HOT SUMMER REVIVES HOPE FOR COAL DEMAND

Monthly Coal News Commentary: March – April 2017

India

CIL hopes that with national electricity generation rising by 4.7 percent and prediction of early summer there would be higher coal demand. CIL was able to surpass its production target for the month of March 2017 achieving 104 percent at 66.07 MT. While offtake remained subdued to 52.30 MT for the month at 90 percent of the target. CIL missed the annual production target by 44.48 MT against a target of 598.61 MT and its off-take target by 55.45 MT for FY17. CIL said in FY17 as whole the average rake loading was 221.8/day compared to 212.8 rakes/day during FY16 registering a growth of 4.3 percent. Increase in absolute terms was 9 rakes/day for the year.

Growth of coal production during FY18 is expected to come down to two to 2.25 percent as compared to 9 percent registered in FY16. Production had been hampered to some extent due to problems in the Talcher mines due to R&R problems. In the last fiscal, CIL production at absolute terms was 536 MT. CIL has a stock 100 MT at pithead. Out of the 517 MT covered under the FSA with the power sector, 400 MT had been already validated and certified.

Replacing imports with high quality domestic coal is one of CILs strategies for finding new markets for its coal. Towards this end CIL is said to be in talks with power companies along the western and eastern coasts to discontinue the use of imported coal. Imported coal is in general more expensive than domestically produced coal.

At a time when almost everyone is worried about the future of coal, West Bengal is set to develop the country’s largest coal mine in Birbhum district, with the Centre allotting the development rights for the Deocha-Pachami coal block to the state under the government route. The block is estimated to have in-place reserves of about 2.1 BT. The block has four seams of coal ranging from 9 metres to 80 metres in thickness at depths ranging from 135 metres to 835 metres. The ash content of coal is estimated at 15-20%, which covers Grades A, B C, D and G. The block can be accessed through the Panagarh-Mourigram road and the nearest railway station is Mallarpur. The government West Bengal is said to be drawing up an Rs 120 billion plan to develop the block, which would create 100,000 jobs and usher in rapid economic development in the area. It is believed that the block is expected to produce coal worth Rs 2.10 trillion and attract total investments of Rs 220 billion. It is not clear what assumptions underpin these optimistic figures produced by the government. If demand for power is not growing and if peak demand generation does not require even half the available power generating capacity of over 300 GW and in addition if over 160 GW of renewable energy is likely to be dumped on a system that is struggling with over capacity who will invest in producing more coal?

CIL is expected to contribute to the government policy of reducing oil imports and reducing carbon emissions as it has come up with three coal bed methane and coal mine methane projects in Jharkhand and West Bengal in FY18. While one plant will be set up in Raniganj in West Bengal, two will be located in Jharia in Jharkhand. The government has said that domestic coal gas can be used as feedstock for producing urea and other chemicals that can help limit the country’s import bill by $10 billion in five years and reduce carbon emission. It is believed that India’s dependence on petroleum and natural gas can be brought down or done away with if the country manages to extract gas from coal. This is not necessarily a new idea.  India’s early plan documents are full of arguments for producing urea and petrochemicals from coal to reduce oil imports. About a third of China’s coal goes for production of olefins and other petrochemicals. CIL is said to be actively looking to acquire coking coal assets in Australia. The rationale for foreign acquisitions is rising coking coal prices. CIL has also asked Mozambique if it can explore for coal in a new area, after surrendering two mining licenses in the African country.  The decision makes commercial sense, for now.

The government is said to be planning amendments to rules for auctioning of coal mines through competitive bidding. The amendments are being considered for permitting sale of coal since there have been changes in the Coal Mines (Special Provisions) Act, 2015 and to align with the rules under this Act. It is said that the changes will accommodate the provisions of the proposed revised standard bidding document for UMPP and speed up coal delivery to UMPP plants.

The government has generated revenue of only ` 17.47 billion from the auction of 31 coal blocks. So far, 82 coal mines have been allocated by way of auction/allotment. Allocation of coal mines, including allocation during 2017-18, is an ongoing process.  The sum generated from coal auction is a pittance compared to the projected notional revenue losses of over Rs 1 trillion in the so called coal scam papers!

