Tag Archives: electricity

PROMO: Energy MBA in Bucharest

The MBA in Energy at the Academy of Economic Studies (ASE) in Bucharest starts the registrations for prospective candidates between 23-25 July 2018.

Organized by the Faculty of Business Administration in Foreign Languages (FABIZ), the Energy Master is the best in Romania and is done in collaboration with representatives of the energy business environment (OMV Petrom, Siemens, CEZ, Electrica, Transgaz etc.).

Join the new challenges and be a part of the Energy Business!

The programme is open to all bachelor degree graduates, but candidates need one year experience in energy. Of course, a good command of English is required, as it is taught in English.

It is a flexible MBA, held during weekends, for 4 semesters. The courses range from “EU Policy in Energy” to “Energy Trading”. The professors and experts’ team is excellent, including one of Romania’s best energy professionals, Corina Popescu.

Please find below the brochure of the programme.


More information also at the following link: mba-energie.ase.ro.

Coal: A Human History – Barbara Freese

Some saw in the mines scientific proof of biblical flood. Some credited coal with protecting people from the bubonic plague; others accused it of promoting baldness, tooth decay, sordid murders, caustic speech and fuzzy thinking.More recently many of us believed we could burn vast amounts of coal without disrupting the natural balance of the planet. No doubt we have still much to learn about coal, but at least we’ve been able to dispel many of the old myths.

The book talks about the history of coal, since Roman times to modern day. Barbara Freese talks about both the good and the bad sides of the mineral. As the author is an environmental lawyer, the book slightly tips on the bad side of coal, however the research is deep, insightful and entertaining.

Coal is appreciated by Ms Freese as the basis of the Industrial revolution and the rock that made the British Empire and the United States. It significantly improved living standards by increasing on a massive scale the efficiency of industrial processes.

On the other side, the bad environmental effects were constant, from the fumes and hard working conditions to current greenhouse gas problems.

The message of the book is that coal was never popular, but always useful. The author finishes the book on a positive note, such as using coal for in plastics and other alternative uses.

How the electricity system works

The electricity market – a very peculiar market

Economic interactions regarding electricity are designed as a market, like any other commodity. Therefore electricity prices follow demand and supply rules. However, they have some very specific characteristics, at consumer level.

Firstly, demand is relatively inelastic in the short-term, particularly for small consumers, less so for large ones. Secondly, there is limited customer storage options. While there is the option of batteries for small consumers, the storage capability is small (Tesla Powerwalls, for example, have a storage of 7kWh and a power of 2kWh; while average daily household consumption in the UK is about 11kWh). This limits significantly consumers’ response to price fluctuations. Thirdly, consumers have limited if any, substitutes for electricity. They can invest in long term demand-response measures (for example, investing in more energy-efficient appliances), but the basic need for the product remains. Fourthly, the entire society is based on electricity as energy carrier. The use of electricity cannot be avoided by consumers. Because of very inflexible demand and limited storage options, the supply has to match and follow the demand at all times. Various ways to organize the electricity market were used, reflecting competing public policies, for example non-for-profit utilities or regulated monopolies. Electricity markets have retail and wholesale markets. Retail markets involve the sale of electricity to end consumers, while wholesale markets involve the selling of electricity to distributors by electric utilities.

How wholesale electricity markets work

The wholesale market is where the commodity, electricity, is traded (bought and sold) by the electricity producers, the electricity suppliers (who subsequently sell it to end consumers) and brokers or traders. Trading can be via direct agreement – directly between producer and supplier, via broker – brokered mutual agreement, or on electricity stock exchanges.

On electricity stock exchanges (also called power exchanges), like any other stock exchanges, transactions may be either financial (speculating for a better price) or may lead to a physical supply. Products can be spot (purchased for delivery on the same day or following day) or forward products (purchased for delivery sometime in the future). This is very similar to any stock exchange, with the exception that the market did not evolve yet to derivative products.

A particularity of the power exchange is that the commodity follows consumption patterns, so the products can also be base (the minimum consumption of electricity) or peak (supply from 8 morning until 20 from Monday to Friday). Finally, spot products can be day-ahead, weekend or hourly-reference products (half an hour, an hour or blocks of several hours). Therefore, a product sold on the exchange can be, for example, base spot or forward weekend. Key is the day-ahead spot price because it is the reference price for the spot trade.

The power of the regulating authority, usually the Transmission System Operator, on power exchanges is significant, because it has the ultimate responsibility to keep the system in balance. Because the electricity system has to be in balance at all times, the grid manager can take balancing actions, procuring more electricity, stopping someone to supply or asking large consumers to limit usage.

