Energy Policy: Technologies, Systems, and Markets

IGA-410 Syllabus

Energy Policy: Technologies, Systems, and Markets

Henry Lee

Fall 2014

M/W 4:10 – 5:30, L140

Review Classes: Friday 11:40-1:00, L130

IGA-410 introduces students to the design, implementation and assessment of energy policy from the United States and global perspective. Energy influences every facet of our economic and social fabric, affecting international security, economic development, and human health. This course covers a wide range of topics, including oil and natural gas, coal, electricity policy, renewable energy, nuclear power, energy efficiency, and climate change. It also introduces students to the basic tools used to analyze and assess energy options. The course’s purpose is to expose students to the fundamental factors that drive energy markets, the causes of market failures, and how government interaction can mitigate those failures. It also addresses the political context, both domestic and international, where government energy policies are designed and implemented.

The syllabus briefly describes each class, assigns the required readings, and lists additional readings that are optional. While most of the early classes will be lectures, to ensure that students understand the fundamentals of energy markets, many of the classes during the second half of the course will be case or issue discussions. Students will be expected to participate in these discussions. There will be three short take home assignments that will provide students an opportunity to 1) use the analytical skills covered in class, and 2) assess specific energy policy issues. Students will also be required to write two short memos on topics related to class discussions.

Requirements for Master’s students are are: 1) Threetake home assignments (30 points), 2) Two policy memos (20 points),3) Class participation (10 points), and 4) Final exam (40 points).The class will be divided into three sections and each section will be assigned two policy memos - assignment details will be handed out in class.All assignments will be submitted as hardcopies in the drop box outside Professor Lee’s office, Belfer 302. All course readings are available on the course website. Requirements for doctoral students are the same with the exception that they will be expected to write a 25-30 page paper in lieu of a final take-home. I will hand out two paper topics in October and students will be asked to select one.

This course will require students to apply basic microeconomic concepts and will cover methodologies that will allow students to quantitatively assess and compose energy options. While no prerequisites are required, familiarity with microeconomic concepts will be helpful.

The class size is limited by the number of seats in the classroom.

Henry Lee will hold office hours on Wednesdays, 2:00pm – 3:00pm and Thursdays, 10:30am – 11:30am. Course assistants’ office hours will be posted in early September.

Review room: Friday at 11:40am in L130

Henry Lee, Belfer 302, 617-495-1350,

Faculty Assistant, Natalie Rios, Belfer 302, 617-495-8850,

Teaching Fellow, Trisha Shrum,

Course Assistant,

Class #DateDayTopic

19/5FRIMotivation, Organization, Introduction to the Issues

Aims and structure of the course; links between energy and important dimensions of human well-being: energy & economy (development, growth, jobs, trade); energy & environment; energy & international security; survey of tools and approaches for the study of energy issues.

Reading:

(R = REQUIRED, O = OPTIONAL; assignments to be read before the indicated class):

R: GEA, 2012: Global Energy Assessment – Toward a Sustainable Future, Cambridge University Press, 2012, Chapter 1, p. 103-140

29/8MONThe Economics of Energy Supply and Demand

Will review demands on capital and labor, patterns of energy use, elasticity, tariff setting, and trade impacts; introduction to market failures (excessive concentration of market power, lack of information, externalities, public goods,and inequality). This class aims to familiarize students with the basic economic concepts that we will use to assess the effectiveness of energy policies in subsequent classes.

Reading:

R: Tom Tietenberg, Environment and Natural Resource Economics, Addison Wesley, sixth edition, 2003, pp. 151-165.

R: Global Energy Assessment – Towards a Sustainable Future – Cambridge University Press, 2012, ch. 6.1-6.5, p. 389-407,

39/10WEDWorld Oil & Gas Markets I

Where oil and gas resources and reserves are found, the economics of oil exploration, production and refining, how oil and gas markets work, and the politics of oil and gas, both domestic and international. Political and security implications of world patterns of oil and gas supply and demand.

Reading:

R: Leonardo Maugeri, Beyond the Age of Oil: The Myths, Realities, and Future of Fossil Fuels and Their Alternatives, (2012) pp. 3-36.

R: Ian W.H. Parry and Joel Darmstadler, “The Cost of U.S. Oil Dependency”,Resources for the Future, Nov. 2004, prepared for the National Commission on Energy Policy,

R: William Leffler, Petroleum Refining for the Non-Technical Person (PennWell, 1979) Chapters 2 & 3 pp. 3-25.

O: Suzanne Maloney “Energy Security in the Persian Gulf: Opportunities and Challenges” in Carlos Pascual and Jonathan Elkind, ed. Energy Security (Brookings Press, 2010) p.37-58.

49/15MONNatural Gas Markets

This class will introduce students to how natural gas markets work. Students will be introduced to both domestic and international markets including pipeline gas, LNG, as well as shale gas.

