Energy paper

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Type	Environmental Impact	Extraction Difficulty	Main benefit of use	Main drawback of use
Renewables
Hydroelectric power	Low-Medium	Easy (as long as water is available)	Clean from an emissions viewpoint; cost effective	Harms fish habitat and ecosystems
Wind	Low-medium	Becoming easier as technology improves	Clean, becoming cost effective	Externalities (noise pollution, aesthetics, bird migration interruption)
Photovoltaics (solar)	Low	Research has made it more effective	Clean, widely available for a variety of uses	Don’t have sun all the time
Biofuels	Medium	Trade-off b/w food and fuel	Cleaner than non-renewables and abundant	Still emits greenhouse gases; may impact food supplies and costs
Geothermal	Low	Have to have a temp of 220 to generate electricity	Cleaner	Costly
Hydrogen	Medium	Must separate hydrogen from other elements	Cleaner fuel source, by product is water	Often extracted from natural gas, methanol or gasoline; expensive

· The Clean Power Plan (CPP) and Renewable Portfolio Standards (RPS) have increased demand for wind and solar

· Tax credits are also incentivizing the upward trend

· Most solar is coming from utility scale installations!

Hydroelectric Power · Currently, most power generated by water is done so by dams and the kinetic energy of water release · There might be a way to capture tidal power (listen to NPR segment) NPR Story on November 15, 2017: https :// www.npr.org/2017/11/15/562900887/oceans-may-host-next-wave-of-renewable-energy
Wind Power · Land-based wind energy potential for contiguous US is 10,500 gigawatt capacity at 80 meters and 12,000 GW at 100 meters · Off-shore not as easily qualified because the ocean must be a certain depth and the wind at 80-100 meters must be significant · Wind is profitable if you have wind! · Externalities: It is a bit unsightly, loud and disturbs bird migration patterns (kills an estimated 140,000 to 328,000 birds each year in North America) · Retrofits are trying to fix this problem
	Solar power Gainesville used to be a leader in solar due to a “Feed-in-tariff (FIT) Program” where customers could sell their energy directly to GRU under a 20 year fixed price contract this served to increase demand in Solar locally and put GNV on the solar map Reported by John Farrell on January 8, 2012: http://grist.org/solar-power/2012-01-06-gainesville-florida-becomes-a-world-leader-in-solar/
Biofuels · Most energy from biofuel is used in transportation · Renewable fuel standard law (2005): Mandates production of 36 billion of gallons of biofuels by 2022. · Supported by $0.45 subsidy for each gallon of ethanol that is blended with gasoline (higher for cellulosic biofuels) Economic considerations: · Energy balance – How much energy do we get out from each unit of energy put in? For ethanol from corn it is ~ 1.3 · Land use – Higher crop prices influence land conversion rates and increase prices for other food crops · External costs – Water pollution from agriculture as well as groundwater use and air pollution from processing

Geographic variation is an important consideration:

Primary reasons renewables are a small % of energy produced:

· Cost of fossil fuel has remained relatively low (especially natural gas in recent years)

· External costs of conventional energy are not fully internalized

· Subsidies for conventional energy persist both directly (tax breaks for investments in new wells) and indirectly (spending on infrastructure)

· The best time and place for generating wind and solar energy does not often match demand

· Transmission infrastructure and energy storage technologies are not sufficient

Policy options for increasing renewable energy:

· Carbon pricing: tax or cap and trade (arguably the best option because it correctly aligns incentives and doesn’t require policy makers to pick winner)

· Production subsidies: feed-in tariffs, net metering, production tax credits, construction tax credits

· Research subsidies: for alternative energy

· Renewable portfolio standards: require producers to generate a specific % of energy from renewables

Energy efficiency vs. energy conservation

· Energy efficiency is a measure of the quantity of energy services provided per unit of energy input

· Energy conservation requires a reduction in the total amount of energy consumed

· It is possible to get one without the other (e.g. improve efficiency but still use more energy)

Energy efficiency vs. economic efficiency

· Economic efficiency involves maximizing net social benefits

· Maximizing energy efficiency typically is not economically efficient because energy efficiency is costly

· Bigger question is whether energy efficiency decisions that households and firms make are economically efficient

Energy efficiency gap: difference between what is economically efficient and actual choices of consumers

· Suppose a CFL bulb will save $10 next year compared to an incandescent bulb, but a consumer is only willing to pay at most $5 extra today for the CFL

· This is not economically efficient unless the consumer has another investment opportunity that offers a larger return

Explanations for why consumer might have low WTP for energy efficient technologies:

· Differences in perceived performance between conventional and efficient technology (e.g. belief that cfls do not provide the same quality of light as incandescent bulbs)

· Differing expectations of future energy prices

· Market failure or “behavioral failure”

Electricity conservation

· Electricity is priced like water, at average cost rather than at marginal costs leading to over-use.

· Government encourages investments in low electricity using items (Bush put in effect the requirement to use high efficiency bulbs).

· Sometimes utilities implement peak-load pricing during peak times to impose a higher cost to consumers on using it.

· Deregulation of electricity has been suggested to remove “regulated monopolies.”