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Sean Casten's Posts

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District energy 101

In the fall of 2003, I was at a barbeque in Vermont with a friend and former (Clinton-era) DOE official. The northeast blackout that August was still in the news, and I asked him whether he anticipated that it would lead to any policy reforms. His response was that during his tenure in D.C., the biggest challenge to smart energy policy was that with very rare exceptions, energy has never been an electoral issue. Those who seek elected office therefore find themselves personally disadvantaged if they allocate their limited educational time to understanding the nuances of our energy policy -- …

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Electricity markets are weird: why a carbon price isn't enough

If power companies have to pay for their CO2 emissions, what will happen to the price of electricity? The answer isn't as obvious as you think. The linkage between costs and prices -- increase the first and you raise in the second -- is predicated on the notion of efficient markets. Yet it would be hard to find a market less efficient and more distorted than the U.S. electric sector, which is responsible for over 40 percent of America's CO2 emissions. If we want to use a price on CO2 to drive changes in energy use, we better start with …

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Me, in the movie 'Carbon Nation'

For those of you who missed my big screen debut last night in Millennium Park, it's safe to say you missed the opportunity of a lifetime. In the sense that the odds I'll have future film credits are pretty slim.  Nonetheless, the movie (Carbon Nation) is worth watching/renting and the footage they got of me is actually pretty good. I say that with all due modesty -- 2 hours of video edited down to a 1'27" solid clip tells you all you need to know about my telegenicity! For those wondering, the industrial footage is of a silicon manufacturer in …

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Why 'clean coal' will never, ever matter

Carbon capture and sequestration (CCS) -- the "clean" in "clean coal" -- will never play a significant role in any future that puts a market price on carbon pollution. Yes, we have to reduce CO2 emissions, and yes, we'll have to pursue every plausible path to that goal. It's just that there are no plausible futures where CCS is economically viable. CCS proponents will argue that (a) it may be expensive now, but with R&D its price will come down and (b) since coal plays such a significant role in our electric system today, coal with CCS simply must play …

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As energy use goes, so goes the economy

It's fairly well-known that economic activity tends to track energy use. It follows that we can learn some interesting things about the economy by examining trends in energy use. For example: the Energy Department's Energy Information Administration (EIA) tracks electricity sales, and its data holds intriguing -- and troubling -- clues on the prospects for growth in the U.S. economy. In the U.S., electricity sales grow at a steady 1-2 percent rate per year, with occasional troughs mapping to slowdowns in economic activity. Note the dips during the S&L crisis in the early '80s, the first Gulf War in the …

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Clean energy: It’s not about the technology

Suppose two factories produce and sell identical widgets at $1 each. Now, suppose a law is passed to provide one of those factories with $9 of additional revenue per widget. Clearly, this is law will distort markets. The $10 widget manufacturer will attract more investors and it will lobby hard to preserve that law. Meanwhile, the $1 manufacturer will struggle. If it survives, it will be through cost control and niche markets. After a few years of this, the $1 manufacturer may well have the better product, given their focus and discipline, while the $10 manufacturer will likely have the …

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Coal-fired power was the big loser in the economic downturn

There's some interesting new data out on recent shifts in electricity demand and consumption, courtesy of the DOE/EIA. In 2008, total U.S. power generation was 4.1 million GWh. In 2009, that fell by 4 percent, to 3.9 million. That's a 4 percent reduction -- clearly the result of the economic slowdown. Nothing surprising there. What's interesting, though, is how generation shifted by fuel type. Over the same year, coal-fired power generation fell by 11 percent, from almost 2 million GWh to just under 1.8 million. US electricity generation, 2008-09Source: EIA Annual Carbon report, 2010 Enough numbers. The point is, generation …

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Prices vs. contracts: Why good CO2 policy needs complex financial markets

Economic theory is predicated on the thesis that if supply and demand are allowed to freely set the price for a given item, rational capital allocation (and a host of other social benefits) will follow.  Much of public policy is predicated on the truth of that thsis. But there's a problem with the thesis: price alone isn't sufficient. A market that provides nothing more than a spot price for a given commodity is only a market in name. To have a real market of the kind that brings about all the good things that economic theory describes, we need a …

Read more: Climate & Energy, Food

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Cap-and-dividend: the worst possible way to regulate GHG emissions

Cap-and-dividend stinks. There are probably worse ways to regulate GHG emissions, but none that have gotten any kind of traction inside the beltway. Its advocates -- in particular, Peter Barnes and Sen. Maria Cantwell (D-Wash.) -- are, so far as I can tell, truly motivated to find good policy solutions. I don't know either of them personally, but I'm pretty sure I share their motivations, which makes me somewhat uncomfortable setting the time aside to criticize their ideas. But the ideas are really flawed. I have generally found that advocates of cap-and-dividend are like advocates of perfect markets: the model …

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ComEd offers Illinois $500M in exchange for guaranteed profits

The gaul of this is hard to put to words. Commonwealth Edison, one of Illinois' regulated utilities is seeking to take advantage of the state's budget crisis by offering the state $500 million in exchange for a guarantee of the utility's future profits. If there's a better case to be made that a regulated utility isn't a business in any normal sense of the word, I haven't found it. As a regulated monopoly, ComEd doesn't get exposed to much in the way of competition, and as long as they can get regulators to declare that their capital investments are prudent, …