Reading:

R: National Petroleum Council, Hard Truths: Facing the Hard Truths about Energy, July 2007, Chapter 2: Energy Supply, pp. 131-170,

R: David Rotman, “Natural Gas Changes the Energy Map” MIT Technology Review, November 1, 2009,

R: Pietro Nivola, “Making Sense of Energy Independence” in Carlos Pascual and Jonathan Elkind, ed. Energy Security (Brookings Press, 2010) pp. 105-118.

59/17WEDThe Shale Revolution – Will it Change the Energy Security paradigm?

This class will discuss the implications of shale oil and gas resources in the U.S. Will the U.S. become a net exporter of both oil and gas? Is this revolution exportable to other parts of the world?

Reading:

R: Leonardo Maugeri, “The Shale Oil Boom: A U.S. Phenomenon” (Belfer Center for Science and International Affairs, June 2013),

R: Philipp M. Richter, From Boom to Bust: A Critical Look at US Shale Gas Projections, German Institute for Economic Research DIW Berlin, 2013,

69/22MONOil and Gas in the Developing World

(Guest Speaker: Francisco Monaldi)

Reading:

R: Naazneen Barma et al, Rents to riches? : the political economy of natural resource led development (World Bank, 2012) pp. 1-30,

R: Noel Maurer and Aldo Musacchio, “Pemex (A): In a Free Fall?” and “Pemex (B): The Rebound”, December 2012. HBS Case 9-713-051.

Take Home Assignment 1 due 9/30by 2PM

79/24WEDCoal: Supply, Demand, and Pollution Abatement Options

Coal is the most plentiful energy resource in the US, China and India, but it is also among the most carbon-intensive. Class will cover supply and consumption patterns, environmental effects, liquefaction, and carbon capture sequestration technologies.

Reading:

R: MIT Interdisciplinary Study, “Future of Coal”, MIT, 2007, Executive Summary, Chapter 2 and 3,

R: J. Fellows, “Dirty Coal, Clean Future,” (Atlantic, Dec. 2010),

R: U.S. Environmental Protection Agency, "Air Pollution and Health Risk." June 6, 2007 Web.

R: U.S. Environmental Protection Agency, "Pollutants in the Ambient Air." January 29, 2010Web.

89/29MONClimate Change: Science and Impacts

(Guest Speaker: Daniel Schrag)

The science of energy-related global climate-change and climate-change impacts; strategies for reducing the risks of energy-related climate change; the IPCC Report and the implications of recent scientific studies.

Reading:

R: Daniel P. Schrag, “Confronting the Climate-Energy Challenge,” Elements, June 2007, pp 171-178,

R: Noah S. Diffenbaugh and Christopher B. Field, Changes in Ecologically Critical Terrestrial Climate Conditions, Science 2 August 2013: Vol. 341 no. 6145 pp. 486-492 DOI: 10.1126/science.1237123,

910/1WEDPolicies to Address Climate Change

This class will discuss domestic policy options to address climate change including carbon tax, cap and trade and compulsory regulation of power plants.

Reading:

R: Ian Parry, Fiscal instruments for Climate Finance (in Handbook on Energy and Climate Change) Roger Fouquet (2013), p. 377-402.

R: Ted Nordhaus & Michael Shellenberg, “Apocalypse Fatigue: Losing the Public Climate on Climate Change” Environment 360, Nov. 16, 2009,

1010/6MONChina I

China is the fastest growing economy in the world. This class will focus on China’s energy use and the driving force that shapes its energy policies.

Reading:

R: Fredrich Kahrl, et al., Challenges to China's transition to a low carbon electricity system, Energy Policy, Volume 39, Issue 7, July 2011, Pages 4032–4041,

R: Damien Ma, China Answers the Call for Rebalancing in the Next Decade, The Atlantic, March 17, 2011,

O: Yuyu Chen, et al., Evidence on the impact of sustained exposure to air pollution on life expectancy from China’s Huai River policy, doi: 10.1073/pnas.1300018110, PNAS July 8, 2013,

1110/8WEDCHINA II

This class will continue the discussion on China’s energy policy – focusing on options for reducing the growth in coal consumption, mitigating urban air pollution, and improving long term energy security.

Reading:

R: China Energy Research Institute, China Energy Outlook 2013, Executive Summary, p. 19-46,

R: Richard Lester and Edward Steinfeld, China’s Real Energy Crisis, Harvard Asia Pacific Review, Vol. 9, November 2007.

Monday, October 13 – Columbus Day – No Class

1210/15WEDPolicy Discussion – Climate Change

This class will address two issues: Should Harvard divest its shares in energy companies producing fossil fuels? ShouldPresident Obama approve the Keystone XL Pipeline? The class will be a discussion of the two issues that have become policy battlegrounds in the climate debate.

