Meeting #1-2007: (Thursday, May 17, 2007, at the Federal Energy Regulatory Commission)
Directions to FERC, 9:30-4:30)
Agenda: Everything Capacity Market Design,

Opening remarks:  Richard O’Neill, FERC, The need for mandatory capacity markets

David Mead, FERC, Capacity market developments

Peter Cramton, University of Maryland, Markets for Resource Adequacy (February 2007, May 2007)

Benjamin Hobbs, The Johns Hopkins University, The PJM Reliability Pricing Model: Summary and Dynamic Simulation to Support Design

Fred Murphy, Temple University, On the Impact of Forward Markets on Investment in Oligopolistic Markets with Reference to Electricity part 1: deterministic demand , part 2: uncertain demand

Fernando Oliveira, University of Warwick, A Reinforcement Learning Algorithm for Agent-Based Modeling of Investment in Electricity Markets

Alfredo Garcia, University of Virginia, Investment Dynamics in Electricity Markets (April, 2007, May 2007)

This meeting is meant to be a "sleeves rolled-up" session on what questions to ask about electricity capacity markets, and how they might be addressed by models.  For instance:

What is the purpose of payments for capacity? 

What mechanisms are most efficient in achieving capacity adequacy goals? 

What distortions in investment decisions (e.g., generation mix) might result? 

Can efficient incentives be provided for demand response/energy efficiency? 

Does the presence of market power change any of these conclusions?

If the purpose is to incent investment, is there any reason why they need to be made to capacity that existed before the payments are initiated? 

If they are paid to preexisting capacity that was built under rate of return regulation, should the payments be made to the current owners or to the regulated LSE that sold it off (and why)?

Meeting #2-2007

Trans-Atlantic Infrastructure Conference, Riggs Alumni Center, University of Maryland, College Park, Maryland, November 2, 2007

Overview
Conference Papers and Presentations

Meeting #1-2006: (Friday, January 27, 2006, at the Federal Energy Regulatory Commission)
Directions to FERC, 9:30-4:30)
Agenda: Everything You Wanted to Know About Natural Gas

Philip Budzik, USDOE EIA, Oil and Gas Division
1) The growth in nonproducing natural gas reserves over the last 18
years, which has reduced the proportion of producing natural gas reserves.
2) The growth in natural gas production which occurred in old gas fields
during the 1990s as a result of wellhead price decontrol, and which helped keep
down prices during the 1990s.
3) The latest EIA natural gas projections.
The materials pertaining to the Annual Energy Outlook 2006 energy projections
presentation can be found at the EIA website at: www.eia.doe.gov/oiaf/aeo/index.html

David Nissen, Columbia University Evolution of Commercial LNG (pdf file)
Industrial Reorganization of the Natural Gas Business

Steve Gabriel, Jifang Zhuang, Ruud Egging, Natural Gas Market Modeling (pdf file)

Neal Elliot, ACEEE and Skip Laitner, USEPA Energy Efficiency's Role in Getting America Out of its Energy Straightjacket (pdf file)

Meeting #2-2006: (Friday, November 3, 2006, at the Federal Energy Regulatory Commission)
Directions to FERC, 9:30-4:00)
Agenda: Emissions Allowance Allocation Systems: Economic Incentives and Modeling

Sam Napolitano, Director Clean Air Markets Division, USEPA, Estimating Future Air Emissions Allowance Values (pdf file)
He will discuss experience with and future directions of conventional pollutant trading in the U.S.

Yves Smeers, CORE, Universite’ Catholique Louvain-la-Neuve, Belgium, The EU-ETS: Observations and thoughts about the first half of the 2005-2007 compliance period (pdf file)

Abstract: The EU-ETS began operations on January 1, 2005. After a brief introduction to the system, we discuss three issues that emerged during the first 18 months of operation. We analyze the evolution of the price of the allowances and relate them to the switching prices between coal and gas. The “windfall profits” of the generators became a subject of intense debate. We summarize the discussion. Finally, we take up the question of the free allocation of allowances and relate it (in an admittedly awkward way) to the crucial issue of investment generation. We present a stylized model of the question.

Ben Hobbs (bhobbs@jhu.edu), The Johns Hopkins University; Yihsu Chen, University of California-Merced; Jong-Shi Pang and Jinye Zhao, Rennselaer Polytechnic , Long Run Power Sector Response to CO2 Allowance Allocation Methods (pdf file)

Abstract: By basing the allocation of CO2 emissions allowance on investment decisions, carbon trading systems (including the EU) risk distorting investments. A long run capacity equilibrium problem is formulated subject to allocation rules, and is analyzed for existence of solutions. Simulations show a potential for large distortions. In particular, if some or all allowances are awarded to new investments in proportion to emission rates, equilibrium generation mixes are altered, increasing costs. If all allowances are given to new investment, in the long run, all allowance rents will be returned to consumers through power prices, but large distortions can occur in generation mixes. A curious result of one set of assumptions is that the total cost to consumers of small or large reductions in CO2 emissions is similar.

