Causes for Stalling of Pipeline Projects
Saleem H. Ali*
he attractive economic and political features of pipelines have not apparently been enough for “rational regionalism” to take root for either the IPI or TAPI projects. At this juncture, what is needed is the requisite political will from the actors involved, and the reasons for proceeding, when considered in tandem, are compelling. Security analysts are increasingly of the view that pipelines can be economical and fairly functional even in high conflict zones.1 There are now adequate technologies to ensure constant security and, in the event of attacks on pipelines, the damage can be repaired relatively quickly. Undersea pipelines, while more expensive to repair, are far less vulnerable to sabotage. The international community can also play an important role in guaranteeing security. For example, the Baku-Tbilisi-Ceyhan pipeline project—traversing 176 different kinds of ecoregions while crossing the highly unstable Caucasus—was designed to protect against terrorist attacks. As part of a $64 million program aimed at repelling saboteurs, U.S. Special Forces trained 1,500-2,000 Georgian soldiers in counterterrorism operations.
These efforts aside, it is important to be aware of potential pitfalls in pipeline development. First, pricing negotiations and hard bargaining in the absence of a clearly agreed upon pricing strategy can impede negotiations. For example, in the case of the Iran to Pakistan pipeline, the Iranians have called for the same price they charge Turkey but have failed to give Pakistani negotiators a clear sense of what that price is. Instead, the terms of reference presented to the Pakistani government are usually given as a percentage of the oil price.
The international community, and the United States in particular, can play a critical role in channeling the efforts of states toward cooperation on energy security. In reality, however, American policy has been characterized by ambivalence rather than clarity, something that comes across, for instance, in Ahmed Rashid’s discussion of U.S. actions during the rise of the Taliban.2 For instance, when the Taliban captured Kabul in September 1996, Chris Taggert, an executive in the U.S. oil firm Unocal, said that the long-awaited gas project from Turkmenistan to Pakistan would now be easier to implement. Unocal was criticized for its willingness to negotiate with the Taliban and quickly retracted the statement. Even U.S. State Department spokesman Glyn Davies initially stated that the United States found “nothing objectionable” in the steps taken by the Taliban to impose Islamic law, describing them as “anti-modern” rather than “anti-western.”3 However, the U.S. embassy in Islamabad, which was far more familiar with the Taliban, contacted Washington to register its concern over the statements.
In the meantime, the Taliban continued to pursue negotiations on the Turkmenistan pipeline with Unocal as well as Bridas, the Argentine company that had first courted Turkmen gas. Two separate Taliban delegations visited Argentina and the United States in February 1997. The Taliban did not make any particular commitments during these visits, which were largely exploratory in nature.
The State Department, however, was growing concerned with the draconian rule of the Taliban, following reports of widespread human rights abuses. The final blow to the project came in August 1998 when Al Qaeda was linked to the bombings of the U.S. embassies in Kenya and Tanzania. Soon after, the Clinton Administration launched air strikes in Afghanistan and discouraged Unocal from any further engagement with the Taliban.
The prospects for the TAP pipeline were briefly renewed when the Bush Administration assumed power in 2000. Republicans have generally been more sympathetic to business interests and the Bush family had particularly good connections in the oil sector. As documented by French journalists Jean-Charles Brisard and Guillaume Dasquie, the Bush Administration began engaging the Taliban in 2000 and early 2001. Funds were provided for opium eradication programs while discussions continued on the TAPI project. Negotiations finally broke down in August 2001, partly due to the Taliban’s reluctance to bargain the future of Osama Bin Laden in exchange for economic cooperation.4 Marty Miller, Unocal vice-president, would remember the entire effort as “the black hole” of his career; despite considerable effort, no agreement was reached.5
The interaction between the Bush Administration and the Taliban in the first eight months of 2001 point to how natural resource interests can lead to cooperative behavior on both the regional and international level. The willingness of two governments with such divergent worldviews to converge on hard economic interests, even if briefly, lends support to the notion of “rational regionalism.” At the same time, there is a darker side to such cooperation: the cooptation of the security agenda by extremists for economic expediency. Human rights activists criticize American and European support of countries like China and Saudi Arabia whose systematic human rights abuses and authoritarian political structure are tolerated on account of energy stability and economic interests. On the other hand, strategies of economic isolation, including withholding energy cooperation, do not seem to have the desired impact either, as demonstrated by the cases of Cuba and Iran.
In short, the dominant approaches of no conditionality and negative conditionality appear to undermine ideals or interests, or both. This suggests exploring alternative strategies of “positive conditionality,” employing economic incentives and infrastructure connectivity— particularly with pipelines—as a bargaining tool. Accordingly, western investment would proceed only after the recipient countries in question meet commitments on any number of concerns, including regional security as well as human rights.
It is important to note that international donors and western governments lose any leverage they might have after pipeline construction is completed. For example, the World Bank negotiated the Chad-Cameroon pipeline project to ensure that the government of Chad would not misuse the revenues to purchase arms. The Bank, however, did not anticipate the subsequent investment from countries like China, which had little interest in what Chad did with its revenue. After five years of efforts, the Bank withdrew from the arrangement in 2008 after Chad refused to comply with the original terms. Once the infrastructure had been built, the World Bank lost the ability to monitor and enforce Chad’s compliance, particularly as operational help was now available to Chad from other sources.6
Another example worth considering is U.S. policy on Iran, which was relatively consistent across the Clinton and Bush Administrations. Commenting on the IPI pipeline project, Congressman Tom Lantos, chairman of the House Foreign Affairs Committee, argued that “India [would] pay a very hefty price for its total disregard of U.S. concerns vis-à-vis Iran.”7 Conservative think tanks, such as the Heritage Foundation, called the project an “unacceptable risk to regional security.”8 The legal basis for American opposition to any investment via Iran is the Iran-Libya Sanctions Act (ILSA), which threatens to place American sanctions on any entity that invests over $20 million in Iran in one year. Consequently, investment in Iran’s energy sector has diminished considerably. By one 2007 estimate, Iran exports 2.34 million barrels of oil per day, about 300,000 barrels below its OPEC quota.9
These limitations not withstanding, Iran is pursuing a proposal for a 140 km pipeline link, which will pump just over 1 million cubic meters a year (cm/y) of Iranian gas, potentially rising to 5m cm/y, to neighboring Armenia, Turkey’s avowed opponent in the region. Might this provide an opportunity for Iran to play a mediating role between Armenia and Turkey? Unfortunately, just as with Iran, the power of positive linkages on energy have eluded policymakers.
This can and will begin to change if pipelines come to be viewed by the actors involved as means, not ends, and as mechanisms rather than rewards for cooperation. International institutions, such as the Multilateral Investment Guarantee Agency of the World Bank Group, and regional institutions are capable of providing safeguards and financial assurances to investors so that broader goals of regional cooperation are realized. Additionally, civil society organizations, such as the Revenue Watch Institute can provide vigilance and transparency through third-party audits and ongoing monitoring of cash flows. There is now increasing momentum for countries to sign on to efforts such as the Extractive Industries Transparency Initiative, initiated by the British government and based in Norway, which requires countries to verify and publish revenues from the oil and gas sector.10
Notes:
* The author is professor of environmental planning and Asian Studies at the University of Vermont.
1 Toufiq Siddiqi, “India and Pakistan: Pipe Dream or Pipeline of Peace?” Georgetown Journal of International Affairs, Winter/Spring 2004.
2 Ahmed Rashid, Taliban: Militant Islam, Oil and Fundamentalism in Central Asia (New Haven: Yale University Press, 2001).
3 Ibid., 166.
4 For details of this account from an interview conducted by Nina Burleigh with Jean-Charles Brisard and Guillaume Dasquie, see Burleigh, “Bush, Oil, and the Taliban,” Salon.com, February 8, 2002, <http://www.salon.com/news/politics/feature/2002/02/08/forbidden/index.html>.
5 Steve LeVine, The Oil and the Glory: The Pursuit of Empire and Fortune on the Caspian Sea (New York: Random House, 2007), 310.
6 See Pegg, “Can Policy Intervention Beat the Resource Curse?”
7 David Temple, “The Iran-Pakistan-India Pipeline: The Intersection of Energy and Politics,” Research Paper, Institute of Peace and Conflict Studies, April 2007,36.
8 Ariel Cohen, Lisa Curtis, and Owen Graham, “The Proposed Iran-Pakistan-India Gas Pipeline: An Unacceptable Risk to Regional Security,” Analysis Paper no. 2139, Heritage Foundation, May 30, 2008.
