Workshop on Energy and Environmental Research

UH Mānoa is particularly strong in energy, environment and resource policy, which often requires interdisciplinary research. This workshop is organized by UHERO and facilitates interaction among faculty and graduate students in UHERO, Economics, Engineering, NREM, DURP, SOEST and more. We also hope to draw participation from visitors and professional economists and policy analysts around the State. Work in progress is strongly encouraged!

Seminars will take place at the Miller Room. The seminar can also be attended online via Zoom on Mondays from 12:00pm – 1:15pm. Subscribe to the WEER mailing list to receive the Zoom link and further information on upcoming sessions.

Class Credit:
Graduate students can obtain ECON 696 credit from Professor Roberts.

Fall 2022

Date

Speaker

Title

Abstract

October 10

Michael Roberts

Real Time Pricing and the Cost of Clean Power

View

October 24

Karl Dunkle Werner (UC Berkeley) and Stephen Jarvis (London School of Economics)

Rate of Return Regulation Revisited

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October 31

Minh Nguyen (UH Mānoa, Economics)

Perceived risk of natural disasters and firm performance: Evidence from self-reported exposure to natural disaster risks in Form 10-K filings

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November 7

John Lynham (UH Mānoa, Economics)

Spillover Benefits from the World’s Largest Marine Protected Area (Recently published in Science)

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November 21

Donkyu Park (UH Mānoa, Economics)

How Did Expiration of Korea-Japan Fishery Agreement Affect Korea’s Hairtail Catch?

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December 5

Ian Rees (UH Mānoa, Economics)

The Effect of Natural Disasters on GDP: A case study of two disasters affecting Hawaii County in 2018

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Real Time Pricing and the Cost of Clean Power

Michael Roberts

Abstract:
Solar and wind power are now cheaper than fossil fuels but are intermittent. The extra supply-side variability implies growing benefits of using real-time retail pricing (RTP). We evaluate the potential gains of RTP using a model that jointly solves investment, supply, storage, and demand to obtain a chronologically detailed dynamic equilibrium for the island of Oahu, Hawai’i. Across a wide range of cost and demand assumptions, we find the gains from RTP in high-renewable systems to exceed those in a conventional fossil system by roughly 6 times to 12 times, markedly lowering the cost of renewable energy integration.

Rate of Return Regulation Revisited

Karl Dunkle Werner (UC Berkeley) and Stephen Jarvis (London School of Economics) (View Paper)

Abstract:
Utility companies recover their capital costs through regulator-approved rates of return on debt and equity. In the US the costs of risky and risk-free capital have fallen dramatically in the past 40 years, but utility rates of return have not. Using a comprehensive database of utility rate cases dating back to the 1980s, we estimate that the current average return on equity could be around 0.5–5.5 percentage points higher than various benchmarks and historical relationships would suggest. We discuss possible mechanisms and show that regulated rates of return respond more quickly to increases in market measures of the cost of capital than they do to decreases. We then provide empirical evidence that higher regulated rates of return lead utilities to own more capital – the Averch–Johnson effect. A 1 percentage point rise in the return on equity increases new capital investment by about 5%. Overall we find that consumers may be paying $2–20 billion per year more than they would otherwise if rates of return had fallen in line with capital market trends.

Perceived risk of natural disasters and firm performance: Evidence from self-reported exposure to natural disaster risks in Form 10-K filings

Minh Nguyen (UH Mānoa, Economics)

Abstract:
I develop a measure of firms’ perceived risk to disaster events equal to the number of words related to natural disaster events in the Management Discussion and Analysis (MD&A) section of firms’ Form 10-K filings to the Securities and Exchange Commission. I then link this measure to contemporary and future firm decision-making and performance. I find that this self-reported measure of natural disaster risks in the current year is negatively associated with firm profitability in the subsequent year. However, it is not associated with sales growth or Tobin’s Q (market value over booked value). These associations between perceived risk to natural disasters and firm performance are significant in the services sector but not significant in the manufacturing sector. Finally, I find that advanced machine learning models robustly outperform linear regression in predicting firm performance under natural disaster risks.

