multiple select, ordering, matching, true/false, and "essay" (in some cases these require independent research and may be quantitative). Be sure to read each question carefully.

Unless specifically instructed otherwise, the answers to all questions come from the material presented in the course lesson. Do NOT go "googling around" to find an answer. To complete the Activity successfully, you will need to read the lesson, and all assigned readings, fully and carefully.

Each week a few questions may involve research beyond the material presented in the course lesson. This "research" requirement will be made clear in the question instructions. Be sure to allow yourself time for this! You will be graded on the correctness and quality of your answers. Make your answers as orderly and clear as possible. Help me understand what you are thinking and include data where relevant. Remember, numbers should ALWAYS be accompanied by units of measure (not "300" but "300 kW"). You must provide ALL calculations/equations to receive full credit - try to "talk me through" how you did the analysis.

This Activity is to be done individually and is to represent YOUR OWN WORK. (See Academic Integrity and Research Ethics [31] for a full description of the College's policy related to Academic Integrity and penalties for violation.)

The Activity is not timed, but does close at midnight EST on the due date as shown in Canvas.

If you have questions about the assignment, please post them to the "Questions about EME 444?" Discussion Forum. I am happy to provide clarification and guidance to help you understand the material and questions (really!). Of course, it is best to ask early.

Summary and Final Tasks

In this lesson, you learned about general types of nonmarket strategy and specific strategies for activities in non-government arenas (private politics). The case study, continued from the previous lessons and concluded here, developed a nonmarket strategy based on the outcomes of the nonmarket analysis. The Case Study introduced new concepts related to non-profit organizations and their role in the nonmarket arena.

You learned:

  • the meaning of "nuclear energy" and the difference between fission and fusion;
  • details of steps in the uranium fuel cycle;
  • profiles of major international nuclear agencies;
  • to quantify nuclear generation capacity around the world;
  • about externalities related to nuclear generation including the risk of catastrophe and terrorism but also the advantage of emissions-free generation;
  • technical details and policy implications of March 11, 2011 accident at Fukushima nuclear power plant in Japan;
  • how to research and report on international nuclear generation estimates;
  • the status of the nuclear energy industry in the U.S.

Have you completed everything?

You have reached the end of Lesson 5! Double-check the list of requirements on the first page of this lesson to make sure you have completed all of the activities listed there.

6 Coal

Introduction

Overview of Lesson 6

With this lesson, we continue our survey of energy industries based on energy sources. In this lesson, we will review the coal industry--from mining and extraction to emissions from coal-fired power plants.

What will we learn?

By the end of this lesson, you should be able to...

  • describe standard forms of coal and their properties;
  • explain coal's role in the carbon cycle, including photosynthesis, coalification, and combustion;
  • use concepts and terminology related to surface and underground mining;
  • recognize various types of coal-fired power plant technologies;
  • describe coal's role in greenhouse gas emissions, including carbon dioxide and methane;
  • research and report on global coal reserves and consumption;
  • explain the technology and status of clean coal technologies;
  • explain the technology and status of carbon capture and sequestration (CCS);
  • recognize and analyze externalities related to the coal industry.

What is due for Lesson 6?

The table below provides an overview of the requirements for Lesson 6. For details, please see individual assignments.

Please refer to the Calendar in Canvas for specific time frames and due dates.

To Do List for Lesson 6
REQUIREMENT SUBMITTING YOUR WORK
Read Lesson 6 content and any additional assigned material Not submitted.
Weekly Activity 6 Yes—Complete Activity located in the Modules Tab in Canvas.
Case Study--work with others on your Team to prepare Case Study, following course guidelines Check Canvas calendar for all Case Study Due Dates.

 

Hello Coal

Introducing Coal

A chunk of coal from the Vermillion River
Coal from the Vermillion River
Credit: coal [191], Conrad Bakker [192], Creative Commons [74]

What is Coal?

Coal is a combustible rock--a rock that burns. It is composed mostly of carbon and hydrocarbons. (A hydrocarbon is a molecule consisting of some combination of carbon and hydrogen, such as methane, CH4).

Coal is a fossil fuel, which means it was created over millions of years from dead plants trapped under layers of earth. The heat and pressure turned the plant remains into what we call coal today. Petroleum and natural gas are also fossil fuels, formed in similar ways.

Fossil Fuels and the Carbon Cycle

A fundamental point to realize about all fossil fuels is that the energy we release by burning them came originally from the sun. How's that?

Plants grow as a result of photosynthesis, a process where carbon dioxide (CO2), water (H2O), and energy from the sun combine to create simple sugars, such as glucose (C6H12O6), and oxygen (O2). Photosynthesis is an endothermic chemical reaction (meaning that it requires the net input of energy to occur). The sun provides this necessary energy, which is used to create chemical bonds. The simple sugars created in photosynthesis may later be converted into other types of molecules that make up all the "matter/stuff" of a plant, including specialized carbohydrates, such as cellulose. (Source: Virtual Chembook [193], Elmhurst College, 2003, retrieved August, 2011).

leaf with inputs sunlight, carbon dioxide, and water and with outputs oxygen and glucose
Inputs and outputs of the photosynthesis process
Credit: Piduwmy, M., and Jones, S. Primary Productivity of Plants [194].

Over millions (and often hundreds of millions) of years, heat and pressure causes the chemistry of the dead plants to change somewhat, and some carbon dioxide and oxygen are released, but the energy from the sunlight is generally retained. So, we can think of coal as a bundle of carbon and hydrocarbon molecules held together by bonds that were formed from the sun's energy millions of years ago. It is this very energy that makes coal so useful to us now.

To release this energy, we burn the coal. This is an exothermic chemical process called combustion. It releases energy stored in the chemical bonds that hold the molecules together. Remember Smokey the Bear? (He's still around right? Did I just date myself? Moving on...) The fire triangle has three necessary components for combustion (fire) to begin: fuel, oxygen, and heat. Once the fire gets started, a chain reaction takes over between the hydrocarbons in the fuel and available oxygen. Some energy is used to break the bonds in the fuel, but even more energy is released when the new bonds form with the oxygen. Overall, the reaction is exothermic--energy is released. In complete combustion of a pure hydrocarbon, the hydrocarbon is converted to carbon dioxide (CO2), water vapor (H2O), and heat (and light). Note that hydrocarbons usually have impurities (e.g. nitrogen, sulfur, mercury), and thus other byproducts usually result from the combustion reaction.

See the reaction below for complete combustion of a hydrocarbon, and the reaction for complete combustion of methane. (Methane is a hydrocarbon composed of one carbon and four hydrogen atoms). Note that the "extra" heat energy released as a byproduct provides heat for the continued combustion process. Combustion will continue to occur until either the heat, fuel source, or oxygen is insufficient to continue the reaction.  

Reactions for the complete combustion of a hydrocarbon and the complete combustion of methane.
Credit: D. Kasper

Please note that the reactions above describe complete combustion, which means that all of the fuel is completely converted to the given byproducts. In reality, this process is rarely so simple. When incomplete combustion occurs, other byproducts such as carbon monoxide (a silent, tasteless, and odorless deadly gas) and carbon (e.g. soot) result.  In addition, there are often impurities in the hydrocarbon that result in additional byproducts. For example, a lot of coal contains traces of sulfur, which forms sulfur dioxide (SO2) when combusted. Sulfur dioxide emissions from power plants are proven to cause so-called "acid rain," which became a major nonmarket issue in the 1980's in the U.S. Coal also often contains traces of mercury, which is released when combustion occurs. Coal combustion is the second leading source of mercury pollution worldwide [195] (just a little bit behind artisanal and small scale gold mining), and mercury is a major human health hazard. Interestingly, the chemical content of the air used in the combustion reaction can be a problem as well.  Our atmosphere is mostly nitrogen, and a byproduct of combustion with air will be nitrogen dioxide (NO2). In short, the products of combustion depend on the specifics of all the compounds involved in the reactions, and the combustion of coal nearly always results in unwanted byproducts.

While we're on this topic, another interesting consideration is the amount of greenhouse gases formed during the combustion process. When we burn a fuel, a reaction takes place between a hydrocarbon and oxygen that yields carbon dioxide and water. When we burn one pound of coal, we produce about two and half pounds of CO2. How can that be?

The atomic weight of carbon is 12 and oxygen is 16 (grams per mole), giving carbon dioxide a total molecular weight of 44. So, each atom of carbon results in 3.7 times its weight in CO2. (44/12 = 3.7)

one red circle marked C=12,two blue circles marked O=16. CO2: 12+(16x2)=44
Atomic weight of one molecule of carbon dioxide
Credit: U.S. Department of Energy [196]

The typical carbon content for coal ranges from more than 60 percent for lignite to more than 80 percent for anthracite, according to the EIA [197]. Let's consider coal that is around 70% carbon. One pound of this coal results in about (0.70 lb carbon/lb coal) x (3.7 lb CO2/lb carbon) = 2.6 pounds of CO2.

Coal Use and Reserves

Types of Coal

There are four basic varieties of coal: lignite, sub-bituminous, bituminous, and anthracite. All are formed from ancient plant material. Variations are the result of different geologic forces which affect the carbon content and heating value--also the dollar value!

  • Lignite: Sometimes called "brown coal," this is a brownish-black coal with generally high moisture and ash content and lower heating value. It is the lowest ranked coal. It contains 25 to 35 percent carbon and has the lowest heating value, 4,000 to 8,300 Btus per pound.
  • Sub-bituminous: A dull black coal, it contains about 35 to 45 percent carbon and has a heating value of 8,300 to 11,500 Btus per pound. It is used primarily for generating electricity and for space heating.
  • Bituminous: Sometimes called "soft coal," this coal is 45 to 86 percent carbon, softer than anthracite, and has a heat content between 10,500 and 14,000 Btus per pound.
  • Anthracite: Sometimes called "hard coal," this coal is 86 to 97 percent carbon and has the highest energy content of all coals, nearly 15,000 Btus per pound.
Four types of coal: lignite(black), anthracite(shiny black), bituminous(black), and sub-bituminous(dull black)
The four types of coal
Credit: Image of lignite coal [198], Image of sub-bituminous coal: stannate [199] and Images of anthracite and lignite coal are works of the U.S. Federal government and in the public domain.

How does the World Use Coal?

To Read Now

Visit the World Energy Council and see the publication "World Energy Resources  2016 [200]." You can download your own copy, or access the copy on Canvas, under the Lesson 6 tab. This is the most recent full energy report from this organization, who is an excellent source of information for global energy markets.  It provides a solid understanding of the development of the global coal market in the recent past.

Please read the following in the Introduction:

  • Coal Summary, pp. 12 - 13 (This is pp. 14 - 15 on the navigation bar at the top)

In the main body of the report (this portion starts after the Introduction, which ends on p. 49) read:

  • Generation Technologies, pp. 11 - 14 (pp. 53 - 56 on the navigation bar at the top)
  • China and India, pp. 17 - 21 (pp. 59 - 63 on the navigation bar)
  • United States and Socio-economics, pp. 31 - 36 (pp. 73 - 78 on the navigation bar)

As you read this, it will help to remember the international definition used by the United Nations for proved recoverable reserves: "the quantity within the proved amount in place that can be recovered in the future under present and expected local economic conditions with existing available technology" (World Energy Council [201]).

To Read Now

  • Read through the "coal" section of the Energy Information Administration's (EIA's) International Energy Outlook 2017. Download the PDF by going to the International Energy Outlook website [202].

The 2017 International Energy Outlook (IEO) mostly provides summaries of international energy trends and projections. The 2016 IEO [203] provides more detail.

  • Open the section "Coal"
  • Read the subsections entitled "World coal trade" and "World coal reserves"

As you read this, it will help to remember that the IEO2017 and IEO2016 Reference case is a forward-looking scenario (through 2040), which does not incorporate prospective legislation or policies that might affect energy markets, including prospective greenhouse gas reduction policies.

To Read Now

The global energy market is a dynamic place. This is but one reason that it is exciting to be in the energy field (hopefully that's not just me!).  Read the following to get an understanding for the most recent trends in the global coal market.

  • "Germany's long goodby to coal despite Merkel's green push [204]." Vera Eckert, Reuters, August 2017.
  • BP Statistical Review of World Energy June 2017: Coal [205].

The EIA and BP publish excellent (and free!) information, loaded with analysis and details far beyond the breadth and depth of this lesson. I've chosen selections carefully that I believe best support the objectives of this lesson and the focus of this course. I encourage you to please keep these important publications and organizations (the International Energy Agency [206] is great as well) in mind, however, as they may be helpful to you in other courses, research, and your professional life--now and in the future!

Coal Mining

Coal is a solid that, if we are to use it, must be extracted from the earth. This is coal mining, going into the earth to remove coal for our consumption. The basic steps of mining and processing coal are described below.

There are two general methods of coal mining: surface mining and underground mining.

Surface Mining

Generally called surface mining, the industry also calls it "opencast" or "open cut mining," while others may refer to it as "strip mining." In this type of mining, workers use explosives and heavy earth moving equipment, such as power shovels and draglines, to break up and scoop off the layers of soil and rock (overburden) covering the coal seam. Once exposed, the coal seam is systematically mined in strips. It is broken up using drills and explosives, and then smaller shovels lift the coal from the ground and load it into trucks or onto conveyors for transport to a coal preparation plant or directly to where it will be used.

Mountaintop removal is a variant of strip mining technology commonly used in West Virginia and eastern Kentucky where local topography provides adjacent valleys which can be used as repositories for overburden. In this type of mining, bulldozers are used first to remove all topsoil and vegetation from the mountaintop. Then explosives are used to break up the bedrock above the coal. Huge draglines (the bucket can hold 15-20 pickup trucks) then remove the overburden and dump the waste rock ("spoil") into the adjacent valleys. Then the coal seam is blasted and front end loaders scoop up the coal and load it into the huge dump trucks that carry the coal to the coal preparation plant. The video below provides a pretty dramatic birds-eye view of a mountaintop removal operation, including the overburden and the coal seams below it. It is also quite clear what the mountains used to look like, as evidenced by the scenery in the background. Please watch the following (3:18) video which shows the process described above.

Spruce#1 Mountaintop Removal Strip Mine: Logan County, West Virginia

Surface mining works only when the coal seam is near the surface. It is, however, usually more cost-effective than underground mining and requires fewer workers to produce the same quantity of coal. And the industry reports that 90% or more of the coal is recovered, a higher proportion than from underground mining. Recall also that from a previous lesson that the EROI of surface-mined coal is higher than underground mines.

The optional (6:43) video below from PBS provides a good sense of the scale of the largest mine in the U.S., the Black Thunder surface mine in the Powder River Basin in Wyoming. 

America Revealed: Where Does Our Coal Come From?
Click for a transcript of "America Revealed: Where Does Our Coal Come From?" video.

PRESENTER: Coal. This one critical resource supplies nearly half of America's electricity. And this is the biggest coal mining operation in the country. The Black Thunder Mine in Wyoming's Powder River basin.

Black Thunder is one of 15 mines in the basin which stretches from Northeastern Wyoming into Montana. In the last 40 years, the area has been completely transformed.

This is what the barren landscape looked like in the 1950s. And here it is now. The terrain completely altered by mines like Black Thunder. Today, Wyoming produces more coal than any state in the nation-- far more than traditional coal mining locations like Kentucky and West Virginia. So what changed?

When you think about protecting the environment, the last thing that comes to mind is digging a giant coal mine in the middle of pristine ranch land.

Yet ironically, all this came about because of a government effort to clean up our air over 40 years ago. The environmental crusader who led the charge is the last person you might expect.

RICHARD NIXON: We can no longer afford to consider air and water common property free to be abused by anyone.

PRESENTER: With pressure from the growing environmental movement, President Richard Nixon signed the Clean Air Act of 1970 into law. It restricted emissions released into the air by big polluters like coal fired power plants. You might think that would have killed coal mining, but not here in Wyoming.

This stuff has a lot less sulfur than the coal mined elsewhere. So it burns cleaner, making the Powder River basin the new king of coal.

Josh Gardner drives one of the trucks that work these pits. It's a 6:30 AM shift change. Time to go to work.

Hey, morning Josh.

JOSH GARDNER: Hey, what's up? Hey.

PRESENTER: What's with you?

Our ride is basically a dump truck on steroids. It stands over two stories tall and weighs almost 200 tons.

But it seems dwarfed by the shovel at the base of the pit.

JOSH GARDNER: That's our first bucket in.

PRESENTER: It Felt like a small earthquake.

JOSH GARDNER: This actually is telling us how much weight we have on there. The first bucket was 68 tons. And then the second one, 60.

PRESENTER: Looks like it's raining coal.

JOSH GARDNER: So we got 174.

PRESENTER: Three bucketfulls and we're on our way. One truckload like this can produce enough energy to heat a home for more than 40 years or run your television for the next 2000 years.

All day long, Josh drives in a big loop filling his truck with coal, dumping it, filling it up again. In a single shift, he can haul 8,000 tons. And there's plenty to haul.

Typically, coal seams might be 10 feet thick. But here, they're 80 feet thick or more.

JOSH GARDNER: We're about 200 feet down. And you can see the definite line where the black starts up there and all the gray above it. And once we get done taking all the coal out of this seam, this shovel is done. Then they'll take all the dirt that sits above it. They'll blast it back down into this hole. And then they'll just start again.

PRESENTER: Again and again until the whole thing is cleared of all the coal.

JOSH GARDNER: Correct.

PRESENTER: And how long can they do that for? How much coal is there?

JOSH GARDNER: They say in the whole Powder River Basin, there's enough coal to last 150 years.

PRESENTER: So this coal will be around a lot longer than you or me.

JOSH GARDNER: Oh yeah.

PRESENTER: But digging it up may be the easiest part of the job where hundreds if not thousands of miles away from the power plants that need it.

So how to get this coal where it needs to go.

Trains.

But not just any trains. Some of them are a mile and a half long.

Carlin Vigil schedules the trains of Black Thunder. She's worked here nearly 30 years-- almost as long as a mine has been in business.

CARLIN SIGIL: We shipped our first train in December of 1977. And we were probably only loading a couple of trains a week at that time. And now you're looking at anywhere from 20 to 25 trains a day.

PRESENTER: This train is headed to a power plant in Montana. This one is on its way into Minnesota, Illinois, or Missouri. This one as far east as Georgia or New York.

And they all start out on the joint line. This 103 mile long set of tracks has developed into the busiest stretch of rail in the entire country.

It links these trains to national rail lines so the coal can get wherever it needs to go. The trains don't even stop as they roll under the chutes at the base of the tower.

CARLIN SIGIL: The coal runs right up this conveyor belt here. This tube that's down below us goes into the silos themselves. We can load a train out of here in about an hour and 20 minutes.

Generally, a good month is over 10 million tons of coal.

PRESENTER: 10 million tons of coal sounds like it's a big number. But I mean, what does that mean in terms of how much energy it's actually giving to the United States.

CARLIN SIGIL: It's actually 10% of the coal generated fuel for the United States.

PRESENTER: In the middle of nowhere, we've built ourselves the Grand Canyon of coal. With our vast reserves, it's no wonder America is still so reliant on the simple black rock to power the grid. Even though coal fired power plants are among the biggest air polluters in the US.


Underground Mining

When the coal deposit lies deep below the surface of the earth, underground mining is used. Miners dig tunnels deep into the earth near the place where the coal is located. The tunnels may be vertical, horizontal, or sloping. Once deep enough, the tunnels interconnect with a network of passageways going in many directions. Entries allow fresh air into the mine and give miners and equipment access to reach the ore and carry it out. The coal extraction is done by either a room-and-pillar method or longwall mining.

When the room-and-pillar method is used, miners cutting a network of 'rooms' into the coal seam and leaving behind 'pillars' of coal to support the roof of the mine. Working from the tunnel entrance to the edge of the mine property, they remove sections of the coal while leaving columns of coal in place to help support the ceiling. This process is then reversed, and the remainder of the ore is extracted, as the miners work their way back out.

In the case of longwall mining, the area being mined is covered with hydraulically-powered self-advancing roof supports that temporarily hold up the roof while the coal is extracted. After the coal is removed, the roof is allowed to collapse. This method requires careful planning and appropriate geological conditions. Carl Hoffman in Popular Mechanics offers this vivid description [207] of longwall mining, 

From an elevator-like entrance shaft deep underground, continuous miners—cutting machines on wheels—bore passages on both sides of seams of coal up to a quarter mile wide and a mile or more long. At the mine face, a massive shearer on self-advancing ceiling supports known as 'shields' slides back and forth across the face like a giant cheese grater. Water sprays constantly against the coal face to dampen coal dust. After each pass, the whole apparatus, as wide as 1600 feet, lurches forward, letting the area behind the shields collapse. A conveyor belt catches the coal, moves it to another belt running along the side passages, and takes it to the surface, often several miles away. When a panel of coal is mined out, the longwall machine is moved to the next one. Over time, mines become enormous labyrinths of passages, and it can take miners a half hour or more to travel miles to the mine face in low-slung vehicles called mantrips.

To Watch Now

Please watch the following (3:30) video:

Coal Story, The Mine
Click for a transcript of "Coal Story, The Mine" video.

This song tells a story of a region, of a rugged landscape that challenges the eye, and a friendly people. It's all part of the legend of Virginia's great southwest. This is the most economically depressed area in the state. For decades, the best and practically only way to make a living in these rugged hills was beneath them in the darkness of a coal mine.

Well, I guess it just gets in your blood once you try it. It's just a daily routine.

A routine Emory Hess and thousands of other miners go through every day.

And over the last few years, you just had to continually move deeper and deeper.

This is Pittston Coal's Laurel Mountain Mine, one of about 290 licensed mines in a 10 county area.

How much longer will you be mining this particular mine?

Hopefully we can get another eight years in here. 8 to 10, anyway.

Every day, around the clock, miners make this journey underground and inside Virginia's hills and mountains. Mining is basically hit or miss. You've got to go where the coal is, and here's where it is. We're about 3 and a half miles underground, and there's about 700 feet of mountain right above us.

They've had to move a lot of rock to get this deep. Powerful machines help the miners chew and claw their way inside, and some places the shaft is less than 4 feet high. You practically have to crawl. They follow the vein, taking only the coal. This one is called the Jawbone Seam. It's hundreds of thousands of years old.

Once miners gather the coal, a conveyor belt takes it outside to be processed. Three a half miles underground means a 20 minute ride on the belt before coal sees the light of day.