9 Luft, “Iran-Pakistan-India Pipeline.”
10 For more on EITI, see http://eitransparency.org/eiti.
Concluded
Views are those of the author
Courtesy: Brookings Doha Center
Prospects for Pipeline Project Revival
Saleem H. Ali*
an “rational regionalism” be resurrected in the current geopolitical climate? The change of administration in the United States suggests that IPI’s renewal may be possible, though similar hopes were expressed during Bush’s presidency. During a rare visit to Islamabad in 2006, President George W. Bush remarked that “our beef with Iran is not the pipeline…our beef with Iran is [that] they want to develop a nuclear weapon” and suggested he “understands the need to get natural gas in the region, that’s fine.”1 While Iran-U.S. relations have deteriorated, the economic imperative to work on the pipeline remains active. Pakistan independently finalized plans to start construction of the pipeline in March 2010 after a final agreement on project initiation was signed in Istanbul. China also indicated that it would consider obtaining gas from Iran by linking itself to the IPI pipeline.2
There may, in fact, be ample room to incorporate pipeline development in American efforts to pressure Iran on nuclear weapons. The Clinton Administration had developed a “national interest” waiver (Section 9(c) of ILSA), which it used to allow Total of France, Gazprom of Russia, and Malaysia’s Petronas to sign a $2 billion contract with Iran in 1998. Since then, another $11.5 billion has been invested in Iran without action from the United States. ILSA’s definition of “investment” does not explicitly mention long-term oil or gas purchases, or the building of energy transit routes to or through Iran, as violations. The Act’s definitions are purposefully vague, stating that infrastructure projects will be deemed violations only if they “directly and significantly contribute to the enhancement of Iran’s ability to develop petroleum reserves.”3
While the Iran Sanctions Act is unlikely to be applied to the Iran-Pakistan-India pipeline, the United States now has a clear preference for the TAPI project since it would contribute to Afghan development and reduce Russia’s domination of gas sector transit. As Richard Boucher, former U.S. assistant secretary of state for South and Central Asian Affairs, explained in September 2007: “One of our goals is to stabilize Afghanistan, so it can become a conduit and a hub between South and Central Asia so that energy can flow to the south... and so that the countries of Central Asia are no longer bottled up between two enormous powers of China and Russia, but rather they have outlets to the south as well as to the north and the east and the west.”4
Security of supply has been considered a major hindrance to pipeline projects. After the intensification of guerilla activity in Afghanistan in 2007 and 2008, this became a more salient concern for TAPI. Nevertheless, prospects for the project continue to hold promise. The TAPI pipeline was a major point of discussion at a donor meeting held on November 18-19, 2006 in New Delhi. The conference’s final statement pledged:
“Countries and organizations will assist Afghanistan to become an energy bridge in the region and to develop regional trade through supporting initiatives in bilateral/multilateral cross-border energy projects…Work will be accelerated on [the] Turkmenistan-Afghanistan-Pakistan-India gas pipeline to develop a technically and commercially viable project.”5
If pipeline construction goes ahead, it could become Afghanistan’s largest ever development project. According to the Interim National Development Strategy for Afghanistan of 2005, transit revenue could amount to nearly half of the Afghan government’s domestic revenue. Encouragingly, India officially joined the TAPI consortium in 2008 and the Asian Development Bank expressed strong interest in supporting the construction of the pipeline if economic and security arrangements are worked out by the consortium.6
On TAPI as well as IPI, a number of concerns remain, including the potential that Pakistan may use its transit portion of the pipeline as blackmail against India. The risk, however, has been minimized by India’s ability to convince the source countries that they will only be paid for the gas that India receives, not for what is pumped. R.K. Pachauri, one of the earliest proponents of the two pipeline projects, has argued for other innovative means of ensuring supply: “The gas pipeline contract could be made far more secure for India by building comprehensive provisions for supply of petroleum products and power to Pakistan. In other words, the contract could be structured in a manner that makes any disruption in supply expensive and strategically infeasible to Pakistan.”7 Pakistan stands to earn several hundred million dollars in transit fees and thus has extremely strong incentives to maintain the flow of gas.
An additional obstacle to TAPI and IPI is the opposition of Balochi separatist leaders who fear the pipeline may lead to further militarization of the area. Indian politicians, particularly those from the Bharatiya Janata Party (BJP), have traditionally had strong ties to Balochi separatists and tended to amplify the latter’s concerns. At the same time, it is becoming increasingly evident that the Baloch would be willing to consider the pipeline as a point of negotiation for increasing their share of gas royalties and meeting some other longstanding demands. In 2006, for example, the Balochistan assembly unanimously passed a resolution seeking royalties for IPI, a place at the negotiation table, 100 percent local employment, and free gas for adjacent communities. While these conditions are unlikely to be acceptable to the Pakistani government, the passage of the resolution suggests the contours of a deal that would address Balochi demands.8
The very fact of a Balochi insurgency may also provide some unusual incentives for Pakistani cooperation on pipelines. As energy analyst David Temple notes, “Pakistan’s suspicion of Indian and possibly Iranian incitement in Balochistan furthers Pakistan’s interest in the IPI since the pipeline would give both India and Iran a stake in Baloch stability.”9 There are already examples of Iranian-Pakistani coordination on Balochi concerns, such as when Pakistan apprehended Iranian Baloch militant Abdulhamid Rigi and turned him over to Iran in June 2008. Terrorism analyst Chris Zambelis pointed out that “the politics of energy pipelines [help] foster closer cooperation between Iran and Pakistan in suppressing Balochi nationalism.”10
In short, the wide-ranging interplay between energy and security concerns can help move governments and investors alike toward a broader vision for the role of pipelines in promoting cooperation and resolving regional disputes. Bringing environmental issues into this evolving framework adds another important, though often neglected, dimension to pipeline construction and routing. Robert Goodland, formerly of the World Bank, notes that “the practice of routing a pipeline through a friendly country, rather than selecting a shorter and lower impact route through a less friendly one should be addressed.”11 His concern is that making the route subservient to geopolitics can have an adverse environmental impact. Thus, choosing short pipeline routes, even if they involve more difficult negotiations, may be worth the trouble.
As such, the harmonization of environmental standards across regions may make pipeline routing more efficient and, by crossing through otherwise hostile states, induce them to at least consider cooperation with each other.
Notes:
* The author is professor of environmental planning and Asian Studies at the University of Vermont.
1 “Bush U-turn on Iranian pipeline,” BBC News, March 4, 2006, <http://news.bbc.co.uk/2/hi/south_asia/4774312.stm>.
2 Stephen Blank, “China Hangs Fire on Iran-Pakistan Pipeline,” Asia Times, March 10, 2010 and Tom Wright, “Iran Pakistan Sign Pipeline Deal,” Wall Street Journal, March 17, 2010.
3 The U.S. House of Representatives, Iran-Libya Sanctions Act of 1996, Section 5(a), HR3107.
4 John Foster, “A Pipeline through a Troubled Land: Afghanistan, Canada, and the New Great Energy Game,” Canadian Centre for Policy Alternatives, no. 1, June 19, 2008, 2.
5 Ibid., 6.
6 Jennifer Lopresto, second secretary, U.S. Embassy in Ashgabat, Turkmenistan, e-mail correspondence, April 7, 2009. The Asian Development Bank has declined to provide any specific commentary on this project, stating only that it is under consideration.
7 R. K. Pachauri, “Not all hot air: Indo-Pak peace in the pipeline,” Times of India, February 5, 2004.
8 Rahil Yasin, e-mail correspondence, July 29, 2009.
9 Temple, “The Iran-Pakistan-India Pipeline,” 4.
10 Chris Zambelis, “Balochi nationalists intensify violent rebellion in Iran,” Terrorism Monitor 7, no. 3, February 9, 2009.
11 Robert Goodland, “Oil and Gas Pipelines: Social and Environmental Impact Assessment,” paper presented at the International Association of Impact Assessment, Fargo, ND, 2007, 160.
Concluded
Views are those of the author
Courtesy: Brookings Doha Center
NEWS BRIEF
OIL & GAS
Cairn Energy says focused on closing Vedanta deal
August 23, 2011. British oil firm Cairn Energy said it was focussing on concluding a long running deal to sell a stake in its Indian unit to Vedanta, but was also looking at opportunities to explore for oil and gas in Lebanon. In June, India granted conditional approval for Vedanta to buy a stake in Cairn India in a $6 billion deal that was first announced in August 2010. The parties are currently working to satisfy the conditions for the deal to complete, said Cairn. Part of the cash returned from the Indian transaction could be used to fund exploration in the Eastern Mediterranean where Cairn said it has teamed up with a Lebanese private company and UK-based explorer Cove Energy. The company said it wanted to participate in a licencing round in Lebanon, expanding its reach to a new frontier basin. Cairn also plans to spend $600 million in Greenland drilling up to four wells in its attempt to open up a new oil province, but has so far had little success in the Arctic territory. The company said it had cash of around $1 billion on June 30, with a production of around 167,000 barrels of oil in the first half, and revenues of $1.3 billion.
Reliance Industries withdraws from Oman oil exploration block
August 23, 2011. Reliance Industries has withdrawn from an offshore oil exploration block in the Sea of Oman. Block 18, a 21,140 sq km concession located off the Batinah coast, was relinquished by the conglomerate's wholly-owned Dubai-based subsidiary, Reliance Exploration and Production DMCC. The decision follows an exploratory drilling campaign that failed to unearth any significant prospects. The move comes six years after Reliance inked a deepwater Exploration and Production Sharing Agreement with the Oman government for Block 18 in the Sohar Basin in June, 2005. While withdrawing from the concession, Reliance stated that the results of its drilling campaign targeting Block 18 had "not been encouraging". It estimated the total expenditure incurred on Block 18, as well as another block in East Timor, at $177 million. State-owned Oman Oil Company Exploration and Production (OOCEP), which had acquired a 30 per cent interest in Block 18 under a farm-out agreement signed in October, 2009, is unlikely to take over the concession and the Ministry of Oil and Gas is expected to remarket the block. In conjunction with the farm-out agreement, OOCEP also signed a Joint Operating Agreement with Reliance, which provided the basis for setting up a joint operating company to be managed by the two companies upon a commercial discovery being established in Block 18. Meanwhile, Reliance is currently focused on the development of its sole existing concession in Oman, Offshore Block 41, which covers an area of around 23,800 sq km off the Sharqiya coast. The company is awaiting the results of 2D seismic surveys before it pursues the next phase of its exploratory plan in Block 41. Reliance Exploration and Production DMCC's portfolio currently consists of 12 blocks spread across Oman, Yemen, Kurdistan, East Timor, Peru, Australia and Colombia.
Reliance to close $7.2 bn BP deal
August 21, 2011. Reliance Industries Ltd (RIL) is likely to close its $ 7.2 billion deal to sell stake sale in 21 oil and gas blocks to UK's BP plc in the next 7-10 days. With the government formally communicating its approval for sale of 30 per cent stake in the 21 blocks, the closing documents are likely to be signed before month-end. BP, which had in the June quarter paid first installment of $ 2 billion, will make payments of the next tranche at the close of the deal. The complete $ 7.2 billion amount was originally envisaged to be paid in three instalments. 25-30 experts from BP will arrive to begin jointly working with RIL on its assets particularly the showpiece eastern offshore KG-D6 block, where production has fallen from 61 million standard cubic meters per day to about 46 mmscmd instead of rising to the planned nearly 70 mmscmd. While RIL will continue its role as an operator of the blocks, BP will focus on enhancing subsurface understanding.
Vedanta cuts bridge loan size to $270 mn for Cairn stake buy
August 20, 2011. Vedanta Resources said it has reduced the size of the bridge loan needed for acquiring stake in Cairn India to $ 270 million from $ 1 billion proposed earlier. The company, however, did not elaborate on the reasons for cutting down the loan size. Vedanta needs to pay $ 4.5 billion for acquiring 30 per cent stake in Cairn India. Edinburgh-based Cairn Energy Plc is selling stake in its Indian unit to London-listed mining group Vedanta Resources. In all, Cairn Energy will get $ 6.02 billion from selling 40 per cent stake in Cairn India to Vedanta. Post the open offer, total deal size is expected to be around $ 9 billion. Vedanta had already received conditional approval from the Government of India for buying majority stake in Cairn India.
