The Special and Important Case of Electricity in Climate Change

I have recently hosted several guests in my podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” with great expertise on the electricity sector.  And today, I’m continuing that with the most recent episode of the podcast.  This is appropriate because the electricity sector – in many countries – is both a major source of carbon dioxide (CO2) emissions, and is also a very important potential part of the “solution space,” due to the promise of increased electrification of the transportation and building sectors (accompanied by greater reliance on renewable sources of generation).

In the most recent episode, I engage in conversation with an economist who has spent close to four decades studying the electricity sector, making important contributions to the design of public policies, and one who also has great expertise in the broader realm of regulatory economics and industrial organization.  I’m referring to Severin Borenstein, who is Professor of the Graduate School at the Haas School of Business at the University of California, Berkeley, where he is the long-time Director of its highly-regarded Energy Institute.  The podcast is produced by the Harvard Environmental Economics Program.  You can listen to our complete conversation here.

As I noted above, Borenstein directs the Energy Institute at Haas.  In my view, its blog platform is among the most effective – and prolific – in energy policy circles. 

Our conversation begins with the fact that Severin has spent several decades studying the electricity power sector after having begun his career working on airline deregulation at the Civil Aeronautics Board (CAB) in the late 1970s.  It was a formative time in his career, he acknowledges, because of how immediately impactful that work was.

“During the time I was there, we basically instituted the process of deregulation which was a very complex process in terms of opening up entry of airlines to new routes, reducing and eliminating regulation of pricing, [and] figuring out how to set rules like denied-boarding compensation. So, there was just a huge amount of regulatory change going on, and with an economist [Fred Kahn] at the helm of the organization, a lot of that was based on economic reasoning. So, the economic group that I was in played a big role in it,” he says.   The Airline Deregulation Act of 1978 specified that the CAB would eventually be dissolved, which it was in 1985.

After teaching at the University of Michigan from 1983 to 1980, Severin returned to his native California to join the faculty at the University of California, Davis, at a time when the state was beginning to deregulate its electricity sector. In 1996, he moved to the Haas School of Business at the University of California, Berkeley, where he continued his work on electricity policy. Today, the state is a global leader in the clean energy transition, Borenstein argues, and should serve as an example for other regions that are lagging behind.

“Electrify everything really is the pathway to making huge gains on reducing greenhouse gas emissions, and that means a lot of renewables on the system. And that raises this challenge, which California is way ahead of almost anyone else in the world on, of keeping the system in balance when you have a lot of intermittent non-dispatchable generation,” he remarks. “You can … do it with batteries, but batteries are extremely expensive if you’re talking about long-term storage and having enough power to get through cold winters and so forth. You can do it with more trade with other areas that have different production patterns, and that’s great. We aren’t doing nearly enough of that.”

Borenstein also explains that the country would benefit tremendously from the placement of additional transmission lines that would facilitate the transfer of electricity from one region to others. He also notes the lack of public policies that would serve to reduce energy demand at peak times.

“We have not gone down the road very far at all of using demand response to help balance the system, and I think that’s just a huge waste,” he says. “There’s plenty of electricity demand that is absolutely critical, but there’s also plenty that’s not and if we can send the signals, now’s not the right time to charge your car, or it would be better if you could shift your electric dryer to later in the evening or middle of the day when we have plenty of solar, we could make this a lot easier. And no one that I’m aware of has gotten very far in doing that. And I think that’s a real disappointment and challenge.”

For this and much, much more, I encourage you to listen to this 51st episode of the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.


Author: Robert Stavins

Robert N. Stavins is the A.J. Meyer Professor of Energy & Economic Development, John F. Kennedy School of Government, Harvard University, Director of the Harvard Environmental Economics Program, Director of Graduate Studies for the Doctoral Program in Public Policy and the Doctoral Program in Political Economy and Government, Co-Chair of the Harvard Business School-Kennedy School Joint Degree Programs, and Director of the Harvard Project on Climate Agreements.