Sunday, July 6, 2014

Potential Synergy between India and Poland in Energy Sector

India and Poland have had a dynamic political, defense and trade cooperation in the past there should be greater academic interactions between both the countries. India and Poland shared vibrant historical and cultural relations. The Erasmus Mundus programme is important in this regard. After Russia’s collapse, Poland has emerged the largest trade and investment partner of India in the Central Eastern Europe. In recent years, India's investment in Poland has significantly grown, approximately $3 billion, while Poland's touched a record investment of $100 million, which is expected to double in a couple of years. But there are technical issues like the Polish government cannot sell those PSUs, where government has more than 51 per cent stakes. However, is important to underline that the Mittals have purchased most of the iron and steel mills in Poland, which became bankrupt particularly after the collapse of the former USSR.

There is great importance of soft power, like research and academic collaboration between India and Poland. Major Indian companies investing in Poland are: ArcelorMittal, Videocon, Escorts, Strides Arcolab, Reliance Industries, Ranbaxy, Essel Propack, KPIT Cummins, Zensar Technologies Ltd, Infosys and Wipro, Jindal Stainless, Berger Paints India, UFLEX Glenmark Pharmaceuticals, Flemingo Duty Free, Rishabh Instruments etc. The Polish companies that operate in India include Torunskie Zaklady Materialow Opatrunkowych (TZMO) in Dindigul (manufacturing hygiene sanitary products) Can-Pack Poland in Aurangabad (manufacturing metal packaging), Inglot (cosmetic products), Geofyzika (seismic surveys for oil companies) In recent years, the scope of service sector has also substantially increased Poland is recognized for its green technologies, while India on the other hand is known for its growing coal consumption in the world. As a result, there is a great possibility of synergy between the two countries in sustainable development and reducing the carbon footprints. Besides, Poland has long and successful history in coal mining sector; hence can supply India good quality coal, state-of-the-art mining and safety equipment.

A strategic partnership between India and Poland would be useful in enhancing India-Poland relations. There is an immense potential for cooperation in energy, particular coal and coal mining between India and Poland. The intellectual discourse and cultural interactions between India and Poland have been widening and trade had substantially increased in recent years. India and Poland have organized an energy summit and trade fair for increasing interactions among the business community.

The potential of India-Poland relations still remained untapped. But the good thing is that there is no lack of will to enhance India-Poland relations. Both the countries have been engaged in the multilateral negotiations. India and Poland have taken initiatives such as establishing India-Central Europe Business Forum and organizing trade fairs, for enhancing their economic and commercial relations. India and Poland have common perceptions on many global issues. But still there are challenges for India-Poland relations like lack of direct flights, small Indian Diaspora in Poland, limited political interactions at the highest level and less coverage of India by Polish media and vice-versa. The Govt. of India should take urgent measures to overcome the said challenges to materialize the real benefits.

Source: 1. Zakir Hussain

Energy Emergency in Ukraine

Russia, Ukraine's main supplier of gas as well as natural gas for Europe via Ukraine, cut off supplies to the ex-Soviet republic on June 16 in a dispute over unpaid bills. Ukraine's parliament gave preliminary approval on Friday to a draft law that would allow the Kyiv government to exert tighter control over the energy sector in the face of dwindling natural gas supplies after Russia cut off exports last month. The parliament also approved, in a first reading, a bill that would allow consortiums with European or U.S. companies to operate Ukraine's aging gas distribution system and storage facilities.

There is fear over possible retaliation from Russia if it were not given the same access to Ukraine's gas infrastructure as would be offered U.S. and European firms. Russia is trying to tighten as many screws as possible on Ukraine.

Gazprom CEO Alexei Miller said last week it was "extremely likely" that Ukraine would start illegally sucking Europe-bound gas from the transit pipeline in the fall. However, deputy head of Ukraine's Naftogaz company Alexander Todiichuk said earlier Wednesday that Ukraine had enough gas in its underground storage facilities to last until November. Kiev currently charges Moscow about $3 per 1,000 cubic metres of gas per 100 km of transit.

Prime Minister Arseny Yatseniuk told parliament, urging it to give his government the right to declare a state of emergency" in the energy sector as the Ukraine is on the brink (of energy collapse. It is quite evident that it is a retaliatory trade measures against Ukraine over its signature last month of a free trade deal with the European Union.

Now Ukraine has cut the gas consumption by approximately 6 billion cubic meters for the season that is 20 percent to get through the incoming winter season. Government may sell gas domestically at a fixed price and force Ukrainian energy companies producing gas from domestic wells to send half their supplies into Ukraine's storage facilities. After the winter the companies would have access to the gas and be able to sell it to customers of their choosing.

Naftogaz said it was willing to resume talks with Gazprom on gas transit. The company was seeking to change the existing gas transit pricing which ties transportation fees to the cost of the fuel components, inflation in Europe and Russian gas price for Ukraine.

The Ukraine Govt. has sought cooperation from European or U.S. companies in operating the Soviet-era gas pipeline system; this would bring structural modernization essential for Ukraine.  The new law opens ways to Ukraine to become an energy player. The proposed legislation appeared to apply to private gas companies as well as the state gas and Oil Company. The draft laws are expected to go to parliament for a second reading at the end of July or in August. Parliament initially rejected the government's energy proposals, but resumed discussion and took a vote on the two draft laws on 4th July, 2014  after speaker Oleksander Turchynov warned that without them many homes could be left without heating in winter.

