Energy Policy

Financial and energy security analysis of China's loan-for-oil deals

Article, Refereed Journal
Energy Research & Social Science
Umul Awan, Ehud Ronn

As China's dependence on imported oil has soared in recent years, Chinese concerns about energy security have naturally increased. The Chinese government has encouraged China's National Oil Companies to expand their investments around the world. Some of the high profile cases of state support for these international deals have taken the form of "loan-for-oil" agreements in which Chinese state development banks lend billions of dollars to oil-producing countries at below-market interest rates in exchange for the producers' agreements to sell oil to Chinese oil companies (at future market prices rather than at a fixed price). Some analysts consider the Chinese investments to be an energy security policy. Using standard financial analysis, we show that these agreements cannot reasonably be considered profit-seeking investments by the Chinese. Separately, we also show that only a few of the projects connected to loan-for-oil deals could ameliorate China's fear of future political-military supply interruptions, and even in those cases, China could achieve the same energy security benefit through simpler mechanisms. The loan-for-oil deals implicitly suggest that China does not expect future conflict that might block Chinese access to oil imports.

Research Topic
Energy Policy

Energy, Coercive Diplomacy, and Sanctions

Book Chapter
Hughes, L. and Gholz, E. (2016). Energy, Coercive Diplomacy, and Sanctions. In Thijs Van de Graaf, Benjamin K. Sovacool, Arunabha Ghosh, Florian Kern, and Michael T. Klare (eds.), Palgrave Handbook of the International Political Economy of Energy (pp. 487-504). New York: Palgrave

pAnalysis of energy markets has long focused on the concern that fossil fuels might be used as instruments of coercion. In this chapter we review the state of knowledge on the relationship between energy, coercion, and sanctions. We argue that historical concerns in the major energy importing countries regarding the potential for coercion have largely been largely misguided: the structure of energy markets make it difficult to use the fossil fuels that form the basis of our energy system as instruments of coercion or to enforce changes in target statesrsquo; behavior. We suggest there are nevertheless a number of important questions that remain amenable to further research. First, more research is needed to understand the implications of energy supply chains in which production, transportation, refining, and distribution are no longer handled by the same companies or dominated by the same countries. Second, recent sanctions efforts suggest that oil consumers may gain leverage vis-agrave;-vis producers, yet the effectiveness of sanctions against energy exporters remains poorly understood, including sanctions that target the financial activities that underpin their ability to settle trades in oil and gas. Third, scholars interested in energy could also profitably study the relationship between the energy sector and interest groups politics, both in targeted countries and those seeking to impose costs through the manipulation of energy markets./p

Research Topic
Energy Policy

Retail Competition, Advanced Metering Investments, and Product Differentiation: Evidence from Texas

Book Chapter
Zarnikau, J., and Rai, V. 2016. In F. Sioshansi (Ed.), Future of Utilities - Utilities of the Future: How Technological Innovations in Distributed Energy Resources Will Reshape the Electric Power Sector (1st ed.). London: Elsevier.
Research Topic
Energy Policy

Merit-order effects of renewable energy and price divergence in California’s day-ahead and real-time electricity markets

Article, Refereed Journal
Woo, C.K., Moore, J., Schneiderman, B., Ho, T., Olson, A., Alagappan, L., Chawla, K., Toyama, N., and Zarnikau, J. 2016. Merit-order effects of renewable energy and price divergence in California’s day-ahead and real-time electricity markets. Energy Policy, 92, 299-312. doi:10.1016/j.enpol.2016.02.023

pWe answer two policy questions: (1) what are the estimated merit-order effects of renewable energy in the California Independent System Operatorrsquo;s (CAISOrsquo;s) day-ahead market (DAM) and real-time market (RTM)? and (2) what causes the hourly DAM and RTM prices to systematically diverge? The first question is timely and relevant because if the merit-order effect estimates are small, Californiarsquo;s renewable energy development is of limited help in cutting electricity consumersrsquo; bills but also has a lesser adverse impact on the statersquo;s investment incentive for natural-gas-fired generation. The second question is related to the efficient market hypothesis under which the hourly RTM and DAM prices tend to converge. Using a sample of about 21,000 hourly observations of CAISO market prices and their fundamental drivers during 12/12/2012ndash;04/30/2015, we document statistically significant estimates (emp/em-valuele;0.01) for the DAM and RTM merit-order effects. This finding lends support to Californiarsquo;s adopted procurement process to provide sufficient investment incentives for natural-gas-fired generation. We document that the RTM-DAM price divergence partly depends on the CASIOrsquo;s day-ahead forecast errors for system loads and renewable energy. This finding suggests that improving the performance of the CAISOrsquo;s day-ahead forecasts can enhance trading efficiency in Californiarsquo;s DAM and RTM electricity markets./p

Research Topic
Energy Policy

The Identification of Peak Period Impacts When a TMY Weather File Is Used in Building Energy Use Simulation

Book Chapter
Zarnikau, J. and Zhu, S. 2016. The Identification of Peak Period Impacts When a TMY Weather File Is Used in Building Energy Use Simulation. In P. Samuel (Ed.), Meteorology and Energy Security, Simulations, Projections, and Management. Boca Raton, FL: CRC Press
Research Topic
Energy Policy

Who regulates it? Water policy and hydraulic fracturing in Texas

Article, Refereed Journal
Texas Water Journal 6.1 (2015): 67–78.

pHydraulic fracturing, the injection of a pressurized fluid mixture of mostly water, sand and a small amount of chemicals (frac fluids), increases extraction rates and recovery of oil or gas. The technique has become increasingly popular when used in combination with horizontal drilling, especially in Texas shale formations. Hydraulic fracturing often requires thousands of cubic meters of water per well. Access to water might be challenging due to water scarcity, allocation policies, price, location, and competition for water. In this policy analysis, we conducted a detailed bottom-up survey for each groundwater conservation district to catalog and assess the prevailing policies and practices related to water and hydraulic fracturing, focusing on the ways in which the State of Texas regulates the use of fresh and non-freshwater for hydraulic fracturing. We find that policies are inconsistent statewide with great variability from district to district in regulations and potential solutions to the challenge of freshwater use. From this analysis, we provide information on the practice of hydraulic fracturing and examine strategies for reducing freshwater use through recycling and use of non-freshwater. In this report, we present the current water policy framework and alternative solutions./p

Research Topic
Energy Policy
Subscribe to Energy Policy