Once the prize industry of southwest, coal mining is quickly losing its steam. Coal demand is down. Mines are closing, and that means layoffs. In some coal counties, the unemployment rate is 50%.

If you were looking at a crystal ball, you would see that coal mining wouldn't exactly be the thing to be trying to start into right now.

Uh, right, that's a pretty good assumption, pretty good-- [UNINTELLIGIBLE] with a crystal ball, yes.

Some coal companies are trying to mine coal a cheaper way. This is the White Stallion surface mine, also owned by Pittston, where miners literally rip off the top of the mountain to take out the coal. They're mining the Dorchester Seam here, more than 1,000 feet above the Jawbone below.

Today, the remnants of a hurricane hundreds of miles away have turned this site into a mountain of mud. But the work continues. Day and night, it never stops.

There have been better times here in southwest Virginia. Coal mining was once an old, reliable way to make a living. It isn't so reliable anymore. The people here realize that, but there's not a whole lot of other ways for them to make a dollar.


Coal Preparation ("Washing")

Once the coal is removed from the mine, it is taken to a coal preparation plant where the raw "run-of-mine" coal is processed to separate the coal from undesirable waste rock and minerals. The finer waste from this process (including silt, dust, water, bits of coal, and clay) is discharged as a thick slurry into a man-made impoundment. This structure is used to confine refuse or slurry, along with any chemicals used to wash and treat the coal at the coal preparation plant. Coarser waste from the preparation process, rock, is dumped back into the pit once mining has ceased or is used in the construction of an impoundment dam.

To Watch Now

Please watch the following (5:43) video:

How They Do It - Coal Mining Video
Click for a transcript of "How They Do It - Coal Mining Video" video.

Man has used coal as a fuel for over 3,000 years, and it remains one of the world's most vital natural resources. It generates more than 40% of the world's electricity and every year we go through 6 billion tons. Somehow, mines must ensure a constant supply, or our cities would be plunged into darkness and industries would grind to a halt. So how do they do it?

Pittsburgh, Pennsylvania. This industrial east coast city is famous for steel production and shipbuilding. But Pittsburgh is also surrounded by rich coal reserves. And here, just 30 miles from the city, are the Bailey and Enlow Fork mines. This is the largest underground mining complex in North America. And every year it produces more than 20 million tons of coal.

There are millions of dollars invested in this vast complex, and with more than 200 men working underground at any one time, keeping it running is a major logistical challenge.

At 4:00 in the afternoon, the day shift clocks off after eight hours of hard work, while the next shift makes its way into one of the lift cages to begin the 650 foot descent into the mine. Mining is one of the toughest jobs imaginable, and there's an unspoken bond between these men who spend every working day deep underground.

Once they arrive at the bottom of the shaft, they still face a long journey to the coal face. After almost 20 years of continuous mining, a vast network of underground tunnels now extends for an extraordinary 35 square miles. The miners face a five-mile journey to get to the section currently being mined. It's a cramped and uncomfortable ride aboard one of the mine's small trains, as the cars rattle their way through the maze of dark tunnels, following a network of rails that are now so busy they require traffic lights.

First up is a monster machine, known as a continuous miner. Armed with a 16-foot cutting drum, this ferocious beast chomps away at the scene, carving out a series of access tunnels. As it bores its way forward, it feeds the cold behind it to a crab-like loader and shuttle car. The continuous miner produces up to five tons of coal every minute-- more than a miner in the 1920s produced in a whole day. But its job is actually to prepare the way for the real monster-- the longwall shearer.

Armed with a set of teeth to put a Tyrannosaurus to shame, its cutting edge is over 1,000 feet long, and it can smash an amazing 50 tons of coal out of this seam every minute. Think about it. That's almost one ton of coal every second, enough to meet all the energy needs of an average household for 78 days. But there are 3 million tons of coal in this 13-foot-high seam. Despite its ferocious appetite, it will still take six months of shuttling back and forth before it has finished digging it all out.

Before the coal is fit for shipping, they first need to remove rock, soil, and contaminants, which account for up to 30% of the raw feed. So the material is fed via conveyor into the processing plant. To ensure it's all properly processed, it's first graded according to size. Next, to separate the coal from the waste rock, it's fed into this giant floatation tank. Because the rock is heavier than the coal, it sinks to the bottom where it can be removed, while the coal floats to the surface.

It's now soaking wet. So just like your home laundry, they load it into a spin dryer.

This industrial dryer spins the coal at high speed until excess water is removed. This water is then fed into vast tanks where the contaminants are removed before being disposed of as waste slurry.

Meanwhile, the different sized pieces of coal are recombined, crushed into a uniform mix, and fed into a giant hopper. Incredibly, just 15 minutes after entering the plant, it's ready for transport by rail. As they park beneath the hopper, a controller opens a chute to allow 6 tons of coal to fill each car. Once full, every train is able to transport over 10,000 tons of coal to power stations across North America.

Thanks to some extraordinary coal crunching machines and the guys who labor 24/7 to keep them working, this essential resource keeps flowing to the world's power stations, and there's enough electricity to power the wheels of the modern world. 

Methane

Methane (CH4) is a gas that forms naturally in the process of coal formation. It is also a potent greenhouse gas [208], with a global warming potential (GWP) over 20-30 times greater than CO2 over a 100 year period, despite the fact that it remains in the atmosphere for a shorter time (about 12 years vs. hundreds of years for CO2). When coal is mined, methane is released. In 2015, the U.S. EPA projected [209] that 8% of of global anthropogenic methane emissions would come from coal mining. Steps to reduce methane emissions can have relatively near term effect. The Global Methane Initiative [210] reports, "of all the short-lived climate forcers, methane has a large reduction potential and cost-effective mitigation technologies are available."

In addition to being a serious greenhouse gas, methane is highly combustible with serious implications for the safety of mine operations. Methane is highly explosive at concentrations of only 5 to 15%. You probably remember the Upper Big Branch mine disaster [211] in West Virginia in 2010 that killed 29 people. This was a result of methane building up and exploding.

Coal Seam Methane

Methane is generated during the natural process of coalification (the transformation of plant material into coal) and is contained in the coal microstructure. Because natural gas is made up mostly of methane, coal bed methane can be seen as a useful "unconventional" source of natural gas. When concentration levels are high, methane recovered from coal mines can be fed into the existing gas pipeline network along with or in place of conventional natural gas. The gas can be be used for cooking and heating or for electricity generation with gas turbines and gas engine systems, among other things.

A range of technologies are used to recover methane from coal. They may be broken down into three categories.

  • Coal Bed Methane: This is methane recovered from un-mined coal seams. It is done to reduce the risk of explosion when mining does take place or simply to use the methane as an energy source, whether the coal is extracted later or not. When the mine will remain unmined, the process is called Virgin Coal Bed Methane (VCBM).
  • Coal Mine Methane: Methane recovered during mining activities as the coal is in the process of being extracted and thus emitting significant quantities of the gas. Methane recovery in this case is done to improve mine safety, to avoid emissions for environmental reasons and may be used as an energy source.
  • Abandoned Mine Methane: Methane recovered from mines that have been abandoned following the completion of mining operations. In this case, the methane recovery is done for the energy value and to reduce atmospheric emissions, if significant amounts are occurring, of methane continuing to escape from the mine following the completion of mining activities. AMM is most effective when the mine has been sealed to trap the methane.

Underground mines account for the vast majority of global methane emissions from coal mines. Surface mines also emit, but less, because there is less pressure to trap methane in the coal. Methane emissions also occur during post-mining operations, including processing, storage, and transportation. Coal can continue to emit methane for months after mining, especially when it is crushed, sized, and dried. And, methane emissions from coal mines can continue after operations have ceased (Source: EPA [212]).

How Much Methane is Emitted from Coal Mines?

According to the U.S. Environmental Protection Agency's Coalbed Methane Outreach Program's most recent assessment [213]:

U.S. coal mines emitted nearly four billion cubic meters or 61 million metric tons of carbon dioxide equivalent (MMTC02E) in 2015. Between 1990 and 2015, U.S. emissions decreased by 40 percent, in large part due to the coal mining industry's increased recovery and utilization of drained gas and decrease in ventilation air methane emissions.

By 2020, global methane emissions from coal mines are estimated to reach nearly 800 MMTCO2E, accounting for 9 percent of total global methane emissions. China leads the world in estimated coal mine methane (CMM) emissions with more than 420 MMTCO2E in 2020 (more than 27 billion cubic meters annually). Other leading global emitters are the United States, Russia, Australia, Ukraine, Kazakhstan, and India.

Methane Capture from Coal Mines

Methane is also the main component in natural gas, a valuable source of energy.  Because of this, coal producers worldwide deploy technology to capture methane from coal mines.  According to the EPA [214], there are more than 200 coal mine methane capture projects in 15 countries worldwide which will capture more than 4 billion cubic meters of methane annually, which is equivalent to over 60 MMTCO2e. In 2015 in the U.S., over 33 billion cubic feet of natural gas were recovered from coal mines. As a point of reference, the U.S. consumed approximately 27,500 billion cubic feet of natural gas in 2015, according to the EIA [215].

Bar graph of top 9 coal mine methane emitting countries worldwide projected in 2020.
Figure 6.1: Estimated Global Coal Mine Methane Emissions, 2020
Click here to expand for a text description of the figure.
Country Million tons of CO2 equivalent
China 421.55
U.S. 83.93
Russia 62.34
Australia 37.02
Ukraine 36.67
Kazakhstan 27.5
India 27.38
Poland 8.93
Germany 4.17
U.S. EPA [213]

"Clean Coal"

According the U.S. EPA [216], fossil fuels are the leading source of global carbon dioxide emissions, and according to data available [217] from the International Energy Agency (IEA), coal is responsible for just over 45% of all energy-related emissions worldwide. Coal is the most carbon-intensive fossil fuel, which means it emits more CO2 than an equivalent amount of oil, natural gas, or other fossilized hydrocarbon. According to the EIA's 2016 International Energy Outlook (IEO2016 [218]), coal became the leading source of world energy-related carbon dioxide emissions in 2006, and projections through 2040 indicate that it remains the leading source. Under the IEO2016 reference scenario, coal is expected to decline from 43% of all carbon dioxide emissions in 2012 to 28% in 2040. However, this would still represent an 18% increase in coal-related emissions between 2012 and 2040.  All of this coal-based emissions growth in the reference scenario is in non-OECD countries, as you can see in the second chart below.

Graph showing Non-OECD vs OECD energy-related emissions from 1990 to 2040. See link in caption for details.

Figure 6.2: World energy-related carbon dioxide emissions, 1990-2040
Click link to expand for a text description of Figure 6.2
World Energy related CO2 Emissions by fuel type 1990-2012 (billion metric tons)"
Year Liquids Natural Gas Coal
1990 9.12 3.98 8.35
1991 9.15 4.07 8.06
1992 9.18 4.07 7.95
1993 9.19 4.16 8.01
1994 9.30 4.17 8.07
1995 9.42 4.29 8.23
1996 9.60 4.40 8.45
1997 9.82 4.41 8.41
1998 9.86 4.44 8.36
1999 10.04 4.56 8.49
2000 10.17 4.74 8.95
2001 10.23 4.78 8.97
2002 10.31 4.97 9.13
2003 10.56 5.11 9.85
2004 10.91 5.29 10.58
2005 11.13 5.43 11.09
2006 11.17 5.58 11.65
2007 11.14 5.77 12.11
2008 11.08 5.95 12.36
2009 11.02 5.75 12.43
2010 11.39 6.26 13.09
2011 11.60 6.43 13.79
2012 11.69 6.57 14.00
World Energy related CO2 Emission Projections by fuel type 2012-2040 (billion metric tons)
Year Liquids Natural Gas Coal
2013 11.81 6.63 14.28
2014 11.95 6.77 14.62
2015 12.06 6.80 14.67
2016 12.25 6.95 14.75
2017 12.40 6.97 14.92
2018 12.57 7.08 15.10
2019 12.75 7.19 15.25
2020 12.93 7.31 15.38
2021 13.03 7.45 15.53
2022 13.13 7.61 15.58
2023 13.22 7.79 15.66
2024 13.33 7.99 15.75
2025 13.44 8.18 15.80
2026 13.55 8.37 15.82
2027 13.65 8.56 15.85
2028 13.77 8.76 15.88
2029 13.89 8.95 15.89
2030 14.01 9.15 15.92
2031 14.15 9.35 15.97
2032 14.29 9.56 16.00
2033 14.43 9.75 16.05
2034 14.58 9.96 16.10
2035 14.74 10.18 16.16
2036 14.90 10.39 16.22
2037 15.06 10.60 16.26
2038 15.22 10.80 16.33
2039 15.38 11.00 16.39
2040 15.54 11.18 16.48
Credit: International Energy Outlook 2016. U.S. Energy Information Administration [218].

Graph showing Non-OECD vs OECD energy-related emissions by fuel type from 1990 to 2040. See link in caption for details.

Firgure 6.3: World carbon dioxide emissions by fuel type, OECD and non-OECD, 1990-2040
Click link to expand for a text description of Figure 6.3
OECD and non-OECD energy-related carbon dioxide emissions by fuel type, 1990-2012 (billion metric tons)"
Year Country Type Coal Natural Gas Liquids
1990 OECD 4.10 1.97 5.52
1990 Non-OECD 4.25 2.01 3.60
2012 OECD 3.93 3.13 5.72
2012 Non-OECD 10.07 3.44 5.97
OECD and non-OECD energy-related carbon dioxide emissions by fuel type, 2012-2040 (billion metric tons))"
Year Country Type Coal Natural Gas Liquids
2020 OECD 4.10 3.32 5.60
2020 Non-OECD 11.28 3.99 7.34
2030 OECD 4.06 3.77 5.49
2030 Non-OECD 11.87 5.38 8.52
2040 OECD 4.01 4.24 5.56
2040 Non-OECD 12.47 6.94 9.99
Credit: International Energy Outlook 2016. U.S. Energy Information Administration [218].

As described previously, burning coal also releases other dangerous pollutants, including soot and fly ash, sulphur, nitrogen oxides, and mercury. There is no known technology that can eliminate all of these pollutants. Even if they could, there are environmental consequences of coal extraction and processing. But that aside, coal resources are abundant, coal-fired power plants are extremely reliable, and coal is relatively cheap (ignoring externalities of course).

Worldwide, efforts and projects are underway to mitigate the environmental impact of carbon combustion. Some of the technologies involved include scrubbers, selective catalytic reduction, fluidized bed boilers, gasification, and carbon capture and sequestration (CSS).

a sponge cleaning the word coal
Credit: U.S Department of Energy

Technology to Mitigate Environmental Impacts of Coal

The National Mining Association published a Clean Coal Technology Backgrounder [219] in 2013. The following is an excerpt, which describes currently available technologies.

Power plants being built today emit 90 percent less pollutants (SO2, NOx, particulates, and mercury) than the plants they replace from the 1970s, according the National Energy Technology Laboratory (NETL). Regulated emissions from coal-based electricity generation have decreased overall by over 40 percent since the 1970s, while coal use has tripled, according to government statistics. Examples of technologies that are deployed today and continue to be improved upon include:

Fluidized-bed combustion–Limestone and dolomite are added during the combustion process to mitigate sulfur dioxide formation. There are 170 of these units deployed in the U.S. and 400 throughout the world.

Integrated Gasification Combined Cycle (IGCC)–Heat and pressure are used to convert coal into a gas or liquid that can be further refined and used cleanly. The heat energy from the gas turbine also powers a steam turbine. IGCC has the potential to improve coal’s fuel efficiency rate to 50 percent. Two IGCC electricity generation plants are in operation in the U.S.

Flue Gas Desulfurization– Also called “scrubbers,” and removes large quantities of sulfur, other impurities, and particulate matter from emissions to prevent their release into the atmosphere.

Low Nitrogen Oxide (NOx) Burners– Reduce the creation of NOx, a cause of ground-level ozone, by restricting oxygen and manipulating the combustion process. Low NOx burners are now on 75 percent of existing coal power plants.

Selective Catalytic Reduction (SCR)– Achieves NOx reductions of 80-90 percent or more and is deployed on approximately 30 percent of U.S. coal plants.

Electrostatic Precipitators – Remove particulates from emissions by electrically charging particles and then capturing them on collection plates.

If you're interested in more detail (NOT required reading), try visiting the DOE's Clean Coal Technology Program [220].

Carbon Capture and Storage (CCS)

There are two general approaches to addressing anthropogenic climate change: mitigation and adaptation.  Adaptation refers to adjusting to the impacts of climate change that can/do occur, while mitigation refers to preventing greenhouse gas emissions from impacting the climate in the first place.  (Keep in mind that planning - of both the market and nonmarket variety - can address both simultaneously.)

There are two general ways to mitigate emissions. Prevention is most often the focus of mitigation efforts. The most common examples are using renewable and carbon-free energy sources, and energy efficiency. However, Carbon Dioxide Removal (CDR) technologies and methods can also be effective mitigating agents.  CDR technologies are frequently mentioned by many governments and organizations, including by the Intergovernmental Panel on Climate Change [221] (IPCC) in their Assessment Reports, including in their most recent report, the Fifth Assessment Report [221] (AR5), which was completed in 2014.  The IPCC is the most prominent and well-regarded international organization studying and proposing solutions to climate change. Carbon capture and storage (sometimes referred to as carbon capture and sequestration), or CCS, is a prominent CDR technology. The video below from the British Geological Society provides a good introduction to this process. Please watch the following (4:45) video.

To Watch Now

What is carbon capture and storage (CCS)?
Click for a transcript of "What is carbon capture and storage (CCS)?" video.

MIKE STEPHENSON: Carbon capture and storage, or CCS, is an important new geoengineering solution to climate change. The idea is simple-- we capture CO2 from large point sources, like power stations, cement factories, and oil refineries, and store it, or dispose of it deep underground. This stops the CO2 from getting into the atmosphere.

But we want to know that CCS works, and most of all that it's safe. CCS could be an industry the size of present-day North Sea oil within a few decades. It's simply the reverse of the oil and gas business, putting climate-changing CO2 gas back in the ground after fossil fuels have been burned. This new technology is one of the ways that Britain could reduce its emissions, as well as other big CO2 producers reduce theirs.

Point sources would be connected in clusters to pipelines that would take CO2 across the country and onshore to wells, where it can be injected into former oil or gas fields, or deep aquifers. The argument is that if the underground storage structure is good enough, the gas will stay there for millions of years, just as natural gas does. Scientists have already shown, at a small scale, that they can capture, transport, and store CO2.

In Britain, we're lucky in being close to one of the largest areas of potential storage for CO2 in Europe. The rocks under the North Sea could absorb about 22 billion tons of CO2, which is 180 years of the UK's 20 largest point sources. This is a really hefty reduction in Britain's emissions.

We're very confident the CO2 won't leak. One of the reasons why is that we know a lot about natural gas, or methane, in the North Sea. We've been extracting natural gas from the North Sea for many years in this country. And as geologists, we know that that methane or natural gas has been in those structures for literally millions of years. It's actually stayed put for millions of years.

So if we engineer the structures in which we hope to store our carbon dioxide to the same level, there's no reason why they should leak at all. The CO2 should stay down there for millions of years. We're also very confident from the science because, for example, we've been injecting CO2 for a long time.

There are various places in the world where CO2 is successfully injected into rocks. For example, in the United States, CO2 is injected for enhanced oil recovery in oilfields, where it flushes the oil, the last remaining oil out of fields. And also, in the Sleipner field in the North Sea, we've been injecting CO2 for well over 10 years, very successfully.

Finally, we feel that we can image, or we can actually see the CO2 collecting in reservoirs. Using very sophisticated seismic techniques, we can actually see the layers of CO2 as they collect. So overall, science gives us a lot of confidence that our containers, the structures where we hope to store CO2 will not leak.

The UK is taking a lead in CCS worldwide, both in terms of British government support for CCS, but also because British scientists are exporting knowledge and expertise to big emitters in the developing world, like China and India.

Large-scale CCS can't happen until we know that it's viable, and that the CO2 won't escape. Would money spent on CCS be better spent on renewable energy, like wind farms? Is CCS a big opportunity for the UK? These are reasonable questions to ask. To answer them, scientists are working around the world to find out whether CCS is a viable long-term option.

There are many good sources of information about CCS, including The Global Status of CCS: 2014 [222]nd also The Global Status of CCS: 2015 [223] (the 2016 summary report [224] is available for free as well, but not the full report), research by the World Resources Institute [225], also from the Energy Information Administration [226], and the International Energy Agency [227]. The best source of current and balanced information on this topic, at an appropriate level of depth and detail are from the source below, which has links to referenced studies.

To Read Now

  • Carbon Dioxide Capture and Sequestration [228] (U.S. Environmental Protection Agency). Note that this is an archived page from January 19, 2017. The Trump Administration is in the process of updating the EPA website, much of which [229] involves altering climate science information to reflect the adminstration's "new approach."

For an updated (but CCS industry-based) perspective, feel free to page through the Global CCS Institute's The Global Status of CCS 2016 [230], especially pp. 8 - 12 (this is their most recent report as of September 2017). When reading this, keep in mind that there are over 33 billion metric tons of carbon dioxide emissions from the energy sector alone.

Finally, for an explanation of the role that CCS could (and possibly must) play in international emissions reductions, read the summary from the World Resources Institute. For an understanding of the current and near-term status of CCS, see the (well-referenced and -written) article from Exponent.

To Read Now

  • "Carbon Capture and Storage: Prospects after Paris [231]" (World Resources Institute, 2016).
  • "Carbon Capture and Storage: State of the Field [232]" (Exponent, 2017).

(Optional) Nonmarket Strategies - Example

SourceWatch [234], and others (PRWatch [235], desmogblog.com [236],) cite a 2008 report prepared by the executive of a public relations (PR) firm working on behalf of the American Coalition for Clean Coal Electricity. The lengthy report to "friends and family" outlines the work the PR firm did on behalf of "clean coal." Whether you agree with the message or not, this letter presents a fascinating accounting of a remarkable orchestration of highly effective, well-funded nonmarket action.

To Read Now

Read this fascinating report in its entirety, To Hawthorne Friends & Family [237] (this is an archived version saved by Kevin Grandia at Desmogblog [236], as the original version was removed by the Hawthorn Group following a backlash). Keep in mind the source, a public relations firm working on behalf of the American Coalition for Clean Coal Electricity.

