Energy Policy ID Midterm

Question 1

Command and Control

Answer 1

“Rule making,” traditional style of regulation, not market based, think of the sticks in Carrots and Sticks
Pros: relatively straight forward, appropriate for some pollutants (like plutonium and mercury)
Cons: requires strong monitoring, difficult to anticipate methods of cheating, fines have to be appropriate, and politically unpopular

Question 2

REPS

Answer 2

Renewable Energy Portfolio Standard- percentage of energy that comes from renewable energy sources, regulated on state level and different for each state, updated only when state legislature feels is necessary and often not very aggressive
Arizona has a 15% by 2025, Hawaii is the only state to have a 100% by 2045

Question 3

Price Anderson Nuclear Indemnity Act 1957

Answer 3

Category 2C subsidy (services provided at beneficial rates), Sets up a structure for owners of nuclear reactors to purchase insurance, owners only have to purchase insurance for the first $300 million, anything between $300 million-$12 billion are funded by private risk pool funding, anything over $12 billion tax payers pay
Tricky because it can either be a huge subsidy or an invisible subsidy, only expensive when there is a nuclear meltdown of some sort, shows how policy can account for a weakness in the market

Question 4

Stakeholder

Answer 4

Someone with an invested interest in something whether it is positive or negative, stakeholders have a say in each part of the Public Policy Process: problem identification, policy formulation, policy adoption, policy implementation, and policy evaluation
Examples of stakeholders of energy: FirstSolar, Exon Mobile, TransCanada

Question 5

NGO’s

Answer 5

Non-Governmental Organization- organization independent of government and the private industry, often non-profit
Three types of NGO’s related to energy issues
1. Industry related- deal directly with energy issues, ex. Rocky Mountain Institute
2. Environmental- deals with environmental damages or benefits of the energy industry, ex. Sierra Club
3. Other- dealing with other issues but touches on energy policy

Question 6

EERS

Answer 6

Energy Efficiency Resource Standard- state utilities have to meet certain percentage of efficiency, establishes specific long-term targets for energy saving administrators must meet through customer energy efficiency programs, can be adopted through either legislation or regulation depending on state, similar to RES and RPS

Question 7

Building Codes

Answer 7

Sets minimum standard for energy efficiency, no federal level building code only state level, deals with mechanical systems, AZ does not have a statewide building code, most important determinant of energy use in the US (excluding transportation, buildings account for 75% of energy usage)
International Code Council (ICC)- makes codes every 3 years, differences between codes are large (ICC 2006–>2012 has a 30% difference in efficiency), not all states automatically adopt newest code, code is not easily available to the public nor is it heavily enforced

Question 8

DOE

Answer 8

Department of Energy- two main jobs: managing US nuclear stock pile and performing research
Special loans: category 2C subsidiary, services provided at beneficial rates, government willing to provide these services cheaper than anywhere else
Currently run by Rick Perry, former governor of Texas who has plenty of history and experience within the oil industry

Question 9

Net Metering

Answer 9

Selling energy made by consumers back into the grid bought by utilities at a fair market price around retail rate, goal is to incentivize distributed generation (primarily through solar, especially in AZ), undermines how utilities build and set things and utilities argue that people with solar panels cause cost shifting, also defeats the purpose of utility companies, AZ discontinued net metering

Question 10

The Revolving Door

Answer 10

When someone moves from the private sector to an influential government position or vise versa, happens a lot in regulating bodies and their respective industries in energy because they want expertise
Pro- the industries/government get an expert in the field
Con- regulatory capture, fear of corruption and not working for the best of the public interests but the best of personal or company interest

Question 11

Arizona Corporation Commission

Answer 11

5 members that are elected (different than any other state where they are appointed) with 4 year staggered terms, regulate utilities, sets utility rates, gives approval for new power plants to be built, only covers investor owned utilities (so does not cover Salt River Project or anything on Tribal Lands)

Question 12

Congressional Committees

Answer 12

A group with members from Congress which deal with specific issues, sub-committees and committees mostly draft laws, this is almost all bills die, first stage for any legislation, significant to energy policy since legislature is mostly how laws are created (minus executive orders)

Question 13

FERC

Answer 13

Federal Energy Regulatory Commission- independent agency that is in charge of the electrical grid throughout the nation, has jurisdiction over interstate electricity sales, wholesale electricity sales, natural gas pricing, licensing for small-scale energy, etc.
Will be more important as renewables are adopted more as power is more spread out due to distributed renewable energy the grid will become more complex

