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Historical Context of Energy Regulation: What is energy?

Historical Context of Energy Regulation: What is energy? How have humans harnessed energy for their own use? How and why do governments intervene in the market to control the use and development of energy resources?. What is energy? From where do humans get useable energy?.

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Historical Context of Energy Regulation: What is energy?

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  1. Historical Context of Energy Regulation: • What is energy? • How have humans harnessed energy for their own use? • How and why do governments intervene in the market to control the use and development of energy resources?

  2. What is energy? From where do humans get useable energy? Energy = the ability to do work

  3. PATH OF ENERGY SUN  Solar energy  EARTH’S SURFACE Ocean absorption: heat and convection currents Land absorption: heat absorbed by animals, plants, etc. Energy is stored in “stocks” of energy resources, like combustible (fossil, biomass) fuels (Btu), water power, etc.

  4. 1st & 2nd LAWS OF THERMODYNAMICS FIRST LAW OF THERMODYNAMICS: “Energy can neither be created nor destroyed, only converted from one form to another.” SECOND LAW OF THERMODYNAMICS: “As energy is converted from one form to another, the availability of energy (and the useable amount) decreases.” (a/k/a the law of “entropy”).

  5. ENERGY FORMS/CONVERSIONS • GRAVITATIONAL • MECHANICAL • ELECTRICAL • THERMAL • CHEMICAL • NUCLEAR

  6. USEFUL ENERGY PRIMARY SOURCE USE Mechanical energy for industrial use (e.g., mills) or to run electricity-generating turbines • HYDRO (falling water) or WIND • COAL, OIL, • NATURAL GAS, WOOD, • BIOMASS, etc. • URANIUM • SOLAR Combustion to produce useable heat or to generate electricity Controlled atomic reaction releases heat to produce electricity Passive solar heat used directly; or converted chemically (active solar) to electricity (by photovoltaic cells).

  7. U.S. Energy Timeline 1700s first use of hydromechanical power 1859 Edwin Drake struck oil in western Pennsylvania 1865 First natural gas utility opened in Fredonia, NY 1882 Edison’s Pearl St. Station power plant opened Late 1800s First hydroelectric stations 1880s Rise of state utility commissions; passage of federal major antitrust legislation 1930s Federal Power Act; Rural Electrification Act; Public Utilities Holding Co. Act

  8. Source: EIA

  9. SOURCE=EIA

  10. Electric Generation Fuel Sources, Worldwide Source: IEA Key World Energy Statistics 2001

  11. Share of U.S. Net Summer Electric Generating Capacity by Energy Source, Year-End 1999 (EIA)

  12. Electricity Generating Capacity by Industry Sector and Ownership, as of January 1, 1999 (Source=EIA)

  13. Extraction of primary source fuels Regulate externalities Commercial or residential end use Transformation into electricity Regulate competition

  14. ENERGY LAW addresses the development, distribution and sale of energy resources. • externalities of energy production • pollution • safety and health risks (workers) • regulation of competition • public utility law • state ownership • antitrust/competition law

  15. EXTERNALITIES • HYDRO • WIND • COMBUSTION (COAL, OIL, NATURAL GAS, WOOD, BIOMASS, etc.) • URANIUM • SOLAR • TRANSMISSION  Aquatic/terrestrial habitat destruction; aesthetic  Primarily aesthetic  COMBUSTION: Air pollution (SO2, NOx, global warming); Water pollution; aesthetic impacts EXTRACTION: habitat destruction; aesthetic; water pollution  EXTRACTION: water pollution; habitat destruction; aesthetic. USE: nuclear waste  aesthetic; waste production (photovoltaic cells)  aesthetic; EMR?

  16. POSSIBLE LEGAL RESPONSES TO EXTERNALITIES • PIGOVIAN TAXES: tax creator of externality an amount that maximizes “social net benefit” • REGULATION: • Prescriptive and proscriptive rules • e.g., licensing statutes allow regulatory agencies to impose conditions to minimize/”internalize” externalities • STATE OWNERSHIP • PRIVATE LAW (TORTS)

  17. EXTERNALITY REGULATION: JURISDICTION (U.S.) HYDRO: FERC & STATES, subject to preemption limits WIND: LOCAL GOVERNMENT • HYDRO (falling water) or WIND • COAL, OIL, • NATURAL GAS, WOOD, • BIOMASS, METHANE • URANIUM • SOLAR State ownership is norm elsewhere Extraction of fuels: DOI and states, subject to preemption Combustion: EPA and STATES NRC with limited STATE jurisdiction LOCAL GOVERNMENT (zoning) Other nations: state may owns/supply energy resources, and regulate externalities

  18. Multiple Jurisdictions and Preemption • Allocation of Powers in Federal System • PUCs, controlling natural resources • Federal Supremacy • Barriers to commerce • Hydro, Energy Transactions

  19. Menu of options for addressing the dangers of monopoly and unfair competition: • manage private competition ex post (antitrust law) • manage private competition ex ante (public utility/common carrier rules) • state ownership

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