Energy Markets in the 1990s and Beyond Proceedings Eleventh Annual North American Conference International Association for Energy Economics Los Angeles, California October 16-18,1989 General Conference Co-Chairman: Anthony Finizza John Peter Weyant Program Committee Cochairmen: Arnold B. Baker Hillard G. Huntington UB/TIB Hannover 110 171 098

89

CONTENTS PREFACE Editors' Preface Arnold B. Baker and Hillard G. Huntington

xii

ENERGY POLICY AND STRATEGY IN THE PACIFIC RIM New Issues of Japan's Energy Policy Takao Tomitate, The Institute of Energy Economics, Tokyo, Japan 1 The Energy Dilemma: Yesterday-Oil, Today-Capital Kay McKeough and Jose Escay, The World Bank, Washington, D.C

13

A Comparison of Energy Intensity in the United States and Japan Sean C. McDonald, Battelle Pacific Northwest Laboratory, Washington, D.C

21

Australia's Role in Pacific Energy Trade Greg McColl, The University ofNew South Wales, Sydney, Australia

31

Optimization of the National Energy Supply of Indonesia A Computer Aided Energy Planning and Technology Assessment Study Manfred Kleemann and Vila Seele, Nuclear Research Centre, Juelich, Federal Republic of Germany 41

ELECTRICITY MARKETS AND PLANNING Competitive Bidding for Electric Power: An Analysis of the Bid Evaluation System of Four Utilities Charles Goldman and Edward Kahn, Lawrence Berkeley Laboratory, Berkeley, California

Ill

Independent Power Production: How Big is Big? Richard H. Hilt, Gas Research Institute, Washington, D.C

122

Learning How Electric Utility Customers Value Service Reliability Robin J. Walther, Southern California Edison Company, Rosemead, California

133

Estimation of Continuously Varying Electrical Demand Lorna A. Greening and Robert H. Patrick, Colorado School of Mines, Golden, Colorado

144

OIL POLICY AND MARKETS The New Sisters: Downstream Integration and U.S. National Energy Policy Leonard L. Coburn, U.S. Department of Energy, Washington, D.C Taxation Effects on the Competitiveness of U.S. Oil and Gas Investments SJ. Flaim andR.C. Hemphill, Argonne National Labvoratory, Argonne, Illinois andR.G. Gordon, The Petroleum Finance Company,Ltd., Washington, D.C Modeling Oil Development in the Arctic National Wildlife Refuge Stephen G. Powell, Dartmouth College, Hanover, New Hampshire

53

65 Least-Cost Planning in a Changing Business Environment Fereidoun Mobasheri and Robin J. Walther, Southern California Edison Company, Rosemead, California 156 77

The Replacement Cost Integration Program An Engineering-Economic Model of Oil Supply David B. Reister, Oak Ridge National Laboratory, Oak Ridge, Tennessee 89 The Role of Oil in Electricity Generation in Five European Countries: Past, Present, and Potential Dianne V. Hawk and Lee Schipper, Lawrence Berkeley Laboratory,Berkeley, California 99

Forecasting Electricity Demand in Alberta Farhood Rahnama and Adrienne Kwaczek, Energy Resources Conservation Board, Calgary, Canada

168

NORTH AMERICAN NATURAL GAS MARKETS Consolidation in the Natural Gas Transmission Industry James M. Conway, The WEFA Group Energy Service, Bala Cynwyd, Pennsylvania

177

Workable Competition in Natural Gas Pipeline Markets William F. Hederman, Jr., and Robert J. Reynolds, ICF Resources, Inc.,Fairfax, Virginia 184

VII

Spot Prices, Contracts and Policy Options in the Natural Gas Industry Thomas P. Lyon, Indiana University, Bloomington, Indiana Natural Gas in the United States: A Comparison of Historical & Projected Market Trends PaulD. Holtberg, Gas Research Institute, Washington, D.C

192

202

Industrial Natural Gas Demand in Canada Merete Heggelund, Canadian Energy Research Institute, Calgary, Canada 214