Dallas Burtraw (burtraw@rff.org) and Karen Palmer (palmer@rff.org), Resources for the Future, Compensation Rules for Climate Policy in the Electricity Sector (pdf file)

Abstract: Policies to cap emissions of CO2 in the U.S. economy could pose significant costs on the electricity sector, which contributes roughly 40% of total U.S.CO2 emissions. Whether producers or consumers bear the cost of this regulation depends on whether generators are subject to cost-of-service regulation or sell power at market-determined prices. Moreover, the claim for compensation by producers depends on the length of the yardstick used to measure harm. Under one recent and relatively modest proposal, when measured at the facility level, the industry could suffer a loss of $50 billion (1999$). However, many facilities gain value. At the firm level where investors own a portfolio of facilities the loss would sum to $14 billion, while many firms would enjoy a substantial gain in value. Under this proposal the net present value of emission allowances sums to $141 billion. Hence, free distribution to electricity generators of emission allowances needed to cover electricity sector emissions has the potential to substantially over-compensate generators. The initial distribution of a portion of the valuable emission allowances represents a significant potential source of compensation, but it is easy for the compensation to fail to reach those who bear the burden of costs. Free allocation also has substantial efficiency costs, raising the social cost of a policy that already promises to be more expensive than prior air pollution regulations.
In this paper we look for approaches to target the initial distribution of emission allowances in order to maximize the share of allowances available for auction while achieving specified compensation goals. Using a detailed simulation model, we find that if regions or states are assigned emission budgets and apportioned emission allowances, they can achieve full compensation using facility-level information with just 39% of the emission allowances, which leaves a net gain in the industry of $19.5 billion. If allocation remains a federal matter then the goal of achieving compensation is less efficient. Information about firm-level emission rates can be used to fully compensate firms using 65% of emission allowances. This approach leaves a net gain in the industry of $36.7 billion. In the federal context we show that the incremental cost of compensating for the last $2.6 billion in harm spread across 81 firms would be about $62 billion in allowance value. A smaller share of emission allowances would be required if regulators at the state or regional level were to use information about firm-level emission rates, requiring just 32% of emission allowances to be given away for free. This would leave the industry with a net gain of $15 billion.

Meeting #2-2004: (April 16, 2004, at the Federal Energy Regulatory Commission)
Directions to FERC
Full program with abstracts (pdf)

Session #1: Transmission Issues
Kojo Ofori-Atta, ICF Consulting, "Transmission: How Much Should Be Built? What are the Benefits and Costs?" (pdf file)
Kelly Perl, FERC, “Beyond the Ten Principles: Merchant Transmission Policy & Why it Still Matters” (pdf file)
Frank Felder, Rutgers University, “Evaluating Reliability Policies and Incentives for Liberalized Electric Power Systems”
Joseph Cavicchi, Lexecon, “Current Debate on Merchant Transmission Investment Incentive Regimes”

Session #2: Collusive Games in Energy
Joe Harrington, Johns Hopkins University, “Dynamic Theories of Oligopoly” (pdf file)
Steve Gabriel & Debby Minehart, University of Maryland, “Vertical Structure in the Natural Gas Market” (pdf file)

Meeting #3-2004: (November 10, 2004, at the Federal Energy Regulatory Commission)
Directions to FERC
Agenda: ECEG Meeting on Representing Technological Change in Energy/Environment/Economy Models
Summary (pdf)

Speakers and tentative titles:
-Richard Newell, Resources for the Future, "Economics of technological change in the context of energy and environmental policy modeling", www.rff.org/Newell.cfm, pdf file

-Robert Eynon, USDOE EIA, "Capturing Technological Progress in the National Energy Modeling System". For an overview of NEMS, see www.eia.doe.gov/oiaf/aeo/overview/overview.html

-Donald Hanson, Argonne National Laboratory, “Capturing Economy-Wide Policy Effects in a Model with Market Failures” (for a related presentation of his, see www.iaee.org/documents/washington/Skip_Laitner.pdf )

-Bruce Biewald, Synapse Energy, “The Shape of Things to Come: Incorporating Unproven Reserves of Efficiency Savings in Energy Models”. For a summary of his firm's efforts in this area, see www.synapse-energy.com, pdf file

-Neil Elliott, American Council for an Energy Efficient Economy, " Characterization of the Potential for Energy Efficiency", www.aceee.org/conf/04ss/rnemeta.pdf