AØKK08318U Seminar: Energy Economics
Energy is a vital component for any society. The access to cheap, clean, and secure energy is high on the agenda and energy is a key component in the green transition. Thus, energy has received much notice from both politicians and from economists.
Whether on a transmission or distribution level, power-, natural gas and district heating grids are natural monopolies. This gives rise to a wide array of questions; How can regulation be put in place to provide incentives for the monopolistic companies to secure a cost efficient provision of their network services? – and how can such regulation be enforced? How does such regulation allow for increased investments in lieu of the green transition?
The energy market is unpredictable and heavily dependent on nature. Windmills and solar power depend on the weather, and hydro plants can only use the water available in the reservoirs. On the demand side, we use more energy in cold winters than in warm ones and the demand for energy is very seasonal. This leaves room for storage of energy (oil tanks, gas storages, thermal power pits), financial price hedging, and possibly arbitration. Countries and regions prepare for extreme weather conditions and cold spells in dry years, as the unavailability of energy under these circumstances means casualties. However, this ‘insurance’ has the characteristics of a public good – so how do societies ensure that sufficient security of supply is provided?
Energy commodities on the exchange are as easy to trade as stocks and bonds, but not as easy to transport. Commodities have physical constraints that must be taken account of when priced in the financial market. The constraints include transportation capacity (e.g. tankers, transmission lines or gas pipelines), transportation time, political instability, storage capacity, transportation tariffs, production capacities and production fallouts. Thus, physical constraints like these will affect prices, trade, and availability.
Yet, these commodities are traded in vast volumes, globally. Energy prices are volatile, and depends on local as well as global conditions. This leaves room for apply financial analysis to the energy markets.
Looking at the supply side of energy, some areas are characterized by competition (i.e. the generation of power) whereas others are characterized by monopoly or oligopoly. The most obvious example is OPEC, which is a prime example of a cartel that dictates output. However the market power is not isolated to oil – there are only few major coal producers in the world, and a majority of European natural gas imports stems from one supplier.
When transporting energy across borders in Europe, a shipper will face tariffs for using the transmission grid. There are different methodologies for tariffs, and the different tariff structures hold different properties. Questions on the optimal tariff structure, the potential cross subsidization and the deadweight loss imposed by tariffs can be analyzed.
Energy is a topic very much influenced by politics – climate politics, trade politics, and even social politics in some countries. Topics of interest here include security of supply, ‘energy independence’, the market liberalization in EU of first the electricity and since the gas market, and finally how auctioning of capacity constrained infrastructure can be implemented.
Finally, this seminar is on energy economics. In particular, on issues related to power, central heating and natural gas. Although the relationship to environmental issues is close (emissions, CO2 quota, efficiency), environmental issues are not the aim of the seminar.
After completing the seminar the student is expected to be able to fulfill the learning outcome specified in the Master curriculum and to be able to:
- Account for energy policy and the implications to the economy
- Analyze a research hypothesis
- Formulate a narrow academic question and hypothesis
- Prepare a schedule for how to write an academic paper
- Apply economic theory and method to a concrete question within energy economic
- Structure a paper and a presentation
- Present hypothesis, approach and results of an academic paper
To be choosen in agreement with the supervisor.
- identify and clarify a problem,
- seek and select relevant literatur,
- write a academic paper,
- present and discuss own paper with the other students at the seminar.
Mandatory activities in the seminar:
- Kick-off meeting
- Finding literatur and defining the project
- Writing process of the seminar paper
- Presentation of own project and paper
- Giving constructive feedback to another student´s paper
- Actively participating in discussions at the presentations and other meetings.
The aim of the presentations is, that you use the presentation as an opportunity to practice oral skills and to receive feedback at the paper. The presentations are not a part of the exam and will not be assessed.
The seminar project paper must be uploaded in Absalon before the presentations, as the opponents and the other seminar participants have to read and comment on the paper. It is important that you upload a paper that is so finalized as possible due to the fact that the value of feedback and comments at the presentation is strongly associated with the skill level of the seminar paper.
The teacher defines what materials may be used for the presentations.
After the presentations, you can with a few corrections improve the seminar paper by including the feedback and comments emerged during the presentations. It is NOT intended that you rewrite or begin the writing of the seminar paper after the presentation has taken place.
In case of a pandemic like Corona the teaching in this seminar may be changed to be taught either fully or partly online. For further information, see the course room on Absalon.
• Kick-Off meeting: Wednesday 10 February at 10-13
• Extra meeting: Wednesday 24 February at 10-13
• Deadline for submitting commitmentpaper/ project description: Not later than March 1st or as specified by the lecturer.
• Deadline of seminar paper uploaded to Absalon: Not later than one week before the presentations or as specified by the lecturer.
• The presentation-meetings: Wednesday 5 May at 08-18 (all day). Ongoing supervision will be agreed on an ad hoc basis.
It is strongly recommended that you think about and search for a topic before the semester begins, as there is only a few weeks from the kick-off meeting to the submission of the project description/agreement paper.
There is no weekly teaching/lecturing and the student cannot expect guidance from the teacher. If the teacher gives a few introduction lectures or gives the opportunity for guidance, this as well as other expectations are clarified at the kickoff meeting.
All information regarding the seminar is communicated through Absalon including venue. So it is very important that you by yourself logon to Absalon and read the information already when you are registered at the seminar.
- Project work
Collective feedback is given as projects are being presented
Each student receives individually oral feedback on the presentation from peers and supervisor.
The supervisor gives the students individual guidance during the seminar.
- 7,5 ECTS
- Type of assessment
- Written examinationA seminar paper in English that meets the formal requirements for written papers stated in the curriculum of the Master programme and at KUNet for seminars.
- Exam registration requirements
- All aids allowed
for the seminar paper.
The teacher defines the aids that must be used for the presentations.
- Marking scale
- 7-point grading scale
- Censorship form
- External censorship
- Exam period
Deadline for submitting the final seminar paper: June 1, 2021 before 10 AM
The seminar paper must be uploaded to the Digital Exam portal. More information will be available from the middle of the semester.
The reexam is a written seminar paper as stated in the Master curriculum.
Criteria for exam assesment
Students are assessed on the extent to which they master the learning outcome for the seminar and can make use of the knowledge, skills and competencies listed in the learning outcomes in the Curriculum of the Master programme.
To receive the top grade, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material.