Fin-482 Term Paper
Yiming Pan
5th, DEC, 2015
Prof. Scott Wrigglesworth and Teresa Marrinan
Analysis of the U.S. electricity revolution and California electricity crisis-What should Chinese Energy market learn? The energy issues have long been complicated and highly discussed for energy affects many aspects of the modern society and people’s daily lives, e.g. oil prices, energy reserves, monthly electricity bills etc. Since my father is working in the Investment and Marketing department of China Citi Bank, I was encouraged to read energy-related reports and journals from the newspapers when I was growing up. Later on I became interested in the energy market, including energy commodity trading and portfolio management. Furthermore, as a
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I really think this case has some meaningful points for my country. The California Electricity Crisis was an unprecedented disease for state government and citizens because it brought inconvenience for citizen 's daily lives and series of subsequent encumbrance for governments ' financial expense or public investments. ‘The crisis of California was cost between 40 to 45 billion dollars ' (Weare, 2003). Weare stated this crisis obviously would lead to a series of issues in the future because the crisis caused catastrophic damage on the investment plans and expense management of California state government. ‘The financial crisis was possible because of partial deregulation legislation instituted in 1996 by the California legislature and Governor Pete Wilson. Enron took advantage of this deregulation and was involved in economic withholding and inflated price bidding in California 's spot markets. ' (FERC Summary of findings, 03-17). Actually, the deregulation legislation reform started as early as 1996, which depended on the demand of improvement in the market. Afterward, the state government tried to use reformation to gradually improve the whole electricity and energy market. After the reformation, the electricity indeed achieved some success in two years. The wholesale price and the energy demand maintained stable, at that time, the wholesale price per month was around $30 to $40/MWh. “It was a delighted period, and the achievement of
Enron had the largest bankruptcy in America’s history and it happened in less than a year because of scandals and manipulation Enron displayed with California’s energy supply. A few years ago, Enron was the world’s 7th largest corporation, valued at 70 billion dollars. At that time, Enron’s business model was full of energy and power. Ken Lay and Jeff Skilling had raised Enron to stand on a culture of greed, lies, and fraud, coupled with an unregulated accounting system, which caused Enron to go down. Lies were being told by top management to the government, its employees and investors. There was a rise in Enron 's share price because of pyramid scheme; their strategy consisted of claiming so much money to easily get away with their tricky ways. They deceived their investors so they could keep investing their money in the company.
Texas has been successful in becoming a key leader in the energy market. Nevertheless, implementing market-driven regulations similar to California’s cap-and-trade program could provide additional benefits, especially in view of federal expectations to reduce Texas’s CO2 emissions by about 40 percent. This report provides an overview of California’s current efforts and challenges, especially those associated with its cap-and-trade program. The biggest challenge for Texas to adapt cap-and-trade regulation seems to lie within perception and attitude of its residents. Californian’s enthusiasm and investment is evident in the lawsuits aimed at maintaining stringent standards. Additionally, litigations challenges with the interstate commerce dormant clause in mind could cause costly and cumbersome delays to an
At the beginning of the year the President of the United States announced that the United States was in the middle of a nation wide energy crisis. The President gave many solutions including using more solar and wind energy, nuclear power, and drilling in the Arctic National Wildlife Refuge (ANWR). The President told the American people that they would have to watch their energy use and conserve as much as possible. Gas prices reached $2 per gallon in the Midwest for the second straight summer, and California continued to be hit by unprecedented power woes that forced rolling blackouts. The price of crude oil rose sharply, from around $10 a barrel to a peak of $37. The
Escalating costs played a major role in the diminishing number of power plants in the United States. (Cohen, 1990). Plants completed in the 1970’s carried an average price tag of $170
Our society has faced two major energy related problems since the Industrial Revolution. The first is where our future energy resources are going to come from. The United States both consumes and produces an immense
Energy is a daily consumption that everybody uses in their daily lives. As a nation, we as modern people in the United States rely heavily upon energy sources such as oil, wind, thermal, natural, solar, hydraulic, etc. During the 70s, energy was a booming industry that everybody wanted to be a part of. This industry affected people 's way of living and everyday use of technology such as house appliances, automobiles, industry, and city power grids. During this era, an energy crisis occurred which had a big impact on many people nationally and internationally. This energy crisis was the result of the production peak in the 1970s, the oil crisis of 1973, and the energy crisis of 1979.