Coal troubles seem to be following the Adani group into Australia. The company’s plan to supply lower quality coal with high ash content to non-premium markets like India from its $ 16.5 billion Carmichael coal mine in Queensland is being highlighted by some of the Australian opponents of the project. Adani Australia’s response is that in terms of quality of the coal it is almost 50 percent better than Indian coal. Final approvals from the Australian government could be by May or June, after which construction could begin. Adani Enterprises has maintained that the work on mine project would create 10,000 jobs for the state. The project involves dredging 1.1 million cubic metres of spoil near the iconic Great Barrier Reef Marine Park, which will then be disposed off on land. A new environmental campaign to stop the development of the Adani project is said to be materialising with the backing of former Australian Green party leader. Three-quarters of Australians oppose a plan for Adani to tap a $900 million government subsidy to help fund infrastructure connected to the mine, according to a poll. The campaign group brings together 13 conservation and community organizations representing 1.5 million Australians. Environmental opposition to the mine, which could begin production in 2020, has delayed the first phase of the project and prompted the company to cut underground capacity by 38 percent. A final investment decision is due to be made by Adani as early as May.

Rest of the World

China has apparently ordered its trading companies to return coking coal from North Korea. As per international news reports, North Korean cargo ships were heading back home to the port of Nampo. Coking coal is the country’s most important export product. At least ten North Korean ships recently arrived at a Chinese port after being stranded for the past three weeks following the top global coal consumer’s ban on imports of the fuel from its isolated neighbour. China has said it would ban coal shipments from North Korea, starting 19 February 2017, as part of its efforts to implement United Nations sanctions against Pyongyang.

Port disruptions in Indonesia and a cyclone hitting mines in Australia have tightened Asia’s coal markets in March, while demand in China and other key import markets remains strong, lifting prices. Prompt thermal coal cargo prices for export from Australia’s Newcastle port have risen by more than 11 percent since March 10, partly reversing a steep decline since last November. The price jump has been driven mainly by an Indonesian government graft probe at ports in its East Kalimantan province, which is one of the world’s most important thermal coal export hubs. The probes have disrupted ship loadings around the port of Samarinda, where 38 large dry-bulk ships are currently sitting idle to take on coal, according to shipping data. Most ships are unable to berth at the port and are being forced to take on coal via a small number of loading vessels. The delays come as demand remains strong in China, by far the world’s biggest coal consumer, after a crackdown on mining led to a 1.7 percent year-on-year drop in domestic output in the first two months of the year. Cyclone Debbie missed most of the region’s mines, but Glencore halted operations at its Collinsville and Newlands mines, and coal carriers stopped heading north for several days, delaying shipments. The higher Asian prices have led to a pickup in shipments from the US and Colombia as traders take advantage of cheap Atlantic basin coal, with prices there dipping due to an unusually mild start to the low demand spring season.

China’s top power groups are lobbying the local government in the western region of Ningxia to request their main thermal coal supplier to cut prices as they are bleeding cash due to surging coal costs and falling power prices. A glut of renewable and coal-fired power capacity in the Ningxia Autonomous Region has pushed down electricity prices, forcing utilities to sell their power at a discount after the government liberalized its power market. Prices in the region are the lowest in the country. Power company profitability is a major interest for the central government, which intervened last year to prevent a winter heating crisis when thermal coal prices soared to multi-year highs and forced mining cutbacks tightened supplies.

Eighteen districts in northern China’s heavily polluted Hebei province will ban the sale of coal by end-June ahead of a complete ban on residential coal use in October. Hebei, home to six of China’s 10 smoggiest cities in the first two months of the year, is on the frontline of China’s three-year war on pollution, and has targeted cutting coal consumption by 40 MT over 2013-2017. It has identified the use of coal by households and small businesses as one of its main targets this year as it battles to improve air quality. In a new action plan aimed at controlling coal consumption, the province said it would also strictly control the number of small businesses that burned coal directly, and crack down on the illegal production and sale of low-grade coals.  The ban is likely to hurt local suppliers of low-grade coal but is not expected to have a wider market impact.