A note from the original author of this course: I saw this strategy in action, maybe you did too? At a 2008 event in Levittown, PA where Obama was speaking, Clean Coal hats were everywhere. On my way in, I, like most others, was offered one (free) in the parking lot.

Assignment

Weekly Activity 6

Please review Canvas calendar for all due dates related to your Nonmarket Analysis Case Study.

Deliverable

Complete "Weekly Activity 6," located in the "Weekly Activities" folder under the Modules tab in Canvas. The activity may include a variety of question types, such as multiple choice, multiple select, ordering, matching, true/false, and "essay" (in some cases these require independent research and may be quantitative). Be sure to read each question carefully.

Unless specifically instructed otherwise, the answers to all questions come from the material presented in the course lesson. Do NOT go "googling around" to find an answer. To complete the Activity successfully, you will need to read the lesson, and all assigned readings, fully and carefully.

Each week a few questions may involve research beyond the material presented in the course lesson. This "research" requirement will be made clear in the question instructions. Be sure to allow yourself time for this! You will be graded on the correctness and quality of your answers. Make your answers as orderly and clear as possible. Help me understand what you are thinking and include data where relevant. Remember, numbers should ALWAYS be accompanied by units of measure (not "300" but "300 kW"). You must provide ALL calculations/equations to receive full credit - try to "talk me through" how you did the analysis.

This Activity is to be done individually and is to represent YOUR OWN WORK. (See Academic Integrity and Research Ethics [31] for a full description of the College's policy related to Academic Integrity and penalties for violation.)

The Activity is not timed, but does close at midnight EST on the due date as shown in Canvas.

If you have questions about the assignment, please post them to the "Questions about EME 444?" Discussion Forum. I am happy to provide clarification and guidance to help you understand the material and questions (really!). Of course, it is best to ask early.

Summary and Final Tasks

In this lesson, you learned about the coal industry--from mining and extraction to greenhouse gas emissions, as well as estimates of coal reserves around the world and global demand for coal. We also reviewed the status and technologies for managing the carbon impacts of coal, including new methods of combustion and carbon capture and storage.

You learned:

  • about standard forms of coal and their properties;
  • about coal's role in the carbon cycle, including photosynthesis, coalification, and combustion;
  • concepts and terminology related to surface and underground mining, as well as coal-fired technologies;
  • about coal's role in greenhouse gas emissions, including carbon dioxide and methane;
  • to research and report on global coal reserves and consumption;
  • the technology and status of clean coal technologies;
  • the technology and status of carbon capture and storage (CCS);
  • to recognize and analyze externalities related to the coal industry.

Have you completed everything?

You have reached the end of Lesson 6! Double-check the list of requirements on the first page of this lesson to make sure you have completed all of the activities listed there.

7 Natural Gas

Introduction

Overview of Lesson 7

With this lesson, we continue our survey of energy industries based on energy sources. In this lesson, we will review the natural gas industry--including exploration and extraction, transportation, resource estimates, demand and, usage and externalities.

What will we learn?

By the end of this lesson, you should be able to... 

  • describe sources of natural gas;
  • provide a simple explanation of seismology and its role in resource exploration;
  • understand and use concepts and terminology related to on- and off-shore natural gas extraction;
  • describe major components of the US natural gas pipeline system;
  • explain benefits and uses of liquefied natural gas (LNG);
  • discern qualifiers in resource allocations, and report on current estimates;
  • weigh the relative advantages and externalities of hydraulic fracturing;
  • about methane leakage and related considerations.

What is due for Lesson 7?

The table below provides an overview of the requirements for Lesson 7. For details, please see individual assignments.

Please refer to the Calendar in Canvas for specific time frames and due dates.

To Do List for Lesson 7

REQUIREMENT

SUBMITTING YOUR WORK

Read Lesson 7 content and any additional assigned material Not submitted.
Weekly Activity 7 Yes—Complete Activity located in the Modules Tab in Canvas.
Case Study--work with others on your Team to prepare Case Study, following course guidelines Check Canvas calendar for all Case Study Due Dates.

 

About Natural Gas

Natural gas flame burning high
Flame from natural gas burners
Credit: Photos.com [238].

What is Natural Gas?

Natural gas, like other fossil fuels (coal and oil), is formed from the ancient decaying remains of plants and animals. Over millions of years, pressure and heat change some of this organic matter into natural gas trapped as bubbles beneath and in layers of rock. Natural gas formed in this way is known as thermogenic gas.

The primary component of natural gas is our old friend methane, CH4, usually around 70 to 90%. Natural gas also contains ethane, propane, butane and may have some carbon dioxide, oxygen, nitrogen, hydrogen sulphide and trace amounts of rare gases (e.g. A, He, Ne, Xe).

Natural gas is also created through biogenic processes. ("Biogenic" means produced by living organisms.) In this type of process, small microorganisms (bacteria) chemically break down (digest) organic matter to produce methane. These microorganisms are anaerobic, meaning they thrive in environments that have no oxygen. They live in shallow sediments, marshes, bogs and landfills, as well as the intestines of most animals, including humans.

One example of biogenic methane (or biogas) is landfill gas. New technologies allow this gas to be harvested and added to the supply of natural gas.

Anaerobic processes for producing methane may also be managed in a digester (an airtight tank) or a covered lagoon (a pond used to store manure) for waste treatment.

Natural gas can be a confusing term. We put "gas" in our car, but this is not "natural gas." The "gas" we use in our BBQs is propane (which is also known as liquid petroleum gas, or LPG), commonly found in natural gas, but not natural gas itself. 

And while we're at it, another interesting thing about natural gas...in its natural form, natural gas is odorless. The "rotten egg" smell is added before it gets to the end user for safety reasons to help detect leaks. (Yes, someone chose that smell.) The odorant is called mercaptan.

Units of Measure

Like other gases, natural gas is commonly measured as a volume expressed as hundreds of cubic feet (ccf), thousands of cubic feet (Mcf), millions of cubic feet (MMcf) or billions and trillions of cubic feet (Bcf and Tcf, respectively).

Another way natural gas may be measured is by its energy or heat content, expressed as British Thermal Units, or BTUs. A BTU is the amount of natural gas required to heat one pound of water one degree. One cubic foot of natural gas contains about 1,027 BTUs, and thus 1 ccf contains about 102,700 BTUs. Residential natural gas is usually sold in ccfs. A therm, sometimes used for billing purposes, is exactly 100,000 BTUs.

Finding and Extracting Natural Gas

Exploration

The section below gives an overview of the exploration activities necessary to locate natural gas resources. Most of the content has been excerpted from Exploration [239], (retrieved February 2014). If you would like more information and far more detail (and pictures!), you are encouraged to consult this source.

photo of natural gas well drilling operation against mountains
Natural gas well drilling operation
Credit: Bureau of Land Management (public domain)

"Exploration for natural gas typically begins with geologists examining the surface structure of the earth, and determining areas where it is geologically likely that petroleum or gas deposits might exist. . . . By surveying and mapping the surface and sub-surface characteristics of a certain area, the geologist can extrapolate which areas are most likely to contain a petroleum or natural gas reservoir.

"Seismology, . . . the study of how energy, in the form of seismic waves, moves through the Earth's crust and interacts differently with various types of underground formations, . . . [is also] used to help locate underground fossil fuel formations.

"The basic concept of seismology is quite simple. As the Earth's crust is composed of different layers, each with its own properties, energy (in the form of seismic waves) traveling underground interacts differently with each of these layers. These seismic waves, emitted from a source, will travel through the earth, but also be reflected back toward the source by the different underground layers. Through seismology, geophysicists are able to artificially create vibrations on the surface and record how these vibrations are reflected back to the surface, revealing the properties of the geology beneath.

"An analogy that makes intuitive sense is that of bouncing a rubber ball. A rubber ball that is dropped on concrete will bounce in a much different way than a rubber ball dropped on sand. In the same manner, seismic waves sent underground will reflect off dense layers of rock much differently than extremely porous layers of rock, allowing the geologist to infer from seismic data exactly what layers exist underground and at what depth. While the actual use of seismology in practice is quite a bit more complicated and technical, this basic concept still holds"

Exploration [239], retrieved February 2014).

Seismology is also used for off-shore exploration, along with other techniques including measuring gravitational and magnetic differences and seismic imaging. Ultimately, the best way to gain a full understanding of subsurface geology and the potential for natural gas deposits to exist in a given area is to drill an exploratory well.

Extraction

To Read Now

Visit NaturalGas.org [240] (Website navigation is a little tricky, so direct links are below):

  1. Extraction [241]
  2. Onshore [242] (scan, read if you're interested and have time)
  3. Shale Shock: Hydraulic Fracturing [243]
  4. Offshore [244] (scan, read if you're interested and have time)

 

Transporting Natural Gas

Transportation Process and Flow

Like all energy sources, natural gas has to be available at the point of use. As a gas, the low density of natural gas presents special challenges for transportation. Because of its volume, it is not easily stored or moved by vehicle. For transportation across land, natural gas is usually moved through a network of pipelines. For transport across bodies of water, it is liquefied and carried by ship. The map below from the EIA shows the pipeline network in the U.S.

USA map showing the numerous inter- and intra-state natural gas pipelines. Most in TX, OK and along the great lakes
Figure 7.1: U.S. Natural Gas Pipeline Network
Credit: U.S. Energy Information Administration [245]

One if by Land

The section below describes the major components of the natural gas pipeline system in the United States. Most of the content has been excerpted from About U.S. Natural Gas Pipelines - Transportation Process and Flow [246]. (If you would like more information and far more detail, you are encouraged to consult this source.

The Natural Gas Gathering System

photo of natural gas pipeline coming out of ground and going back in with an ajuster wheel. fenced in
Natural gas pipeline along the Oregon Trail west of Casper, Wyoming
Credit: Bureau of Land Management/Wyoming Field Office

A natural gas pipeline system begins at a natural gas producing well or field. In the producing area many of the pipeline systems are primarily involved in "gathering" operations. That is, a pipeline is connected to a producing well, converging with pipes from other wells where the natural gas stream may be subjected to an extraction process to remove water and other impurities if needed. Natural gas exiting the production field is usually referred to as "wet" natural gas if it still contains significant amounts of hydrocarbon liquids and contaminants. . . .

Once it leaves the producing area, a pipeline system directs flow either to a natural gas processing plant or directly to the mainline transmission grid. Non-associated natural gas, that is, natural gas that is not in contact with significant quantities of crude oil in the reservoir, is sometimes of pipeline-quality after undergoing a decontamination process in the production area, and does not need to flow through a processing plant prior to entering the mainline transmission system.

The Natural Gas Processing Plant

At the wellhead, natural gas is usually a mix of mostly methane along with other hydrocarbons including ethane, propane, butane, and pentanes. Raw natural gas also contains water vapor, hydrogen sulfide (H2S), carbon dioxide, helium, nitrogen, and other compounds. This is why natural gas is sent to a processing plant after being extracted.

The principal service provided by a natural gas processing plant to the natural gas mainline transmission network is that it produces pipeline-quality natural gas. Natural gas mainline transmission systems are designed to operate within certain tolerances. Natural gas entering the system that is not within certain specific gravities, pressures, Btu content range, or water content level will cause operational problems, pipeline deterioration, or even cause pipeline rupture.

In processing, associated hydrocarbons (e.g., ethane, propane, butane, and pentanes) are removed and captured from natural gas and are known as "natural gas liquids " (NGLs), valuable by-products of natural gas processing. Natural gas processing plants also extract contaminants from the natural gas stream to produce pipeline quality "dry" gas, which is transported to end-users. "Dry" or "consumer grade" gas is almost pure methane and is what is used by consumers.

The Transmission Grid and Compressor Stations

The natural gas mainline (transmission line) is a wide-diameter, often-times long-distance, portion of a natural gas pipeline system, excluding laterals, located between the gathering system (production area), natural gas processing plant, other receipt points, and the principal customer service area(s). The lateral, usually of smaller diameter, branches off the mainline natural gas pipeline to connect with or serve a specific customer or group of customers. . . .

Between the producing area, or supply source, and the market area, a number of compressor stations are located along the transmission system. These stations contain one or more compressor units whose purpose is to receive the transmission flow (which has decreased in pressure since the previous compressor station) at an intake point, increase the pressure and rate of flow, and thus, maintain the movement of natural gas along the pipeline. . . .

To address the potential for pipeline rupture, safety cutoff meters are installed along a mainline transmission system route. Devices located at strategic points are designed to detect a drop in pressure that would result from a downstream or upstream pipeline rupture and automatically stop the flow of natural gas beyond its location.

USA map showing compressor stations throughout the U.S. All over. More on Eastern half of US. Lot between TX and great lakes
Figure 7.2: U.S. Natural Gas Compressor Stations, 2008 (most recent map available as of June 2017)
Credit: U.S. Energy Information Administration [247]

Natural Gas Market Centers/Hubs

Natural gas market centers and hubs evolved, beginning in the late 1980s, as an outgrowth of natural gas market restructuring and the execution of a number of Federal Energy Regulatory Commission’s (FERC) Orders culminating in Order 636 issued in 1992. Order 636 mandated that interstate natural gas pipeline companies transform themselves from buyers and sellers of natural gas to strictly natural gas transporters. Market centers and hubs were developed to provide new natural gas shippers with many of the physical capabilities and administrative support services formally handled by the interstate pipeline company as “bundled” sales services.

Two key services offered by market centers/hubs are transportation between and interconnections with other pipelines and the physical coverage of short-term receipt/delivery balancing needs.  . . .

Underground Storage Facilities

At the end of the mainline transmission system, and sometimes at its beginning and in between, underground natural gas storage and LNG (liquefied natural gas) facilities provide for inventory management, supply backup, and the access to natural gas to maintain the balance of the system. There are three principal types of underground storage sites used in the United States today: depleted reservoirs in oil and/or gas fields, aquifers, and salt cavern formations. In one or two cases mine caverns have been used. Two of the most important characteristics of an underground storage reservoir are the capability to hold natural gas for future use, and the rate at which natural gas inventory can be injected and withdrawn (its deliverability rate). . . .

Peak Shaving

Underground natural gas storage inventories provide suppliers with the means to meet peak customer requirements up to a point. Beyond that point the distribution system still must be capable of meeting customer short-term peaking and volatile swing demands that occur on a daily and even hourly basis. During periods of extreme usage, peaking facilities, as well as other sources of temporary storage, are relied upon to supplement system and underground storage supplies.

Peaking needs are met in several ways. Some underground storage sites are designed to provide peaking service, but most often LNG (liquefied natural gas) in storage and liquefied petroleum gas such as propane are vaporized and injected into the natural gas distribution system supply to meet instant requirements. Short-term linepacking is also used to meet anticipated surge requirements.

The use of peaking facilities, as well as underground storage, is essentially a risk-management calculation, known as peak-shaving. The cost of installing these facilities is such that the incremental cost per unit is expensive. However, the cost of a service interruption, as well as the cost to an industrial customer in lost production, may be much higher. In the case of underground storage, a suitable site may not be locally available. The only other alternative might be to build or reserve the needed additional capacity on the pipeline network. Each alternative entails a cost.

A local natural gas distribution company (LDC) relies on supplemental supply sources (underground storage, LNG, and propane) and uses linepacking to "shave" as much of the difference between the total maximum user requirements (on a peak day or shorter period) and the baseload customer requirements (the normal or average) daily usage. Each unit "shaved" represents less demand charges (for reserving pipeline capacity on the trucklines between supply and market areas) that the LDC must pay. The objective is to maintain sufficient local underground natural gas storage capacity and have in place additional supply sources such as LNG and propane air to meet large shifts in daily demand, thereby minimizing capacity reservation costs on the supplying pipeline (About U.S. Natural Gas Pipelines - Transportation Process and Flow [248]).

Two if By Sea

When natural gas is cooled to about -260°F, it becomes a liquid and, cleverly, is called Liquefied Natural Gas or LNG. In this form, it takes up about one six hundredth the volume of gaseous natural gas.

This has clear advantages for transportation and storage. Because it is easier to move, LNG can give "economically stranded" natural gas deposits access to markets.

LNG is shipped in specialized tankers with insulated walls. This makes it possible for countries that are separated by large bodies of water to import and export gas to one another.

LNG also makes it possible to store quantities of natural gas economically at sites where geologic conditions are not suitable for underground gas storage. This is especially important when LNG is stored at peak-shaving facilities, where it can be gasified and added to pipelines to meet consumer needs at times of peak demand. The videos below provide a solid overview of the LNG production chain, including the liquefaction process. (Note that both videos have a closed-captioning option, and a link to the transcripts is available as well.) Please watch the following (3:44) and (2:23) videos:

Click for a transcript of "LNG 101" video.

PRESENTER: LNG, Liquefied Natural Gas. LNG is natural gas that has been cooled to at least minus 162 degrees Celsius to transform the gas into a liquid for transportation purposes.

To understand why liquefying natural gas is important, we first need to understand natural gas's physical properties. Methane has a very low density and is therefore costly to transport and store. When natural gas is liquefied, it occupies 600 times less space than as a gas.

Normal gas pipelines can be used to transport gas on land or for short ocean crossings. However, long distances and overseas transport of natural gas via pipeline is not economically feasible. Liquefying natural gas makes it possible to transport gas where pipelines cannot be built, for example, across the ocean.

The four main elements of the LNG value chain are, one, exploration and production, two, liquefaction, three, shipping, four, storage and regasification. At the receiving terminal, LNG is unloaded and stored before being regasified and transported by pipe to the end users.

The demand for LNG is rising in markets with limited domestic gas production or pipeline imports. This increase is primarily from growing Asian economies, particularly driven by their desire for cleaner fuels and by the shutdown of nuclear power plants.

The largest producer of LNG in the world is Qatar with a liquefaction capacity in 2013 of roughly one-quarter of the global LNG production. Japan has always been the largest importer of LNG and in 2013 consumed over 37% of global LNG trade.

The extraction process also has environmental and social issues to consider. LNG projects require large energy imports for liquefaction and regasification and therefore have associated greenhouse gas emissions.

Spills pose concerns to local communities. There have been two accidents connected to LNG. But in general, liquefaction, LNG shipping, storage, and regasification have proven to be safe. LNG projects require large upfront capital investments, which can be a challenge in moving projects ahead.

That's LNG.

Click for a transcript of "LNG 101 Part 2" video.

PRESENTER: Heat and cold, Shakespeare told us to fear no more the heat of the sun nor the furious winter's rages, and natural gas now rises above other fuels to beat those forces back.

Natural gas is abundant, at least in some parts of the world, but how do we get it from regions that have it to regions that don't.? So we cool natural gas until it condenses into a compact liquid. Now we can ship it on special tankers.

Natural gas is mostly methane, with varying amounts of other hydrocarbons and impurities that can freeze and foul equipment. We remove the impurities in the pretreatment area of the LNG plant. Here we also remove heavy hydrocarbons, inert gases, and other gases that accompany the methane that is natural gas.

Now we can begin to liquefy this clean gas. Many technologies can do that but also based on the same cyclic process that serves our kitchen refrigerators. That means we need some kind of refrigerant to remove heat from the gas so it'll condense into liquid. Here's how it works.

First, the liquid refrigerant expands from a high pressure to a low pressure, turning it into a cold mixture of liquid and some vapor. Next, it passes through a heat exchanger that uses heat from the natural gas to turn the refrigerant into pure vapor. The natural gas is now a lot colder and we can compress the refrigerant back to its high pressure. We cool the hot refrigerant in another heat exchanger until it condenses back into liquid, then we expand the refrigerant again to repeat the cycle.

The key to cooling condensing natural gas into LNG is flashing the liquid refrigerant. And once the gas is LNG, we store it in tanks at very nearly atmospheric pressure. Liquid natural gas looks like water except that it boils off at room temperature. It's odorless, colorless, non-toxic, and virtually non-flammable.

The cryogenic LNG stays in these storage tanks at a constant temperature between minus 159 and 162 Celsius. Evaporation helps keep it cool and liquid while it's stored on land or in the ship. We capture the vapors and either burn them for fuel or we re-condense them and send them back to storage. Who then uses the LNG? Typically, a power plant or industrial user, they convert the liquid back to a gas so it can be burned as a fuel or used as a feedstock.

More than half of today's LNG comes from just four countries-- Qatar, Indonesia, Australia, and Malaysia, but that's soon likely to shift. New natural gas discoveries promised to send Australia, the US, and Africa to the forefront.

The companies that build these plants have much to think about. Who will buy their gas? How best to meet buyer specifications. How much LNG will buyers want? Another thing, buyers have to make long-term commitments before suppliers can invest in new units.

If this is a golden age for natural gas, it rests upon vast ingenuity and daring. What gulfs of heat and cold we must cross to provide that Elixir of warmth anywhere in the world.

To Read Now

  • See "U.S. Liquefied Natural Gas Exports, A Primer on the Process and the Debate [249]" (Center for American Progress). This is an older reading, so the statistics are a little outdated, but the description of the process and other considerations are accurate. Read sections: "Introduction" and "Physical conditions for export: Liquefaction, shipping, re-gasification, and their costs." (If you have an interest in this area, I highly recommend reading more or all.)
  • Read "IEA sees global gas demand rising int 2022 as US drives market transformation [250]," and watch a related video from Fox Business News here [251], in which the host interviews the executive director of the IEA.

The map below, Major Trade Movements 2016, is from BP Statistical Review of World Energy 2017 [252] (page 35). For a larger version of the map and more information (you may need to do this for this week's questions), please see the original source.

Map showing major trade movements, 2016. Most LNG goes to Asia while pipeline gas goes to Europe
Figure 7.3: Major Trade Movements 2016.
Credit: BP Statistical Review of World Energy 2017 [252]

Where is Natural Gas located; how much is there?

To Read Now

  • Go to the Energy Information Administration's (EIA's) International Energy Outlook 2017 page [253] (IEO 2017) and open up the PDF version of the report. Read through the entire natural gas section.
  • The EIA produces an IEO every year. The 2016 IEO (as I noted previously) provides more comprehensive information. Visit the IEO 2016 [254] and navigate to the "Natural Gas" section. Read or browse as much as you like, but definitely read the "World natural gas reserves" section in its entirety.

