Week 1-2 Flashcards
Systems thinking
A way of thinking about, and a language for describing and understanding, the forces and interrelationships that shape the behavior of systems.
Energy
o Total volume or stock of energy available to do work
o Volume concept, denominated in Joules, Kwh
o Energy = Power * Time
o It’s energy if you can burn it
o Non-renewable resources are stock-limited
Power
o Transformation of energy, rate of flow in the system
o Power = Energy/ Time
o MW, Joules/Second
o Device/ thing that transforms energy in power, e.g. engine, pipeline, NG well,
LNG terminal
o Renewable resources are flow-limited
1st law of thermodynamics
law of conservation of energy, ins & outs must be the same in the end
2nd law of thermodynamics
: “entropy” (Infogehalt) increases, energy flows form hot to col, losses accumulate
• As we transform energy, we occur losses. Only useful energy is lost, total energy cannot be lost (1st law)
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Systems
consist of stocks, flows and feedback loops (Rückkopplung)
Feedback loop
o Communication mechanism btw stocks & flows, taking in data about the state of the system
o We transform energy, by incurring costs, to increase it in value (to do useful work). Ideally, you have to increase the value so much that the costs are less than the value, that’s called a feedback loop.
o Stabilizing and goal seeking: system that detects when stocks are too low, causes increases in inflows or decreases in outflows
o Reinforcing and runaway: causes a system that is out of balance to go further in that direction (positive feedback)
o Feedback loops only affect future behavior
In physical, exponentially growing systems, there must be at least 1 reinforcing loop driving the growth and at least 1 balancing loop constraining the growth, cause no physical system can grow forever.
• Capital that matters in the energy system
o Human capital (labor)
o Financial capital
o Physical capital (infrastructure and all that goes along with it)
o Intellectual capital (knowledge and technology needed to innovate and create)
o Political (regulation, permits)
o Natural (energy resources, water, land, raw materials)
Total energy use (E)
E= P * E/P
Energy use per capita (E/P)
E= P* GDP/P * E/GDP
-> energy use per unit of income
Energy Intensity
E/GDP
Productivity of energy
GDP/E
Stocks
o Foundation of any system, you can see, feel, count or measure at any given time
o Stocks change overtime through the actions of a flow (1st derivative)
o Stocks change slowly because flows take time to flow
o A stock can be increased by decreasing its outflow rate, as well as by increasing its inflow rate
Flows
Infrastructure of the energy system. Actions/devices that change energy over time
Usually expressed as rate (Electricity/hour)
Stabilizing/ goal seeking loop
keeps things in certain range (negative feedback)
Reinforcing / runaway loop
pushes things to extremes (positive feedback)
System purposes
Need not be human purposes and are not necessarily those intended by any single actor within the system
• Resource Limits/constraints in the E system
o Oil stocks and reserves are unevenly distributed (highest in middle east) + not enough res.
• Energy security issues (the oil trade makes us dependent)
o All Coal is local + not enough atmosphere
• Its less mobile than liquid or gas fuels
o Natural gas reserves are concentrated + not enough resources
o Hydropower resources (best in mountains) + not enough sites
o Wind resources + not enough sites
• Location dependent (good on the coasts and in the upper plains)
o Biomass resources (location dependent- good in the upper mid-west) + Hydrogen is not a “source”, requires energy to produce it
o Geothermal potential: (better on west coast)
o Solar Resources- best in SW of US
• Ratio of useable solar to our energy needs: 7,000:1
o Fuel prices are rising and becoming more volatile (inconsistent)
Value
o Value- Surplus = Price = Costs + Profits
o amount of benefit that the customer receives from the purchase or use of of a good/service. It is the highest at final consumption.
Surplus
o what I am willing to pay over what the price is
Fungible goods
Goods are only fungible if they are identical in
o WHAT - Type and Quality (wholesale vs. residential prices)
o WHERE – Location (transportation costs)
o WHEN – Point in Time
o HOW CERTAIN – Certainty of availability (subsidized vs. unsubsidized)
• Subsidies: Price= Costs + Profits – Subsidies
Fully-loaded costs
o Internal costs should be fully baked in, not external costs
o Variances for future expectations must be accounted for in total costs somewhere
o Stranded costs: issue of fairness when system changes occur.
• Existing investments in infrastructure for the utility may become redundant in a competitive environment
Stranded costs
When competitive markets are set up, certain assets may become uneconomic or no longer needed - > these asset are called stranded assets. The associated investments that are paid off over years (like debt) and these ongoing costs are called stranded costs.