The US President’s decree to reverse former President Barack Obama’s 2016 ban on new federal coal leases, part of a wide-ranging executive order to sweep away green regulations have not had expected impact. A review of company filings showed that coal miners with the most to gain already have enough leases in hand to last well over a decade. That suggests miners could already ramp up production levels immediately if the market demanded more coal. Obama’s administration imposed the temporary ban on new federal coal leases in January 2016 as part of a broad environmental and economic review to ensure royalties from lease deals provide fair returns to taxpayers. Coal accounts for about a third of US electricity production, down from about half a decade ago. About 40 percent of all US coal comes from federal lands, mainly in the Powder River Basin in Wyoming and Montana.

Japanese trading company Mitsubishi Corp may sell stakes in Australia thermal coal mines as it presses on with a switch to core assets such as coking coal after slumping to its first-ever annual loss last year. Mitsubishi is looking to unload its 31.4 percent stake in the Clermont mine, and may also sell stake in the Hunter Valley operation. The firm plans to raise its stake in Canada’s Montney shale gas field, buying more shares from partner Japan Oil, Gas and Metals National Corp. Mitsubishi is considering whether or not to sell its 32.4 percent stake in Hunter Valley thermal coal mine in Australia after its partner Rio Tinto decided to sell its Australian coal assets to China’s Yancoal.

In the dusty scrub of the Thar desert, Pakistan has begun to dig up one of the world’s largest deposits of low-grade, brown, dirty coal to fuel new power stations that could revolutionize the country’s economy. The project is one of the most expensive among an array of ambitious energy developments that China is helping the country to build as part of a $55 billion economic partnership. A $3.5 billion joint venture between the neighbours will extract coal to generate 1.3 GW of electricity that will be sent across the country on a new $3 billion transmission network. Pakistan by contrast relies on coal for just 0.1 percent of its power. Pakistan’s coal reserves would give the nation a cheap domestic alternative to expensive oil and gas imports. In an effort to curb the import bill and meet demand for power, Pakistan plans to dig up some of the world’s biggest known deposits of lignite, a lower-grade brown coal. But first, it must clear 160 meters of sand to get to the coal.

CIL: Coal India Ltd, MT: Million Tonnes, BT: Billion Tonnes, FY: Financial Year, R&R: Resettlement & Rehabilitation, FSA: Fuel Supply Agreement, GW: Gigawatt, UMPP: Ultra Mega Power Project, US: United States

Courtesy: Energy News Monitor | Volume XIII; Issue 45

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RENEWABLES TRUMPED?

Monthly Non-Fossil Fuels News Commentary: October – November 2016

India

What will happen to India’s renewable energy targets now that a tectonic shift in climate policy is anticipated? Will they be trumped? These are the questions that ended a month filled with upbeat news from the renewable sector such as commitments for more dollars, more incentives and more support for solar power with some morsels thrown in for wind. Though there was uncertainty in these commitments materialising even before the tectonic shift, the level of uncertainty has increased since the election of a new President in the USA. India’s renewable energy targets for 2022 that were being described as aspirational or ambitious may now have to be described as fantasy.

In a recent report on renewables, the IEA has said that the share of renewables in India’s power generation would touch 19 percent in 2021 taking into account the 175 GW target for renewable capacity by 2022. The report revised its earlier estimates upward due to much higher capacity additions of solar PV which IEA expects to account for 50 percent of all new renewable capacity growth over the medium term. It expects onshore wind to expand by 25 GW over the medium term on account of ‘strong project pipeline, new supportive policies to encourage the repowering of old sites, and the announcement of wind auctions to develop 1 GW of capacity that should drive additional growth after 2018’.  However the scaling back of accelerated depreciation benefit for wind from 80 percent to 40 percent, which will come into effect at the end of FY16 is expected to increase uncertainty in capacities materialising.

Hydropower capacity is expected to expand by over 10 GW driven by the government’s 5 GW small hydropower target by the end of the 12th Five-Year Plan in 2022. India’s agreement with Bhutan to co-develop over 2 GW of mostly large hydropower projects is also expected to contribute. The issue of targets for renewables depends on what is classified as renewables and in this context, the request from the MNRE to seek cabinet approval to reclassify large hydro power plants as renewable projects becomes important. This could potentially help India achieve clean power capacity of 230 GW by 2022 according to the Minister in charge of the MNRE. Until now only hydro projects that were less than 25 MW were classified as renewable.