This document includes the following chart, which provides a snapshot of projected natural gas consumption through 2040:

Chart of natural gas consumption by region. See link in caption for text version
Figure 7.4: World Natural Gas Consumption Projection through 2040, OECD and non-OECD. Click link to expand for a text description of Figure 7.4
World natural gas consumption, 2015-2040 (quadrillion Btu)
Year OECD Non-OECD
2015 59.0 65.1
2020 59.9 66.9
2025 62.0 76.0
2030 64.8 83.7
2035 69.1 93.2
2040 73.5 103.5
Credit:U.S. Energy Information Administration [253]. Data available for download here [255].

In the opening section, the 2016 Outlook report contains this statement, which emphasizes the role of unconventional natural gas reserves.

Although there is more to learn about the extent of the world's tight gas, shale gas, and coalbed methane resource base, the IEO2016 Reference case projects a substantial increase in those supplies—especially in the United States and also in Canada and China (Figure 3-3). The application of horizontal drilling and hydraulic fracturing technologies has made it possible to develop the U.S. shale gas resource, contributing to a near doubling of estimates for total U.S. technically recoverable natural gas resources over the past decade. Shale gas accounts for more than half of U.S. natural gas production in the IEO2016 Reference case, and tight gas, shale gas, and coalbed methane resources in Canada and China account for about 80% of total production in 2040 in those countries.

Things had not changed by the time the 2017 report was published.

  • In the United States and China, increases in natural gas production between 2016 and 2040 are projected to mainly come from the development of shale resources...
  • Shale resource development accounts for 50% of U.S. natural gas production in 2015, increasing to nearly 70% in 2040, as the country leverages advances in horizontal drilling and hydraulic fracturing techniques and taps into newly discovered technically recoverable reserves.
  • Shale resource developments are projected to account for nearly 50% of China’s natural gas production by 2040, making the country the world’s largest shale gas producer after the United States.
  • In Canada, future natural gas production is expected to come mainly from tight resources, from several regions in British Columbia and Alberta.

Remember the IEO "Reference" case refers to IEO projections about the future that are based on the assumption that legislation and policy related to energy stays the same as when the report was generated. The Reference case "does not incorporate prospective legislation or policies that might affect energy markets."

Chart of natural gas by source (shale, tight, coalbed methane, other) in Canada, China, and the U.S. in 2015 and 2040.
Figure 7.5: Natural Gas Production by Type in the U.S., China, and Canada, 2015, 2030, and 2040.
Click link to expand for a text description of Figure 7.5. Note that the IEO 2017 data do not disaggregate tight gas, shale gas, and coalbed methane. Data available for download here [256].
Natural gas production by type in U.S.
gas type 2015 2030 2040
tight gas, shale gas, and coalbed methane 19.2 28.8 31.9
other gas 7.8 6.1 5.8
total gas 27.0 34.9 37.7
Natural gas production by type in Canada
gas type 2015 2030 2040
tight gas, shale gas, and coalbed methane 3.2 4.4 5.9
other gas 2.2 1.3 1.2
total gas 5.5 5.6 7.1
Natural gas production by type in China
gas type 2015 2030 2040
tight gas, shale gas, and coalbed methane 0.6 5.0 9.7
other gas 4.1 3.7 4.5
total gas 4.6 8.7 14.1
Credit: U.S. Energy Information Administration [257].

Clearly, shale gas, and to a lesser extent, tight gas and coalbed methane, are to play an increasingly important role in global natural gas production!

The 2016 IEO provides the following chart for natural gas proved reserves (this information is not available in the 2017 report).

Chart of natural gas reserves by region. See link in caption for text version
Figure 7.6: World Natural Gas Proved Reserves as of January 1, 2016.
Click link to expand for a text description of Figure 7.6
World proved natural gas reserves by region as of January 1, 2016
Country Trillion Cubic Feet
Middle East 2,810.23
Eurasia 2,184.56
Africa 605.27
Asia 502.12
OECD Americas 457.27
Non-OECD Americas 271.62
Europe 118.71
Credit:U.S. Energy Information Administration [258].

The data in the second chart represents proved reserves. The Outlook study says, "the world's proved natural gas reserves have grown by about 40% over the past 20 years, to a total of 6,950 Tcf as of January 1, 2016."

As with coal, "proved reserves" means the natural gas that has been discovered and defined at a significant level of certainty and that can be economically recovered. "Technically recoverable" resources are estimates of the amount of gas that can be recovered, using current technology, without regard to cost. The chart below demonstrates that even as natural gas use increases, proved reserves continue to (paradoxically) increase. This is the result of improved extraction technology rendering natural gas increasingly economic, particularly with regards to unconventional sources. (For example, the 2013 International Energy Outlook stated that reserves had grown by 39 percent over the past 20 years, and that the total reserves were 6,793 Tcf, both of which are smaller than the 2016 numbers.) The chart below indicate the proved reserves of various regions since 1980. The exact numbers in the chart are not important, but it should give you a feel for the general trend over time.

Proved natural gas reserves by region, 1980 - 2015. All regions have increased proved reserves.

Figure 7.7: Proved reserves of natural gas by geographic region, 1980 - 2015. (Interactive and customizable version of map) [259]
Credit: U.S. Energy Information Administration.

The nuances of resource estimates for non-renewable energy sources are incredibly complex. (For those who are interested, here is a full discussion of natural gas resource classifications [260].) For all of us, the larger point is the importance of being fully aware of these concepts and qualifiers whenever you are working with or analyzing data related to reserves of non-renewable energy sources.

Shale Gas, the Play

Dry natural gas production by type in the U.S. from 1995 -2040. Shale gas and tight oil plays will continue to be the biggest growth sector through 2040.
Figure 7.8: Total U.S. Dry Natural Gas Production by Type through 2040. 
Credit: U.S. Energy Information Administration, 2017 Annual Energy Outlook [261], p. 58.

Contributing mightily to the interest in natural gas, are new extraction techniques that make it economical to recover gas from "unconventional" sources, which (as defined by the EIA) include tight gas, shale gas, and coalbed methane.

Coalbed methane we understand from our previous lesson. "Tight gas" refers to natural gas that is locked in extraordinarily impermeable hard rock or that is trapped in sandstone or limestone formations that are impermeable or nonporous ("tight sand"). "Shale gas" refers to natural gas that is trapped within shale, a formation of fine-grained sedimentary rocks.

In the International Energy Outlook 2013 [262], the EIA reports, "In the United States, one of the keys to increasing natural gas production has been advances in the application of horizontal drilling and hydraulic fracturing technologies, which have made it possible to develop the country's vast shale gas resources and have contributed to a near doubling of estimates for total U.S. technically recoverable natural gas resources over the past decade" (p. 41). This trend, as clearly indicated above, continues today.

To Read Now

From the Department of Energy's Energy in Brief series, read "What is shale gas and why is it important? [263]" (the statistics are outdated, but the descriptions are concise and valid) and "Natural Gas and the Environment [264]" from the U.S. EIA.

Hydraulic fracturing brings with it a host of potential problems, but that aside, natural gas is a much "cleaner" burning fuel than coal or oil. The chart below from the National Energy Technology Laboratory demonstrates the benefits of burning natural gas relative to other fossil fuels. Note that this only indicates the direct emissions from burning the fuels, and also keep in mind that most renewable energy is emissions-free! The data below come from a very informative report [265]about natural gas and hydraulic fracturing by the National Energy Technology Laboratory, which is run by the U.S. Department of Energy. Feel free to browse through it!
Combustion Emissions, pounds per billion BTU of energy input
air pollutant natural gas oil coal
Carbon dioxide 117,000 164,000 208,000
carbon monoxide 40 33 208
nitrogen oxides 92 448 457
sulfur dioxide 0.6 1,122 2,591
particulates 7.0 84 2,744
formaldehyde 0.750 0.220 0.221
mercury 0.000 0.007 0.016
Credit: U.S. National Energy Technology Laboratory [265].

Natural Gas Demand and Uses

Demand

Worldwide 2014 % natural gas usage: N. America-26, Asia & Oceania-20, Eurasia-18, Europe-15, M. East-12, C. & S. America-5, Africa-4
Figure 7.9 Worldwide usage of Natural gas, 2014 (the most recent year data are available)
(Original data and interactive chart) [266]
Credit: D. Kasper.  Data from EIA International Energy Statistics [266].
Click link to expand for a text description of Figure 7.9
World natural gas consumption, 2014
region Consumption (billion cubic tons Percent of total
North America 33,279 26%
Asia & Oceana 24,737 20%
Eurasia 21,426 18%
Europe 16,769 15%
MIddle East 16,098 12%
Central & South America 5,806 5%
Africa 4,689 4%

According to the Energy Information Administration, the world consumed 122,804 billion cubic feet (Bcf) of natural gas in 2014. The chart above depicts how this consumption was distributed worldwide. Overall, in 2014, a little over 21% of the world's energy consumption was from natural gas, according to the International Energy Association's 2017 "Key World Statistics [267]" publication.

Regarding future demand, in International Energy Outlook 2016 [254], the Energy Information Administration reports,

By energy source, natural gas accounts for the largest increase in world primary energy consumption...Natural gas remains a key fuel in the electric power sector and industrial sector. In the power sector, natural gas is an attractive choice for new generating plants because of its fuel efficiency. Natural gas also burns cleaner than coal or petroleum products, and as more governments begin implementing national or regional plans to reduce carbon dioxide (CO2) emissions, they may encourage the use of natural gas to displace more carbon-intensive coal and liquid fuels...Consumption of natural gas increases in every IEO region..

As you might guess (and may recall reading previously), as natural gas becomes a more popular fuel source worldwide, international trade will also increase. As you can see, the U.S., Russia, and China will play major roles in this. As stated in the IEO 2017 [257],

  • China’s imports of natural gas remain at 32% of supply in 2015 and 2040 as the country’s domestic shale gas production grows from 2% in 2015 to 33% over the same period...
  • Russian exports account for a growing share of China’s pipeline imports as pipeline capacity expands. China’s LNG imports are also projected to grow—supplied by an increasingly diversified pool of exporters...
  • World liquefied natural gas (LNG) trade is projected to nearly triple, from 12 trillion cubic feet to 31 trillion cubic feet, between 2015 and 2040.
  • Europe is projected to remain largely dependent on Russian pipeline gas, while Asia is projected to import a large share of the traded LNG.
  • North America is projected to become a major exporter of natural gas by 2020, even though flows from Russia to Europe and Asia are expected to show the largest volumetric growth in trade.

Uses

Natural gas is used in many ways, including power generation, residential heating and appliances (cooking, clothes dryers) and in the production of many products.

According to the U.S. EIA [268], in the United States, about 29% of all the energy we used came from natural gas in 2015. About 35% of the natural gas we used was for electricity generation (up from 30% in 2014). Another 33% was used for industrial and commercial purposes, and about 17% was used in homes, while 12% was used in commercial buildings. Only 3% was used for transportation.

Natural gas can be used in a several different ways to generate electricity--it may be burned to create steam that turns a turbine (similar to a coal-fired plant) or may be used with a gas turbine where hot gases from the burning gas turn the turbine (instead of heating steam). Gas turbines may be turned on and off quickly, making them well suited to meet peak load demands. Gas turbines are also used in combined cycle units, where the waste heat from the gas turbine is used to create steam and drive a turbine. These arrangements are much more efficient than steam or gas turbines alone - many combined cycle units approach 60% efficiency, compared to just over 30% for coal and nuclear. Because of its widespread availability and other advantages, natural gas is used for distributed generation--where electricity is generated at or very near the point of use, often a commercial or industrial site.

Natural gas is also used to produce steel, glass, paper, clothing, and brick. Many products use natural gas as a raw material, such as paints, fertilizer, plastics, antifreeze, dyes, photographic film, medicines, and explosives.

In the United States, more than half of the homes use natural gas as their main heating fuel. In our homes we also use it for cooking, water heaters, clothes dryers, and other appliances.

Hydrogen Production

Instructor with hydrogen-powered van

placard describing components of hydrogen-powered engine

Hydrogen-powered van from Air Products [269]. With worldwide headquarters in Allentown, PA, the company is a leading producer and distributor of atmospheric and specialty gases, including hydrogen. (Yeppers, that's the Program Administrator of the Energy and Sustainability Policy Program, looking awkward--then took a spin, wow, incredible instant power and all quiet.)
Credit: Photos taken at 2010 Pennsylvania Renewable Energy and Sustainable Living Festival. Copyright ©2011 Vera Cole. Used with permission.

Natural gas is also used in the production of hydrogen to power fuel cells. [A fuel cell converts chemical energy of a fuel (usually hydrogen) and an oxidant into electricity. If you're interested, visit the DOE's fuel Cells [270].]

Remember that natural gas is mostly methane and that methane is CH4? Ah ha, makes sense! Hydrogen is produced from natural gas through a type of thermal process called natural gas reforming.

To Read Now

Visit the Department of Energy's Fuel Cell Technologies Program. [271] Click on "Hydrogen Production," then under the "How Hydrogen Production Works" heading, click on the link that is linked to the phrase "domestic resources." Open and read "Natural gas reforming." (And of course, you are encouraged to poke around more on this nifty topic, if you have the time and interest.)

Compressed Natural Gas

In addition to its gas and liquid states, natural gas may also be compressed to be used as a fuel for vehicles. According to NGV Global [272], there were over 24 million Natural Gas Vehicles (NGVs) operating worldwide by August of 2017 [272], including motorcycles, cars, vans, light and heavy duty trucks, buses, lift trucks, locomotives, even ships and ferries. From 1996 to 2016, the number of NGVs has grown by over 2800%! (850,445 vehicles in 1996 and 24,452,517 vehicles in 2016, according to NGV Global [272].) As you can see in the image below, global growth is driven by the Asia-Pacific region and to a lesser extent Latin America.

Natural gas vehicle use by region, 1996 - 2016.Growth in Asian-Pacific & Latin American regions.Trends further discussed in surrounding text
Figure 7.10 Natural Gas Vehicles by Region 1996 - 2016.
Credit: NGV Global [272].

In the United States, however, at 160,000 in 2017 the number of NGVs is small and increasing slowly. Vehicles fueled by natural gas get fewer miles on a tank of fuel and, here, refueling stations are not widely available and new CNG-fueled vehicles are limited. According to the U.S. DOE [273], the 2016 Chevrolet Impala Bi-Fuel (CNG) is the only new vehicle currently available in the U.S. However, conventional gasoline, and diesel vehicles can be retrofitted for CNG.

When biogas (produced from decomposing organic matter) is processed to purity standards, it is a renewable natural gas (RNG) that can substitute for natural gas as an alternative fuel for natural gas vehicles. In fact, according to the U.S. DOE [274], "about 60% of the gas used in Sweden's 38,500 natural gas vehicles is RNG. In Germany, 25% of the public compressed natural gas stations dispense 100% RNG. In the United States, biomethane vehicle activities are on a smaller scale."

Looking Ahead

A Mixed Bag of Climate Benefits

From a climate change perspective, natural gas has some strong positive and negative aspects. One of the primary environmental benefits of natural gas is that it emits much less CO2 per MMBTU (million BTUs) than other fossil fuel sources. Much less, in fact, as can be seen in the chart below.

Pounds of CO2 emitted per million Btu's of energy by fuel type
Fuel Type Pounds of CO2
Coal (anthracite) 228.6
Coal (bituminous) 205.7
Coal (lignite) 215.4
Coal (subbituminous) 214.3
Diesel Fuel and Heating Oil 161.3
Gasoline 157.2
Propane 139.0
Natural Gas 117.0
Credit: [275]U.S. Energy Information Administration [275]

As you can see, natural gas has the lowest carbon intensity of all fossil fuels, and emits about half as much CO2 per unit of energy as coal. Coal and natural gas are the two primary sources of electricity, and in addition to natural gas emitting less carbon dioxide on a raw energy basis, as mentioned previously combined cycle turbines are more efficient than coal-fired power plants, which decreases the carbon footprint further relative to coal.

The shale gas boom has been one of the drivers of the decreasing carbon intensity of the energy sector and the U.S. economy. There are five lines in the chart below, each of which indicate a relatively clear trend. Each of these lines shows a trend relative to 1990. For example, As of 2003, the GDP (the blue line at the top) increased to a factor of 1.5, which means the GDP was 50% larger in 2003 relative to 1990. (This chart is from the US EIA, and there are a number of excellent charts on the page if you are interested):

  • GDP (blue line at the top): "Total value of goods and services produced over a specific time period" (From Investopedia [276], a great source of economic/financial information, by the way!).
  • Energy CO2 (red line, second from top): These are the total emissions that were emitted as a result of energy use.
  • Carbon intensity of energy (yellow line, third from the top): This indicates the ratio of carbon dioxide emissions to energy consumed.
  • Energy intensity of the economy (green line, fourth from the top): Indicates the ratio of energy use to economic output.
  • Carbon intensity of the economy (brown line, bottom): Indicates the amount of CO2 emitted per unit of economic output.
Figuree 7.11: Trend in various indicators of energy-related emissions drivers
Click link to expand for a text description of Figure 7.11

Index of key energy related emissions drivers, 1990-2014. 1990 acts as a base line labeled 1.0

  • Gross Domestic Product: increases fairly steadily with a slight dip in 2009, reaching about 1.9 in 2014
  • Energy CO2: increases slightly 1990-2009 then declines to about 1.1 in 2014
  • Carbon Intensity of the economy: steadily decreases to approximately .6 in 2014
  • Energy Intensity of the economy: Follows the same trend as carbon intensity of the economy
  • Carbon Intensity of the energy: fairly stable at 1 until 2007-2008 where it slightly decreases to .9 to 2014
Credit:U.S. Energy Information Administration [277]

The EIA attributes part of the decline in overall emissions and decreased carbon intensity of the economy and energy generation to natural gas usage.  However, natural gas can have (and has had) negative climate impacts.

To Read Now

  • "Methane's On The Rise, But Regulations to Stop Gas Leaks Still Debated [278]" (NPR, January 2, 2017)
  • "Future of Natural Gas Hinges on Stanching Methane Leaks [279]" (New York Times, July 11, 2016) (.pdf file also available) [280]
  • For a more global perspective, read "Rhodium Group Report on Global Oil & Gas Methane Emissions [281]" (Environmental Defense Fund, April 2015). You only need to read the summary on the link, but feel free to download the entire report.

The Future of Natural Gas

The following essays are from the Union of Concerned Scientists (UCS). The UCS is known as a strong proponent of renewable energy and energy efficiency, safe and clean energy supplies, and policies that address climate change. The essays appear at the same location on the same web page, but at two different points in time. The first essay was originally accessed in February of 2014, and the second was last accessed in September of 2017. The first essay thoughtfully draws together the vying promises and challenges of natural gas at a time when fracking was not quite as ubiquitous (the essay was written in 2010, as it turns out). The second essay was written in 2015. These positions illustrate both the promise of natural gas as a (possibly) lower-carbon "transition" fuel and, when taken together, the cautiousness with which societies should approach increased natural gas production... and give us a nice landing spot for this hard-working lesson. Enjoy.

The Future of Natural Gas

A convergence of factors is driving our society towards greater reliance on natural gas as a source of energy. An increased focus on the potential reductions in carbon emissions and air pollution from burning natural gas instead of coal or oil have made natural gas an environmentally attractive alternative to other fossil fuels. Concurrently, improved techniques for extracting unconventional sources of gas have dramatically raised estimates of the U.S.’s available gas resource.

Because energy produced from natural gas has much lower associated carbon emissions than these other fossil fuels, natural gas could act as a “bridge” fuel to a low-carbon energy future. Particularly in the electric sector, natural gas has the potential to ease our transition to renewable energy.

In the short term, renewable energy added to the grid may displace natural gas use, because natural gas power typically has the highest operating costs. In the long term, increased amounts of renewable energy are likely to encourage the use of natural gas as a complementary source of power. The integration of large amounts of renewable energy sources into the electrical generation mix will pose some challenges for the nation’s electric system because of the inherent variability of solar and wind power. Natural gas plants have the operational flexibility to vary their production rapidly, allowing them to provide reliability to the electric power system as it transitions to greater shares of renewable generation.

Natural gas is by no means a panacea for the environmental problems caused by our energy use. There is broad agreement among climate scientists that carbon reductions of about 80 percent will be needed to avert the worst effects of climate change, so simply switching to natural gas from coal and oil will not ultimately bring about the necessary reductions. In addition, the development of our newly-discovered shale gas resource will disturb areas previously untouched by oil and gas exploration and raise serious water management and quality challenges. Some researchers have also suggested that abundant shale gas resources could delay the transition to renewables by providing a cheap, plentiful alternative.[48] Given the competing uses of natural gas and the vagaries of regional supplies, increased dependence on natural gas also exposes our economy to its frequent price volatility.

Overall, the increased use of natural gas over coal and oil will produce real and substantial reductions in global warming emissions and improvements in public health. As gas use expands, the natural gas industry must also minimize the environmental effects of its extraction and production. If used wisely and efficiently, natural gas can help our economy effectively transition toward even cleaner, more sustainable sources of energy like wind, solar, geothermal, and bioenergy.

(Union of Concerned Scientists [282], retrieved February 2014).

The Future of Natural Gas

Despite significant environmental concerns associated with its extraction, production, and distribution, natural gas burns more cleanly than coal and oil and therefore offers advantages in reducing emissions and improving public health. However, natural gas is a fossil fuel whose emissions do contribute to global warming, making it a far less attractive climate solution than lower- and zero-carbon alternatives such as energy efficiency [283] and renewable energy [284].

Furthermore, new research suggests that methane leakage during the extraction and distribution of natural gas may be undermining the potential to reduce global warming emissions by using natural gas in place of higher-carbon fossil fuels such as coal and oil. And new horizontal drilling and hydraulic fracturing (or "fracking") techniques that have allowed domestic gas and oil production to expand rapidly over the past decade have raised new questions about the impacts that natural gas extraction and use will have on climate change, public health and safety, land and water resources, and people. This expansion is currently outpacing our capacity to understand and manage the attendant risks.

During our nation's transition to a low-carbon energy future, natural gas can play an important but limited role in the electricity and transportation sectors [285] -if policies sufficient to minimize emissions and protect communities and public health are put in place.

Union of Concerned Scientists [286], retrieved February 2015).

Lesson 7 Assignment

Weekly Activity 7

Please review Canvas calendar for all due dates related to your Nonmarket Analysis Case Study.

Deliverables

Complete "Weekly Activity 7," located in the "Weekly Activities" folder under the Modules tab in Canvas. The activity may include a variety of question types, such as multiple choice, multiple select, ordering, matching, true/false, and "essay" (in some cases these require independent research and may be quantitative). Be sure to read each question carefully.