Downstream
Petrol in India costlier than US, Pakistan
August 23, 2011. Petrol prices in India are costlier than the US but cheaper than European countries. Petrol in Delhi is priced at ` 63.70 a litre, while the same in USA is priced at ` 42.82 per litre.
The price in India is more than any of its neighbours -- Pakistan (` 41.81 a litre), Sri Lanka (` 50.30 per litre), Bangladesh (` 44.80 a litre) and Nepal (` 63.24 per litre). But the rate in Delhi is cheaper than France (` 94.97 per litre), Germany (` 95.99 a litre), the United Kingdom (` 96.39 per litre) and Italy (` 96.79 a litre). Higher rates for petrol in India are due to higher incidence of taxes. Without taxes, petrol would cost ` 23.37 per litre in Delhi.
The diesel price in Delhi, at ` 41.29 per litre, is cheaper than in the US and European nations, but costlier than Sri Lanka and Bangladesh. Without taxes, diesel would cost ` 24.90 a litre. The current price of diesel in Delhi is ` 4.97 a litre below its actual cost.
In the US, diesel is priced at ` 45.84 a litre, while in France, it costs ` 69.87 per litre. In Germany, diesel costs ` 72.54 a litre, while it is priced at ` 82.93 a litre in the UK and ` 74 per litre in Italy. In the neighbourhood, diesel is priced at ` 46.70 a litre in Pakistan, ` 45.38 a litre in Nepal, ` 34.37 a litre in Sri Lanka and ` 27.32 per litre in Bangladesh. The PDS kerosene price of ` 14.83 a litre in Delhi was the lowest in the region, with the cooking fuel priced at ` 44.06 per litre in Pakistan, ` 24.67 in Sri Lanka, ` 27.32 in Bangladesh and ` 45.38 a litre in Nepal.
Similarly, the domestic LPG rate of ` 399 per 14.2-kg cylinder is lower than the price tag of ` 757.04 in Pakistan, ` 863.40 in Sri Lanka, ` 469.24 in Bangladesh and ` 819.60 in Nepal. The price of kerosene is subsidised by ` 23.74 a litre and LPG by ` 247 per cylinder in India. Oil marketing companies pay a Trade Parity Price (TPP) for the purchase of petrol/diesel and Import Parity Price (IPP) for the purchase of PDS kerosene and domestic LPG. The government controls prices of diesel, PDS kerosene and domestic LPG to insulate the common man from the impact of rising oil prices in international markets.
Oil firms losing ` 2.3 bn per day on fuel sales
August 18, 2011. State-run Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum are losing ` 235 crore per day on selling diesel, LPG and kerosene below cost. The current sales price of these retail fuels in Delhi -- ` 41.29 per litre of diesel, ` 395.35 per 14.2-kg LPG cylinder and ` 14.83 per litre of kerosene -- is way below the imported cost of the fuel.
Accept all govt conditions on Vedanta deal: Cairn Energy to Cairn India
August 23, 2011. UK's Cairn Energy Plc said it wants Cairn India to accept all the government's conditions and agree to pay royalty and cess on the Rajasthan oilfields so as to facilitate its stake sale to Vedanta Resources. The Edinburgh-based firm, which is selling a 40 per cent stake in Cairn India to Vedanta, has till now maintained that forcing its Indian unit to pay royalty and cess on the mainstay Rajasthan oil block was against the signed contract and would hurt minority shareholders' interest.
Prime Minister Manmohan Singh to review oil ministry's functioning
August 19, 2011. Prime Minister Manmohan Singh will review the functioning of the oil ministry amidst criticism of mismanaging oil blocks, and also assess the performance of over a dozen state-run firms in the sector as some of them have slipped into red in the first quarter of current year. Issues under review include ballooning fuel subsidy bill, delay in appointments of key officials in state oil firms, steep decline in natural gas production from the KG-D6 block and concerns raised by the draft CAG report.
Oil ministry confirmed that they were busy preparing a detailed presentation on ministry's affairs and issues involving the oil and gas sector that would be reviewed by the Prime Minister shortly. The government's biggest concern at this moment is to provide adequate cash compensation to state-run oil marketing companies - Indian Oil, Bharat Petroleum and Hindustan Petroleum - so that they do not make heavy losses like Air India.
Cairn Energy Plc seeks ONGC no-objection certificate by September 21
August 18, 2011. Cairn Energy Plc has written to ONGC to grant its no-objection certificate by September 21 for completing the Cairn-Vedanta deal.
Cairn India would announce the result of a postal ballot on September 14, where majority shareholders would accept cess and royalty conditions imposed by the government to conclude the $9 billion Cairn-Vedanta deal.
Cairn India is holding its annual general meeting in Mumbai, where minority shareholders may raise objection against the cess and royalty conditions which have a direct impact on the profits of Cairn India. Both Cairn and Vedanta have accepted the conditions and declared that they would vote in favour of the deal and the conditions.
OMCs rule out petrol price cut for now
August 17, 2011. State refiners Indian Oil, Hindustan Petroleum and Bharat Petroleum have ruled out any immediate reduction in petrol prices despite the fact that they currently make a profit of 10 paise a litre on the fuel. Slashing the price of the fuel can be considered only if a declining trend in international oil prices is sustained for a fortnight.
The companies are also trying to recover in part, the ` 2,400-crore loss incurred earlier in the year when prices could not be increased. Options to minimise revenue losses like rationing the highly-subsidised cooking-gas cylinders and also implementing targeted kerosene subsidy to the poor through smart cards have been initiated. Subsidised cooking gas is one of the major drags for the exchequer, which is not only consumed by the rich but also diverted as auto fuel.
India fuel demand growth will beat IEA forecast
August 17, 2011. India's fuel demand growth is likely to slow in the second half of this year, but probably not by as much as the International Energy Agency forecasts. In order to meet the IEA's latest forecast of a 3.6 percent gain in 2011, oil-product sales would have to expand 2.9 percent in the last six months, after they grew at a 4.3 percent rate in the first half. While it's reasonable to expect some slowing of fuel demand in the world's fourth-largest energy user, it's hard to see why the 4.3 percent recorded in the first six months of the year should tail away quite so dramatically as the IEA suggests it will.
POWER
Nuclear power generation to touch 20 GW in 20 years
August 22, 2011. The country's nuclear power generation is expected to reach 20,000 MW in another 20 years. At present about 4,785 MW is being generated by 20 atomic power stations of different capacity across the country and it would touch 7,300 MW by 2013.
Sahara Power, Korean co to set up 6 GW plants
August 18, 2011. Sahara India Power Corporation announced a partnership with Korea East-West Power Co, a Korean government company, to set up power plants with combined capacity of up to 6,000 mega watt. The agreement signed between the two companies allows them to jointly participate in tariff-based bidding for ultra-mega power projects (UMPPs) and other opportunities in India. An UMPP has a capacity to generate 4,000 MW of electricity. The deal, announced, is an extension of an earlier tieup between Sahara India Power and Korea East-West for setting up a 1,320MW power plant in Titlagarh, involving an investment of around ` 8,000 crore. Though Sahara did not comment on how much investment is proposed under the deal, the cost of setting up 6,000 MW capacity would be at least ` 24,000 crore.
Transmission / Distribution / Trade
Lack of proper support slows FDI into power sector: NTPC
August 21, 2011. State-run NTPC has said that lack of "politico-administrative" support to tackle commercial losses and poor health of government utilities are among the main reasons for low FDI inflows into the Indian power sector. Cumulatively, the sector has witnessed FDI inflow of just $5.9 billion between April, 2000 and March, 2011. NTPC is the country's largest power producer and has an installed capacity of 34,854 MW. Out of the total, over 28,000 MW are from coal-based projects. Looking at capacity addition of about 17,600 MW in 2011-12, the power sector is grappling with environmental hurdles, project delays and fuel supply issues. The sector attracted FDI of $1.25 billion in the last financial year as compared to USD 1.44 billion in 2009-10. Many power distribution companies are incurring huge losses, especially due to a mismatch between power tariffs and the cost of generating electricity. Estimates show that electricity distribution losses touched about ` 70,000 crore in 2010-11. Other major concerns for the sector include constraints on power equipment manufacturing capacity and shortage of skilled manpower. The country's energy requirement at the end of 12th plan (2012-17) is projected to be 1,392 billion units. And to achieve this target, power generation has to rise at a Compound Annual Growth Rate (CAGR) of over 9 per cent. Power generation has seen a CAGR of 5.17 per cent from 2001-02 to 2010-11.
Essar Energy to sign another power supply agreement with Bihar
August 18, 2011. Essar Energy plc said it will be signing an agreement to sell one-fourth of the 1,200 MW power to be generated from its Tori station, to Bihar. BSEB has issued Essar Energy's subsidiary Essar Power Jharkhand Ltd (EPJL) a Letter of Intent to purchase the power over a 25 year period and it is expected that a binding PPA will be signed within two months. This follows a competitive bidding process. Under the terms of the Letter of Intent issued by BSEB, the 300 MW PPA will involve EPJL supplying power at a levelised tariff of ` 3.28 per kWh or unit, net of transmission costs. Tori I, in Latehar district of Jharkhand, is a coal fired power project consisting of two generation units of 600 MW each. Tori II is an additional 600 MW project. The projects will source coal from the nearby Chakla and Ashok Karkata captive coal blocks, which have been secured for the power project, Essar said. EPJL has applied to the Government of India for a temporary coal linkage supply in the event of coal mining operations at the captive coal blocks not commencing in time for commissioning of the power station or to cover any shortfall in coal as production is ramped up at the mines.
Policy / Performance
NTPC preparing back-up plan to avoid slippages in capacity addition targets
August 23, 2011. India's largest power generator, NTPC, is preparing a back-up plan to avoid slippages in capacity addition targets as some of its proposed new projects face obstacles such as gas shortage and legal tussles over tenders. NTPC's capacity addition would be crucial for India's target of adding 100,000 megawatts in the 12th plan because the state-run utility aims to add 25,000-30,000 MW of capacity in the five year period, accounting for 30% of India's target. NTPC is exploring the option of expanding its power plants in case the plans to set up new projects fail. NTPC had floated tenders for 20 supercritical units worth around ` 40,000 crore. It first invited bids for 11 boilers and turbines, and later for supply of nine boilers and turbine generators sets.