According to a report by Bloomberg New Energy Finance, $10.5 billion was invested in renewables in India in FY16, which was 60 percent more than the investment last year. The investment required for meeting the target set for 2022 is estimated to be about $100 billion equivalent to almost 5 percent of all the goods and services produced annually by India according to Bloomberg.

India’s riparian challenges were in the news this month.  The upper riparian narrative that India uses to appropriate the waters of the Indus for power generation under the Indus Water Treaty may be of little use to take on China as India is the lower riparian in the Brahmaputra basin. India was reported to be concerned by China blocking a tributary of Brahmaputra in Tibet to facilitate construction of what is descried as the ‘most expensive’ hydro-power project. India’s concern follows an announcement by China that it has completed the dam for a hydroelectricity project at Lalho on the Xiabuqu river, a tributary of the Brahmaputra in Tibet. Experts have commented that the Lalho project which is a run-of-the-river project, will not reduce water flow once it is complete as the dam only diverts water into a tunnel.  However experts feel that it will impact the flow of silt, essential to the build-up of soil in the South Asian plains.  Staying with China, it was also reported that the Chinese government was keen to sell the excess electricity to India. This is seen as one of the main reasons why China agreed to Indian requests for Brahmaputra flood season water flow data and expanded the agreement in October 2013.  India has a data sharing arrangement under which China provides data during flood season on Brahmaputra and Sutlej. In 2015, China started generating electricity from the $1.5 billion Zam Hydropower Station, the largest in Tibet and built on the main stem of the Brahmaputra.

In the nuclear sector, the Russian Kudankulam Nuclear Power Plant continued to dominate. Unit 3 & 4 of the plant for which the Indian and Russian leaders laid the foundation through video-conferencing was reported this month.  The units were expected to sell electricity at ₹3.90/kWh. The first two units were estimated to cost $3.3 billion while unit 3 & 4 are estimated to cost about $6 billion to build.  Despite the increase in cost they are expected to sell electricity at the same price.

Rest of the World

Tesla was reported to be working with Panasonic Corp on production of photovoltaic cells and modules at a facility under construction by SolarCity in Buffalo, New York. The deal requires shareholders’ approval of Tesla’s planned acquisition of SolarCity. It is too early to say if this will help both Tesla and Panasonic to alleviate some of the challenges that they are facing.

The U.K. government had supposedly miscalculated the costs of renewable-energy support and is expected to overshoot its $9.2 billion annual budget by about a fifth in 2020 and 2021, according to auditors. The support mechanism, known as the levy control framework, was established by the U.K.’s Department of Energy & Climate Change, subsequently renamed by Prime Minister Theresa May’s government to the Department of Business, Energy & Industrial Strategy. It sets annual caps on costs for clean energy such as feed-in tariffs, renewable obligation certificates and contracts for difference. Apparently most of the allocated government funds have been spent and there is little left over to fund new projects between now and 2021.

On hydropower, the most interesting development on the global scene was the riparian conflict between Central Asian nations over hydro power projects. Tajikistan had reportedly diverted the flow of Vakhsh river to start building the world’s tallest dam and the main element of the Rogun hydroelectric power plant, a $3.9 billion project. Uzbekistan was reported to be concerned as a downstream nation and is said to be urging Tajikistan not to build Rogun.

Moving to the USA, an investment bank has said that nuclear power will come to an end in the country if the industry does not get more government support. Low power prices, fuelled by an abundance of natural gas from shale drilling and weakening demand, have reportedly squeezed profits of the nuclear industry just as its operating costs rose on account of an increase in regulatory costs. The cost of building a nuclear plant in the USA is estimated to be 5 times that of a gas-fired plant.  In August, regulators cleared subsidies worth about $500 million a year as part of a clean energy plan to reduce greenhouse gas emissions in New York. This is being fought by competing power producers who say the measures are unlawful.

According to the World Nuclear Association China is set to overtake the USA in nuclear capacity over the next 10 to 15 years. China is expected to overtake France with the second-highest number of nuclear reactors by 2020.  Out of 39 reactors of capacity 47.4 GW under construction in Asia 20 are in China. Four countries – China, Russia, India and South Korea are expected to account for 70 percent of reactors commissioned in the period to 2030. A research institute in China was reportedly developing the world’s smallest nuclear power plant, which could fit inside a shipping container and installed on an island in the disputed South China Sea within five years. The reactor is expected to generate 10 MW of heat which can potentially power 50,000 households.