Unless specifically instructed otherwise, the answers to all questions come from the material presented in the course lesson. Do NOT go "googling around" to find an answer. To complete the Activity successfully, you will need to read the lesson, and all assigned readings, fully and carefully.

Each week a few questions may involve research beyond the material presented in the course lesson. This "research" requirement will be made clear in the question instructions. Be sure to allow yourself time for this! You will be graded on the correctness and quality of your answers. Make your answers as orderly and clear as possible. Help me understand what you are thinking and include data where relevant. Remember, numbers should ALWAYS be accompanied by units of measure (not "300" but "300 kW").  You must provide ALL calculations/equations to receive full credit - try to "talk me through" how you did the analysis.

This Activity is to be done individually and is to represent YOUR OWN WORK. (See Academic Integrity and Research Ethics [31] for a full description of the College's policy related to Academic Integrity and penalties for violation.)

The Activity is not timed, but does close at 11:59 pm EST on the due date as shown in Canvas.

If you have questions about the assignment, please post them to the "Questions about EME 444?" Discussion Forum. I am happy to provide clarification and guidance to help you understand the material and questions (really!). Of course, it is best to ask early.

Summary and Final Tasks

With this lesson, we continued our survey of energy industries based on energy sources. In this lesson, you learned about the natural gas industry--from exploration and extraction, transportation, resource estimates, demand, usage, and externalities.

You learned:

  • about sources of natural gas;
  • a simple explanation of seismology and its role in resource exploration;
  • concepts and terminology related to on- and off-shore natural gas extraction;
  • about major components of the US natural gas pipeline system;
  • benefits and uses of liquefied natural gas (LNG);
  • qualifiers in resource allocations and how to report on current estimates;
  • to weigh the relative advantages and externalities of hydraulic fracturing;
  • about methane leakage and related considerations.

Have you completed everything?

You have reached the end of Lesson 7! Double-check the list of requirements on the first page of this lesson to make sure you have completed all of the activities listed there.

8 Biomass and Hydro

Introduction

Overview of Lesson 8

With this lesson, we continue our survey of energy industries based on energy sources. In this lesson, we will review the natural gas industry--including exploration and extraction, transportation, resource estimates, demand, usage, and externalities.

What will we learn?

By the end of this lesson, you should be able to... 

  • describe sources of renewable energy, in the USA and worldwide;
  • quantify biomass and hydropower energy sources, in the USA and worldwide;
  • explain biomass conversion processes, including feedstocks and products of each;
  • discuss biomass logistics and identify major operations;
  • explain in detail major factors related to bioenergy economic, social, and environmental sustainability;
  • present and consume electricity data using appropriate and correct units of measure;
  • reflect on worldwide trends and projections for electricity generation from renewable sources;
  • describe major types and components of hydropower plants;
  • apply major factors related to hydropower economic, social, and environmental sustainability.

What is due for Lesson 8?

The table below provides an overview of the requirements for Lesson 8. For details, please see individual assignments.

Please refer to the Calendar in Canvas for specific time frames and due dates.

To Do List for Lesson 8

REQUIREMENT

SUBMITTING YOUR WORK

Read Lesson 8 content and any additional assigned material Not submitted.
Weekly Activity 8 Yes—Complete Activity located in the Modules Tab in Canvas.
Case Study--work with others on your Team to prepare Case Study, following course guidelines Check Canvas calendar for all Case Study Due Dates.

 

Renewable Energy

Introduction

The Energy Information Administration glossary [287] defines renewable energy sources as "energy resources that are naturally replenishing but flow-limited. They are virtually inexhaustible in duration but limited in the amount of energy that is available per unit of time. Renewable energy resources include biomass, hydro, geothermal, solar, wind, ocean thermal, wave action, and tidal action."

On the other hand, the EIA, in the context of transportation fuels, defines alternative fuels [288] as fuel that is "substantially not petroleum and would yield substantial energy security benefits and substantial environmental benefits." Of the energy sources we have considered so far, coal and natural gas are non-renewable energy sources. Nuclear, though not renewable, is often considered an alternative fuel source because it does not have greenhouse gas emissions associated with fossil fuels. Natural gas is considered by the EIA as an alternative transportation fuel. Other alternative fuels include biofuels such as ethanol and biodiesel.

The most commonly used renewable energy sources are hydroelectricity, wind, biomass, solar, and geothermal. In this course, we are going to look closely at hydropower and biomass (this lesson) and wind and solar (next lesson).

According to the International Energy Agency's [289] (IEA's) 2017 "Key World Energy Statistics, [290]" renewable energy accounted for around 13.7% of total primary energy supply (TPES) in 2015, down from 14.1% in 2014 and13.8% in 2013 (2015 is the most recent year for which global data are available).  Note that this includes "waste" which in part consists of municipal, commercial, and industrial waste (i.e., garbage) that is burned and used to generate electricity and/or heat (see the glossary for an explanation).  Believe it or not, it is standard practice to consider waste incineration as renewable energy, regardless of the composition of the waste. Whether or not this is valid is a debate for another time, but for now we'll consider it renewable since it cannot be disaggregated from biomass in the IEA data.

Primary energy refers to energy in its "original" form, in other words "before any transformation to secondary or tertiary forms of energy" (source: US EIA [291]). For example, coal is a primary energy source, but any electricity or heat it generates is not. Renewable energy sources are also primary energy sources, as are oil, nuclear, and natural gas (but again, any electricity generated from any of these sources is not primary energy). Total primary energy supply refers to all primary energy used in a given geographical area.  

Total primary energy supply by source from 1973 through 2015.
Figure 8.1: Total Primary Energy Supply by Source, 2015.
Credit: International Energy Agency [290], 2017.

According to the IEA [292], about 23% of all electricity generation worldwide was from renewables in 2014 (as well as 2015), and is predicted to rise to 28% by 2021. Renewable energy accounted for over half of all net electric power capacity additions in 2015, which is the first time that they have accounted for more than 50%. This was led by onshore wind at 63 GW (gigawatts, or billion Watts) and solar photovoltaics at 49 GW (both of these will be addressed in the next Lesson).

Energy and Power

Hopefully, this is a refresher at this point, but because it is so important and so easily confused, let’s be certain…

Power is the rate at which work is performed or energy is converted from one form to another. A car, for example, will have a power rating in “horsepower.” This power rating basically indicates how fast the car can convert chemical energy (from the fuel) into kinetic energy (motion). The power rating is separate from how fast or how far the car actually goes. For example, a 1967 Corvette with a 435 hp power rating will have that rating whether it is sitting in the driveway, rolling along a country road, or racing around a track. But while in operation, the engine's actual hp (the rate the energy is physically being converted) can increase and decrease. 

Similarly, a light bulb has a power rating measured in watts. In this case, the light bulb is transforming electrical energy into heat and light. The higher the wattage, the higher the rate of energy transformation. And like our car engine, the power rating stays the same whether the light bulb is on or not. A 75-W bulb is always a 75-W bulb.

To understand energy, think about your power bill. You don’t get a bill for how many light bulbs you have, or how many watts they are. You get a bill for how much you use them. And when you use them, they use energy (electrical energy). The amount of electricity (energy) they use is measured in kilowatt hours (kWh). In two hours, a 150-W bulb will use 300 Wh of electricity (150 W x 2 h = 300 Wh). Since there are 1,000 Wh in a kWh, this is 0.3 kWh. A 50-W bulb will use 100 Wh in the same amount of time (0.1 kWh).

When we refer to electricity generation of power stations (including hydroelectric, wind, and solar), the systems themselves have a power rating that is in watts (or kW or MW). This is generally referred to as capacity. You can think of capacity as the maximum power output of an energy source. For example, a 1 MW (megawatt, or million watt) power plant has a peak electric power output of - you guessed it - 1 MW. If it operates at full capacity for 1 hour it would generate 1 MWh (1 MW x 1 hr) (a MWh is a megawatt hour, which should ring a bell because SRECs are measured in MWh). If it operated at full capacity for one day it would output 24 MWh (1 MW x 24 hr).

Wind and solar energy are notoriously intermittent, but even coal and natural gas power plants have downtime. Nuclear power plants generally operate at near capacity most of the time, and are viewed as one of the most reliable renewable energy sources. Hydroelectricity can be designed to operate at near full capacity, but generally do not. The capacity factor of an energy source is determined by dividing the actual energy generation over a given period of time by the maximum possible generation over that same period (hopefully this sounds familiar, as it was the subject of a question in an earlier homework). Capacity factor generally refers to a year or an average year of generation, but can refer to any amount of time. In the example above, if the 1 MW power plant output 12 MWh in one day, the capacity factor for that day would be 50% (12 MWh/24 MWh = 50%). Nuclear tends to have an average capacity factor above 90%, while hydroelectricity hovers in the 40% range. See this table from the IEA [293] for the average capacity factors of different non-fossil fuel sources of electricity in the U.S., and this table for fossil-fuel capacity factors. [294]

Generation is the amount of electricity generated (should be easy to remember!) by an energy-generating system. The amount of electricity a system generates can be measured in kWh, but can also be measured in MWh (million Wh) or GWh (billion Wh), or even TWh (trillion Wh). The amount of electricity a hydroelectric power plant will generate is basically determined by the plant's capacity and the amount of fuel (moving water), and whether or not full output is desired at the time. The amount of electricity a solar array will generate is basically determined by the solar array’s capacity and the amount of fuel (sunshine). The amount of electricity a wind turbine will generate is determined by the turbine’s capacity and the amount of fuel (wind) that is being provided at the time.

U.S. Energy Use

The image below illustrates the total energy flows in the U.S. in 2016.  All of the fuel sources on the left are primary energy sources, and the quantities are given in quads (a quad is one quadrillion BTUs, or 1 x 1015 BTUs).  The image indicates how each energy source is used, and how much is wasted ("rejected"), mostly as heat. (You can click on the image to see a larger and resizable version.)  You can view a short explanation of this chart [295] by a representative from Lawrence Livermore National Laboratory [296] (LLNL), the U.S. national lab that generates this chart every year.

 
A chart showing energy flows in the U.S. in 2015 [297]
Figure 8.2: Estimated Energy Flows in the U.S., 2015.
Credit: Lawrence Livermore National Laboratory [297], 2016.

Lawrence Livermore National Laboratory also publishes an annual carbon emission flow chart (this type of "flow" chart is called a Sankey diagram). The 2014 chart (the most recent available) can be seen below. Note that the subjects of this Lesson (hydroelectric and biomass) and next lesson (solar and wind) do not account for any of the U.S.'s carbon footprint.

 
A chart showing carbon sources in the U.S. in 2014. [298]
Figure 8.3: Estimated Sources of Carbon Emissions in the U.S., 2014.
Credit: Lawrence Livermore National Laboratory [298], 2016.

Biomass

The table and chart below comes from the EIA's monthly report [299], "Short-Term Energy Outlook," March 2017. (Commonly referred to as STEO).

A chart showing the amount of renewable energy use in the U.S. from 2007 to 2016, with projections to 2018. Data is shown in table below
Figure 8.4: U.S. Renewable Energy Consumption 2006 - 2015, with projections through 2017.
Credit: U.S. EIA, 2016.
2015 2016 2017 (Est.) 2018 (Est.)
U.S. Renewable Consumption (Quadrillion Btu)
Energy Source
Hydroelectric Powera 2.321 2.477 2.665 2.549
Geothermal 0.213 0.230 0.235 0.236
Solar 0.427 0.588 0.778 0.936
Wind 1.812 2.152 2.289 2.458
Wood Biomass 2.043 1.953 1.934 1.942
Ethanol 1.148 1.186 1.190 1.194
Biomass-based diesel 0.215 0.289 0.307 0.330
Waste Biomass 0.522 0.526 0.525 0.529
Otherc 0.776 0.798 0.811 0.818
Total 9.471 10.160 10.706 10.967
a Conventional hydroelectric power only. Hydroelectricity generated by pumped storage is not included in renewable energy.
c Other renewables includes biofuels production losses and co-products.

Biomass clearly comes from a variety of sources, so what is biomass? In the table above, it is wood biomass, waste biomass, ethanol, and biomass-based diesel ("biodiesel"). Is it me, or does it seems like other renewable sources like solar and wind get most of the press? Don't get me wrong - these are great sources, but biomass is by far the largest single source of renewable energy both in the U.S. and worldwide. Altogether, about 39% of renewable energy consumed in the USA in 2016 came from biomass sources. More than wind and solar combined! 

What is Biomass?

Biomass is "organic nonfossil material of biological origin constituting a renewable energy source." (Source: EIA [300]). Why the word "nonfossil?"  We know that fossil fuels are formed in the Earth's crust from decayed organic material. So why aren't fossil fuels considered "biomass"?

Another definition describes biomass as "derived from living, or recently living organisms." This is the trick: the difference is one of time scale. "Fossil fuels such as coal, oil, and gas are also derived from biological material, however material that absorbed CO2 from the atmosphere many millions of years ago" (Biomass Energy Centre [301]). Biomass then is a renewable energy source, as indicated by the EIA definition, and thus is "virtually inexhaustible in duration but limited in the amount of energy that is available per unit of time." Biomass differs from other renewables such as solar and wind because, in addition to being limited in availability, it is possible to use it at a much higher rate than it can be replenished. Think of a clear-cut forest or decimated corn field.

Biomass Applications and Processes

Bioenergy conversion technologies see text description below
Figure 8.5: Bioenergy Conversion Technologies
Click link to expand for a text description of Figure 8.5

Diagram examines bioenergy conversion technologies of various different energies. F stands for Feedstock. PP stands for Preprocessing, C stands for conversion and PEP stands for primary energy product.

Thermal Conversion

F: Lignocellulose (all sources)

PP: Densification

C: Combustion

PEP: Power, Heat, Steam

Chemical Conversion

F: N/A

PP: N/A

C: Transesterification

PEP: Bio-diesel

Thermochemical Conversion

F: Lignocellulose (all sources)

PP: N/A

C: Torrefaction

PEP: Bio-coal

C: Gasification

                PEP: Syngas

C: Pyrolysis

                PEP: Charcoal, methanol, syngas, bio-oil

Biochemical conversion

F: Lignocellulose (all sources)

PP: Cellulose to Sugars

C: Fermentation

PEP: Ethanol

F: Sugars & Starches (Agricultural Crops)

PP: N/A

C: Fermentation

PEP: Ethanol

F: Land Fill gas & Biogas

PP: N/A

C: Anaerobic Digestion

PEP: Pipeline quality gas, CNG, LNG

Source: Wisconsin Grasslands Bioenergy Network, Biomass Conversion [302]

A feedstock is "any renewable, biological material that can be used directly as a fuel, or converted to another form of fuel or energy product."  According to the Office of Energy Efficiency and Renewable Energy [303], "biomass feedstocks are the plant and algal materials used to derive fuels like ethanol, butanol, biodiesel, and other hydrocarbon fuels".

There are two basic categories of biomass material: woody & .... non-woody! "Lignocellulose" is woody biomass. (For an excellent description and discussion, see Sources of biomass [304] from the Wisconsin Grasslands Bioenergy Network. This is not required reading.)

From the Environmental and Energy Study Institute [305], here is a list of some of the most "common (and/or most promising)" biomass feedstocks--

  • Grains and starch crops – Sugar cane, corn, wheat, sugar beets, industrial sweet potatoes, etc.
  • Agricultural residues – Corn stover, wheat straw, rice straw, orchard prunings, etc.
  • Food waste – Waste produce, food processing waste, etc.
  • Forestry materials – Logging residues, forest thinnings, etc.
  • Animal byproducts – Tallow, fish oil, manure, etc.
  • Energy crops – Switchgrass, miscanthus, hybrid poplar, willow, algae, etc.
  • Urban and suburban wastes – Municipal solid wastes (MSW), lawn wastes, wastewater treatment sludge, urban wood wastes, disaster debris, trap grease, yellow grease, waste cooking oil, etc.  

Logistics

Feedstock logistics encompass all of the operations necessary to harvest the biomass and move it to the conversion reactor at the biorefinery (or the heat and/or electricity generation facility), including the processing steps necessary to ensure that the delivered feedstock meets the specifications of the biorefinery conversion process. A biorefinery is where "biomass is upgraded to one or more valuable products such as transport fuels, materials, chemicals, electricity and, as a byproduct, heat" (Source: "What is a Biorefinery? [306]" by Bernstsson, Snadén, Olsson, and Åsblad. This article provides an excellent explanation of various biorefining processes if you are so inclined!). Conventionally, facilities that generate electricity and/or heat through direct thermal conversion (combustion) are not considered biorefineries unless they first convert the biomass into a "novel" material like biogas. In the chart at the top of this page, biorefineries are used in all technologies except for thermal conversion.

Logistics includes harvest and collection, preprocessing, storage and queuing, handling and transportation, and is used in all four of the technologies in the chart above.

In its natural form, most biomass is bulky, relatively wet, and due to its low bulk-density, costly to transport. Preprocessing includes production steps, like chipping, grinding, compacting and drying, that turn biomass into what is properly called feedstock.

Biomass densification is the compression or compaction of biomass to reduce its volume per unit area. Densification is used for solid fuel applications (e.g., pellets, briquettes, logs). Drying biomass improves the grinding process, and results in smaller more uniform particles of biomass.

For cellulosic biomass, mechanical (e.g., crushing) and thermochemical (e.g., hydrolysis) pretreatments are necessary.

Many herbaceous feedstocks, for example, corn stover, are only harvested over a few weeks during the year in the U.S. Corn Belt. To maintain a continuous supply of this feedstock to biorefineries, storage is required. Biological degradation can reduce the amount of biomass available for bioenergy production and also impact the conversion yield, by altering biomass chemical composition.

Unprocessed biomass leaving the field or forest is often bulky, aerobically unstable, and has poor flowability and handling characteristics. These traits can make raw biomass handling and transportation inefficient. Transport can be expensive, especially as distance increases.

The video below from the U.S. Department of Energy may help you visualize some of the processes involved with harvesting and using various feedstocks. Please watch the following (3:39) video:

Click for a transcript of "Energy 101 Feedstocks" video.

PRESENTER: Nearly a billion dollars a day-- that's how much we spend on oil imports in the US. Oil that powers our nation's transportation systems and industries.

But here's something to think about-- a strong biofuels industry could meet much of our demand. Biofuels are made from organic materials, or biomass, grown in our own fields and forests. A booming biofuels industry would also keep a lot of the money we spend on imported oil in the country-- plus it would reduce our dependence on foreign oil, and create jobs in rural America.

In fact, we can use homegrown biomass to replace or supplement almost every product that comes from a typical barrel of crude oil. These are things like gasoline, diesel, jet fuel, and other consumer products, like plastics. Much of our imported oil could be replaced with sustainable, renewable biofuels and products made in the USA.

Check this out. This is the Billion-Ton Update Study by the US Department of Energy. This study found that potential biomass resources could produce about 85 billion gallons of biofuels a year-- that's about a third of the oil we use.

OK, so what kinds of plant materials or feedstocks can be converted to fuels? And, where will they come from? America is already using biomass that comes from agriculture and forest operations across the country. These are non-food plants grown specifically for energy. American farms all across the US can produce a wide variety of energy crops. These are plants that are grown because of their high energy content-- crops like switchgrass or fast-growing hybrid poplar trees.

And energy crops can also be grown on marginal, degraded, or underused agricultural land, helping farms expand and become more productive. Agricultural waste can even be converted into biofuels.

Look at this-- farmers can gather and sell corn stalks and wheat straw to be converted to biofuels, making their lands even more profitable. This is non-edible plant material left over from crop harvests that's been collected from farm land instead of going to waste.

So, how do you take plants and make them into fuels and other products? No matter what kind of plant you start with, the first steps are to break them down. The US Department of Energy, partnering with private industry, is making these steps a lot more efficient and affordable. Together, they're developing new machinery and processes specific to the various biomass crops.

This equipment is harvesting, baling, grinding, and condensing these raw plants into energy-ready materials-- materials like these energy dense pellets, ready for the biorefinery. From there, energy-ready biomass feedstocks are transported to one of many biorefineries sprouting up in communities across the country. Here, they can be further broken down, converted into biofuels, and made ready for use.

Homegrown biomass feedstocks-- creating jobs in rural America, generating clean renewable fuels, and reducing our dependence on foreign oil.

Conversion

The figure at the top of this page shows four categories of biomass processing: thermal, thermochemical, biochemical, and chemical. This is a very helpful starting place for understanding the different inputs and outputs associated with biomass.

To Read Now

Visit the the Wisconsin Grasslands Bioenergy Network and read closely, Bioenergy Conversion Technologies [308].

Biomass and Sustainability

Benefits of Energy from Biomass Resources

The Natural Resources Defense Council [309] lists (below) the "Advantages of Biomass Energy":

  • Farmers and foresters already produce a great deal of residue. While much of it is needed to protect habitat, soil, and nutrient cycles, tens of millions of tons and more could be safely collected with the right management practices. Every year in the United States, roughly 39 million tons of crop residues go unused.
  • Unlike coal, biomass produces no harmful sulfur or mercury emissions and has significantly less nitrogen -- which means less acid rain, smog, and other toxic air pollutants.
  • Over time, if dedicated biomass is sustainably managed, converting it to energy can result in low or no net carbon emissions, provided that the carbon released is rapidly absorbed back from the atmosphere by biomass re-growth.
  • Using biofuels in our cars and airplanes can potentially produce less global warming pollution than petroleum-based fuels, and allows us to invest our energy dollars at home rather than in foreign oil.
  • Switchgrass, a promising source of biofuels, is a native, perennial prairie grass that is easier to grow responsibly than most row crops. If planted in such a way that it does not replace native habitat or take land out of food production, switchgrass and other sustainably managed energy crops have the potential to reduce erosion and nitrogen runoff, and increase soil carbon faster when mowed than when standing.
  • Many ethanol refineries are owned by farmer-cooperatives, which help preserve the economic vitality of rural communities.