Reading:

R: Bill McKibben, Global Warming’s Terrifying New Math, Rolling Stone, July 19, 2012,

R: Congressional Research Service: Keystone XL Pipeline Project: Key Issues, p. 5-34, May 7 2013,

R: Michael Shear and Jackie Calmes, Obama Says He’ll Evaluate Pipeline Project Depending on Pollution, NY Times, July 27, 2013,

R: Elana Schor, Are Environmentalists Getting It Wrong on the Keystone XL Pipeline?, Atlantic, Feb. 15, 2013,

O: William Nordhaus, “A question of Balance: Weighing the Options of Global Warming Policy” (Yale University Press 2008) pp. 1-29.

1310/20MONCost Comparison Methodologies & Energy Finance

Methodologies for evaluating and comparing the costs of energy projects. This class will provide the analytical methods for comparing different electricity generation options and sets the stage for the classes on electricity options that follow. If time permits, students will be introduced to some of the fundamentals of energy finance.

Reading:

R: Robert S. Pindyck, Microeconomics [7th edition], Upper Saddle River: Prentice Hall, 2009. "Investment, Time, and Capital Markets," pp. 573-577.

R: Congressional Budget Office, “The Economics of Climate Change: A Primer,” US Congress, Washington, DC. April 2003, pp. 23-34.

R: Edith Stokey and Richard Zeckhauser, A Primer for Policy Analysis, Norton, Chapter 10, pp. 159-176.

1410/22WEDElectricity Policy I

The economics of electricity markets and their component parts, models for competitive pricing at the wholesale and retail level, transmission pricing and sitting, and the new role for regulation.

Reading:

R: Timothy Brennan, et. al. Alternating Currents: Electricity Markets and Public Policy, Washington DC: Resources for the Future, 2002, pp. 1-12, 33-45, 81-91.

R: Paul Joskow, “Markets for Power in the United States”, The Energy Journal, 2006, vol. 27, no 1, pp. 1-36,

R: United States Department of Energy, “Electricity 101”,

Videos:

How Electricity Works (20 minutes)

Working of a Coal Fuel Power Plant (4 minutes)

Take Home Assignment 2 due 10/29 by 2 PM

1510/27MONElectricity Policy II

This class will introduce students to electricity market reforms, including transmission and generation.

R: Case on NY Transmission – The New York Independent System Operation (A): Wholesale Energy and Capacity Markets.

R: William Hogan, A Competitive Electricity Market Model, Harvard Electricity Policy Group, October 9, 1993,

1610/29WEDElectricity Policy III

This class will focus on the California electricity crisis. What went wrong and what could California officials have done differently? What lessons can one take away from the restructuring reforms that swept the globe in the late 90s and early part of the last decade?

Reading:

R: “Disaster by Design: California’s Experience with Electricity Restructuring“, HKS Case Study A & B, CR 14-01 1632, CR 14-01 1633.

O: Paul Joskow, “Lessons Learned from Electricity Market Liberalization,” Energy Journal: Special Issue on the Future of Electricity 2008, pp. 9-42,

1711/3MONRenewable Energy – An Overview

This class starts a three class segment on renewable energy with an overview of key renewable technologies, including wind, solar, biomass and geothermal energy. The subsequent two classes will explore the policy challenges confronting wind and solar energy options.

Reading:

R: Judith Lipp, “Lessons for Effective Renewable Electricity Policy from Denmark, Germany and the United Kingdom” Energy Policy, Vol. 35, No. 11, pp. 5481-5495, 2007,

R: David J.C. Mackey, Sustainable Energy – Without the Hot Air, UIT Cambridge, 2009:

pp. 22-28:

pp. 38-49:

pp. 50:

pp. 81-87: l

pp. 88:

pp. 186-201:

R: John Decicco, Why Pushing Alternate Fuels Makes for Bad Public Policy, Environment 360, 22 Aug 2013,

1811/5WEDRenewable Energy – Policy Options

This class will look at the strengths and weaknesses of various policies to promote solar energy options—including feed-in tariffs and renewable portfolio standards.

Reading:

R: Leah Stokes and Henry Lee, Feed-In Tariffs: The Experience of the Gainesville Regional Utility.

R: National Journal, April 25, 2009 “What Exactly is a Feed- In Tariff?” pp. 36-37,

O: Summary of Bingaman Discussion Draft – Renewable Portfolio Standard, January 2009,

1911/10MONRenewable Energy – Wind

Class will discuss the economic and institutional factors affecting greater penetration of wind power in the US. Specifically it will focus on the nine year debate over the development of a wind farm off the coast of Cape Cod.

Reading:

R: Richard Vietor: Cape Wind: Offshore Wind Energy in the USA: HBS case 9-708-022.