Spillover Benefits from the World's Largest Marine Protected Area

John Lynham (UH Mānoa, Economics)
View Paper
Co-authors: Sarah Medoff (UH Mānoa, JIMAR-PIFSC) and Jennifer Raynor (University of Wisconsin-Madison)

Abstract:
Previous research has cast doubt on the potential for marine protected areas (MPAs) to provide refuge and fishery spillover benefits for migratory species as most MPAs are small relative to the geographic range of these species. We test for evidence of spillover benefits accruing from the world’s largest fully protected MPA, Papahānaumokuākea Marine National Monument. Using species-specific data collected by independent fishery observers, we examine changes in catch rates for individual vessels near to and far from the MPA before and after its expansion in 2016. We find evidence of spillover benefits for yellowfin (Thunnus albacares) and bigeye tuna (Thunnus obesus).

How Did Expiration of the Korea-Japan Fishery Agreement Affect Korea's Hairtail Catch?

Donkyu Park (UH Mānoa, Economics)

Abstract:
This paper studies the impact of the expiration of the Korea-Japan Fishery Agreement (KJFA) on the hairtail catch from Korean long-line fishing. Since 1965 when the KJFA was signed, it has played a significant role as a resource management tool to reduce the risk of resource depletion and conflicts between the countries sharing the Exclusive Economic Zone (EEZ). When the KJFA expired on June 30, 2016, fishing activities in the mutual EEZ were prohibited. This prohibition significantly affected Korea’s hairtail catch, which depended heavily on the EEZ. Though the China EEZ serves as an alternative fishing ground, higher fishing efforts are required to operate because of long-distance fishing. The main result shows that the monthly average hairtail catch and fishing days from long-line fishing decreased by 8.2% and 13.1% after the expiration, respectively. Focusing only on fishers who switched to the Korean water from the Japan EEZ after its closure, the catch and fishing days decreased by 7.8% and 13.7%, respectively. These findings support the idea that the long-line hairtail fishing vessels were mainly crowded out to Korean water by the suspension of the KJFA.

The Effect of Natural Disasters on GDP: A case study of two disasters affecting Hawaii County in 2018

Ian Rees (UH Mānoa, Economics)

Abstract:
The 2018 eruption of Kilauea and the partial grounding of Hurricane Lane devastated the County of Hawaii. The combined effect of both disasters totaled close to $300m in direct costs and significantly disrupted the county’s growing tourism sector. Multiple studies have been conducted on the direct costs of natural disasters in the State of Hawaii, but none have yet to measure the indirect cost on county-level GDP. In this study, we use county-level panel data to estimate how these disasters affected Hawaii County’s gross domestic product. We use the synthetic control approach formalized by Abadie, A. et al. (2012) that uses unaffected counties of Hawaii as a control. We show that the 2018 disasters had no significant impact on Hawaii County’s GDP, possibly because negative impacts were offset by productive activities stemming from relief funds and associated rebuilding activities.