Coal shortage to affect 15 GW new capacity addition
August 18, 2011. At a time when the country is embarking on ambitious power generation programmes, the shortage of coal is expected to impact new capacity addition plans to the tune of 15,000 MW in the current fiscal.
Coal availability for power plants designed to run on indigenous coal would be only 417.5 MT in the current fiscal, as against the requirement of 480 MT. Out of the total, 319 MT would be supplied by Coal India. For 2011-12, the capacity addition target has been set at 17,600 MW, including 2,000 MW from nuclear power generation. Non-availability of fuel and environmental hurdles are among the major factors adversely impacting the capacity generation targets.
India has a peak power shortage of about 13 per cent. Even with 17,600 MW of new capacity addition in the current fiscal, the country would see only an addition of little over 52,000 MW during the 11th Plan period (2007-12), much lower than the revised target of 62,374 MW. Coal India should give first priority to the power sector in coal allocation. The Power Ministry expects to see the capacity addition of over 80,000 MW in the 12th plan period (2012-17).
Won't mediate Tata Power, RPower tariff hike: Power Ministry
August 18, 2011. Tata Power and Reliance Power are clamouring for a revision in the tariffs of their power projects based on imported coal, but the Power Ministry has decided to steer clear of the matter, directing the generation companies to sort out the issue bilaterally with procurers. Tata Power and Reliance Power are developing 4,000-MW ultra-mega power projects at Mundra (Gujarat) and Krishnapatnam (Andhra Pradesh), respectively.
The two firms had asked the Power Ministry to allow them to increase the tariffs of their projects as the imported coal sourced from Indonesia for these projects has become dearer. A new regulation implemented by the Indonesian government has made it mandatory for all overseas sales of coal to be benchmarked to prevailing international market rates. The move may put the margins of Indian power generation companies that are securing the fuel from the island nation under pressure. Previously, there were no restrictions imposed by the Indonesian government on coal pricing. Following the development, Tata Power and Reliance Power had written to the Power Ministry for raising the tariffs of their ultra-mega power projects. If the price of coal rises, it would increase the input cost for the power project and investors may not find it feasible to put money into such projects. Krishnapatnam is one of three UMPPs being executed by Reliance Power.
The others are Sasan (Madhya Pradesh) and Tilaiya (Jharkhand). Tata Power is executing the 4,000-MW (5x800 MW) Mundra project in Gujarat, the first 800-MW unit of which is likely to be commissioned next month. Power Finance Corporation (PFC), the nodal agency for UMPPs in the country, has so far awarded four such projects. The fifth UMPP at Bedabahal, in Orissa, for which preliminary bids were invited, received a response from 20 companies. PFC would finalise the award of the project to the successful bidder by the end of the current financial year (2011-12).
PowerMin ups pressure on CoalMin to reallocate NTPC blocks
August 18, 2011. Power Minister Sushilkumar Shinde has written to Coal Minister Sriprakash Jaiswal for a review of the decision to deallocate five coal blocks awarded to NTPC. The Power Minister has been in regular touch with his counterpart in the Coal Ministry on this issue and once again exerted pressure in his latest letter for restoration of the deallocated NTPC coal blocks. Earlier, the Power Secretary had requested the Coal Secretary to review the government's decision to deallocate the coal blocks and restore them to NTPC.
The Coal Ministry had deallocated five coal blocks of the country's largest power producer, NTPC, over its failure to develop the blocks within the timeframe stipulated in the production sharing agreement. The five blocks -- Chatti Bariatu, Chatti Bariatu (South), Kerandari, Brahmani and Chichiro Patsimal -- were awarded to a joint venture between NTPC and state-run Coal India Ltd. The Coal Ministry had decided to deallocate mines awarded to companies that had failed to develop them in a time-bound mannger on the recommendations of a panel that reviewed the progress made by steel, power, cement and other firms in developing 88 coal and lignite blocks allotted for captive use. The Coal Ministry also cancelled the allotment of blocks awarded to Damodar Valley Corporation (DVC), Andhra Pradesh Power Generation Corporation (APGENCO), Tenughat Vidyut Nigam, Bihar State Mineral Development Corporation and the Jharkhand State Electricity Board. NTPC had asked the Coal Ministry to reconsider the deallocation of its coal blocks, asserting that project activities were underway when the decision was taken. Thermal power projects comprise a major chunk of NTPC's current installed generation capacity of over 34,000 MW. The company plans to increase this capacity to 75,000 MW by 2017. Meanwhile, the company is also exploring the possibility of importing coal to bridge the shortfall in domestic supply.
SJVN plans ` 300 bn investment
August 17, 2011. State-run SJVN said it plans to have a generation capacity of 6,000 MW, entailing an investment of about ` 30,000 crore by 2019-20. The firm is a joint venture between the Central government and Himachal Pradesh state government. The company is executing projects in Himachal Pradesh, Uttarakhand, Nepal and Bhutan, among others. The 412 MW Rampur Hydro Electric Project in Himachal Pradesh, is expected to be commissioned by September 2013.
The project has a plan outlay of ` 45.52 crore. The 1,500 MW Nathpa Jhakri Hydro Power Station generated 4,296 million units of electricity from April 1 till August 15. The latest figure is also 786 million units more than last year's generation during the same period. The power station was heading for another record of power generation during the year 2011-12. In the last fiscal, the plant had generated 7,140 million units of electricity. SJVN's profit jumped nearly 20 per cent to ` 348.21 crore for the three months ended June on the back of higher sales of electricity and increase in other income. The firm had raked in a profit of ` 972.74 crore in 2009-10. The utility is also implementing three hydro projects (252 MW Devsari, 60 MW Naitwar Mori and 51 MW Jakhol Sankri) in Uttarakhand. It is also developing the 900 MW Arun III hydroelectric project in Nepal.
No nuclear power plant at Haripur: West Bengal government
August 17, 2011. The West Bengal government said it will not allow the proposed nuclear power plant at Haripur in East Midnapore district. Power Minister Manish Gupta said that the state government has decided to scrap the proposal for a nuclear power plant at Haripur. Gupta alleged that the erstwhile Left Front government had "misled" the people about the project. The present government has no plans to set up nuclear power plants in any other parts of the state, he said. Asked how the government proposed to address the growing demand for power, Gupta said the present power demand in the state was 6,500 MW.
Of this, 5,525 MW were generated in the state, while the shortfall was met by procuring power from the Power Grid Corporation of India Ltd. During his visit to Russia, Prime Minister Manmohan Singh had signed an agreement with the Russian government for collaboration on setting up five nuclear plants in the country, including the one at Haripur. The project was given environment clearance by the Centre and land in Haripur was allotted to Russian company Rosatom for developing a nuclear park for its 1000 MW atomic power plants.
Local farmers and fishermen, supported by a number of NGOs, launched an agitation against the project fearing eviction and loss of livelihood. Although the Union Environment Ministry cleared the project last year, some environmentalists and scientists have expressed concern that the project would be hazardous for the environment.
Indian companies to feel pinch of new Indonesian coal policy
August 17, 2011. A new Indonesian policy that stipulates benchmarking of coal prices to international market rates is likely to increase the cost of coal imports from that country for Indian firms.
The September 23, 2010, regulation ratified by the government of Indonesia stipulates the benchmark price for coal sales, Minister of State (MoS) for Coal Pratik Prakashbapu Patil said while replying to a question on whether the new law makes it mandatory for all parties to sell coal at the prevailing international market rates. The Minister of State (MoS) for Coal further said that it stipulates for adjusting within 12 months the contracts negotiated/finalised prior to enactment of the regulation, which implies that the new rule will apply to all contracts retrospectively. Indonesia was India's largest source for imported coking coal in FY2009-10, accounting for 31.959 million tonnes out of the total imports of 48.56 MT.
OIL & GAS
Oil producers cautious on Libya return to output as rebels reach Tripoli
August 22, 2011. Foreign oil producers in Libya, where rebels have entered Tripoli in a push to end Muammar Qaddafi’s 42-year rule, said it’s too early to consider restoring output at halted fields. Libya, home to Africa’s largest oil reserves, produced more than 1.5 million barrels a day before the start of the civil war in February. Italy’s Eni SpA, Russia’s OAO Gazprom and others idled oil and gas fields and evacuated staff, cutting the country’s output by more than 90 percent. Eni has said it may take a year to get fields back to full capacity. The U.S., U.K., France and Italy, allied nations supporting the rebels with air power, are working with Libya’s National Transitional Council to restore oil production.
Pertamina expects to sign East Natuna block contract
August 19, 2011. PT Pertamina expects the company and its partners to sign a production sharing contract with the Indonesian government for the development of the East Natuna block on Oct. 28. Pertamina expects to own a majority stake in the project so that it can be the block’s operator.
ONGC Videsh Ltd targeting 20 million tonnes of oil output from assets abroad
August 18, 2011. ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp, is targeting doubling of crude oil production from its assets abroad to 20 million tonnes by 2020. OVL and other PSUs have properties in more than 20 countries including Russia, Sudan, Vietnam, Venezuela, Syria and Columbia. The government is encouraging national oil companies to pursue equity oil and gas opportunities abroad. OVL has assets in 14 countries. OVL's purchase of Imperial Energy is the largest acquisition of a foreign company by an oil PSU. ONGC has seen crude oil production drop from 25.4 million tonnes in 2008-09 to 24.4 million tonnes in 2010-11. OVL produces hydrocarbons from its 9 assets -- Russia (Sakhalin-I and Imperial), Syria (Al-Furat Project), Vietnam (Block 06.1), Colombia (Mansarover Energy Project), Sudan (Greater Nile Oil Project and Block 5A), Venezuela (San Cristobal Project) and Brazil (BC-10). Besides, six of its projects are in development phase and 23 in the exploration phase. OVL's international oil and gas operations produced 9.448 million tonnes of oil plus oil equivalent gas in 2010-11 as against 0.252 million tonnes of oil and oil equivalent gas in 2002-03. Its overseas cumulative investment has crossed $10 billion.