IEA: International Energy Agency, MW: Megawatt, GW: Gigawatt, kWh: Kilo Watt Hour, PV: Photovoltaics, MNRE: Ministry of New and Renewable Energy, FY: Financial Year

Courtesy: Energy News Monitor | Volume XIII; Issue 22

SIGNALS OF REVIVAL IN THE GAS SECTOR

Monthly Gas News Commentary: March – April 2017

India

After a pause of several years, there was optimism over prospects for production of gas in India. According to ICRA, India’s natural gas production is set to rise by over 42 percent to 125 mmscmd over the next decade through 2027 owing to a market-linked pricing formula and the marketing freedom allowed by the government to companies. It said that apart from marketing and pricing freedom for gas discoveries, the centre had announced various reforms like implementation of the revenue-sharing model, a uniform licence framework and an open acreage policy under the new HELP and reduction in royalty rates for the deep-water and ultra-deep-water areas which could aid in incremental gas production over the long term.

The government has provided marketing and pricing freedom to players operating in deep-water, ultra-deepwater and high pressure-high temperature areas that were yet to commence commercial production. Natural gas price ceiling for the challenging areas are US$5.3/mmBtu as of now but this may keep varying in line with the prices of substitute fuel. According to ICRA, the capacity utilisation levels of some gas transmission pipelines would remain sub-optimal in the near to medium term due to shortage of gas supplies but would show an increasing trend with rising LNG consumption. India’s total natural gas supply potential is expected to increase over the next five to six years with higher domestic production and commissioning of firm re-gasification capacity during 2018-22. With the increase in supplies, the difference between the projected demand and supply potential is expected to narrow down 2019-20 onwards. However, the upcoming LNG capacities may operate at relatively lower utilisation than the current utilisation of regasification capacities in the country, according to ICRA. While optimism is always welcome, one must keep in mind that projections for gas demand and supply has always been over-optimistic.  Projections by the hydrocarbon vision document of gas demand today are about 130 percent higher than actual demand.  One can only hope that rating agencies are not indulging in making optimistic projections to support the case of gas producers.  In addition supply does not automatically create demand especially in the case of goods for which there is a cheaper substitute.

For its part ONGC has also sought a review of the natural gas pricing formula as rates have dropped below cost. India’s largest natural gas producer demanded a floor or minimum price of natural gas be fixed at $4.2/mmBtu for the business to make economic sense. The government had evolved a new pricing formula using rates prevalent in gas surplus nations like the US, Canada and Russia to determine rates in a net importing country. Prices have halved to $2.5/mmBtu since the formula was implemented. The new formula provides for revising rates every six months – on April 1 and October 1, based on one-year average gas price in the surplus nations with a lag of one-quarter. When the formula was implemented, rates went up from $4.2 to $5.05/mmBtu but fell to $4.66/mmBtu in April 2015 and to $3.82 in October that year. This financial year, prices further dipped to $3.06/mmBtu in April and to $2.50/mmBtu in October. The cost of production of natural gas in the prolific Krishna Godavari basin is between $4.99/mmBtu and $7.30/mmBtu. The same for other basins is in the range of $3.80/mmBtu to $6.59/mmBtu. As per the mechanism approved in October 2014, the price of domestically produced natural gas is to be revised every six months using weighted average or rates prevalent in gas-surplus economies at Henry Hub of US, National Balancing Point of the UK, rates in Alberta (Canada) and Russia with a lag of one quarter. The price for undeveloped difficult fields would also go up from current rate of $5.3/mmBtu.

The oil ministry for its part has apparently moved a proposal to the Cabinet for allowing pricing freedom for natural gas produced from coal seams. The ministry has proposed to the Cabinet that CBM gas producers be given pricing freedom and allowed to price the fuel at market rates. The estimated CBM resources in the country are about 2.6 tcm. The 33 CBM blocks awarded so far hold a total of 1.7 tcm of the estimated CBM resource, of which, so far 280 bcm has been established as Gas in Place.