R: How a Wind Turbine Works -

R: David J.C. Mackey, Sustainable Energy – Without the Hot Air, UIT Cambridge, 2009:

pp. 32-34 pp. 60-67 pp. 263-268

pp. 269

R: Leonardo Maugeri, Beyond the age of oil: the myths, realities, and future of fossil fuels and their alternatives (Praeger, 2010) Ch. 8, pp. 141-154.

R. Boaz Moselle, “Renewable Generation and Security of Supply”, Harnessing Renewable Energy in Electric Power Systems, pp. 51-68.

2011/12WEDNuclear Technologies

(Guest Speaker: Matthew Bunn)

This class will focus on nuclear power - its potential and the risks inherent in expanding its development.

Reading:

R: How a Nuclear Power Plant Works -

R: WEA, 2000, Chapter 8, section on “Advanced nuclear energy technologies,” pp. 306-318

R: Keystone Center, Nuclear Power Joint Fact-Finding, 2007, Executive Summary, pp. 9-18,

R: Matthew Bunn, “Managing Risks From a Nuclear Energy Revival,” presentation, January 2009,

O: President’s Committee of Advisors on Science and Technology, “Nuclear Energy: Fission and Fusion,” chapter 5 in Federal Energy Research and Development for the Challenges of the 21st Century, Executive Office of the President of the United States, November 1997, pp. 5-1 to 5-24,

Readings suggested by Matt:

R: How a Nuclear Power Plant Works -

R: Read this summary and review of the film "Pandora's Promise"

R: "Hold on a moment" perspective (critiquing the film "Pandora's Promise," from different perspectives: or

R: Bunn, "Making Nuclear Energy Suitable for More of the World's Energy Supply: Issues and Prospects" (Dec. 2010)

Take Home Assignment 3 due 11/19 by 2 PM

2111/17MONEnergy Technology and Innovation

(Guest Speaker: Laura Diaz Anadon)

This class will examine the innovation process that takes energy technologies from invention to commercialization. It will focus specifically on the institutions and policies that are critical to the development of a new menu of energy technologies.

Reading:

R: Venkatesh Narayanamurti, Laura Anadon and Ambuj Sagar, “Institutions for Energy Innovation: A transformational Challenge” (Belfer Center for Science and International Affairs, Harvard University 2009),

R: K.S. Gallagher, J.P. Holdren and Ambuj Sagar —“Energy-Technology Innovation“ in the Annual Review of Environmental Resources, 31 (2006) pp. 193-237,

2211/19WEDEnergy Technology Innovation II

This class will look at the factors contributing to technological innovation in context of the problems facing 1366 Technologies, a local solar startup company.

Reading:

R: Joseph Lassiter, et.al “1366 Technologies” Harvard Business School 9-810-005 (Cambridge, Mass, 2010).

R: Venkatesh Narayanamurti, et al. Transforming the Energy Economy: Options for Accelerating the Commercialization of Advanced Energy Technologies. Energy Technology Innovation Policy research group, Belfer Center for Science and International Affairs, Harvard Kennedy School, February 2011,

2311/24MONIncreased Energy Efficiency

This class will look at increasing energy efficiency – both in buildings and motorvehicles.

Reading:

R: Global Energy Assessment, 2013, IIASA, p. 657-670 and p 722-744 (chapter 10.1 and 10.8),

R: Transportation Research, Policy Options for Reducing Energy Use and Greenhouse Gas Emissions from U.S. Transportation (Washington, DC, 2011) chapter 5 p. 149-194,

Thanksgiving Break – No Wednesday Class

2412/1MONCountry Study 1: Japan: Post Fukushima

In 2010, Japan experienced a meltdown at 4 nuclear power plants at Fukushima. The disaster and the subsequent public outcry resulted in the shutdown of all 52 of Japan’s nuclear reactors, forcing the country to diametrically increase its imports of coal and oil. Both energy prices and carbon emissions have risen significantly.

Reading:

R: Nagatomi, Yu et al, “Short-term Energy Supply and Demand Outlook,” Institute for Energy Economics, Japan, July 3, 2012,

R: “Innovative Strategy for Energy and the Environment,” the Energy and Environment Council, Government of Japan, September 14, 2012,

2512/3 WEDCountry Study 2: Energy in Developing Countries

This class will focus on the energy problems confronting poor developing countries. It will use the case of Liberia to discuss the challenges of attracting investments in an electricity system.

Reading:

R: Akash Deep and Henry Lee: Buchanan Renewables: Bringing Power to Liberia, Case 171813.

R: John E. Besant-Jones, “Reforming Power Markets in Developing Countries: What Have We Learned?” Energy and Mining Sector Board Discussion Paper, no. 19, The World Bank, September 2006, pp.1-8, 21-36,

Final Exam Due 5pm on December 10