LOCAL AIR POLLUTION-SEVERING THE ENERGY NEXUS Preliminary Report on a Cost Benefit Study of Mandated EthanolGasoline Blends David Bradford and Carol Dahl, Department of Economics, Louisiana State University, Baton Rouge, Louisiana Auto Emission Taxation: Alternative Policies for Improving Air Quality Evan H. Davis, London Business School, London, United Kingdom, Scott T. Grusky and Feriedoon P. Sioshansi, Southern California Edison Company, Rosemead, California

Use of the World Model to Analyze Strategic Reserves Drawdown Theodore R. Breton, ICF Resources Incorporated, Fairfax, Virginia

vtn

The Changing Productivity of U.S. Electric Utilities: 1979-1987 Mark Allen Bernstein, University of Pennsylvania, Philadelphia, Pennsylvania 267 Prudence Reviews and Independent Power Producers: The Evolution of Industrial Organization in the Electric Utility Industry Peter Lilienthal, Stanford University, Stanford, California

The Electric Utilities: Environmental Concerns and Institutional Changes Stephen C. Peck, Electric Power Research Institute, Palo Alto, California and John Weyant, Stanford University, Stanford, California 226

237

ENERGY SECURITY AND THE STRATEGIC PETROLEUM RESERVE Strategic Petroleum Reserve Expansion PaulN. Leiby and Russell Lee, Oak Ridge National Laboratory, OakRidge, Tennessee

ELECTRIC UTILITIES IN TRANSITION

278

290

Comparative Status and Development Trends of Central-Electricity Supply Technologies in the Federal Republic of Germany-Fossil, Nuclear, Renewables GerhardKolb, Systemforschung und Technologische Entwicklung, Julich, Federal Republic of Germany 297 Stop and Start: A Duration Analysis of Nuclear Reactor Operation Geoffrey S. Rothwell, Stanford University, Stanford, California ... 309

ENERGY AND CLIMATE CHANGE 249

Policies to Encourage Private Sector Responses to Potential Climate Change Robin Cantor, Donald Jones, Paul Leiby, and Steve Rayner, Oak Ridge National Laboratory, OakRidge, Tennessee

261

tx

318

The Environmental and Economic Benefits of Avoided Energy Consumpton in the Buildings Sector Andrew Nicholls, Battelle Pacific Northwest Laboratory, Tom Secrest, Battelle Pacific Northwest Laboratory, Washington, D.C. and Fred Abel, U.S. Department ofEnergy, Washington, D.C 329

FRONTIERS IN ENERGY MODELING AND FORECASTING Crude Oil Price Forecasting: A Bayesian Simultaneous Equations Approach George J.Y. Hsu and Yuh-min Hong, Chung-Hua Institutionfor Economic Research, Taipei, Taiwan.R.O.C A Review of Energy Forecasts: What Have We Learned? Malcolm T. Shealy, Decision Focus Incorporated, Los Altos, California

341

353

Introduction to ISTUM-PC: Challenges and Applications for Industrial Energy Demand Forecasting, Policy Analysis and Economic Research

Mark Jaccard,

Simon Fraser

University,

Vancouver,

Canada

. . . . 363

Pricing and Optimal Capacity with Economies of Scale: Implications for Gas Pipeline Expansion to Serve New England Donald A. Hanson, Argonne National Laboratory, Chicago, Illinois and Gilbert W. Basse tt Jr., University ofIllinois, Chicago, Illinois

375

How Far Can the World Get on Energy Efficiency Alone? Martin Katzman, OakRidge National Laboratory, OakRidge, Tennessee

387

Economic Impacts of Sustained Low Energy Prices on Saskatchewan Agriculture DeviD. Tewari, Indian Institute, Ahmedabad, India

399

Environmental Protection and the Future of Transport Fuels in the United States West Coast Region Nancy D. Yamaguchi, PhD., East-West Center RSI

411

European Gas Demand Prospects to 2010 Frits van Oostvoorn, Nico H. van der Linden, Netherlands Energy Research Foundation ECN 422