Question 14

Regulatory Capture

Answer 14

Occurs when regulating bodies represent the interest of their respective industries instead of regulating them for the public good, often happens with utility/energy industry because of the nature of industry (revolving door)
Example- Mineral Management Services (MMS) played two important roles that conflicted heavily with one another, leasing land for natural gas and oil exploration and conducting inspections for the companies before they could start exploration, allowed BP to do their own inspection which aided to the Deepwater Horizon oil spill

Question 15

NRC

Answer 15

Nuclear Regulatory Commission- independent agency that inspects nuclear reactors and nuclear power plants and is also in charge of nuclear waste
Heavily criticized for regulatory capture because most people who work in the NRC are pro-nuclear so they do not necessarily regulate as heavily as they should

Question 16

Energy Policy Act of 2005

Answer 16

In response to fuel pricing shooting up due to the increase in demand (from places like China, Brazil and India), three approaches to tackle the issue-alternatives, conservation, and domestic sourcing
Large subsidies for corn based ethanol and exempt fracking from a lot of environmental regulations and promoted fracking, also gave tax reduction to vehicles with alternative fuels (electric cars)

Question 17

Natural Monopoly

Answer 17

Occurs when something is so expensive and requires a lot of investment that makes it extremely difficult to start up
Example- utility companies

Question 18

ARRA

Answer 18

American Recovery and Reinvestment Act of 2009 aka The Stimulus Package- bill passed in order to stimulate the American economy following the 2008 recession, $43 billion dollars invested to energy and federal building energy efficiency retrofits due to long-term ownership of buildings, also gave low interest rate loans for research and development which was mostly taken out by utilities and is still being used (thus making us unable to tell how successful ARRA really was/is)
Example- biggest recipient of the loan are the nuclear power plants in the south (Georgia)

Question 19

Pigovian Taxes

Answer 19

Taxes on something that go towards payment for their externalities, attempt to account for externalities relate to a certain action or products, tries to discourage behaviors that the government finds undesirable and uses revenue from taxes to offset the externalities
Pros- allows for a better substitute for common and control regulation since it allows for people to decide on their on in a sense, most economically efficient because all costs are accounted for and allows consumers and firms flexibility in how to deal with the issue
Cons- tax has to be set at a sufficient rate, can be regressive and hard to implement
Example- tax on gas which goes to building more highways and maintaining roads, diesel is taxed more than regular fuel because cars that use diesel generally have more negative externalities, can be considered a failed pigovian tax because the tax itself does not move with inflation so no longer actually covers the cost of maintaining roads
Feed in Tariffs (FIT’s) are similar to Pigovian taxes but come from energy use instead and all taxes collected from FIT are used towards energy and energy only, Germany uses a lot of FIT’s

Question 20

Essay pt. 1:

What are the different kinds of subsidies that policymakers may use to influence energy markets?

Answer 20

Different types of subsidies:
Category 1: direct financial transfer (not super common)
Category 2A: trade intervention (tariffs, quotas, etc.) example- most recent tariff on solar panels from outside the US enacted by Trump
Category 2B: tax reduction (tax credit and deduction) example- corn and oil exploration
Category 2C: services provided at beneficial rates, government willing to provide these services cheaper than anywhere else, example-Price Anderson Indemnity Act of 1957
Category 2D: services NOT provided by the private sector, long term research and development, example- about $85 billion spent yearly on protecting oil
Category 3: ignored externalities, Levy et. Al. 2009 state that real price of Sox should be around $4800/ton, NOx $17000/ton and PM 2.5 $74000/ton

Question 21

Essay pt. 2:

Why are subsidies often so hard to get rid of once they’ve been enacted?

Answer 21

Subsidies can be expensive and are hard to get rid of due to the amount of people/groups that rely and benefit from subsidies. Also these subsidies are paid by taxpayers at an almost unnoticeable amount thus leading for lower incentive/reason to take action against this subsidy
Example- subsidy on corn ethanol (category 2B), taxpayers spend less than a fraction on corn subsidies and most don’t even know thats where part of their taxes go so they are less likely to be effected by this subsidy and or to care about this subsidy so they have no reason to argue against this and the only people that argue for this are people that are greatly benefitting from it and typically the only person arguing related towards this subsidy.