Norway sees longer oil era as North Sea find offers hidden giant
August 17, 2011. Norway may slow a decade-long slump in oil production after a series of discoveries from the Arctic to the North Sea. Statoil ASA has made two offshore finds of more than 250 million barrels of oil equivalent in Norway this year. The country’s biggest oil and gas producer said Aldous Major South and Avaldsnes in the North Sea are part of one “giant” oil field, and among Norway’s top 10 discoveries. The discovery is less than 10 feet away from where Total SA (FP), then Elf Aquitaine, drilled a dry well in 1971, according to Statoil. Norway, the seventh-biggest oil exporter, is facing dwindling production due to maturing fields. Output peaked in 2000 and may drop 6 percent this year to about 1.7 million barrels a day, according to the Norwegian Petroleum Directorate. Statoil, which operates 80 percent of Norway’s production, missed its 2010 target and may produce less this year than last. An estimated 60 percent of Norway’s petroleum resources are still underground. The country had an estimated 10 to 16 billion standard cubic meters of oil equivalent in recoverable resources by the end of 2010.
Ecopetrol buyers ‘lose heart’ as $1.4 bn sale falling short of target
August 17, 2011. Ecopetrol has received orders for 69 percent of the stock it seeks to sell in Colombia’s largest offering in four years, less than its 2.5 trillion-peso ($1.4 billion) target a day before the sale is set to expire. Rising production at Ecopetrol has helped make Colombia the third-largest oil producer in South America after Venezuela and Brazil. Improved security also has drawn international investors including billionaires Eike Batista and Carlos Slim.
Libya rebels battle for Zawiya oil refinery, push to cut Tripoli highway
August 18, 2011. Libyan rebels are battling forces loyal to Muammar Qaddafi for control of the Zawiya oil refinery and say they are advancing from the city of Misrata south toward a strategic highway linked with Tripoli, the capital. Rebels and Qaddafi forces are fighting in the industrial area in the oil town of Brega, 300 miles (480 kilometers) east of Tripoli. In the western mountains, rebels have taken the city of Gherian and clashes continue around Ajeelat, west of Tripoli. The flow of oil from the Zawiya refinery to the capital 35 miles away has been shut down. Zawiya has a refining capacity of 120,000 barrels of oil a day, almost a third of Libya’s total. The nation’s biggest refinery, Ras Lanuf, which can produce 220,000 barrels a day, has stopped operating because of the fighting.
Shell declares force majeure on Nigeria Bonny Light crude oil exports
August 23, 2011. Royal Dutch Shell Plc’s Nigerian unit declared force majeure on its Bonny Light crude oil exports after “several pipeline incidents”. Shell shut its Adibawa pipeline in the southern Bayelsa state after saboteurs cut crude lines and has begun repair works on the link. Attacks by armed groups targeting the oil industry cut more than 28 percent of the country’s crude output from 2006 to 2009. Attacks subsided after thousands of militants campaigning for more local control of the delta’s energy resources accepted a government amnesty and disarmed in 2009. Nigeria is Africa’s biggest oil producer and the fifth- biggest source of U.S. oil imports. Shell operates a joint venture in the nation in which it holds a 30 percent stake and state-owned Nigerian National Petroleum Corp. owns 55 percent. Total SA has a 10 percent stake and Eni SpA holds 5 percent.
Japan’s crude-oil imports fall 11.2 pc in July; coal declines, LNG increases
August 18, 2011. Japan’s crude oil imports fell 11.2 percent in July to 16.03 million kiloliters from a year earlier. The country’s coal imports fell 14.6 percent to 14.3 million tons, while liquefied natural gas imports increased 14.3 percent to 6.5 million tons.
Shell says lots of oil still in leaking pipeline
August 17, 2011. Oil major Royal Dutch Shell said a large volume of oil remained in its leaking pipeline, raising the possibility that Britain's worse oil spill for a decade could worsen, but said the extra amount would only seep out in a worse case scenario. Oil leaked into the sea off the coast of Scotland for a seventh day as Shell said it was planning extensive activity including the deployment of divers to completely stop the flow of oil.
Petronas, partners plan $5 bn Malaysia gas investment to boost supply
August 23, 2011. Petroliam Nasional Bhd., Malaysia’s state oil and gas company, plans to invest 15 billion ringgit ($5 billion) with partners to develop natural gas fields off the country’s eastern coast in a move to help replenish the Southeast Asian nation’s shrinking energy reserves. The so-called North Malay Basin project aims to extract gas with high carbon dioxide content from nine discovered fields to help meet rising demand on Peninsular Malaysia. A 200 kilometer-pipeline (124 miles) will be laid to transport the fuel to Kerteh, in Terengganu state. The state utility has traditionally sold gas at a discount to power distributor Tenaga Nasional Bhd. (TNB) to help keep business and consumer costs low in Malaysia. The government allowed it to reduce that subsidy, acknowledging that this had limited Petronas’s ability to reinvest and pay dividends. The nation’s crude and natural gas production has fallen for two straight years, declining to the equivalent of 1.63 million barrels of oil a day in the year ended March 31 from 1.66 million a day a year earlier. The gas fields are located within Blocks PM301 and PM302 in the Bergading contract area, about 300 kilometers off the country’s peninsula. The investment will be undertaken on an “accelerated” basis, with the first delivery of 100 million cubic feet of gas per day expected by early 2013, rising to 250 million by 2015.
Natural-gas fracking rules considered by U.S. for federal lands
August 19, 2011. The U.S. is weighing whether to impose new rules on hydraulic fracturing to extract natural gas on public lands. Companies such as Anadarko Petroleum Corp. of The Woodlands, Texas, and Treasure Resources Inc. of Windsor, Colorado, may be required to disclose chemicals used in the drilling and adopt well-integrity standards as part of the permit process. In fracturing, or fracking, companies inject water, sand and chemicals under high pressure thousands of feet underground to break up shale-rock formations and release the gas trapped there. The technique is used for more than 90 percent of wells drilled on public lands. The technique can pollute water resources. Natural-gas production on federal lands rose 6.5 percent to 2.97 trillion cubic feet, or 14 percent of U.S. production.
On a clear day you may soon see a rig off Virginia
August 17, 2011. Fifty miles off the coast of Virginia is a sliver of ocean the shape of a pizza slice and home to at least 130 million barrels of oil and more than a trillion cubic feet of natural gas.
A previously scuttled plan to drill in these waters offshore Virginia Beach has resurfaced and could get the green light at a time when an election-minded Obama administration is trying to salvage its credentials as worthy guardian of the U.S. economy.
Fluctuating gasoline prices, a faltering economy and fading fears of another BP-style oil spill have put the mid-Atlantic back on the radar for the oil and gas industry. Lawmakers on the Senate Committee on Energy and Natural Resources will debate legislation on offshore drilling in September when the Senate returns from recess. One of the bills under consideration would allow the leasing of 3 million acres of ocean offshore Virginia for oil and gas exploration beginning in 2012.
President Barack Obama canceled plans to expand offshore drilling in the Atlantic and Arctic oceans after the massive BP oil spill in the Gulf of Mexico. The proposed area off Virginia holds a fraction of the country's offshore energy reserves but state leaders, including Democrats, are billing it as an economic winner in desperate times.
POWER
Generation
Zambia to build two new power plants
August 23, 2011. Zambia plans to build two new hydro power plants that are expected to add a total of 247 MW to the national grid and boost regional supply by 2016. The project was estimated to cost $650 million, which will be raised through debt and equity financing. The plant, the first large-scale electricity generator in northern Zambia, would supply power to the copper mines and was also expected to feed planned manganese mines. Foreign investors were willing to fund the project because of the power deficit in southern Africa. Preliminary engineering work had already started and construction would begin by 2013. Zambia's peak electricity demand currently stands at about 1,580 MW against available generation of 1,401 MW.
Siemens to build two combined-cycle power plants in Thailand
August 18, 2011. Siemens Energy has secured orders from the Electricity Generating Authority of Thailand for the engineering, procurement and construction of two combined-cycle power plants. The company, together with its Japanese partner Marubeni, will build the Chana Block 2 single-shaft natural gas-fired plant in the province of Songkhla and the Wang Noi Block 4 multi-shaft facility in the vicinity of Bangkok. The two plants, each with an installed capacity of about 800MW, are expected to cost a total of approximately $1bn and are scheduled to commence operations in 2014. The Chana Block 2 facility will be built by Siemens as an extension to the Chana Block 1 plant.
Muzaffargarh Power Station to regain 1100 MW capacity
August 18, 2011. The Muzaffargarh Thermal Power Station will regain its power generation capacity of 1100 megawatt through a USAID project worth US$15.93 million by November 2011. This was stated by USAID Pakistan director Mr. Andrew Sisson after being briefed by officials during a visit to the power plant. He said that US secretary of State Hillary Clinton had announced support to Pakistan’s energy sector and many other power projects including rehabilitation of thermal power stations in Jamshoro and Guddu, Tarbela Hydro Power Plant were being undertaken. USAID was also providing funds for completing Gomal dam and Satpara dam besides conversion of 11000 tube wells into energy efficient models. All these steps would translate into generation of 900 megawatt power which comes around to fifteen percent of the existing electricity shortfall in the country, USAID director said. Muzaffargarh Thermal Power Plant had a capacity to generate 1100 megawatt of power, which, however, later reduced by 400 MW due to technical problems and lack of maintenance. Pakistan government had signed an agreement with the USAID for restoration of 165 megawatt power generation capacity of the plant in May 2010. However, later it was decided that the power plant should regain full 400 megawatt generation capacity it had lost. The power plant will be operational with full strength in Nov 2011 to supply electricity to consumers and will provide relief to them. Andrew Sisson said that USAID would repair and rehabilitate all the six units of the thermal power station. It also included repair of boilers, turbines and replacement of big equipment. The work on the project began in June 2010. During visit to the thermal power station, the USAID director reviewed the pace of progress and expressed satisfaction observing that it was an important power generating facility of the country. He said that the on-going project was also beneficial for the local people who were getting jobs. He said that US was helping Pakistan to overcome its power generation problems and the initiative would yield good results shortly.
Zimbabwe issues license for $3 bn power plant
August 17, 2011. Zimbabwe awarded a license to an unidentified French company to build a 2,000 megawatt thermal power plant in the country. The plant, estimated to cost $3 billion, will be built over the next four years, ending a power shortage. A separate proposed 2,400 megawatt thermal power plant licensed to RioZim Ltd. will probably start producing electricity in 2014. The state-owned Zimbabwe Power Co., a unit of ZESA Holdings Ltd., has identified investors to help finance a plan to boost power from its Hwange thermal power and Kariba hydro-power plants.