Biocultural values of groundwater dependent ecosystems in Kona, Hawai‘i

Veronica Gibson

Abstract:
Groundwater dependent ecosystems (GDEs) are increasingly recognized as important conservation targets with linked ecological and social value. However, the social uses and values of GDEs have received relatively little attention in peer-reviewed literature, precluding their greater inclusion in policy and management decisions. To help fill this gap, we provide a case study from Kona, Hawaiʻi, where multiple types of GDEs are abundant, to illustrate the diversity of social uses and values of GDEs. To explore these uses and values, we combined a literature review, archival analysis, and key-informant interviews with resource managers and lineal descendants connected to three prominent GDEs: Indigenous aquaculture systems, anchialine pools, and nearshore ecosystems. Interviews focused on current and historical uses and values of GDEs, contemporary management challenges and strategies, and desired visions for the future. Interviewees expressed a range of uses and values associated with GDEs, which we categorized using a Hawaiʻi-based cultural ecosystem service framework focused on social connections, physical and mental health, spirituality, and knowledge. Importantly, results suggest that the historical value of these systems directly informs current social value, and that restoration efforts are largely carried out through biocultural approaches, which emphasize the mutually reinforcing restoration of ecology and culture. We found that interviewees seek to restore ecosystem functions, cultural practice and connection to place, and in some cases, local food production. Achieving these goals requires addressing multiple and interacting threats to these systems including invasive species, land-based sources of pollution, groundwater pumping, and climate change. Importantly, effective and equitable restoration also rests on recognition and amplification of Indigenous rights, knowledge, practice, and governance. Results provide important lessons for land and water management and policy in Hawaiʻi as well as other islands and coastal areas where GDEs have important linked social and ecological value.

Are We Building Too Much Natural Gas Pipeline?
A comparison of actual US expansion of pipeline and storage to an optimized model of the interstate network

Thuy Doan

Abstract:

Many consider natural gas to be a bridge to renewable energy. Between 2005 and 2019, coal-to-gas switching reduced electricity sector CO2 emissions by 61%. This change was driven by abundant shale gas made cheaply extractable by innovation in hydraulic fracturing. Natural gas power plants can be efficient, fast-to-build, relatively inexpensive, and flexible, which pairs well with intermittent wind and solar. But natural gas still emits about half the carbon per unit of energy as coal, while methane leaks from wellheads and pipelines greatly diminish these benefits. To achieve net zero, gas use will likely need to decline substantially, leading to stranded gas infrastructure assets that have not been fully depreciated. It is not clear whether regulators or pipeline companies have made desirable long-run plans. Even the Department of Energy projects continued growth of natural gas use well beyond 2050, the US goal for net zero emissions. If gas use declines substantially, then difficult questions arise about who will pay for stranded assets.

To shed light on this issue and aid future planning, this paper presents a novel, national-level capacity expansion model of pipeline and storage development. Taking supply and demand of gas as historically observed (2002-2019) and projected (through 2050), it finds the time-path of investments in interstate pipeline and storage that minimizes the cost of balancing supply and demand in each U.S. state on each day. The model’s novelty includes its simultaneous consideration of investments in pipeline capacity, storage capacity, and daily interstate flows, injections, and withdrawals of gas in storage. We then compare minimized costs to actual costs, and assess differences in model flows and storage use from those observed. Preliminary results indicate that the U.S. has invested much more in pipeline, and moderately less in storage, than are optimal. Overinvestment, however, is not uniform across states. Pipelines had been overbuilt in some regions while under-invested in others. States in the East region have underinvested in storage. Building additional storage may be more efficient than building more pipelines in some states. In future work, we plan to use the model to consider optimal future investment along alternative decarbonization pathways.

Economic valuation for spatial targeting of coral reefs conservation in the face of climate change

Carlo Fezzi

Abstract:
Coral reefs are currently facing some of the greatest threats in their long history, such as increasing climate change and local stressors. Economic analyses can contribute to the conservation and restoration of these precious ecosystems by developing methods to understand which policy interventions are likely to deliver the highest benefits for the lowest cost, and which locations of implementation provide the highest values for the society. While the coral reef valuation literature is large, most studies provide results that are specific to a single site and lack the explicit spatial component needed for prioritizing intervention across heterogeneous landscapes. This work integrates ecological and socio-economic information on more than 170 different recreation sites located on the island of Maui within a structural, random utility model (RUM) estimated on more than 2500 recreation trips carried out by Maui residents in a period of 4 weeks. We use our model to provide the estimates of the economic impact of recent bleaching events, which are in the order of $30M per year. We also show how our estimates can be used to prioritize areas for ecosystem restoration.