CEA Energy Policy & Market Analysis 4 — Questions and Answers
Question 1: Which demand-side management (DSM) program compensates customers for voluntarily reducing electricity use during grid stress events?
- Energy efficiency rebate program
- Demand response program (Correct answer)
- Net metering tariff
- Green power purchasing program
Correct answer: Demand response program
Demand response programs pay customers to curtail or shift electricity use on short notice, reducing peak load without building additional generation capacity.
Question 2: A utility integrated resource plan (IRP) is primarily a tool for:
- Setting retail electricity rates for residential customers
- Long-term planning of least-cost supply and demand resources (Correct answer)
- Complying with federal environmental permitting requirements
- Scheduling daily dispatch of generating units in merit order
Correct answer: Long-term planning of least-cost supply and demand resources
An IRP evaluates combinations of supply-side and demand-side resources over a planning horizon to identify the least-cost, reliable portfolio meeting projected load growth.
Question 3: In electricity markets, 'ancillary services' include all of the following EXCEPT:
- Frequency regulation
- Spinning reserves
- Voltage support (reactive power)
- Long-term capacity expansion planning (Correct answer)
Correct answer: Long-term capacity expansion planning
Ancillary services are real-time grid support products (regulation, reserves, reactive power); long-term capacity expansion planning is a resource adequacy function, not an ancillary service.
Question 4: The 'duck curve' problem in electricity systems with high solar penetration refers to:
- Excess wind generation overnight that must be curtailed
- A midday drop in net load followed by a steep evening ramp as solar output falls (Correct answer)
- The shape of demand response curves during peak summer afternoons
- Volatile natural gas prices that follow a duck-bill pattern seasonally
Correct answer: A midday drop in net load followed by a steep evening ramp as solar output falls
High solar generation depresses net load midday but creates a rapid ramp need in late afternoon as solar output drops and evening demand rises, stressing dispatchable resources.
Question 5: Which instrument allows a clean energy developer to sell the environmental attributes of renewable generation separately from the electricity itself?
- Power purchase agreement (PPA)
- Renewable energy certificate (REC) (Correct answer)
- Investment tax credit (ITC)
- Carbon offset credit
Correct answer: Renewable energy certificate (REC)
A REC represents the environmental attributes of one megawatt-hour of renewable electricity and can be sold or retired separately from the underlying energy.
Question 6: In the context of natural gas markets, 'basis differential' refers to:
- The difference between Henry Hub and a regional delivery point price (Correct answer)
- The spread between spot gas prices and long-term contract prices
- The cost difference between pipeline gas and LNG imports
- The premium paid for firm versus interruptible transportation service
Correct answer: The difference between Henry Hub and a regional delivery point price
Basis differential measures the price spread between Henry Hub and a specific regional or local delivery point, reflecting transportation costs and local supply-demand conditions.
Question 7: When a state adopts a carbon pricing policy that raises in-state electricity costs, but imports cheap carbon-intensive power from neighboring states, this problem is known as:
- Regulatory arbitrage
- Carbon leakage (Correct answer)
- Transmission congestion
- Energy portfolio imbalance
Correct answer: Carbon leakage
Carbon leakage occurs when emission reductions in a regulated jurisdiction are offset by increased emissions elsewhere due to economic incentives to move production to unregulated areas.
CEA Energy Policy & Market Analysis 4
Which demand-side management (DSM) program compensates customers for voluntarily reducing electricity use during grid stress events?