Transmission / Distribution / Trade
Chinese coal imports climb 36 pc on power demand
August 17, 2011. China’s July coal imports climbed 36 percent to 17.53 million metric tons from a year earlier. That exceeded the customs bureau’s record of 17.34 million tons in December and 13.73 million tons in June. The world’s largest coal consumer and producer increased imports of the fuel amid the worst summer power shortages in at least seven years. A shrinking gap between domestic prices and global costs are also spurring purchases. The premium of Chinese coal to Newcastle prices narrowed to $8.74 a ton on June 10. Coking-coal imports gained 29 percent to 4.05 million tons last month and coal for power plants rose 15 percent to 4.99 million tons.
Policy / Performance
Philippines may bid out contract to convert nuclear power plant
August 23, 2011. The Philippines may bid out a contract to convert a mothballed nuclear power plant into a facility that will run using either coal or gas.
Japan reopens first nuclear reactor since tsunami
August 18, 2011. Tomari nuclear power plant's reactor number three, in Japan's northernmost Hokkaido island, restarted full commercial operations after receiving the official go ahead from central government. Close to 75 per cent of Japan's 54 reactors are currently off line for safety checks since the Fukushima power plant was badly damaged in the earthquake and tsunami, triggering the on-going nuclear crisis. A wave of anti-nuclear sentiment has been gathering pace across many communities, particularly those hosting power plants, resulting in local authorities increasingly opposing a resumption of operations.
Iran to launch Bushehr nuclear power plant
August 17, 2011. Head of the Atomic Energy Organization of Iran (AEOI) Fereidoon Abbasi said his country is planning for the official inauguration of the Bushehr nuclear power plant in southern Iran in mid-November or in December. The Bushehr nuclear power plant is currently nearing its pre- operation phase which means that initial tests for its reactor and turbine are in the final stages. He said that the steam which had already been produced in the plant is currently injected to the turbine and electricity is generated which is tentatively and in intervals connected to the electricity grid for the tests required. Abbasi said that the first phase of Bushehr nuclear power plant will be commissioned by the end of August if the tests underway are completed. If the tests are completed, the first stage of the Bushehr nuclear power plant will surely become operational by the end of Ramadan (August), said Abbasi. The nuclear power plant will join the national grid at the first phase and can consequently generate 40 percent of its total power generation. Construction of the Bushehr plant began in 1975 by several German companies. However, work was halted when the United States imposed an embargo of hi-tech supplies on Iran after the 1979 revolution. Russia signed a contract with Iran to complete the construction in 1998. Completion of the plant's construction has been postponed several times due to technical and financial challenges and pressure from the United States.
Semirara taps P14-billion loan for power plant
August 17, 2011. Semirara Mining Corp. is tapping a P14-billion project loan facility to fund the first phase of its coal-fired power project in Batangas, which involves the construction of a 300-megawatt plant. The facility will have a seven-year tenor plus a three-year grace period, and will likely have an annual interest rate of less than 8 percent. Proceeds from the project loan facility, for which BDO Capital and Investment Corp. will be the lead arranger, will be used specifically for the design, engineering, procurement, construction and operation of the planned coal plant. The construction of the additional two 150-MW units will be undertaken by its subsidiary, Southwest Luzon Power Generation Corp., which is still under the process of incorporation. The new coal units will be located adjacent to the existing 600-MW Batangas coal-fired thermal power plant, which is owned and operated by SEM Calaca Power Corp., also a wholly owned subsidiary of Semirara Mining. The proposed 300-MW coal facility (Phase 1) is part of a bigger project that targets to have a completely new 1,200-MW coal-fired power generation complex in Batangas.
Renewable Energy / Climate Change Trends
German solar inverter to set up manufacturing base in India
August 23, 2011. REFUsol GmbH, a manufacturer of solar inverters, will start local production of its products and first deliveries by early 2012. This manufacturing facility will be located in Pune, where it has already set up a customer support office. Its three-phase string inverters with power classes from 8 to 20kW are suitable for indoor and outdoor use and for installations ranging from small rooftop systems to large solar parks. Featuring an MPP-tracking and a wide input voltage range of up to 380 to 850V, the solar inverters achieve a peak efficiency of up to 98.2%, even at low irradiation levels.
Govt to prepare a national bio-energy mission to boost power generation from biomass
August 22, 2011. The government is preparing a national bio-energy mission to boost power generation from biomass, a renewable energy source abundantly available in India. The mission, to be launched during the 12th Five-Year Plan, will offer a policy and regulatory environment to facilitate large-scale capital investments in biomass-fired power stations, Minister of New and Renewable Energy Farooq Abdullah said. It will also encourage development of rural enterprises. Biomass is derived from agriculture, animal and human waste. It can be harnessed to produce fuel, power and heat. The national mission will aim at improving energy efficiency in traditional biomass consuming industries, seek to develop a bio-energy city project and provide logistics support to biomass processing units. It will also propose a GIS-based National Biomass Resource Atlas to map potential biomass regions in the country. Abdullah said power projects based on biomass could generate employment in rural areas, besides helping in the stabilisation of electricity grid. Nearly 70% of the country's population lives in villages with marginal access to electricity. Currently, India has a total installed capacity of 3,000 MW of biomass-based power generation. The ministry of new and renewable energy is targeting to double this capacity during the 12th Plan (2012-17).
SunBorne eyes $1 bn revenue by FY16
August 21, 2011. Solar power developer SunBorne Energy is looking at a topline of $1 billion (` 4,500 crore) by 2015-16, as it expects to get several projects from the National Solar Mission programme auctions. The government has established a three-phased plan targeting to install 1,000-2,000 MW by 2013; 4,000-10,000 MW by 2013-2017 and 20,000 MW by 2022 under the solar mission. Gurgaon-based SunBorne is promoted by billionaire venture capitalist Vinod Khosla, through his fund Khosla Ventures. Other investors are US venture capital firm General Catalyst Partners and International Finance Corp. The company has set a target of developing projects of over 1,000 MW in the next 5-7 years, and commissioning over 200 MW plants by 2014. Apart from NSM, SunBorne is also looking at state-level solar power programmes as potential opportunities. States such as Gujarat, Maharashtra, Karnataka and Rajasthan have already initiated policies to meet renewable energy purchase commitments. Some state electricity regulators have made it mandatory for all distribution licensees, open-access consumers and captive users to meet a minimum percentage of total consumption through renewable energy purchase obligation (RPO), as a part of the overall government intent of generating more power from non-fossil-based resources. SunBorne is already developing a 15-MW solar photo-voltaic plant in Gujarat, for which the company has secured a ` 140 crore loan from State Bank of Patiala, Canara Bank, Exim Bank and State Bank of Travancore. The company plans a 50:50 capacity in thermal and photo-voltaic.
Schneider Electric India bags ` 1.1 bn orders
August 18, 2011. Schneider Electric India has bagged orders worth ` 110 crore to supply turnkey solutions for three photovoltaic solar power plants in India. The three photovoltaic solar power plants have a combined capacity of 22.3-mw. The orders comprise of two 5-mw photovoltaic solar power plants and one 12.3-mw photovoltaic solar power plant. The plants will have annual generating capacity of up to 35 gigawatt-hours of electricity. Schneider Electric India will be responsible for the design, engineering, manufacturing, installation commissioning of the plants and will deliver turnkey electrical and control solutions. Schneider Electric offers electrical balance of plant solutions to harness solar energy and efficiently convert it into reliable electricity, ready for transfer into the local grid.
Renewable energy bill passes Japan’s lower house of parliament
August 23, 2011. Japan’s lower house of parliament approved legislation to subsidize electricity from renewable sources as the country reduces its dependence on atomic energy after the Fukushima nuclear crisis. Passage of the bill, which now goes to the upper house, sets the stage for Prime Minister Naoto Kan to leave office this month and the ruling Democratic Party of Japan to choose his successor. Kan’s popularity has fallen over his handling of the earthquake, tsunami and nuclear disaster and he pledged to step down once the Diet approves his legislative agenda. The legislation requires utilities to buy electricity generated by geothermal, solar and wind sources at above-market rates in order to stimulate investment in renewable energy, which accounts for 9 percent of Japan’s power supply. Solar panel manufacturers like Kyocera Corp. and geothermal plant developers including Fuji Electric Co. may benefit from the subsidies, known as feed-in tariffs. Kan called for phasing out atomic power after the March earthquake and tsunami caused the worst nuclear disaster in 25 years.
Trina Solar sees bright future in new markets
August 23, 2011. China's Trina Solar Ltd shrugged off last quarter's demand slump in Germany and Italy -- the solar sector's largest markets -- to forecast a stronger second half helped by increasing orders from new markets. The company said it expects to benefit from higher shipments driven by growth in Europe and improved demand from the United States.Solar companies are looking at China, India and the United States to drive future growth. Kleinwort Benson Investors predicts China will be the biggest solar market in three years, followed by the United States. North America accounted for about 15 percent of the company's sales volume in the second quarter, and Trina expects this to increase further. The low-cost solar panel manufacturer expects to ship 480-520 megawatt (MW) of PV modules this quarter, up from 396 MW in the second quarter -- echoing the brighter outlook from peers Suntech Power Holdings Co Ltd, Yingli Green Energy, JinkoSolar Holding Co and ReneSola Ltd. Trina said it is seeing the market stabilizing and mature prices bottoming out, and expects to raise in-house ingot and wafer production capacity to about 1.2 gigawatt (GW) from 1 GW as of July 31. However, Solar companies like JA Solar Holdings Co Ltd, MEMC Electronic Materials Inc and First Solar Inc have warned the industry's rapid price declines will further hurt business. Trina, which posted a sharp decline in second-quarter profit, saw second-quarter margins slip to 17 percent. They are not likely to let up in the third quarter, when the company expects gross margins in the mid-to-high teens. Trina had margins above 30 percent for all of 2010. Solar companies are struggling with high costs as the price for polysilicon, the main raw material in the industry, has risen in recent months as supplies remain tight. Suntech Power Holdings Co Ltd, which gave a strong shipments outlook, also said it expected margins to remain tepid. Solar subsidy cuts triggered a global glut of solar panels and drove down prices sharply, denting profits and stock prices at leading solar manufacturers.