The merit order

A model often used by traders and brokers on electricity markets to describe the electricity generators, their production and costs is the merit order. This ranks power generators (mostly power stations and wind farms) by increasingly short-run marginal costs of production and capacity. Power generators with costs below the demand curve (also known as electricity load) will produce, while those above load will wait for a peak. The last power generator “called” to fill the needed load “sets” the price.

While the model has its limits, such as ignoring energy storage and ramp rates, it still shows that electricity produced by the plants with the lowest cost is dispatched first, minimizing the cost for consumers. The difference between the dispatched power plant cost and the load price is called infra-marginal rent.

For peaking units, the costs are covered by scarcity rents, created when load is very high (peaking). Spread is called the difference between electricity prices and the production cost of the plant (mainly involving fuel costs). Clean spread is the difference between electricity prices and the production cost of the plant, including taxes (such as the CO2 price or the carbon floor in the UK). The main competition is between coal and gas, called clean dark spread and clean spark spread, respectively.

How electricity wholesale markets work in EU28

In 2015, there were several bidding zones, but the purpose of the European policymakers is to make an European Energy Market, with one central market. A bidding zone is the largest geographical area where bidders can exchange energy without constraint . The bidding zones are CWE (France, Belgium, Netherlands, Germany, Austria, Luxembourg), NordPoolSpot (Sweden, Denmark, Finland, Estonia, Latvia, Lithuania and Norway), Apennine (Italy), Iberia (Spain and Portugal), CEE, also known as PXE (Poland, Czech Republic, Slovakia, Hungary, Slovenia, Romania), and Greece. Other couplings were constructed between countries, but they do not significantly affect price differentials.

Some of those bidding areas are now further integrated to form an even larger European power exchange, limited only by the level of interconnection between systems. National power markets still exist, such Romania’s OPCOM, Portugal’s OMIP or Spain’s OMEL, which creates some overlap.

Those bidding zones or power exchanges, including national power exchanges, work as a genuine exchange, trading electricity like any other commodity. NordpoolSpot, the leading European power market, for example offers day-ahead and intraday spot contracts for Nordic, Baltic and UK’s N2EX markets and intra-day spot contracts for the German market. The European Energy Exchange (EEX) and EPEX Spot, a joint venture between Germany’s EEX and France’s PowerNext, offer day-ahead and intraday spot contracts for Germany, Austria, France and day-ahead spot contracts for Switzerland. In addition, EEX has also future contracts, varying from day to year futures, for about all Western countries.

One Second After – William R. Forstchen

She’d always talk about how great Gandhi was. I’d tell her the only reason Gandhi survived after his first protest was that he was dealing with the Brits. If Stalin had been running India, he’d been dead in a second, his name forgotten.

Have you wondered what will happen if electricity suddenly stops coming? This book replies exactly at that questions, under a fictional story following an ex-military history professor, in a small town in the mountains in the United States.

Loss of electricity (not a blackout, in a blackout you kind of expect electricity to return) can have several reasons. In this book, there is an electromagnetic pulse that fries the grid and everything electric (circuitry). This threat is actually possible, and the guy in the US Army looking at this problem (asymmetrical threats) was an advisor for the book.

In case electricity stops coming, the very fiber of society disintegrates: no communications (no phones, television, internet, newspapers), no commerce (no card readers, only cash for a while, then only barter), no food (no refrigeration, no trucks to bring food to supermarkets, no machinery to harvest, no trucks to bring food from silos to animal farms), government loses the monopoly of violence (how can you announce the police of a robbery, crime, rape, if communications are down?), no medicines for the needy (diabetics and others). Also, no hygiene products for women.

Without electricity

Electricity allows to increase tremendously the efficiency of agriculture and food production. Therefore, as soon as it disappears, human population reduces to the efficiency of food production before electricity. This means mass starvation, which the book painfully describes.

The story takes place in the United States, in a mountain town. Hence, some features are present, which might be specific to the country, such as : numerous people have guns that can hunt with and many citizens have military experience. This comes as an advantage, because, as society breaks, individuals usually kept in check by police, re-surge as organized bands, taking food by force and killing. Police can’t quickly intervene, without the instant communications.  Also, many officers and hospital staff might be wanting to return home, at their loved ones, until some form of community protection is realized.

William R. Forstchen is asking many interesting, deep questions about the vulnerabilities of our society. The literary value of the book is quite low, writing is ok, fluid, but not fantastic; however, the strength of the book is coming from the really good questions that it asks. This is kind of hard fiction, from politically conservative perspective.