Bioenergy Sustainability

In 2005, the United Nations adopted the World Summit Outcome, including a commitment "to promote the integration of the three components of sustainable development – economic development, social development and environmental protection – as interdependent and mutually reinforcing pillars." (Resolution Adopted by General Assembly [310], page 11)

In 2013, the Food and Agriculture Organization of the United Nations issued "Biofuels and the sustainability challenge: A global assessment of sustainability issues, trends and policies for biofuels and related feedstocks." This report examines the assessment of bioenergy different factors governing the sustainability of biomass production for biofuels, and is the most comprehensive assessment of the sustainability implications of biofuels that I have seen with a global perspective. The authors identify “tests” relevant to these pillars:

  1. Economic sustainability. This test assesses when production makes sense from an economic  point of view; which stable competitive conditions would induce producers to opt for biofuels production; what impacts increased production may have on competing uses for the feedstock (primarily  food and feed); and to what extent biofuels  can be a reliable substitute for fossil fuels. 
  2. Environmental  sustainability. This test addresses criteria “such as GHG emissions, soil stress and its ability to maintain productive capacity, available water resources, air and water pollution and biodiversity.” 
  3. Social sustainability. This test includes considerations of rural development, gender mainstreaming [311], community involvement, inclusiveness of small farmers in the  production processes, labour and land rights.

These pillars are essentitally the same as what is often referred to in the literature as the "3 E's" of sustainability: economics, environment, and (social) equity.

To Read Now

Download and open "Biofuels and the sustainability challenge: A global assessment of sustainability issues, trends and policies for biofuels and related feedstocks [312]" from the Food and Agriculture Organization of the United Nations.

Read Section 2.1 Definition of sustainable development (starting on page 53).

Take a few minutes to become familiar with overall document (review table of contents). You will be using all of Chapter 2 to answer questions in this lesson's assignment.

Not required, but if you have time and are interested, review case studies in Boxes 2.3, 2.4, and 2.5. Very interesting, just a little too "in the weeds" for this lesson. (Okay, I thought that was funny.)

 

Renewable Energy for Electricity

About Renewable Energy Sources

Biomass, the subject of the first part of this lesson, is a widely used renewable energy source. As you learned earlier in the lesson, it constitutes nearly 10% of global TPES according to the IEA's 2017 Key World Energy Statistics [290] and nearly 5% of U.S. TPES, according to Lawrence Livermore National Laboratory. As we have learned, it is processed in many different ways to produce a wide range of outputs for many kinds of applications, including heat for cooking, space heating and warming water; heat for industrial purposes; heat for electricity production; syngas; ethanol and biodiesel for transportation, and even methane for natural gas applications.

Other widely used renewable energy sources--hydro, wind and solar--are used almost exclusively for electricity generation. Energy from the sun also is used in solar hot water applications and other solar heating applications, including passive solar. But, its most common application is for electricity generation.

For the remainder of this lesson, and the following lesson, we will be considering renewable energy sources used to generate electricity: hydropower, then wind and solar (in the next lesson).

Renewable Energy for Electricity Generation

In their most recent International Energy Outlook (2017) with electricity projections, the EIA reports that renewable energy is the fastest-growing source of electricity generation (not just capacity!) in the IEO2017 Reference case through 2040. Overall, electricity generation from renewable energy sources is expected to increase 2.8% a year. In their 2016 Renewable Energy Medium-Term Market Report [313] (the most recent report available), which projects to 2021, the IEA projected that renewable electricity capacity will grow by 42% between 2015 and 2021, and renewable sources will account for more than 60% of additional generation between 2015 and 2021.

 World Net Electricity Generation by fuel. See link in caption for text version
Figure 8.6: World Net Electricity Generation by fuel, 2012 - 2040 (trillion kilowatt hours)
Click link to expand for a text description of Figure 8.6
World net electricity generation from renewable power by fuel, 2012-40 (trillion kilowatthours)
Fuel Type 2012 2020 2025 2030 2035 2040
Petroleum 1.06 .86 .69 .62 .59 .56
Nuclear 2.34 3.05 3.40 3.35 4.25 4.50
Natural Gas 4.83 5.26 6.30 7.47 8.78 10.14
Coal 8.60 9.73 10.07 10.12 10.31 10.62
Renewables 4.73 6.87 7.89 8.68 9.64 10.63
Credit: U.S. Energy Information Administration, International Energy Outlook [314] 2016, "Electricity [315]."
 World Net Renewable Electricity Generation by fuel. See link in caption for text version
Figure 8.7: World Net Renewable Electricity Generation by fuel, 2012 - 2040 (trillion kilowatt hours)
Click link to expand for a text description of Figure 8.7
World net electricity generation from renewable power by fuel, 2012-40 (trillion kilowatthours)
Fuel Type 2012 2020 2025 2030 2035 2040
Other .39 .68 .86 .97 1.11 1.25
Geothermal 0.07 0.14 0.21 0.31 0.35 0.40
Solar 0.10 0.45 0.60 0.72 0.85 0.96
Wind 0.52 1.31 1.60 1.86 2.19 2.45
Hydropower 3.65 4.29 4.63 4.82 5.15 5.57
Credit: U.S. Energy Information Administration, International Energy Outlook [314] 2016, "Electricity [315]."

To Read Now

Go to the "Electricity" section of the International Energy Outlook 2016 report [254]. Read and browse as much as you like, but definitely read the "Overview" and "Renewable resources" sections.

Read the Executive Summary of the International Energy Agency's Renewable Energy Medium-Term Market Report 2016 [292]. Note that the IEA is referring to electricity whenever they refer to the "power sector."

Hydropower Technology

In 2012, about 22% of the world's electricity was generated from renewable energy sources. Of that, about 77% came from hydropower. Between 2012 and 2040, the Energy Information Administration (in the IEO2016 Reference case [254]) projects that about 33% of new renewable generation will be hydropower (in the IEO2013 Reference case, hydropower was projected to have over 50% of the generation growth). Despite this growth, the EIA projects that hydropower will drop to just over 50% of the total renewable energy generation in 2040. This drop in total percentage is very apparent in the chart below. (Note that the chart below uses the same data as the chart on the previous page, but is expressed as a percentage instead of total generation.)

 World Net Electricity Generation by fuel. See link in caption for text version
Figure 8.8: World Net Renewable Electricity Generation by fuel expressed as a percentage, 2012 - 2040
Click link to expand for a text description of Figure 8.8
World net electricity generation from renewable power by fuel, 2012-40 (trillion kilowatthours)
Fuel Type 2012 2020 2025 2030 2035 2040
Other .39 .68 .86 .97 1.11 1.25
Geothermal 0.07 0.14 0.21 0.31 0.35 0.40
Solar 0.10 0.45 0.60 0.72 0.85 0.96
Wind 0.52 1.31 1.60 1.86 2.19 2.45
Hydropower 3.65 4.29 4.63 4.82 5.15 5.57
Credit: D. Kasper. Original data from U.S. Energy Information Administration, International Energy Outlook 2016 [314], "Electricity [315]."

In their 2016 "hydropower status report [316]" (an outstanding resource for international hydropower trends!) the International Hydropower Association (IHA) reports that 33.7 GW of new hydropower capacity was installed in 2015. At the end of 2015, worldwide hydropower capacity was about 1,212 GW (up from 1,036 GW in 2014). China dwarfs all other countries in increased capacity, with nearly 20 GW of growth in 2015.

Types of Hydropower Plants

There are three general types of hydropower stations:

Run of River (or Diversion), electricity is generated through the flow of a river.

Reservoir (or Impoundment), water is stored in a reservoir where the release of the water to generate electricity can be controlled.

Pumped Storage, where stored water is pumped from a lower reservoir to a higher reservoir, so that it can be released to generate electricity when needed.

To Read Now

Visit the Office of Energy Efficiency and Renewable Energy (EERE) and read

Types of Hydropower Plants [317]

How Hydropower Works [318] Be sure to scroll over animation at top of page for more detail. Near bottom of page, click "Hydropower Basics page" and see a closeup of the turbine and generator. Again, scroll over for details.

After reading through the information on the link above, please watch the following (3:50) video from the U.S. Department of Energy.

Click Here for a Text Description [319]

To Read Now

Visit the Foundation for Water & Energy Education.

Take the Walk Through a Hydro Project [320] tour, click through all 10 steps.

Take the Fish Passage [321] tour, click through all 5 features (Spillways, Turbines, Juvenile Fish Transportation, Bypass Systems, Fish Ladders).

To Read Now

Read an article from Yale 360 [322] that illustrates how pumped storage can be integrated with other renewable energy sources.

A fourth emerging type of hydropower is marine and hydrokinetic, where electricity is generated from the energy of waves, tides, ocean and river currents. Data are hard to come by, but in their 2013 Hydropower Report [323] the International Hydropower Association estimates global installed tidal and ocean capacity was about 515 MW at the of 2012, with roughly an additional 3,000 MW of "pipeline capacity" (planned).

Click Here for a text description [324]

Global Hydropower and Sustainability

Global Trends

In the 2016 International Energy Outlook [315], the Energy Information Administration projects that most new hydroelectric development will take place in non-OECD countries, especially non-OECD Asia, particularly China and Vietnam. In their 2016 Hydropower Report [316], the International Hydropower Association identified the following key trends and developments driving this growth:

  • New international policy and agreements
  • Advanced hydropower control technologies enabling renewable hybrids
  • Climate aspects
  • The value of pumped storage being recognized worldwide
  • New financial instruments
  • Climate bonds attracting strong interest
  • Mergers and acquisitions pointing to a larger role for the private sector
  • The China sector going global
  • Transformative projects in Africa
  • Hydropower driving regional connection

To Read Now

Visit the International Hydropower Association and download and read the 2016 Key Trends in Hydropower [325] report.

Hydropower and Sustainability

The World Bank supports the "responsible development of hydropower projects of all sizes and types—run of the river, pumped storage, and reservoir—including off-grid projects meeting decentralized rural needs." In a world where more than a billion people lack access to electricity, and the quality of life it provides, hydropower has great promise, if done responsibly.

To Read Now

Visit the World Bank and read Hydropower Overview [326]. Read through the content on all three tabs at the top - Context, Strategy, and Results.

The World Bank overview concludes with this potent paragraph: "While hydropower development offers great opportunities, it also comes with complex challenges and risks that vary significantly by the type, place, and scale of projects. Factors such as resettlement of communities, flooding of large areas of land, and significant changes to river ecosystems must be carefully considered and mitigated."

In 2010, an international Hydropower Sustainability Assessment Protocol was launched. According to the Hydropower Sustainability Assessment Protocol [327]: "The Protocol was developed through 30 months (2008–10) of cross-sector engagement, including a review of the World Commission on Dams Recommendations, the World Bank Safe Guard Policies and the IFC Performance Standards. During this period, a multi-stakeholder forum jointly reviewed, enhanced, and built consensus on what a sustainable project should look like." This protocol involved "representatives of environmental NGOs (WWF, The Nature Conservancy), social NGOs (Oxfam, Transparency International), development banks, governments (China, Zambia, Iceland, Norway), and the hydropower sector."

The Hydropower Sustainability Assessment Protocol addresses the three pillars of sustainability for hydropower: environmental, social, and economic. Environmental issues include those arising from hydropower construction and operation related to broad areas of water quality, sedimentation, and habitat. While hydropower has the potential to reduce poverty and improve quality of life, it can also be the cause of population displacement and other negative social impacts on local and indigenous communities. Hydropower can be a tool of economic development with many benefits for local communities, if (big IF), economic benefits are distributed equitably between "the government, the project proponents, and stakeholders who receive the electricity services and the local communities who bear the impacts of a development."

To Read Now

Visit the Hydropower Sustainability Assessment Protocol, [328] and browse the Home page and the overview page [329].

You'll use info in the About Sustainability [330] tab as part of this lesson's assignment.

For an EXCELLENT discussion of river-related environmental factors, review the following. This is not required reading, but highly recommended.

From the Foundation for Water & Energy Education, see:

  • Changes to the Ecosystem [331]
  • Changing Habitat Conditions for Fish and Wildlife [332]

Lesson 8 Assignment

Weekly Activity 8

Please review Canvas calendar for all due dates related to your Nonmarket Analysis Case Study.

Deliverables

Complete "Weekly Activity 8," located in the "Weekly Activities" folder under the Modules tab in Canvas. The activity may include a variety of question types, such as multiple choice, multiple select, ordering, matching, true/false, and "essay" (in some cases these require independent research and may be quantitative). Be sure to read each question carefully.

Unless specifically instructed otherwise, the answers to all questions come from the material presented in the course lesson. Do NOT go "googling around" to find an answer. To complete the Activity successfully, you will need to read the lesson, and all assigned readings, fully and carefully.

Each week a few questions may involve research beyond the material presented in the course lesson. This "research" requirement will be made clear in the question instructions. Be sure to allow yourself time for this! You will be graded on the correctness and quality of your answers. Make your answers as orderly and clear as possible. Help me understand what you are thinking and include data where relevant. Remember, numbers should ALWAYS be accompanied by units of measure (not "300" but "300 kW"). You must provide ALL calculations/equations to receive full credit - try to "talk me through" how you did the analysis.

This Activity is to be done individually and is to represent YOUR OWN WORK. (See Academic Integrity and Research Ethics [31] for a full description of the College's policy related to Academic Integrity and penalties for violation.)

The Activity is not timed, but does close at 11:59 pm EST on the due date as shown in Canvas.

If you have questions about the assignment, please post them to the "Questions about EME 444?" Discussion Forum. I am happy to provide clarification and guidance to help you understand the material and questions (really!). Of course, it is best to ask early.

 

Summary and Final Tasks

With this lesson, we continued our survey of energy industries based on energy sources. In this lesson, you learned about the natural gas industry--from exploration and extraction, transportation, resource estimates, demand, usage, and externalities.

You learned:

  • about sources of renewable energy, in the USA and worldwide;
  • to quantify biomass and hydropower energy sources, in the USA and worldwide;
  • to explain biomass conversion processes, including feedstocks and products of each;
  • about biomass logistics and identify major operations;
  • details about major factors related to bioenergy economic, social, and environmental sustainability;
  • appropriate and correct units of measure to use with electricity data;
  • about worldwide trends and projections for electricity generation from renewable sources;
  • the major types and components of hydropower plants;
  • to apply major factors related to hydropower economic, social, and environmental sustainability.

Have you completed everything?

You have reached the end of Lesson 8! Double-check the list of requirements on the first page of this lesson to make sure you have completed all of the activities listed there.

9 Wind and Solar

Introduction

Overview of Lesson 9

With this lesson, we continue our survey of energy industries based on energy sources. In this lesson, we will review two renewable energy sources, wind and solar.

What will we learn?

By the end of this lesson, you should be able to...

  • quantify current and projected worldwide use of renewable energy;
  • use units of measure for power and energy correctly and consistently;
  • understand distributed generation and associated concepts including on- and off-grid and net metering;
  • explain commonly used incentive structures for renewable energy including tax credits, rebates, and performance-based incentives (Renewable Portfolio Standards and Feed-In Tariffs);
  • describe wind-energy technology, resources, and issues affecting growth of the industry;
  • explain three categories of solar-energy systems: passive, thermal, and electric-generating;
  • list components of photovoltaic systems and describe the purpose of each;
  • explain features of four types of concentrating solar power systems;
  • discuss status of and advances in the use of solar for electricity generation.

What is due for Lesson 9?

The table below provides an overview of the requirements for Lesson 9. For details, please see individual assignments.

Please refer to the Calendar in Canvas for specific time frames and due dates.

To Do List for Lesson 1

REQUIREMENT

SUBMITTING YOUR WORK

Read Lesson 9 content and any additional assigned material Not submitted.
Weekly Activity 9 Yes—Complete Activity located in the Modules Tab in Canvas.
Case Study--work with others on your Team to prepare Case Study, following course guidelines Check Canvas calendar for all Case Study Due Dates.

 

Policy Basics

The technology and economics of wind and solar make it practical to install and use them over a wide range of scales--from single-household residential installations a kW or less in size to multi-MW power plants. In particular, the ability for electricity consumers to generate some or all of their own electricity invites new circumstances, needs, and opportunities for policy.

On- and Off-Grid

Both solar and wind can be used in situations with or without access to electricity from a utility company. When solar or wind is used to generate electricity at a site that is not connected to a local electricity transmission and distribution system, the installation is off-grid (also often referred to as a standalone system). An installation may be off-grid because it is in an area where there is no electricity infrastructure - typically remote areas - or because the wind or solar system is generating enough electricity to support the site, and electricity from the grid is not necessary. More often than not, it is due to the lack of local electricity infrastructure. Because wind and solar are intermittent energy sources - the wind doesn’t always blow and the sun doesn’t always shine - off-grid systems are almost always designed with on-site electricity storage, usually batteries and called "battery backup."  Off-grid systems constitute a very small portion of total installed capacity worldwide (remember that capacity refers to the rated output of an energy-generating system, as opposed to generation, which refers to the energy output). In the U.S. the most frequent use of off-grid systems is for small-scale solar applications such as road signs and weather stations.

Solar and wind systems are most often installed at sites that do have access to electricity from the grid. These sites have a meter and are connected to local power lines from the utility company. These installations are on-grid and often called grid tied. (These systems may also have battery-backup, to provide power during times of grid outages.)

When a grid-tied electricity consumer generates some or all of its own electricity that it uses on site, it is called a behind-the-meter (BTM) installation. If you were to put a photovoltaic system on the roof of your home or small business, for example, and used some of it on-site you would have a BTM installation. And when you both buy electricity from others (through the grid) and generate some of your own electricity, you are sometimes referred to as a customer generator.

When wind or solar is used on the scale of a power plant where the electricity being generated is sold to other electricity consumers, the installation is a commercial generator (a power plant), in the same way that other power plants are, like the coal, nuclear, and gas generators we considered earlier. 

Net Metering

In BTM generation, the site will use electricity it generates (from the wind or solar) and, when more is needed, draw additional electricity from the grid. If the site is generating more electricity than it is using, the excess electricity is sent out to the grid. Customers pay for the electricity they get from the grid and may get credit for the electricity they send to the grid. This credit may then be used to offset future electricity use. For example, a customer generator may generate more electricity than they use in the summer time which gives them “money in the bank” (kWh in the bank, really) with the utility company. In the winter, when the customer generator needs more electricity than it can generate, electricity is pulled from the grid and the credit is used. When the credit is used up, the customer once again buys electricity from the grid. This may also happen on a daily basis if a customer generates excess energy during some daytime hours and needs to purchase energy at other times. When the utility gives the customer credit for all energy the customer sends to the grid, it is called net metering. Net metering exists in most, but not all, states in the USA but the details vary widely.

Net metering gives the customer generator the opportunity to avoid electricity costs beyond what they have without it. The customer only pays for the “net” amount of electricity that is purchased, which means that the utility in effect pays customers for the electricity they generate and feed into the grid. Many states require utilities to pay "retail" rate for this electricity, which means they pay the same rate the customer pays to the utility. See the image below for an indication of which states have net metering policies. (This is the most updated listing of policies as of October 2017.)  This map was taken from the Database of State Incentives for Renewables & Efficiency (DSIRE [20]), which is unequivocally the best source to consult if you want to find which energy incentives are available nationally or in any U.S. state.

US map of net metering policies by state. 38 states + DC, AS, USVI, Guam & PR have mandatory net and metering rules
Figure 9.1: Summary map indicating states with net metering policy.
Credit: U.S. Department of Energy, DSIRE Summary Maps [333]

To Read Now

Net metering policies have become quite controversial in the past few years. For a good summary of this and some other issues related to subsidies, read "The Solar Net Metering Controversy: Who Pays for Energy Subsidies? [334]" by Forbes Magazine.

Incentives

Both wind and solar require substantial initial capital outlay relative to the long run operating cost. These systems have no fuel costs. Once built, the operating costs are generally low. Solar photovoltaics (PV, aka solar panels), in particular, have a low operating cost. In addition to components having long rated lives (solar panels are usually warrantied for at least 25 years), there are no moving parts (except in cases where mechanical trackers are used). Under normal conditions, wind turbines will last at least 25 - 30 years, though they require more maintenance than solar PV.

States and countries have implemented a variety of policies meant to incentivize or encourage private investment in clean, renewable energies. The most common of these policies are tax credits, grants/rebates, and performance-based incentives (PBI), including feed-in tariffs (FIT) and renewable portfolio standards (RPS).

A tax credit is just that, a credit. When an individual or business investor earns a tax credit it means that the amount of the credit will be subtracted from a future tax bill. For example, in the United States, we have a Federal Residential Renewable Energy Tax Credit [335]  which provides a tax credit covering 30% of the cost of an installation. If you put a photovoltaic system in your yard at a cost of $30,000, you earn a $9,000 tax credit. The government doesn’t mail you a check for this amount. It means you get to deduct that amount from your next tax payment. To realize this money, you will need to have paid at least $9,000 in taxes, but excess credits can "generally" be carried over to future tax years. Note that even if you were owed a refund, this tax credit can be used to increase your refund, as long as you paid at least $9,000 in federal income tax throughout the year.

A rebate means that a government agency or other group (sometimes utility companies) will refund some of the investment. Pennsylvania used to provide a solar rebate program that provided rebates to investors based on the power rating of the system, $1.75/Watt, for example. The rebate was a check mailed directly to the investor (or their designate). Many states still have such programs such this solar PV rebate program in Oregon [336] (description from DSIRE of course!). Different states often have different program specifics. See DSIRE for more examples of programs.

Performance-based incentives (PBIs), also known as production incentives, provide cash payments based on the actual output of the system. For wind and solar electric, this is the number of kilowatt-hours (kWh) generated.

The case study for this course illustrates in detail how a renewable portfolio standard (RPS) policy works. To summarize, an RPS requires utilities to use renewable energy or renewable energy credits (RECs) to account for a certain percentage of their retail electricity sales. A REC is earned by a qualified grid-tied facility for every 1,000 kWh (i.e., 1 MWh) of electricity that is generated using a renewable energy resource. The RECs are then bought and sold through an auction where the market determines the price. The settlement price varies depending on REC supply and demand at any point in time, though special auctions with guaranteed pricing and incentives are sometimes used.

Another type of production-based incentive, a feed-in-tariff (FIT) pays grid-tied renewable energy generators a specified price for the electricity they generate and guarantees them this price for a specified amount of time. This type of policy is widely used in Europe, most notably in Germany, but less so in the USA. This may be changing.