Recent doubt in country’s energy supply as a result of political concerns in the Middle East nations, and other foreign oil generating nations, also volatility in the prices of oil, and natural gas have contributed to increase country’s energy independence through a greater local energy supply and to minimize the greater effects of the economy from any prices fluctuation in the fossil fuel markets, including the natural gas price hike in 2004 and 2005 cyclone
Continued investment should be encouraged in order to develop the best technology in energy for the future. Continued investment will allow for new and exciting developments that will improve the energy industry in the long run. It will assist the industry in satisfying the growing demand and need for sustainability. There are a number of political and legal factors that are significant to the energy industry. For example, laws and government regulation on energy use could potentially affect the demand for domestic energy and thus lead to a shift in prices. However, with an increase of clean energy use, the demand for energy will not change dramatically due to laws and regulations, instead, the future prosperity of the globe will improve.
California’s reliance on high polluting fossil fuels requires that the state strongly emphasize the development of Alternative Energy Sources (AES) such as hydrogen power, electric vehicle, hydroelectricity, as well as wind and solar power. It proposes that a wholesale move towards AES will improve life in the state in three distinct ways. First, it will increase Californians’ consumer reliance on finite non-renewable energy. Second, it will create jobs in the state by generating a domestic AES production infrastructure. Finally, it will reap enormous environmental benefits whereby fossil fuel emissions will be cut significantly. While the move away
From the time when man invented fire, he has put his faith in one energy source or another. Energy plays a significant factor in our lives, providing luxury, swelling productivity and letting us to live the way we want too. Our lives are exactly surrounded by energy, but we do not habitually stop to think about why those energy sources are significant. Energy is the most discussed subject and has become a basic requirement for the societies. It is an important factor on to which economies depend and prevail. Independence in energy leads to prosperity and economic progress in the country. The significance of energy generation cannot be unrecognized due to its crucial share in the industrial practice and growth of the
The American energy revolution has done more than just provide record amounts of oil and natural gas to fuel our transportation needs or generate electricity and heat our homes, schools and businesses. Increased American energy production has lowered the cost of energy and manufacturing feedstocks, which helps to cut energy and materials costs for American manufacturers, particularly producers of steel, chemicals, refined fuels, plastics, fertilizers and numerous consumer products. U.S. industrial electricity costs are 30 to 50 percent lower than those of our foreign competitors, according to a 2015 study from the Boston Consulting Group (BCG). American manufacturing costs are now 10 to 20 percent lower than those in Europe and could be 2 to
Russia’s energy security depends largely on the global demand and international energy market price. Thus, Russian energy security is vulnerable to market forces and benefits from economic stability, particularly that of the European countries, with whom Russia conducts the majority of its energy trade. Let us see the history trend of Russia’s energy trade during the financial crisis.
The winners have been consumers, who have paid lower prices, and investors, who have seen competition force the power suppliers to become much more efficient . Under the old regulated model of delivering gas and electricity, customers were offered a one-size-fits-all contract . Enron pioneered contracts that could be tailored to the exact needs of the customer. To do this, Enron unbundled the classic power contract into its constituent parts, starting with price and volume, location, time, etc., and offered customers choices on each one. Again, consumers won. Enron's investors did too, because Enron earned the surplus typically reaped by inventors. Arguably, Enron is the embodiment of what economist Joseph Schumpeter called the "process of Creative Destruction." But creative destroyers are not necessarily likable, pleasant folks, which may be part of Enron's problem today. (Bodily and Bruner, 2001)
China has an energy dependence problem that dwarfs that of the United States forty years
The energy sector accounts for about 2.5% of the country’s Gross Domestic Product. However, this sector has a greater importance than that because it affects all types of economic activities in the country. Historically, this sector has always had a deficit because the shortage of resources in the country.