Russian energy giant Gazprom has estimated that Ukraine owed it $4.46 billion. On June 16 2014, Gazprom switched to the prepayment regime for gas supplies to Ukraine following failure of talks mediated by European Union Energy Commissioner Guenther Oettinger. Ukraine, whose gas transit network already operates below capacity, is also seeking to prescribe in the contract a minimum annual volume of gas it transports to Europe from Russia.

According to Russian estimations, Ukraine has accumulated 14.2 billion cubic metres of natural gas in its gas holders. The country needs at least 18.5 billion cubic metres of gas to survive the fall and winter and to ensure smooth gas transit to Europe. Now There is a question of survival for Ukraine. Russia had previously offered to buy into Ukraine's gas distribution system in return for cheaper gas. The draft laws on possible "state of emergency" powers would give the government the right to dictate to gas companies to whom they should supply gas and for how much, irrespective of supply obligations under existing contracts.

1.       VOA News;


Thursday, July 3, 2014

In Search of an Effective Energy Policy

As per the second round of Kyoto Protocol on climate change the countries of the world have decided to reduce the Co2 by 18 %.  President Obama is now must be congratulated for his recent commitment which was announced on 2nd June 2014. President Obama announced the USA’s national goal of a 30% reduction of CO2 emissions from electrical generation utilities by 2030.  The recent announcement of Mr. Obama has created a new debate in the world regarding effective energy policy. As per the current scenario of state by state approach to regulation in the energy sector has been a patch work quilt of minor success with little innovation. Every potential country now needs an effective national energy policy that could drive and reward innovation in particular states. For example, a national policy that encourages energy efficiency in our buildings through innovative and simple tax law changes could provide enormous returns of reducing energy costs as a percentage of GNP. Any country cannot move forward as a country without leadership in its own state. The recent announcement by the Obama Administration of the proposed federal Clean Power Plan is a step in the right direction.

The strained relationships between advocates of renewable energy, energy efficiency and the utilities need to be repaired. Creative thinking to find “win-win” strategies would help. Examples include allowing utilities to obtain a rate of return on investing in customer renewable energy and energy efficiency projects. It is pertinent to mention the statement made by a famous English energy economist, Mr. Fritz Schumacher in 1964 about the importance of developing sound energy policy: “There is no substitute for energy. The whole edifice of modern life is built upon it. Although energy can be bought and sold like any other commodity, it is not ‘just another commodity,' but the precondition of all commodities, a basic factor equally with air, water and earth.

In the 1980's, the Alaskan pipeline opened up 2.1 million gallons per day of petroleum and served to blunt the national security concerns presented by reductions in oil imports caused by the Iran/Iraq war. The approval of the Keystone pipeline is critical to secure sources of petroleum from a friendly neighbor to the north; thereby substantially reducing the national security threat presented by USA’s reliance on oil in the in the politically unstable Middle East. Given the fact that a significant share of the world's GNP is now generated in developing economies and significant sources of oil are located in politically unstable areas, the globalization of energy is the new strategic threat for the 21st century.

The failure of our political leaders to develop a sound energy policy is troubling given these disturbing world-wide energy trends.  Installing renewable energy projects is quite complex and intimidating for interested parties. It would be useful if standard programs could be arranged that take advantage of economies of scale for installation in neighborhoods. An example is the Solar Group Buy Program offered by the City of Milwaukee. This state should award a tax credit in the amount of the avoided tax in tipping fees for landfills if waste material is used to generate electricity in Wisconsin. Waste to energy projects using digester and pyrolysis technologies that convert waste to energy should be accorded tax credits in the amount of the tax assessed against land filling material if this waste material, used in these energy projects would otherwise be land filled.

 In a way similar to how the oil depletion allowance stimulates oil production through a reduced tax, a Waste Depletion Allowance would stimulate energy projection using waste as a source for energy production. Clean Power Plan involves trading in carbon offsets to meet carbon caps. Market-based principles for encouraging pollution reduction in clean energy production have been successful. If a company can make money by reducing its pollution more than is required by law, the more efficient pollution reducer should be able to trade the increase reduction to another emitter who will pay for it as an offset against its emission requirements. The VOC trading program for ozone nonattainment and SO2 reductions in the electrical generation segments are good examples of successful, market-based programs that work.

 More regulatory innovation should take place to encourage market-based trading solutions of this type which would encourage the development of clean energy sources. The proposed strategy for trading carbon offsets in the Clean Power Plan is a step in the right direction. In his seminal book on energy titled "The Prize," Daniel Yergin highlights the following current trends which, without an effective energy policy to contain them, will result in turmoil in the energy markets: the developing world surge in demand, the ‘internationalization' of energy companies, climate change and energy insecurity.

In the face of these trends, our political leaders must act now to develop a sound energy policy. The development of that policy is critically important not only for our economic, but also for our political security. It is much less expensive to encourage efficiency than to build new supply capacity. Programs should be designed to incentivize the utilities to promote energy efficiency rather than just returns on capital intensive base load projects. The regulators need to find a system in the rate based approach to utility regulation to incentivize investor owned utilities to invest in research and development. Unlike other industries, the “cost plus” model for rate regulation does not provide an incentive to innovate. The boiler and turbine technology used for base load generation has been around for almost a century.

 Innovation in the green technology and utility sector could be a “game-changer” for promoting clean tech in the industry. The Clean Power Plan's proposed requirements for a 30% reduction in carbon emissions may also drive much-needed technology innovation in the industry.  Now the leaders are required to plan a proper strategy and to achieve the much coveted goal of 30 % Co2 reduction from the emission. Only a policy on paper will be useless unless we have a commitment to achieve the target by an effective policy & execution of relevant regulations.

Source: by Art Harrington