Quantitative Essays in Resource and Energy Economics

This thesis comprises three research papers analyzing quantitative questions in resource and energy economics. The first paper quantifies welfare and price effects of a counterfactual introduction of widespread agricultural liming in the Zambian smallholder maize market. This practice is known to reduce soil acidity to the benefit of fertilizer productivity. Via a dynamic, deterministic, open market, spatial partial equilibrium model, a price reduction of 22.8% and an increase in welfare of 3.4% are identified. These results change when favorable world market conditions with maize prices of 350 USD/t make export profitable, decreasing the price reduction to 16.1% and increasing the welfare gain to 5.6%. The second paper analyzes two aspects of the interaction between agricultural production of biofuel and food: the first aspect is competition for arable land between food and energy crops and the second aspect is a potential decrease in fuel cost for agricultural food production caused by local biofuel production. The two aspects are quantified for Zambia with an open market, welfare maximizing, partial equilibrium model. The model builds on the first paper concerning the market for maize and additionally considers biodiesel, cassava, fossil diesel, and palm oil. A complete switch from fossil diesel to biodiesel is estimated to reduce local fuel prices by 51%, while increasing food production (cassava and maize combined) by 0.4% with a related drop in price by 3%. Overall welfare increases by 9.9%. An additional analysis at increased global maize prices, rendering export just profitable, leads to a similar gain in welfare, a decrease in the gain of domestic food supply to 0.3% with the related price decrease shrinking to 2%. At the same time food supply including exports increases by 32%. The third paper presents a methodology to estimate fixed cost parameters relevant to the decision to operate, mothball, or retire an open-cycle gas turbine (OCGT) using a dynamic discrete choice model. The model uses data from the PJM power market including information on natural gas prices, electricity prices, capacity premiums, and both operational status and technical data of OCGTs (including age, capacity, and vintage class). The model identifies fixed operation & maintenance costs that vary with the operational status and technical specifications of the OCGT. The estimated fixed O&M cost parameters for an operational OCGT vary from 15.3 USD/kW/year for new, large, high-effciency units, to 50.8 USD/kW/year for older, small, low-effciency units. Mothballing a plant reduces these costs by 75% to 95%, depending on plant vintage and size. Decommissioning an OCGT was found to be cash flow negative.