Balance Please

Renewables are not the only energy source receiving government subsidies to keep costs down and encourage consumption. The International Energy Agency (IEA) provides this global assessment in their 2016 World Energy Outlook (released in November of 2016):

"The value of global fossil-fuel consumption subsidies in 2015 is estimated at $325 billion, much lower than the estimate for 2014, which was close to $500 billion... The decrease in the value largely reflects lower international energy prices of subsidized fuels since mid-2014, as the gap between international benchmark and end-user prices is closed by decreased international prices of energy, but it also incorporates the impact of pricing reform. Of the total, oil subsidies accounted for 44% of the total ($145 billion, covering an estimated 11% of global oil consumption), followed by electricity subsidies estimated at just over $100 billion (covering 17% of global electricity use). Natural gas subsidies were also significant, amounting to nearly $80 billion (affecting the price paid for 25% of gas consumption). Coal subsides are relatively small, at $1 billion in 2015"

International Energy Agency, World Energy Outlook 2016, p. 99.

The IEA goes on to address market distortion and their projection of the continued need for subsidies. (The New Policies Scenario is the IEA's baseline scenario, and assumes that countries will comply with policy commitments and plans. There is also a description of other IEA scenarios) [337]

"In the case of subsidies to renewables (examined in detail in Chapter 11), these continue to be necessary to incentivize investment in renewables over fossil-fuel alternatives, for as long as markets fail to reflect the environmental and health costs associated with the emissions of CO2 and other pollutants. But as technology costs come down and electricity and CO2 prices increase in several markets, more and more new renewable energy projects become economically competitive without any state support: in India, solar PV is competitive without subsidies well before 2030; for the world as a whole, most new renewables-based generation in 2040 does not require subsidies. The value of the subsidies paid to all forms of renewable energy peaks at $240 billion in 2030 in the New Policies Scenario and then falls back to $200 billion by 2040, remaining well below the today’s value for fossil-fuel consumption subsidies. The subsidy per unit of renewables-based electricity generation falls dramatically: subsidies to renewable-based generation rise by some 30% over the period to 2040, yet the electricity generated by non-hydro renewables increases by a factor of five over the same period."

International Energy Agency, World Energy Outlook 2016, p. 100.

It is difficult to put an objective number on the amount and distribution of energy subsidies in the United States, due to the complexity of the inner workings of our tax code. As one Forbes article [338] put it, "Just how taxpayer money gets doled out is mired in so much intricacy that is difficult to follow." (And that's from Forbes, "among the most trusted resources for the world's business and investment leaders!")

One can easily find news from credible sources saying that both in the United States and globally, fossil-fuels are subsidized more than renewables, and vice versa, depending on how you scope which subsidies and tax breaks to include and how you measure the amount (total $ or total $/BTU produced, for example). Regardless of the relative subsidy, a strong case can be made for reducing fossil-fuel subsidies, especially with regards to climate change. For example, in 2015, a coalition of eight governments  (Costa Rica, Denmark, Ethiopia, Finland, New Zealand, Norway, Sweden, and Switzerland) calling themselves the Friends of Fossil Fuel Subsidy Reform submitted a communique "encouraging governments to prioritize the reform of fossil fuel subsidies," mostly in an effort to influence the recent Paris Climate Talks.

To Read Now

Via the International Institute for Sustainable Development [339], read "Fossil Fuel Subsidy Reform Communique [340]".

Distributed Generation

In any case, when electricity is generated at or near where it is going to be used (the “load center”), this is called distributed generation. Solar and wind are both widely used for distributed generation, but so are non-renewable sources such as diesel generators. The U.S. EPA [341] defines distributed generation as "a variety of technologies that generate electricity at or near where it will be used, such as solar panels and combined heat and power."

Benefits and Costs of Pv.  See link in caption for text version
Figure 9.2: Benefits & Cost Categories for solar distributed generation value analysis.
Click link to expand for a text description of Figure 9.2

Text Version of the Benefit and Cost Categories Diagram

The diagram looks like a bulls eye with “Grid Services” in the middle.  Going outwards, the rings are “Financial”, “Security”, “Environmental”, and “Social”.  Each of the categories have text associated with them. 

Grid Services

  • Energy
    • energy
    • system losses
  • Capacity
    • generation capacity
    • transmission & distribution capacity
    • DPV installed capacity
  • Grid Support Services
    • reactive supply & voltage control
    • regulation & frequency response
    • energy & generator imbalance
    • synchronized & supplemental operating reserves
    • scheduling, forecasting, and system control & dispatch

Financial Risk

  • fuel price hedge
  • market price response

Security Risk

  • reliability & resilience

Environmental  

  • carbon emissions (CO2)
  • criteria air pollutants (SO2, NOx, PM)
  • water
  • land

Social

  • economic development (jobs and tax revenues)
     
Credit: Rocky Mountain Institute, "A Review of Solar PV Benefits & Cost Subsidies [342]."

 

To Read Now

Visit the Rocky Mountain Institute and download A Review of Solar PV Benefit and Cost Studies [342]. (If you have time, explore the site and learn more about RMI. Great organization!) Scan the document to the extent you find interesting and useful.  (If you are having difficulties accessing it, a .pdf is also available [343].)
  • Look closely at the Distributed Energy Resources (DERs) illustration and comments on page 8.
  • Review closely Stakeholder Perspectives on page 19.

 

Wind & Solar: Variable Renewables

ALL information on this page through Wind Power comes directly from World Energy Outlook 2013 [344], pp 208 - 211

Focus on power generation from variable renewables

Unlike dispatchable power generation technologies, which may be ramped up or down to match demand, the output from solar PV and wind power is tied to the availability of the resource. (Electricity generation from (non-dispatchable) variable renewables, such as wind and solar, is weather dependent and can only be adjusted to demand within the limits of the resource availability.) Since their availability varies over time, they are often referred to as variable renewables, to distinguish them from the dispatchable power plants (fossil fuel-fired, hydropower with reservoir storage, geothermal and bioenergy). Wind and solar PV power are not the only variable renewables – others include run-of-river hydropower (without reservoir storage) and concentrating solar power (without storage) – but PV and windpower are the focus of this section as they have experienced particularly strong growth in recent years and this is expected to continue.

The characteristics of variable renewables have direct implications for their integration into power systems (IEA). The relevant properties include:

Variability: Power generation from wind and solar is bound to the variations of the wind speed and levels of solar irradiance.

Resource location: Good wind and solar resources may be located far from load centres. This is particularly true for wind power, both onshore and offshore, but less so for solar PV, as the resource is more evenly distributed.

Modularity: Wind turbines and solar PV systems have capacities that are typically on the order of tens of kilowatts (kW) to megawatts (MW), much smaller than conventional power plants that have capacities on the order of hundreds of MW.

Uncertainty: The accuracy of forecasting wind speeds and solar irradiance levels diminishes the earlier the prediction is made for a particular period, though forecasting capabilities for the relevant time-frames for power system operation (i.e., next hours today-ahead) are improving.

Low operating costs: once installed, wind and solar power systems generate electricity at very low operating costs, as no fuel costs are incurred.

Non-synchronous generation: power systems are run at one synchronous frequency: most generators turn at exactly the same rate (commonly 50 Hz or 60 Hz), synchronized through the power grid. Wind and solar generators are mostly non-synchronous, that is, not operating at the frequency of the system.

The extent to which these properties of variable renewables pose challenges for system integration largely depends on site-specific factors, such as the correlation between the availability of wind and solar generation with power demand, the flexibility of the other units in the system, available storage and interconnection capacity, and the share of variable renewables in the overall generation mix. The speed at which renewables capacity is introduced is also important, as this influences the ability of the system to adapt through the normal investment cycle. Elective policy and regulatory design for variable renewables needs to co-ordinate the rollout of their capacity with the availability of flexible dispatchable capacity, grid maintenance and upgrades, storage infrastructure, efficient market operation design, as well as public and political acceptance.

Wind power

Generating power from wind turbines varies with the wind speed. Although there are seasonal patterns in some regions, the hourly and daily variations in wind speed have a less predictable, stochastic pattern. Geographically, good wind sites are typically located close to the sea, in flat open spaces and/or on hills or ridgelines, but the suitability of a site also depends on the distance to load centres and site accessibility.

For onshore wind turbines, capacity factors – the ratio of the average output over a given time period to maximum output – typically range from 20% to 35% on an annual basis, excellent sites can reach 45% or above. The power output from new installations is increasing, as turbines with larger rotor diameters and higher hub heights (the distance between the ground and the centre of the rotor) can take advantage of the increased wind speeds at higher altitudes. Moreover, wind projects are increasingly being tailored to the characteristics of the site by varying the height, rotor diameter, and blade type. Wind turbines that are able to operate at low wind speeds offer the advantage of a steadier generation profile, reducing the variability imposed upon the power system, but likely reducing annual generation.

Wind turbines located offshore can take advantage of stronger and more consistent sea breezes. Wind speeds tend to increase with increasing distance from the shore, but so too does the seafloor depth, requiring more complex foundation structures. Capacity factors are generally higher ranging from 30% to 45% or more, as distance from the shore or hub height increases. However, offshore wind turbines are more expensive to install because of the high costs associated with the foundations and offshore grid connections. Bottlenecks can also occur due to a shortage of specialized installation vessels.

Solar photovoltaics

Power generation from solar PV installations varies with the level of solar irradiation (irradiation is the amount of solar energy hitting a surface over a period of time) they receive. Irradiation is usually measured in kWh/m2/day or kWh/m2/yr. Geographically, solar irradiation over the course of a year increases with proximity to tropical regions and is more uniformly distributed than wind. Seasonal and daily patterns in output from solar PV systems can be fairly well forecast – on a clear day, solar will follow a consistent pattern, based on the path of the sun through the sky. The power received from the sun is called irradiance, generally measured in W/m2. The irradiance from the sun can be predicted with reasonable accuracy for a given location at a given time of year. Of course, local conditions (particularly shading) can significantly impact irradiance levels.  A heavily-shaded area can result in near-zero irradiance levels.

Wind Power

A picture is worth a thousand words! Below are three examples of wind turbine of varying scales.

Residential-scale installation. small turbine on house roof
A typical residential-scale installation. This is a Skystream 3.7 [345], which has a rated capacity of 2.4 kW. It has a rotor diameter of 12 feet and is mounted on a tower that is probably about 30 to 45 feet. The manufacturer’s published “energy potential” is 400 kWh/month, based on 12 mph winds.
Credit: National Renewable Energy Laboratory Photographic Information Exchange, 15337 [346]
100-kw wind turbine. medium turbine in feild
A 100-kW Northern Power [347] Northwind 100A turbine with 19-meter diameter blades mounted on a 30-meter tower. This installation is located at the National Wind Technology Center in Golden, Colorado.
Credit: National Renewable Energy Laboratory Photographic Information Exchange, 16392 [348]
3.6 MW wind turbine installed off shore. Large turbines have immersed in water.
A GE Wind 3.6-MW wind turbine, located about 10 kilometers off the coast of Arklow, Ireland. It is one of seven in the Arklow Bank Offshore Wind Power Plant [349]. Each blade is about 165 feet long for a rotor diameter of 341 feet. Each tower weighs 160 tons and is 230 feet tall. Airtricity, a partner in the project, estimates that the 25-MW facility (7 turbines at 3.6 MW each) will generate enough electricity to power about 16,000 Irish households.
Credit: National Renewable Energy Laboratory Photographic Information Exchange, 13043 [350]

To Read and View Now

  • Read "Wind 101: The Basics of Wind Energy [351]" and watch the (3:16) embedded video from the Department of Energy titled "Energy 101: Wind Turbines."
  • Read through How a Wind Turbine Works [352]and click through the animation from U.S. DOE.

To View Now

Please watch the following (4:18) video from First Wind, Where does Wind Power come from? Climbing Inside a Wind Turbine.

Click for a transcript of " Climbing Inside a Wind Turbine" video.

LIZ WEIR: Hey, I'm Liz from First Wind. Today, we're going to be doing something that anyone who's ever seen a wind farm is dying to do-- climb one of these bad boys. Let's go.

RYAN FONBUENA: Just hand over hand, and easy as she goes.

LIZ WEIR: All right, sounds good. See you guys up there.

RYAN FONBUENA: Right now, we are at the base unit section. This is at the top of the base section-- the midsection of the tower's bolted up. We're about 85 feet up in the air right now, and only 180 to go.

LIZ WEIR: Sounds good. Now, you're so much faster than the rest of us. About how often do you climb this thing?

RYAN FONBUENA: I try and climb a couple times a week. Not as much as I used to, but with practice, about a six-minute climb is average, for average technicians.

LIZ WEIR: Six minutes, all the way up?

RYAN FONBUENA: All the way up.

LIZ WEIR: Oh, my gosh.

All right, so Ryan, tell us where we are now.

RYAN FONBUENA: Well, where we are now, we're at the yaw deck of the turbine. This is just below the nacelle at the very top of the top tower section. What we have here, these are all the cables that allow the turbine to not only operate, but to communicate with the master control system in the bottom of the tower.

What we also have here are the power cables that delivers energy from the generator back to the grid.

LIZ WEIR: These guys are pretty smart.

RYAN FONBUENA: Yes, they are very intelligent machines. They're constantly tracking wind speed, wind direction, temperatures. They are very intelligent machines.

LIZ WEIR: All right, now we're heading up to the last leg of the trip, up to the nacelle.

RYAN FONBUENA: Yeah, I'll grab the ladder to get us up there, and we'll get the full tour.

LIZ WEIR: Sounds good. I’m smacking my head-- OK. Here we go. All right. Where to?

RYAN FONBUENA: So here we are at the nacelle.

LIZ WEIR: Now, exactly how many feet are we up in the air right now?

RYAN FONBUENA: We're proximately 270 feet in the air right now. So the wind is obviously going to be a lot stronger up here than it is on the ground.

LIZ WEIR: Can you tell us what we're looking at, in front of us?

RYAN FONBUENA: Yes, what's in front of us now is the main shaft. And this is what the rotor, or the hub, and all three blades are bolted to. The main shaft is running to our gear box here. And what the gear box does is take that low speed rotation, transmits it into a high speed rotation into the generator.

LIZ WEIR: So all the power that's coming from here goes right down through the cables we just saw, on a level before us?

RYAN FONBUENA: Yes, that's correct.

LIZ WEIR: All right, well I think what we're all looking forward to doing is heading up top. Think we can go?

RYAN FONBUENA: Yeah, we'll get up on top.

LIZ WEIR: All right, sounds good.

Oh, my god!

All right, so it's pretty cloudy up here today. But in actuality, how high up are we?

RYAN FONBUENA: We're about 275 feet off the ground now, being on top of the nacelle.

LIZ WEIR: Straight up in the air.

RYAN FONBUENA: Yes.

LIZ WEIR: And behind us, you see a weather station. Can you tell us a bit about what that measures?

RYAN FONBUENA: Yes, the met stations that's behind us measures not only the wind speed, but also the wind direction. So the turbine constantly knows where to point itself into the wind. And with the wind speed, to know when to pitch the blades to start capturing the wind, and when to pitch them out when the wind speeds either get too high, or too low.

LIZ WEIR: To learn more about wind power, please come and visit us at firstwind.com. I'm Liz, I'll see you next time.

To View Now

Please watch the following (2:38) video from Puget Sound Energy.

Click for a transcript of "Puget Sound Energy" video.

PRESENTER: We're going to go ahead and climb a C3 wind turbine today. We're going up over 200 feet wind turbine mace wave because of the wind outside. You will be in the close proximity of high voltage cables. 34,500 volts.

PRESENTER 2: So we're set to go ahead and climb up the turbines. So there's a base section, a mid section, and a top section to each turbine. Right now we're in the yaw deck.

This is where the cell’s going to pivot. The gearbox weighs around 20 tons. The generator and air cooler are just less than 10 tons.

Wind Turbine Output

As described in the videos above, wind turbines convert the kinetic energy of the wind into mechanical energy that rotates a rotor, which then spins a generator, which generates electricity. This process (from wind to electricity) has a theoretical maximum efficiency of 59.3% (this is called the Betz Limit [353]), but in practice, turbines operate a significantly lower efficiency.

So where does the energy in the wind come from, and how much is there? Wind is caused by differences in pressure - air from high-pressure areas will naturally move toward areas of lower pressure. Pressure differences are caused by differential heating of the surface of the earth. All else being equal, cold air has a higher pressure than warmer air. There are many localized wind sources, but global wind circulation is caused by cold air from polar regions (relatively high pressure) moving toward warm air (relatively low pressure) toward the equator.

The power in the wind is given by the following equation:

Power (W) = 1/2 x ρ x A x v3

  • Power = Watts
  • ρ (rho, a Greek letter) = density of the air in kg/m3
  • A = cross-sectional area of the wind in m2
  • v = velocity of the wind in m/s

Thus, the power available to a wind turbine is based on the density of the air (usually about 1.2 kg/m3), the swept area of the turbine blades (picture a big circle being made by the spinning blades), and the velocity of the wind. Of these, clearly the most variable input is wind speed. However, wind speed is also the most impactful variable because it is cubed, whereas the other inputs are not.

Turbines are rated in terms of capacity, usually in kW or MW. As with other energy sources, this is not the amount of power that a turbine generates at all times - it is the peak output. At peak output, a 100 kW wind turbine will generate 100 kWh of energy over 1 hour (100 kW x 1 h = 100 kWh). To determine the output at different speeds, you need to look at the power curve. The power curve for the 95 kW Northern Power turbine (similar to the turbine in the picture above) is below. As you can see, the turbine will only generate its rated 95 kW with a very limited range of wind speeds. Note also that the turbine has a startup speed of 2 m/s.

Power curve of the Northwind. Power increases with speed till peak at 12-14 m/s then slowly decrease
Figure 9.3: Power curve of the Northwind 100C, 95 kW wind turbine.
Source: Northern Power Systems, turbine spec sheet [354])

Distributed Wind Generation

Energy.gov's Wind Program gives this description of distributed wind generation:

The Wind Program defines distributed wind in terms of technology application, based on a wind plant's location relative to end-use and power distribution infrastructure, rather than size. The following wind system attributes are used by the Wind Program to characterize them as distributed:

  • Proximity to End-Use: Wind turbines that are installed at or near the point of end-use for the purposes of meeting onsite energy demand or supporting the operation of the existing distribution grid.
  • Point of Interconnection: Wind turbines that are connected on the customer side of the meter, directly to the distribution grid, or are off-grid in a remote location.

Distributed wind energy systems are commonly installed on, but are not limited to, residential, agricultural, commercial, industrial, and community sites, and can range in size from a 5 kilowatt turbine at a home to a multi-megawatt turbine at a manufacturing facility. Small wind turbine technology, which includes turbines that have a rated capacity of less than or equal to 100 kilowatts, is the primary technology type used in distributed wind energy applications and is the focus of the Wind Program's technology R&D efforts for distributed applications.

Not required, but for more information on distributed wind generation see Distributed wind energy systems [355] and OpenEI's Small Wind Guidebook [356].

IEA Wind is the International Energy Agency's (IEA) Implementing Agreement for Co-operation in the Research, Development, and Deployment of Wind Energy Systems. "Founded in 1974, the IEA Wind Agreement sponsors cooperative research tasks and provides a forum for international discussion of research and development issues" (IEA Wind [357]).

Visit International Energy Agency (IEA) Wind [358] and open the most recent report, the IEA Wind 2015 Annual Report. [359]

In the Executive Summary, read:

  • Section 1.0 Introduction
  • Section 2.0 National Objectives and Progress, these portions:
    • Section 2.1 National targets
    • Section 2.2 Progress
    • Section 2.3 National policies
    • Section 2.4 Issues affecting growth
    • Section 3.3 Operational Details

Wind Resources in the U.S.

Average wind speeds vary widely by geographical location. Take a few minutes to inspect the wind speed charts from the National Renewable Energy Laboratory below. Note the location of the greatest and wind speeds, and think about the physical characteristics of those areas (e.g. flat, mountainous, on-shore, off-shore, etc.).  Click here for a larger version of the 30m wind speed image [360] and click here for the 80m image. [361]

In addition to variability being a barrier to wind deployment, the location of wind resources is as well. In general - and certainly, in the U.S. - the best onshore wind resources are not located near major population centers. Approximately 50% [362] of the U.S. population lives within 50 miles of the coast, but as you can see in the maps below, this is generally not where the greatest onshore wind is located.  This is a problem because transporting electricity over power lines results in energy loss (as heat) due to electrical resistance in wires. The longer the electricity has to travel, the more energy is lost.  To minimize this loss, large (and very expensive) power lines must be built. As you can imagine, this type of infrastructure is lacking in areas of the country that do not have large populations.

Average wind speed at 30 m height, U.S.. Highest speeds occur in the middle of the country

Onshore and offshore average wind speeds in the U.S. Highest speeds along coasts and in central plains
Figures 9.4 and 9.5: Average annual wind speeds at 30 m height (top image) and 80 m height (bottom image) in the U.S. 
Credit: National Renewable Energy Laboratory Dynamic Maps, GIS Data, & Analysis Tools [363].

To Read Now

For an idea of how expensive building high voltage lines can be ($560 million to $720 million for 224 miles!) and to gain some insight on some interesting issues related to wind, hydro, and international energy issues, read the summary below.

  •  "Presidential Permit Paves Way for Minnesota Power's Great Northern Transmission Line to Deliver Canadian Hydropower to Customers [364]." Business Wire, November 16, 2016.

Solar Energy

Every single hour, the Earth’s surface receives more energy from the sun than the entire world's human population uses in a year. And, as far as fuel prices go, the price is right!

It is only natural that we have learned to work with the sun--to use it for our convenience and well being. We use energy from the sun in all sorts of ways, to heat water, dry clothes, warm spaces and generate electricity. Be they simple or complex, these designs and technologies all use “solar energy” for useful purposes.

Uses of Solar Energy, Other than Electricity Generation

Passive Solar Energy

This is the art and science of designing systems (typically buildings) to work in cooperation with the sun, without any mechanization. There are no motors, no fans or blower or switches, for example. Instead there are simple features, such as deep overhangs that provide shading in the summer, when the sun is high and temperatures are warm, but let the sunlight in in the winter, when the sun is low and the warmth is welcomed. If you would like more information, a good starting place is the Department of Energy's Passive Solar Design [365] page. (Clothes lines are another example of passive solar, and wind. A "renewable dryer" investment has a terrific return financially and environmentally!)

Solar Thermal Systems

This is a broad term for systems that use energy from the sun to heat water (or other material) for a variety of purposes.