Subsidies
o lower the producer costs or consumer prices below the preexisting market level (usually lower production costs and increase activity levels)
o can be a volume constraint, min. standard, behavior constraint, policy constraint or support from market
o Hard to correct for or remove effect of subsidies because they already exist and are embedded in today’s architecture
o Price = Costs + Profits – Subsidy
Transformation of Energy
has to create value: Exploration and discovery, production or harvesting, preparation, transport or storage, further processing, purification, and conversion, distribution, utilization, recovery, destruction, decontamination, or storage of by-products and waste.
o Transformations of Coal: Coal–fired Generators, Coal Conveyers, Mining Trucks, Rail Freight, Barges
o Transformations of Petroleum: Drilling rigs, Pipelines, Tankers, Ports, Canals, Refineries, Fueling Stations
o Transformations of Natural Gas: Pipelines, Distribution, LNG Terminals, Tankers, Burners, Underground Storage
o Transformations of Electricity: Generators, Transmission Lines, Transformers, Meters, Batteries, Devices
o Transformations of Biofuels: Harvesting Equipment, Crushers, Blenders, Delivery Tankers, Engines
Infrastructure
literally, the connecting elements between two or more parts of transformations which can be measured by some rate of transformation or power rating.
Forecasting
• A forecast usually asserts that both the model and the input assumptions are right, and therefore the output is expected to approximate future reality.
Scenarios
• Scenarios have similar modeling techniques, but they are formulations of the work that suggests a model is sound, but the input assumptions are either uncertain or are presented for illustrative purposes.
Auction
o Rules by which trade or exchange happens within a market
Constraints
o In our system, constraints are perceived to come from what economists call scarcity
Leverage Points
Because systems are interconnected, any point can be affected by many others. Not all of these will have an equal effect as the strength of the transformations may vary, particularly across a number of relationships or structural elements. Identifying where small efforts in one part of the system can create major change in other parts of the system allows for the observation of leverage points.
Root cause
When trying to explain the reason that certain observations occur, there are many levels on which that explanation can proceed. Sometimes there is an immediate reason, but that reason is usually motivated by other, deeper relationships in a system. An apt analogy is evaluating the symptoms versus the disease, and uncovering the underlying “root cause” of the observed phenomenon can be enabled using system dynamics.
Clearing Price
In an auction, bidders continue to bid prices until they are no longer willing to go higher, and then the winner is the one who bid the highest price and the bid becomes the clearing price.
Costs
All expenses that a producer has to pay in order to deliver their good/service to market
Primary Energy Production
Bringing the raw material into the supply chain
Secondary energy carriers
Primary energy is converted through various devices into secondary carriers of electricity and fuel, which are further used to create motion, light or heat for vehicles and buildings.
Non-linearities
Sometimes, dramatic change can occur but only after a while and in a non-linear way. Systems often exhibit the behavior of maintaining themselves until certain thresholds are reached and then system dynamics can radically alter the behavior to a very different mode. Observing and predicting these non-linearities reveals much about the system itself.
Dose-Response curve
o Comes from examination of non-linearities in the medical field.
o It tries to understand the amount of treatment or medicine provided to patient (the dose) and what kind of reaction that creates in the patient (the response)
Cartel
o Intentional anticompetitive collusion
o They intentionally restrict output based on some allocation mechanism across the cartel members with the hopes of increasing prices and profits
Market failure
Relate to:
o Problems with internal market structure, where the conditions of 1) free entry and exit or 2) all agents acting as price takers fail to occur
o Problems of external market scope, when markets fail to include all of the effects of the participant’s behavior within them or conversely fail to include all participants that re involved in the use or allocation of resources within a market.
o Problems of information, where information is either costly or unavailable to market participants, which can be compounded by agency relationships, where one person is expected to act on behalf of another person
o Problems of market design introduced by government policy and regulation, though well intentioned, can cause both intended and unintended consequences on market function
Examples:
o Natural monopoly: declining cost industry
o Public goods
o Pricing in externalities
o Vola and diversifiable uncertainty
o Costly info or transaction
o Correct for existing policy distortions
Myopia
Form of nearsightedness, where things are up close are much more clear than things that are far away.
Administrative burden
Many initiatives are measures by how much of the resource that is being applied goes to meet the intended goal of the policy and how much is used to administer the program.
Market intervention
market participants trying to affect outcomes of the markets, in which they operate Methods of intervention o Direct investment o Codes and Standards o Information Sharing and Education o Lobbying o Associations
Lifecycle Analysis (LCA)
Method for assessing the total cost of owning a facility (from acquiring the facility to owning it, to disposing of a building or building system)
Market distortive
externalities that allow producers to escape the full costs or prevent them from recovering the full benefits of their actions.
Engine
device transforming some form of power into movement
Motor
converts electricity into other forms of power
Generation
process of generating electric power from other sources of primary energy
Transmission
Bulk transfer of electrical energy, from generating power plants to electrical substations located near demand centers
Distribution
Final stage in the delivery of electric power. Carries electricity from the transmission system to individual consumers
Unintended consequences
unexpected effects of well-intentioned policy interventions on market behavior
Natural monopoly
industry/ service for which a single provider is economically efficient (e.g. electric grid)
Value added
net profit generated from the production of energy related activities through the supply chain
Value at risk
amount of income and asset value exposed to changes in energy prices in a firm or economy
Dependance
% of national energy balance that comes from or is sold outside the energy orders of the country. E.g. Europe’s dependance on Russia
Value metric
a metric of energy, such as R-value of energy = measure of thermal resistance
Externalities (positive and negative)
costs and benefits that are not internalized in the transaction and price. Thus they accrue to other people than those involved in the transaction.