Toyota, Ford to collaborate on hybrid trucks
August 23, 2011. Toyota Motor Corp and Ford Motor Co will work together to develop hybrid trucks and SUVs that will be ready for market by the end of the decade. Developing the hybrids will help each automaker meet stringent U.S. fuel economy standards in coming years.
China Longyuan first-half profit surges two-thirds on wind power
August 23, 2011. China Longyuan Power Group Corp., the country’s biggest wind-project developer, said profit surged by two-thirds in the first half after it sold more electricity. Net income rose to 1.4 billion yuan ($219 million) from 848 million yuan a year earlier. Sales increased 22 percent to 7.6 billion yuan. China, the world's largest energy consumer, aims to install 110 gigawatts of wind-power capacity by 2015. The country added 17 gigawatts of wind capacity last year, about two-thirds more than a year earlier. Longyuan said the electricity generated from wind resources rose 44 percent to 7,069 million kilowatt-hours in the six months ended June 30. Longyuan, whose shares have lost 16 percent this year, agreed in the first half to develop 6 gigawatts of wind projects in provinces including Heilongjiang, Jilin, Inner Mongolia and Hebei. The average preferential wind-power price for the first half increased by 7 yuan from a year earlier to 572 yuan a megawatt-hour, Longyuan said. Net income from sales of carbon-emission credits more than doubled to 381 million yuan, according to the filing. As of the end of June, the company operated 30 megawatts of solar plants. The Beijing-based company plans to build 1 gigawatt of offshore wind farms by 2015 as part of a government push for clean-energy generators.
EU may propose plan to extend Kyoto
August 22, 2011. The EU could yet table a proposal that would throw the beleaguered Kyoto Protocol a lifeline and secure the future of the Clean Development Mechanism (CDM) beyond 2012. Officials from the bloc's member states will in the next few weeks discuss whether to formally back a plan to extend the life of the 1997 climate treaty, on condition it would expire in 2018 and be replaced with a single global pact that includes capping all major nations' emissions. If all 27 countries agree, the EU could announce the plan at U.N. climate talks in South Africa in November as part of an attempt to overcome the four-year impasse over Kyoto's future and how to tackle the long-term problem of climate change. Such an agreement could bolster confidence in the CDM, for which new investment shrank to a fifth of its peak last year as U.N. negotiators tied the future of the offsetting system to new targets under the Kyoto pact that underpins it. The 27 EU states will discuss the proposal ahead of an October meeting of environment ministers, which is when the bloc is expected to agree a collective negotiating position for the year-end U.N. climate negotiations in Durban. The EU rebuffed an offer by developing nations to unilaterally sign a second Kyoto period in return for extending the CDM, the offsets from which are used by EU nations to meet their emissions targets. Since then the EU, which had said it couldn't agree to extend its Kyoto target without robust commitments from other major emitters like the U.S, China and India, has grappled with various ideas to help secure a global deal to prevent runaway climate change. It might also persuade other nations with Kyoto targets to agree to a transitional measure that could keep the pact's strict auditing system and carbon markets working without immediately taking on new internationally-binding pledges. Green groups and developing countries want a second Kyoto phase to preserve the pact's system of independently verified emission reductions rather than a voluntary pledge-and-review system that major emitters are lobbying for, but have yet to agree the rules. Canada, Russia and Japan have all ruled out ratifying a second phase of targets, despite the Japanese government spending hundreds of millions of dollars in buying Kyoto-backed carbon credits to meet caps.
Australia passes CO2 offset laws, carbon pricing next
August 22, 2011. Australia's parliament endorsed the world's first national scheme that regulates the creation and trade of carbon credits from farming and forestry, to complement government plans to put a price on carbon emissions from mid-2012. The laws, the first major bills passed by the government with Greens support in the Senate since the Greens took the balance of power on July 1, are a precursor to the carbon price legislation to be put before parliament later this year. Known as the Carbon Farming Initiative (CFI), the new laws allow farmers and investors to generate tradeable carbon offsets from farmland and forestry projects. Land use including agriculture accounts for 23 percent of Australian emissions. The laws passed with minor Senate amendments backed by the government, with the House of Representatives now due to rubber-stamp the changes. The step came as hundreds of truckers circled Australia's parliament in a campaign aimed at forcing the government to withdraw the proposed carbon tax law, and call new elections. Projects backed by the CFI include tree plantations that soak up carbon dioxide as they grow, cutting methane emissions from burping camels and livestock, reducing fertilizer use and better fire management of northern grasslands. The government said the offsets can be traded domestically and overseas. However, the scheme is expected to start off slowly until parliament passes laws to put a price on carbon emissions from July 2012. Prime Minister Julia Gillard plans a carbon tax starting at A$23 a tonne on about 500 of Australia's biggest polluters from July 2012, ahead of emissions trading from mid-2015, and has staked her government's future on securing parliamentary support for her plan. Agriculture is not included in the carbon price scheme, but the government wants farmers to be able to benefit from the market for carbon credits. Under the carbon price plan, Australian industries which buy carbon offsets will need to ensure at least 50 percent of the offsets are domestic credits. The government estimates the carbon farming initiative will help cut Australia's carbon emissions by 460 million tonnes by 2050. Australia accounts for about 1.5 percent of global emissions, but is the highest per-capita polluter in the developed world because coal is used to generate most of the country's electricity. The government has committed to cut total emissions by five percent of year 2000 levels by 2020. The conservative opposition strongly oppose putting a price on carbon emissions and has promised to scrap the scheme if it wins the next election, due in the second half of 2013. But a report by the left-leaning Australia Institute said the opposition plan would create a prolonged period of uncertainty, even if the conservatives win the next election, as the polls suggest. It said the conservative Liberal and National Parties would have to wait until mid-2016 before they could win enough seats in the Senate to repeal the carbon-trade laws, and its direct action plan for tackling emissions could be delayed until 2018.
Canada moves ahead with new coal-fired power rules
August 20, 2011. Canada moved ahead with new regulations for cutting emissions from coal-fired power plants as environmental groups decried one project that they said won a speedy approval just in time to avoid the tighter rules. Environment Minister Peter Kent said the regulations, aimed at gradually phasing out coal-fired power generation as a way to meet the federal government's greenhouse gas commitments, will force developers to reduce emissions to levels that are comparable to high-efficiency gas-fired plants.
Yingli profit beats Wall Street, sees sector bounce
August 19, 2011. Rosy earnings from Chinese solar panel maker Yingli Green Energy stood in stark contrast to the dismal reports from its rivals. The solar industry has been battered in 2011 by steep declines in the prices for the modules that turn sunlight into electricity, shrinking profit margins and pushing some of the largest players into the red. The MAC Solar companies index has slumped more than 31 percent so far this year, more than three times the drop in the S&P 500. Yingli, however, managed to beat Wall Street forecasts with its second-quarter earnings issued as it shipments jumped nearly 37 percent from the first quarter, and it stuck with its forecast that it would sell more than 1,700 megawatts of solar panels this year. That helped lift Yingli's share price more than 3 percent, gaining back a bit of the selloff that has wiped off more than 40 percent of its value this year.
Mitsui, Toshiba plan Japan's largest solar plant
August 19, 2011. Japan's Mitsui Chemicals Inc, Mitsui & Co and Toshiba Corp plan to construct the country's largest solar power facility with an output of 50,000 kilowatts (KW). The project is in anticipation of the passage of a bill that will require utilities to purchase electricity from renewable sources at fixed rates. The proposed plant will be built on 800,000 square meters of land owned by Mitsui Chemicals in Aichi Prefecture and have a 6,000 KW wind farm. The companies, which plan to sell the power produced at the plant to Chubu Electric Power Co from 2013, have asked Chubu to participate in the project, while Mitsui Engineering & Shipbuilding Co and Toagosei Co may also join the project. The government-backed Development Bank of Japan is to provide a low-interest loan to cover about 90 percent of the project's estimated 20 billion yen ($262.3 million) cost. The renewable energy legislation is currently being discussed and is expected to take effect in July 2012.
U.S. offers Abengoa $134 mn loan aid for cellulosic
August 19, 2011. The Energy Department said it has offered a conditional commitment for $133.9 million in loan aid to Abengoa Bio-energy for a cellulosic ethanol plant in Kansas. The Abengoa project is expected to convert about 300,000 tons of corn crop waste into about 23 million gallons (105 million liters) of ethanol per year. Cellulosic ethanol is expected to be made in commercial quantities from crop waste and non-food crops like switch-grass. It has been touted as an alternative to ethanol from corn, which has been blamed for helping to push up food prices. Production has been slower than expected however, and the year the Environmental Protection Agency has reduced the U.S. mandate for cellulosic for the second year running. The DOE also said it has finalized a $197 million loan guarantee to private company Solo-Power, Inc to support the construction and operation of thin film solar plants in Oregon and California.
UK names chair for offshore wind cost group
August 19, 2011. The British energy minister appointed a director at Scottish Power Renewables to lead its task force on reducing the levelized cost of offshore wind to 100 pounds ($165) per megawatt-hour (MWh) by 2020. Andrew Jamieson, regulation and markets director at Scottish Power Renewables and chair of green energy body RenewableUK, will head with immediate effect the government's working group to help industry bring down the cost of offshore wind.
Japan to give $809 mn climate aid to Indonesia
August 19, 2011. The Japanese government has signed an agreement to provide about 62.3 billion yen ($809 million) in new climate aid to Indonesia, one of the biggest emitters in the developing world. Almost all of the money (60.3 billion yen) was provided in the form of low interest loans, mainly to build five geothermal power plants. The cash will be repaid over 40 years at 0.3 percent annual interest. According to the World Bank, Indonesia has the world's largest geothermal resources, with nearly 40 percent of known global resources. It is estimated that the country has 27 GW of geothermal generation capacity. The cash is part of Japan's contribution to a $30 billion global fund to help poor countries adapt to climate change and cut their emissions. Japan pledged 1.75 trillion yen in aid, worth $15 billion at the time, although the amount is worth $22.7 billion due to the strength of the yen against the dollar.
