ECON 366: Energy Economics

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.title[
# ECON 366: Energy Economics
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.subtitle[
## Topic 1: An Introduction to Energy Economics
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.author[
### Andrew Leach, Professor of Economics and Law
]
.date[
### <a href="mailto:aleach@ualberta.ca"><i class="fa fa-envelope fa-fw"></i> aleach@ualberta.ca</a> <br> <a href="https://github.com/leachandrew"><i class="fa fa-github fa-fw"></i> leachandrew</a><br><a href="https://twitter.com/andrew_leach"><i class="fa fa-twitter twitter"></i> <span class="citation">@andrew_leach</span></a><br>
]

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# Welcome!

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Some quick facts about me:
- I grew up in Ottawa
- I have degrees in environmental science, economics, and law
- My academic interests are energy economics, environmental policy, constitutional law, and energy markets
- I've worked in various governmental advisory roles
- This is my third time teaching this class. I also taught energy markets in the School of Business for 10+ years
]

.pull-right[
<br>

![:scale 80%](andrew_pro.jpg)
  
]

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# Welcome!

.pull-left[
Beyond the classroom:
- I have two kids, aged 14 and 15
- I have a border collie named Kona
- My main hobby is cycling, and I also play hockey and dabble in woodworking
- I have a serious Twitter addiction

My expectations of you

Your expectations of me
]

.pull-right[
<br>
![:scale 80%](andrew_bike.jpg)

]

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# About this course: learning goals

By the end of this course, you will:

1. be familiar with the major sectors of Alberta's energy economy;

2. understand the key local and global drivers for energy supply and demand;
  
3. be able to relate popular press discourse about energy economics to basic economic models;

4. understand the implications of climate change policies for the global and local energy economy;

5. be able to access, present, and interpret relevant energy and economic data;

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# Class delivery

- Regular MW class meetings will be in person unless circumstances force us online; I will not teach in person if I am putting you at risk
- Friday classes will be an asynchronous class which I will use for R lessons, data exercise reviews, and other similar material to let you work through the data work at your own pace
- I do not plan to record or stream class content for in-person meetings, although I may make exceptions on a case-by-case basis (pre-midterm and pre-final classes, for example)

---

# Materials
- [eClass](https://eclass.srv.ualberta.ca/course/view.php?id=91208) and my [personal class website](https://econ366.aleach.ca)

- slides and data exercises

- practice questions

- podcasts and other media

- data and other resources

- pre-exam practice problems

- there is no textbook

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# Communication

- [eClass](https://eclass.srv.ualberta.ca/course/view.php?id=95033) announcements

- Email me: <a href="mailto:aleach@ualberta.ca"><i class="fa fa-envelope fa-fw"></i> aleach@ualberta.ca</a>

- Code and data help: <a href="https://github.com/leachandrew"><i class="fa fa-github fa-fw"></i> leachandrew</a> or my [projects page](https://aleach.ca/project)

- My Twitter: <a href="https://twitter.com/andrew_leach"><i class="fa fa-twitter twitter"></i> @andrew_leach</a>

- Class discussion and lecture materials

- [Periodic energy charts Substack](https://aleach.ca/charts)

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# Assignments
<br>
<br>
<table class="table table-striped table-hover table-condensed" style="margin-left: auto; margin-right: auto;">
 <thead>
  <tr>
   <th style="text-align:center;"> Task </th>
   <th style="text-align:center;"> Date </th>
   <th style="text-align:center;"> Weight </th>
  </tr>
 </thead>
<tbody>
  <tr>
   <td style="text-align:center;"> Data assignments </td>
   <td style="text-align:center;"> online, one per month </td>
   <td style="text-align:center;"> 30% </td>
  </tr>
  <tr>
   <td style="text-align:center;"> Midterm </td>
   <td style="text-align:center;"> In class, February 14th </td>
   <td style="text-align:center;"> 25% </td>
  </tr>
  <tr>
   <td style="text-align:center;"> Final </td>
   <td style="text-align:center;"> April 22 (Monday), 2:00 PM (tentative) </td>
   <td style="text-align:center;"> 45% </td>
  </tr>
</tbody>
</table>

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# Tips for Success

- Attend class;

- Take notes;

- Do any data exercises and problem sets;

- Work together;

- Ask questions, participate, and drop by during my office hours;

- Read the Energy Charts weekly and other sources I provide to you;

- Don't struggle in silence, you are not alone!

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# Roadmap for the Semester (1/3)

### Introduction
> **Concepts:** RMarkdown; Quarto; Data sources(e.g. EIA; CER; AER; AESO; CANSIM; ECCC; IEA; BP)

### The Global Energy Economy
> **Concepts:** Total primary energy supply; supply; demand; electricity generation vs. capacity; climate change.

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# Roadmap for the Semester (2/3)

### Oil and gas markets

> **Concepts:** OPEC; WTI; Brent; AECO/NIT; Henry Hub; fractionation; backwardation; contango; storage; inventories; sweet vs. sour crude or gas; well-head prices; pipeline gas.

### Oil and gas production, reserves, resources

> **Concepts:** conventional vs. unconvential extraction; shale gas; light tight oil; fracking; *in situ* vs. mined oil sands; type curves; 1P and 2P reserves; company-level vs. country-level reserves; capital vs. operating costs; supply cost and net present value of an oil project.

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# Roadmap for the Semester (3/3)

### Pipelines and Downstream Processing 
> **Concepts:** tolls; common carrier; open season; diluent recovery unit; *Canadian Energy Regulator Act*; cost-of-service regulation.

### Electricity

> **Concepts:** duration curves; cost-of-service; merit order; ancillary services; energy storage; prices and riders; rate regulation; electrification.

### GHG Policy

> **Concepts:** marginal abatement cost; marginal damage; carbon budgets; POGG; tax; output-based allocation; GHG; Kyoto; Copenhagen; Glasgow; IPCC; UNFCC; COP.

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# A reminder on positive and normative statements
- Economics alone can't tell you the **right** decision 
- A positive statement is a statement of what **is** or what **will happen** and describes reality.  
   - If you increase the costs of production, consumer prices will go up.
- Positive statements can reflect **uncertainty** about outcomes
- A normative statement concerns what somebody believes **should** happen:
  - “The government should tax greenhouse gas emissions.”
  - Normative statements cannot be tested because they imply value judgments which cannot be refuted by evidence.
- Normative statements can inform objective functions
  - A decision-maker might value a policy which does not increase inequality
  - Economists can provide constrained advice: this policy accomplishes your objective and *is unlikely to* increase inequality