There are many low chance, high threat events that could destroy civilization. Supervolcanoes, meteorites, robots, plagues, but it is not a lot you can do if a meteorite comes. On the other hand, just blowing a nuclear bomb at high-altitude, for example 50 km up over a continent, the US Army colonel specialized in this issue argues, is enough to destroy a country. In the book, they don’t even know who launched the nuclear bomb. All that they know was that the launch was from a freighter out in the sea and they speculate that maybe a terrorist group or a country not friendly to US or even a large power that covered their tracks really well.

A report from nine scientists was published, unluckily in the day of the 9/11 attacks and, seemingly, a US Congress inquiry was made over this, but overridden by the terrorists attacks.

Overall, a must-read book for the interesting questions it asks.


[Picture from http://maxpixel.freegreatpicture.com/Strommast-Current-Pylon-Steel-High-Voltage-Sunset-520008%5D

A few words about energy and electricity – differences

Energy is the basis for modern human civilization, because of the significant increase in productivity it brings. It is a vital part for most, if not all, of human activities: agriculture, communications, trade, manufacturing, mining, education, health etc. Consequently, there is a correlation between energy consumption and wealth (Webber, 2013).

According to the first law of thermodynamics, which says that energy of an isolated system is constant, humans are basically transforming energy that is already in the system into energy more convenient to use. For example, a windmill transformed wind energy into mechanical energy used to mill grain. Replacing human muscle with wind energy increased enormously the efficiency of the process. Repeating this idea for thousand and thousand of processes led to the highly efficient and also highly energy-transformative economy we have today.

For dawns of civilization the main energy source used by humans was wood, later followed by coal and now we live in an era dominated by oil.

There are many forms of energy – kinetic (motion), thermal, chemical, nuclear, radiant (light), gravitational, etc – electricity is just a form of energy, used according to our needs. Electrical conversion is basically a transformation of various energies already existing in the system. For example, thermal energy (heat – which is basically kinetic energy at molecular level) from burning coal; or kinetic energy from wind motion; or gravitational energy from waterfalls is converted into electrical energy.

Energy sources have several classifications. For example, the International Energy Agency manual for energy statisticians (IEA, 2005), which shares harmonized definitions, units and methodology with Eurostat, the statistical office of the European Union, and the United Nations Economic Commission for Europe, considers that energy sources (called “commodities”) can produce primary electricity through direct use of natural resources, such as hydro, wind, solar, tide and wave power or they can produce secondary electricity, using thermal energy as intermediate step, such as from nuclear fission of nuclear fuels, geothermal heat and solar thermal heat, or by burning coal, wood, natural gas, oil, etc.

US Energy Information Administration (EIA, 2015) makes the distinction between primary energy sources and secondary energy sources. Primary energy sources are those forms of energy, such as oil, natural gas, coal, uranium, biomass, wind, that are used to convert energy into energy carriers. Energy carriers, called secondary energy sources, such as electricity and hydrogen, transport energy, which is later converted into other forms of energy that are useful for humans. Electricity is used because it is easy to transport and can be quickly transformed in other forms of energy we need (kinetic, e.g. for coffee maker, thermal, e.g. for light bulbs).

Other several classifications, more or less scientific are used. Conventional energy is used mainly to nominate energy production from fossil fuels, while alternative energy is basically any source other than fossil fuels. Renewable energy is energy derived from processes with a replenishment rate higher than consumption. Eurostat, however, considers biofuels and municipal waste as renewables. Green energy is any form of energy with small environmental impact at its end-use (IEA, 2015; Webber, 2013). However, all energy sources have an environmental impact (Webber, 2014, Sheldon 2014, Mayfield, 2015).

Energy is not the same as power, although similar in meaning. Energy is power over time. For example, a refrigerator has a power of 225 Watts, and in an hour it uses 225 Wh (energy.gov, 2015), which is a measure of energy.

From a long term energy strategy standpoint, the second law of thermodynamics, which says that entropy always increases or remains the same in a close system, is relevant. This means that Earth-based highly-ordered forms of energy, such as fossil fuels, will always have conversion loses, because Earth is a closed system (Sheldon, 2013; Webber, 2013). For example, overall efficiency for converting primary energy to light using a light bulb is just 1.6% (Tester et al, 2005, p.58). However sun radiance can be used at will, because Earth is not a closed system regarding this type of energy (Webber, 2013; Sheldon, 2013).

In other words, there is a lot of space for progress in energy production.