  • Sometimes the water is used for “domestic” purposes, such as drinking, cooking, bath and showers, laundry, and so forth. These are called solar domestic hot water (DHW) systems.
  • Solar-heated water may also be used for other purposes, such as swimming pool heating, to warm or cool (really!) buildings, and industrial process heating.
  • Solar concentrating systems are another form of solar thermal. (See below)

For clear understanding and communication, it is useful to keep in mind the broad meaning of “solar thermal” and to be specific regarding the technology of a given application.

Solar Energy for Electricity Generation

These are systems that use energy from the sun to generate electricity. There are two general categories: photovoltaics (PV) and concentrating solar power (CSP).

Photovoltaics (PV)

Certain materials have the natural property of converting energy from the sun into electricity. When the sun hits these materials, electrons start to flow, creating a direct current (DC). This is the photovoltaic effect. Photovoltaic materials (semiconductors) are packaged into solar cells, which are appropriately wired and connected together into modules (also called panels) to collect the flow of electrons into a current and make it available for our use. If you have a solar-powered calculator, the little window is a small solar cell. The solar arrays that you may see on a roof top are an installed group of solar modules wired together. Systems that use photovoltaic components to generate electricity are photovoltaic (PV) systems.

To Watch and Read Now

  • From Energy.gov, watch the (2:00) video Solar 101: Solar Photovoltaics [366] and read the material below the video.
  • "Why China Is Dominating the Solar Industry [367]." Scientific American, December 19, 2016.  This provides a good overview of the role of incentives in the development of the global solar PV industry, as well as an aggressive plan for a "global grid."

Solar PV Output

The output of an array is primarily dictated by the amount of solar energy (insolation) hitting the panel. Insolation is highest when the panel is directly facing the sun, when the sun is at its peak in the sky (at solar noon, which is usually not the same as local noon), and when it is unshaded. Insolation is synonymous with irradiation, noted earlier in this lesson. Irradiance, on the other hand, is the amount of solar power (not energy) hitting a surface at any given moment, or the average power over a given period of time. This is typically measured in W/m2.

Average daily insulation in the U.S. Greatest irradiation occurs in the south west and south with the least occurring in Washington and new england
Figure 9.6: Average daily irradiation in kWh/m2/day in the U.S.  Note that this image indicates the output at a perfect tilt, ideal azimuth, and without derating. Larger map image available here [368]. 
Credit: National Renewable Energy Laboratory Dynamic Maps, GIS Data, & Analysis Tools [369].

Like wind, a solar array's capacity is rated in power (usually kW, but larger ones can be rated in MW). Also like wind, solar panels only generate full capacity under optimal conditions, mostly having to do with panel temperature and irradiance level. Further, the capacity is what is directly generated by the panels, and does not include other losses. After generated by a panel, the electricity must travel through wires and (usually) an inverter. There are other factors that impact output, such as panel imperfections, loss of efficiency over time, and mismatch of panels in an array. All of this adds up to losses, usually in the range of 10% - 20%. All of these losses together are called the derating factor. A derating factor of 80% means that 20% of the energy generated by the panel is lost (to heat) before it leaves the PV system. Note that derating does not include losses associated with shading or imperfect panel placement! Finally, the hotter a panel gets, the less energy it generates, and the colder it gets, the more it generates (all else being equal). Because of this, it is not uncommon for a solar array to generate nearly as much electricity on a very cold, clear winter day as a hot summer day, despite the fact that irradiance is significantly higher in the summer.

When all is said and done, it is not unusual for an array to generate 20% - 30% less than its rated capacity, especially if the panels are not tilted at a perfect angle and facing an ideal direction (the compass direction a panel is faced is called its azimuth), and/or is partially shaded during certain times of the year/day.

A 1 kW array will generate 1 kWh of electricity over the course of one hour if it is operating at full capacity, but if it has a derating factor of 15%, it will only generate 0.85 kWh. If there is a 10% additional loss due to shading and other losses, the output would be 0.765 kWh (0.85 kWh x 0.9 = 0.765 kWh).

Concentrating Solar Power (CSP)

Systems that use mirrors (heliostats) to reflect (focus) the sun's energy onto a single point or area are called concentrating solar power or CSP systems. They use mirrors to focus energy from the sun to heat synthetic oil, molten salt, gasses, or other materials to high temperatures for purposes of generating electricity (by generating steam to turn a turbine or with a Sterling Engine.) The focused energy may be used to create very high temperatures for generating electricity (with a Sterling Engine or by creating steam to drive a turbine).

To Read and Watch Now

  • From Energy.gov, watch the (2:16) video Solar 101: Concentrating Solar Power [370].
  • From NPR (Feb 2016), read "Morocco Unveils A Massive Solar Power Plant in the Sahara [371]" and an update from the Wall Street Journal (September 2016) [372].

Concentrating Photovoltaic (CPV)

These systems use highly concentrated (focused) sunlight to generate electricity directly from photovoltaics. According to a December 2013 report (Concentrated PV (CPV) Report [373], from IHS), "After years of slow progress, the global market for concentrated photovoltaic (CPV) systems is entering a phase of explosive growth, with worldwide installations set to boom by 750 percent from 2013 to the end of 2020. CPV installations are projected to rise to 1,362 megawatts in 2020, up from 160 megawatts in 2013." For better or worse (despite promising research like this [374]at Penn State), the market for concentrated solar PV has yet to materialize, due in large part to the rapid drop in PV module prices.

Lesson 9 Assignment

Weekly Activity 9

Please review Canvas calendar for all due dates related to your Nonmarket Analysis Case Study.

Deliverables

Complete "Weekly Activity 9," located in the "Weekly Activities" folder under the Modules tab in Canvas. The activity may include a variety of question types, such as multiple choice, multiple select, ordering, matching, true/false, and "essay" (in some cases these require independent research and may be quantitative). Be sure to read each question carefully.

Unless specifically instructed otherwise, the answers to all questions come from the material presented in the course lesson. Do NOT go "googling around" to find an answer. To complete the Activity successfully, you will need to read the lesson, and all assigned readings, fully and carefully.

Each week a few questions may involve research beyond the material presented in the course lesson. This "research" requirement will be made clear in the question instructions. Be sure to allow yourself time for this! You will be graded on the correctness and quality of your answers. Make your answers as orderly and clear as possible. Help me understand what you are thinking and include data where relevant. Remember, numbers should ALWAYS be accompanied by units of measure (not "300" but "300 kW").  You must provide ALL calculations/equations to receive full credit - try to "talk me through" how you did the analysis.

This Activity is to be done individually and is to represent YOUR OWN WORK. (See Academic Integrity and Research Ethics [31] for a full description of the College's policy related to Academic Integrity and penalties for violation.)

The Activity is not timed, but does close at 11:59 pm EST on the due date as shown in Canvas.

If you have questions about the assignment, please post them to the "Questions about EME 444?" Discussion Forum. I am happy to provide clarification and guidance to help you understand the material and questions (really!). Of course, it is best to ask early.

 

Summary and Final Tasks

In this lesson, you learned about renewable energy, specifically the use of wind and solar technology for electricity generation. We reviewed important concepts related to distributed generation and policies that work to support and incentivize these technologies, including on- and off-grid applications, net metering, rebates, tax credits, and performance-based incentives.

You learned:

  • to quantify current and projected worldwide use of renewable energy;
  • about using units of measure for power and energy correctly and consistently;
  • about distributed generation and associated concepts including on- and off-grid and net metering;
  • commonly used incentive structures for renewable energy including tax credits, rebates and performance-based incentives (Renewable Portfolio Standards and Feed-In Tariffs);
  • to describe wind-energy technology and resources and issues affecting growth of the industry;
  • three categories of solar-energy systems: passive, thermal, and electric-generating;
  • the components of photovoltaic systems and the purpose of each;
  • the features of four types of concentrating solar power systems;
  • the status of and advances in the use of solar for electricity generation.

Have you completed everything?

You have reached the end of Lesson 9! Double-check the list of requirements on the first page of this lesson to make sure you have completed all of the activities listed there.

Case Study

Introduction

Case Study Overview

This is a Nonmarket Analysis Case Study completed as a Team Project, with a few assignments that are to be done individually. All due dates are posted in the Canvas calendar.

Case Study Issues for Current Semester

On the following page, you will find a list of Case Study Issues for the current semester. Each topic is phrased as an issue appropriate for nonmarket analysis and is accompanied by several general references to help you become acquainted with the issue. Based on the results of your Interest Survey (see below) you will be assigned to a team and an issue for your case study. Your team will also be assigned two other issues where you will be the "audience" for the case study presentation.

Case Study Issue Interest Survey

This is a Canvas survey, completed INDIVIDUALLY. See Canvas for the due date.

On the following page in this lesson, you will find a list of case study issues (“topics”) current for this semester. After exploring each of these topics on your own, complete the Case Study Interest Survey. You will find the “Case Study Issue Interest Survey" under the Modules tab and Case Study Assignments subheading. There are no right or wrong answers! These results will be used to make team assignments.

Case Study Team Project

The Case Study is a TEAM project with three parts. Each part is submitted via Canvas. See Canvas for due dates.

Detailed guidelines for each part of your Nonmarket Analysis Case Study are given in the following pages of this Lesson. Your Team will receive one grade for each part of the Case Study. These grades will not be posted to the grade book.

After all parts of the Case Study are complete, each member of the team will complete a team assessment survey of individual contributions by each team member (see below).

Your Team will be given one total Case Study score. Individual scores for the Case Study will be calculated as:

Team Score x Team Assessment of Contribution.

Depending on your level of contribution to the Case Study, your individual score may be the same as the Team Score, or it may be lower or higher (not to exceed 100 points).

Team Assessment of Contribution

This is a Canvas survey, completed INDIVIDUALLY. See Canvas for the due date.

In this survey, you will provide feedback on the contributions of other members of your team to this project. This is to encourage all team members to work together and contribute fully to this project. Each student's final score on this team project is calculated as:

Team Score x Team Assessment of Contribution

Depending on the Team's assessment of your level of contribution to the Case Study, your individual score may be the same as the Team Score or it may be lower or it may be higher (not to exceed 100 points).

You will find the “Team Assessment of Contribution” survey under the Modules tab. You'll be asked to assess the contributions of other Team members to this group project. When considering the contributions of each team member, please include these factors: level of engagement, timeliness of work, quality of work, and integrity of work (correct and complete source citations). For each Team member, your options are:

  • this is me
  • did not contribute (0%)
  • did very little to contribute (50%)
  • did far less than fair share (80%)
  • did less than fair share (90%)
  • did around fair share (100%)
  • did more than fair share (110%)
  • did MUCH more than fair share (120%)

Case Study Q & A (Canvas Discussion Forum)

These are Canvas Discussion Forums, graded INDIVIDUALLY. See Canvas for due dates.

Near the end of the semester, each Case Study will be presented in a Q&A Discussion Forum in Canvas. The Team that did the Case Study will be the Host of the forum and two other Teams will be assigned to participate as Audience members. Each student will participate in three Case Study Q&As (once as Host, twice as Audience). Participation in all three Discussion Forums is graded on an individual basis.

Specific guidance is presented with each Discussion Forum.

Fall 2017 Case Study Options

1. Should the U.S. support or oppose the use of carbon trading as an allowable method to achieve carbon reductions outlined in the United Nations Framework Convention on Climate Change (UNFCCC) Paris Agreement [375]?

  • Trump lays groundwork for staying in Paris Agreement [376]
    (Climate Home, August 2017)
  • Outcomes of the U.N. Climate Change Conference in Paris [377]
    (Center for Climate and Energy Solutions, Dec 2015)
  • What's ahead for carbon markets after COP 21 [378]
    (Center for Climate and Energy Solutions, February 2016)
  • How emissions trading at Paris climate talks has set us up for failure [379]
    (The Conversation, Dec 2015)
  • How the aviation sector's carbon offset plans will undermine the Paris agreement [380]
    (REDD Monitor, December 2016)

2. Would you support or oppose a national revenue-neutral carbon tax, as proposed by the Climate Leadership Council?

  • The Four Pillars of our Carbon Dividends Plan [381]
    (Climate Leadership Council, accessed August 2017. I suggest looking around their website.)
  • Exxon Mobil Lends Its Support to a Carbon Tax Proposal [382]
    (New York Times, June 2017) 
  • Why a "revenue neutral" carbon tax could hurt - not help - the planet [383]
    (Common Dreams, November 2016)
  • 10 Reasons to Oppose a Carbon Tax [384]
    (American Energy Alliance, Nov 2015)

3. Would you support or oppose removing the U.S. Environmental Protection Agency's 2016 methane regulation rule?

  • EPA's Methane Rule: Should it Stay or Should It Go? [385]
    (Resources for the Future, July 2017)
  • Court Blocks E.P.A. Effort to Suspend Obama-Era Methane Rule [386]
    (New York Times, July 2017)
  • EPA mulls options after appeals court blocks delay of Obama-era methane gas rule [387]
    (CNN, July 2017)

4. Would you support or oppose Congressional action to repeal the Renewable Fuel Standard [388]?

  • Overview for Renewable Fuel Standard [389]
    (The U.S. Environmental Protection Agency, June 2017)
  • Trump should drain the renewable fuel standard swamp [390]
    (The Hill, April 2017)
  • Scrap or overhaul? Trump and Clinton promise changes to the Renewable Fuel Standard [391]
    (Forbes, October 2016)
  • The EPA raises the Renewable Fuels Standard. Here's why that makes no sense. [392]
    (Grist, Nov 2015)

5. Would you support or oppose building the Jordan Cove Energy Liquified Natural Gas (LNG) export project [393] in Oregon?

  • What a West Coast gas terminal could mean for the Rockies [394]
    (Marketplace, August 2017)
  • FERC to prepare Jordan Cove LNG EIS [395]
    (LNG World News, June 2017)
  • Jordan Cove LNG [393]
    (Jordan Cove LNG project website)
  • Jordan Cove LNG project plans to re-apply at FERC [396]
    (Natural Gas Intelligence, December 2016)
  • Stop Liquified Natural Gas [397] 
    (Sierra Club (Oregon Chapter), Dec 2015)

Case Study Team Project

The Case Study Nonmarket Analysis Team Project consists of three parts submitted individually. Parts I and II are written documents, which may include figures, tables, and graphics. Part III is a slide presentation. Please see Canvas calendar for due dates.

Guidelines for individual Parts of the Case Study are provided below. The following important guidelines apply to all Parts--

  • Audience.
    This Case Study is prepared for a general audience. Assume the reader has no prior background on the topic.
  • Organization.
    Use subheads, paragraphs, bulleted lists, and other defining features to organize each Part of your case study clearly and orderly. This will help your team be sure that all bases are covered and will help the audience understand the points you are making. Format all structural features (e.g., subheads, lists) consistently. Be sure that all figures, graphs, and tables are clearly labeled and referenced.
  • Overall Presentation.
    Write in a professional tone (not in the first person). Format Parts I and II consistently. Use page numbers. Give your Case Study a short title and include it on all pages and slides (in footer or header). For all Parts (I, II, and III) include a title page/slide with your Case Study title, course name, date, and names of all Team members. Carefully spell check, grammar check, and proofread each Part before submitting.
  • References.
    All sources MUST be cited. Please review the Academic Integrity Guide [398] (link also in Resources menu) for guidelines and formatting methods. Select a formatting approach and use it consistently throughout your Case Study. Include a properly formatted and organized list of References with each Part of your Case Study. Use APA formatting.

All Parts of all Team Case Studies will be shared with others in this course and will be the subject of Case Study Q & A Discussion Forums. This will happen near the end of the term after all Case Studies are complete.

Part I. Background and Status

(For example, see RPS Case Study, Lesson 1, “Background and Status”)

Research and collect background on your Case Study Issue. Document key terms and concepts, historical context, current status, and the overall timeline of relevant past events and upcoming ones (if known). Clearly explain what the issue is about! Use data, graphs, pictures, and tables as needed to describe the issue.

Format Part I as a Word (.doc or .docx) file OR share a Google Document with me and upload (or submit a link to the Google Doc) to Canvas using the link to "Case Study Part I. Background and Status." This is under the Case Study Assignments subheading in the Modules tab.

Note that all sources must be cited, and direct quotes must be indicated. I use a software called SafeAssign that will clearly indicate any material that is plagiarized. I will be very strict about this, and take academic dishonesty very seriously.   

Part II. Stakeholders and Nonmarket Analysis Summary Framework

(For example, see RPS Case Study, Lesson 2, “Stakeholder and Nonmarket Analysis Summary Framework”)

Identify stakeholders (firms, associations, groups, or individuals) that have an interest in the outcome of your team’s Issue. Include a group of at least six stakeholders that represents a sound balance of different positions on the Issue.

For each stakeholder, provide name, type of organization, and its mission. Establish stakeholder’s initial position on the issue and explain the basis for this position.

For each stakeholder, continue the analysis with an orderly presentation of all variables related to demand and supply of nonmarket action.

To evaluate demand for nonmarket action, assess available substitutes, aggregate benefits, and per capita benefits. To evaluate supply of nonmarket activities, assess effectiveness (numbers, coverage, and resources) and cost of organizing.

To make these assessments, you’ll need to establish a scale for each variable. You can use the one in the RPS case study (for example, benefits are “small”, “moderate”, “considerable”, “large” or “substantial”) or design your own. Either way, include the scales you are using in your case study.

In all cases, be sure to give some reasoning that supports the value you have assigned. If you indicate that “coverage” is “extensive,” explain why you believe this to be true.

Now you are ready to predict the likelihood of the stakeholder taking nonmarket action. To do this, review the information you have collected to this point. For each stakeholder, weigh the demand for taking action against the supply of action. The greater the demand, the more likelihood of taking action. The greater the cost (considering available resources), the less likelihood of taking action. You’ll need to establish a scale for this too. You can use the one from the RPS case study or establish your own. Either way, be sure to include it.

Finally, summarize all of your findings into a Nonmarket Analysis Summary Framework. You’ll find an Excel template for the Nonmarket Analysis Summary Framework in the “Case Studies” folder under the Modules tab in Canvas. Be sure to group stakeholders based on their position on the issue. Integrate the Excel Summary Framework into your Part II document.

Format Part II as a Word (.doc or .docx) file OR share a Google Document with me and upload (or provide link) to Canvas ("Case Study Part II. Stakeholders and Framework").

Part III. Strategy and Recommendations

Parts I and II of the Case Study didn't "pick sides." Part I framed the issue (Background and Status). Part II identified key stakeholders on all sides of the issue and gave a basis for their positions.

In Part III, your Team WILL take sides. As a Team, select one of your stakeholders and assume you are making nonmarket strategic recommendations to that stakeholder. Clearly identify the stakeholder to whom your presentation is submitted.

Imagine that your Team has been invited to make recommendations to this stakeholder. You've been asked to prepare and submit a presentation of no more than 20 slides. The presentation needs to stand on its own (you can include some notes in the Notes section of PowerPoint if desired). It will be submitted electronically and shared with others, without your being there.

Present your Team's nonmarket strategy recommendations with as much detail as possible. If your issue will be handled in a government arena, consider appropriate public politics strategies. If your issue is not being addressed in a government arena, consider appropriate private politics strategies. Or some of both. Include specifics; be imaginative!

Organize your strategy and recommendations carefully. Be sure that what you are suggesting and why will be clear to your stakeholder. But, do not pack your slides with words and data. Be creative and succinct.  Feel free to write some narrative in the slide notes at the bottom of the page, but please keep the slides themselves relatively uncluttered.

The RPS Case Study “Strategy and Recommendations" in Lesson 3 gives an example of a nonmarket strategy that you may find to be a helpful reference. It is not, however, in a presentation (slide) format as required for Part III of your Team's Case Study.

Format Part III as a PowerPoint Presentation (.ppt or .pptx) file and upload to Canvas ("Case Study Part III. Strategy and Recommendations").

Case Study Assignments and Grading

Please check the Canvas calendar for all due dates.


INDIVIDUAL Case Study Assignments

Case Study Issue Interest Survey (Canvas survey, see Canvas for due date)

You will find the “Case Study Issue Interest Survey" under the Case Study Assignments sub heading in the Modules tab. This assignment is not graded, but all students are required to complete the survey. (The individual case study final grade will be penalized 1 point for late, incomplete or missing survey results.)

Team Assessment of Contribution (Canvas survey, see Canvas for due date)

You will find the “Team Assessment of Contribution” survey under the Modules tab. Not graded, but all students are required to complete the survey. (The individual case study final grade will be penalized 1 point for late, incomplete or missing survey results.)

Case Study Q & A (Canvas Discussion Forum, see Canvas for due dates)

Each Case Study will be presented as a Q&A Discussion Forum. The Team that did the Case Study will be the Host of the forum and two other Teams will be assigned to participate as Audience members. Each student will participate in three Case Study Q&As (once as Host, twice as Audience). Participation in all three Discussion Forums is graded on an individual basis.

Each Discussion Forum is worth 3% of your course grade. Grading criteria are presented with each Discussion Forum.


TEAM Case Study Assignments

The Team will receive one grade for each Part of the Case Study. See Canvas for due dates. These grades will not be posted to the grade book.

After all parts of the Case Study are submitted, the Team will be given one total Case Study score. Each Part is weighted equally.

Scoring for each Part of the Case Study is based on:

35% Completeness (meeting requirements outlined in this lesson)

35% Level of research and quality of information (reasoning, supported with data, clearly stated assumptions)

30% Writing quality, organization, and presentation.

All sources and references MUST be identified and properly referenced. Failure to do so can result in a failing grade and other possible sanctions. See College of Earth, Mineral and Sciences Academic Integrity and Research Ethics [31].

After all parts of the Case Study are submitted, each member of the team will complete a team assessment survey of individual contributions by each team member.

Individual scores for the Case Study will be calculated as Team Score x Average Team Assessment of Contribution.

  • this is me
  • did not contribute (0%)
  • did very little to contribute (50%)
  • did far less than fair share (80%)
  • did less than fair share (90%)
  • did around fair share (100%)
  • did more than fair share (110%)
  • did MUCH more than fair share (120%)

See Canvas for complete assignment description. See the rubric for grading, and the Canvas or Google Calendar for due dates.

Depending on your level of contribution to the Case Study, your individual score may be the same as the Team Score, or it may be lower or higher (not to exceed 100 points).

The Team Case Study is worth 30% of your course grade.


If you have questions, please post to the "Questions about EME 444?" Discussion Forum. I'll be happy to help you!


Source URL: https://www.e-education.psu.edu/eme444/node/198

Links
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