Aviva ends first financing for planned $429 mn renewables fund
August 19, 2011. Aviva Investors, the global asset management arm of London-based Aviva Plc, closed the first round of financing for its European Renewable Energy Fund as part of plans to raise a total of 300 million euros ($430 million). Aviva, with about 269 billion pounds ($445 billion) of assets under management, expects to attract the full amount through 2011 and into 2012. Worldwide new investment in clean energy climbed 22 percent to $41.7 billion in the second quarter from a year earlier. Private equity and venture capital investment increased 74 percent to $3.1 billion, the highest for any quarter since 2008. The fund will invest directly in renewable energy assets in operation, as well as considering projects being built. It will focus on solar photovoltaic projects and onshore wind, and on the “largest markets and economies” in Europe, including France, Italy, Germany, Spain and the U.K. The fund, with a 10-year life, will invest as much as 50 million euros each in as many as 20 projects, seeking mature technology supported by stable regulatory regimes.
Centrica, Siemens seek banks for $1.7 bn U.K. wind financing
August 19, 2011. Centrica Plc, Siemens AG and Dong Energy A/S invited commercial banks to join a 1 billion-pound ($1.7 billion) financing plan to build an offshore U.K. wind farm, the first deal of its kind in the country. The figure includes a 550 million-pound term loan and a 250 million-pound facility to pay for a link to bring the power to shore.
The companies’ use of commercial loans and their own funds, instead of state financing, to construct the 270-megawatt Lincs project off east England sets a precedent. It would be the first time banks provided project finance loans to build a U.K. offshore farm.
The government is betting that the technology will help the nation to meet a European Union goal of generating 15 percent of energy from renewable sources by 2020. Bank of Tokyo Mitsubishi UFJ is an adviser on the transaction.
Centrica will offer a total of 333.3 million pounds for the funding facilities and Dong Energy 166.7 million pounds, while Siemens plans to contribute 75 million pounds through its Siemens Financial Services Ltd. arm. The companies invited banks to provide the balance of the financing for the project, which will power 200,000 U.K. homes a year.
LDK Solar declines on lower forecast, $60 mn writedown
August 19, 2011. LDK Solar Co., a Chinese maker of polysilicon and solar cells, fell 16 percent in late trading after the company cut its forecast and said it would write down as much as $60 million in inventory. LDK Solar expects to report revenue of $480 million to $500 million in the second quarter, down from an earlier forecast of $710 million to $760 million. Revenue for the year will be in the range of $2.5 billion to $2.7 billion, down from $3.5 billion to $3.7 billion. Panel shipments are expected to be in a range of 75 megawatts to 80 megawatts, down from an earlier forecast of 200 megawatts to 220 megawatts. Shipments for the year will be between 600 megawatts and 700 megawatts, compared with 750 megawatts to 800 megawatts.
Statkraft to build several wind farms in Sweden for $157 mn
August 18, 2011. Statkraft AS will build the Stamasen 1 wind farm in Sweden. The wind farm will be established in cooperation with SCA and will be completed with a capacity of 60 MW next year. The total investment for the project is around 850 million kroner ($157 million).
GM to build Cadillac EV, eyes electric Chevy
August 18, 2011. General Motors Co confirmed it will build a luxury electric car based on the technology used in its Volt plug-in hybrid for Cadillac as the automaker also studies plans for an all-electric small car for its mainstream Chevrolet brand.
U.S. carbon dioxide emissions rose most since 1988
August 18, 2011. U.S. emissions of carbon-dioxide related to energy consumption surged 3.9 percent, the largest increase in 22 years. U.S. utilities burned more coal and manufacturing recovered from a recession, contributing to an increase in emissions of 213 million metric tons. Total emissions were 6 percent below 2005 levels.
Solar Millennium sinks after switching technology at largest solar plant
August 18, 2011. Solar Millennium AG, the German developer of power plants using concentrated-solar technology, fell the most in six years in Frankfurt after saying a rival technology will be used on the world’s biggest solar project.
Solar Millennium, which is leading the project in a joint venture, said that the plant near Blythe, California, will switch to using photovoltaic technology for at least half of its generation capacity. The company had said in May it planned to branch into photovoltaic projects as well.
Solar Millennium, which has projects in several countries using concentrated-solar technology, will deploy photovoltaic panels at the first 500-megawatt phase of the 1,000-megawatt plant.
One thousand megawatts of capacity is almost as big as the average reactor used in new atomic plants. The change was largely motivated by improved commercial lending conditions and cheaper access to photovoltaic devices, which have plunged in price per kilowatt-hour in recent years.
U.S. seeks offshore wind bids in Rhode island, Massachusetts
August 18, 2011. The U.S. Interior Department designated an area off the coasts of Rhode Island and Massachusetts where developers may build sea-based wind farms. The department invited energy companies to submit proposals for wind projects. It designated similar areas off the coasts of Delaware, Maryland, New Jersey and Virginia in February and plans to offer commercial leases in those places as early as 2012.
Cree acquires Ruud lighting in $525 mn deal to drive usage of LEDs
August 18, 2011. Cree Inc., a maker of energy- efficient lighting products that are used indoors, purchased Ruud Lighting Inc. for about $525 million in cash and stock to expand into the market for outdoor illumination. Cree completed the acquisition and expects Ruud’s results to be “slightly” dilutive to its fiscal 2012 net income, the Durham. Ruud will continue to be based in Racine, Wisconsin, and operate as a subsidiary of Cree. The combination will give Cree access to a larger market for light-emitting diodes, which many cities are starting to use for streetlights to save money in the $17.3 billion U.S. lighting industry.
Vestas orders, profit show Western edge in wind
August 17, 2011. Danish wind turbine maker Vestas wrong-footed investors, affirming its expected 2011 profit margin despite wider weakness in equipment prices, suggesting a technology edge over Chinese and other rivals. That contrasted with the situation in solar power, where cheap Chinese producers have undercut Western rivals, helping precipitate a bankruptcy filing this week by U.S.-based Evergreen Solar.
GM hopes spending on start-ups will make it cool
August 17, 2011. From an empty auto-parts plant in the heart of Rust Belt America, General Motors Co is out to show the world that the automaker once dismissed as an industrial dinosaur has gained some Silicon Valley cool just two years after its taxpayer-funded bankruptcy.
Brazil's booming wind sector faces auction test
August 17, 2011. Brazil's blustery coastlines and booming electricity demand have spurred a wind-power gold rush as investors flock to build turbines and set up wind farms. Yet, as wind projects slowly shed government protection to compete head-to-head with traditionally cheaper fossil fuel energy, government power auctions may reveal whether the wind-power investment euphoria is overblown. Developers of natural gas power plants, biomass thermoelectric plants and wind farms will compete in an auction to offer the lowest prices for the electricity their facilities will sell in the coming years. A second auction will not include natural gas projects. The results will show whether Brazil's wind industry can continue lowering generation costs, a trend that has spurred investment in wind farms and equipment factories -- and could help diversify Brazil's hydro-dependent energy system. A strong showing by natural gas projects may validate some skeptics' claims that the wind boom has gotten ahead of itself, possibly cooling investor interest or requiring new government efforts to support the industry.
Government leaders, excited to promote an alternative to hydro-power, say tumbling wind costs are a sign Brazil has helped the industry evolve from an environmentalist dream into a competitive money-maker. Wind power accounts for 240 of the 321 projects participating in the auctions and more than 40 percent of the 14,083 megawatts in generating capacity on offer. Brazil's current 1,400 megawatts of installed wind power represents only around 1 percent of its total capacity.
Wind power is still roughly double the cost of power produced by the large hydroelectric dams that provide most of the country's electricity. Nonetheless, it is slated to grow almost eight-fold between 2010 and 2014 to reach 4.2 percent, according to wind energy association ABEeolica. EPE expects Brazil's total power consumption to rise 60 percent between 2010 and 2020, reflecting Brazil's brisk economic growth and expansion of its middle class.
ABEeolica expects 25 billion reais ($15.7 billion) in wind investments between 2009 and the end of 2013. Wind power has gained traction around the world in the past decade as concerns about greenhouse gas emissions spur greater interest in alternative energy. Brazil created an incentive program in 2004 that offered to buy wind power at higher rates than other types of generation. By 2010, thanks to new technology, tax breaks, and more local manufacturing of turbines, wind farms were offering to sell power at prices 50 percent lower than the average price during the period of government incentives.
Spain's Gamesa and France's Alstom have invested in manufacturing facilities to build wind equipment in Brazil, while General Electric and India's Suzlon Energy are studying similar projects.
Brazil has natural advantages for wind energy, including windy coasts in the northeast and the south. Its many dams can make up for the variability of wind generation -- a major problem for wind projects in the United States and elsewhere. The government has spurred excessive optimism about wind power, leading project developers to promise power rates that they may not be able to deliver.
Norway’s SN Power acquires Brazil hydropower stake for $440 mn
August 17, 2011. SN Power, a hydropower project developer majority-owned by the Norwegian utility Statkraft AS, bought 41 percent of Desenvix SA for $440 million to expand its Brazilian operations.
Through the acquisition, SN Power and Desenvix’s other owners plan to install as much as 1,000 megawatts of renewable energy in Brazil by 2018, focusing on hydropower projects. Desenvix has 162 megawatts of clean energy assets in operation. It also has 176 megawatts under construction and a project pipeline of about 1,600 megawatts, mainly hydropower assets, two wind farms and a biomass plant. Having a local development organization also enables SN Power to participate in future hydropower auctions. The hydropower development pipeline is in the southern regions of Brazil.
The acquisition also includes Sao Paulo-based Desenvix’s 50 percent holding in Enex O&M de Sistemas Eletricos, which focuses on operating and maintaining small and medium- sized hydroelectric power plants. Jackson Empreendimentos Ltda. owns about 41 percent in Desenvix and Fundacao dos Economiarios de Seguridade Social, or Funcef, Brazil’s third-largest pension fund, the rest. SN Power is also 40 percent-owned by the Norwegian investment company Norfund AS.
U.S. to invest up to $510 mn in biofuels for planes, ships
August 17, 2011. The U.S. departments of Energy and Agriculture and the U.S. Navy will invest as much as $510 million over three years to spur the development of biofuels for commercial and military transportation. The three agencies will fund the construction or retrofit of U.S. plants to produce fuels that will be compatible with existing infrastructure. The program is expected to accelerate the efforts of companies trying to create a commercially viable replacement for fossil fuels. The collaboration means the Agriculture Department can provide help in evaluating source crops while the Navy offers a large potential market. Companies are expected to match the government investment. Funding will be doled out through competitive bids and will be split equally between the three agencies. Publicly traded biofuel companies with well-defined commercialization plans may qualify for some of the government investment.
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