The government is expected to offer incentives to companies that take lead in proposing to develop oil and gas blocks of their choice leading to a government-monitored auction, according to the draft OALP. Besides encouraging companies to propose blocks for auction through the year, the open acreage policy will also keep alive the previous practice of the government carving out blocks and offering them to investors in an auction round. Open acreage licensing is part of the HELP unveiled last year. The DGH, an arm of the oil ministry, has now drafted the procedure to operationalise the OALP.

The DGH maintains a national data repository that investors can access to study hydrocarbon data and determine their interest in specific blocks. Investors can then apply for a specific area for either reconnaissance contract that permits exploration for two years, or petroleum operations contract for 20 years, including an initial exploration phase of six years, according to the draft OALP. An investor’s expression of interest must be accompanied by a bank guarantee of $1 million for petroleum operations contract and half a million dollars for reconnaissance contract.

The government will accept an expression of interest from investors in two six-monthly windows, ending in June and December, following which the interests will be evaluated, and if found fit will result in an open bidding overseen by the DGH. All bidders will be evaluated on technical and financial criteria. The maximum marks in technical evaluation available to an ordinary bidder is 90 under reconnaissance contract, but the investor submitting the expression of interest leading to this bid will get additional 10 marks, as per the draft OALP. Similarly, in petroleum operations contract, the one that first expressed interest gets five marks over and above the maximum 65 marks other bidders can aim for in technical evaluation. There is no incentive available in financial bids. The government will incentivise investors transitioning from Reconnaissance to Petroleum Operations Contract.

Rest of the World

The optimism over gas sector revival appears to be global.  The French oil major Total has apparently extended an option with British shale gas developer Egdon Resources to buy a stake in one of Egdon’s shale gas licences, the companies said. Total’s previous option on the licence had lapsed. In exchange, Total has agreed to then pay Egdon’s expenses of an exploration programme worth up to £13.47 million including the drilling of a well.  In the USA Total has been building a sizeable presence in the shale oil market, most recently buying assets from Chesapeake in September 2016. Its strategy differs from that of French energy peer Engie, which sold its British shale gas interests to petrochemicals firm Ineos.

The pioneer and leader in LNG business Qatar has also lifted a self-imposed ban on development of the world’s biggest natural gas field. Qatar declared a moratorium in 2005 on the development of the North Field, which it shares with Iran, to give Doha time to study the impact on the reservoir from a rapid rise in output. The vast offshore gas field, which Doha calls the North Field and Iran calls South Pars, accounts for nearly all of Qatar’s gas production and around 60 percent of its export revenue. The development in the southern section of the North Field will have a capacity of 60 mcm/day or 400,000 boe/day and increase production of the field by about 10 percent, when it starts production in five to seven years. Qatar is expected to lose its top exporter position this year to Australia, where new production is due to come on line. The LNG market is undergoing huge changes as the biggest ever flood of new supply is hitting the market, with volumes coming mainly from the United States and Australia.

The world’s biggest LNG buyers, all in Asia, are reportedly forming an alliance to secure more flexible supply contracts in a move which shifts power to importers from producers as oversupply grows. KOGAS has signed a memorandum of understanding in mid-March with Japan’s JERA and CNOOC to exchange information and “cooperate in the joint procurement of LNG.” Together, the three companies purchase a third of global LNG production, giving them a strong hand to challenge restrictive contract terms that have squeezed buyers’ finances.  Several joint LNG-buying deals have been set up since then but none approach the scale of the latest agreement, which is the first involving the game’s biggest players.

Total is seeking a 50 percent stake in a $4 billion project in Iran’s giant South Pars gas field. Total signed a preliminary deal for the South Pars project last year, becoming the first Western oil major to sign an energy agreement after the EU and the USA eased sanctions as part of a pact to curb Iran’s nuclear ambitions. Total said the South Pars 11 project would require investment of about $4 billion, with the French firm financing 50.1 percent with equity contributions and payments in non-US currency. The South Pars project is expected to have a production capacity of 370,000 boe/day and the gas would be fed to the Iranian grid. It would require two offshore platforms and 30 wells. Total is expected to make a final investment decision by summer although this would depend on a renewal of US sanctions waivers, Total said. Iran said contracts would be finalised around April. Total resumed trading with Iran in February 2016, and bought about 50 million barrels of crude for about $1.9 billion last year, most of it to supply its refineries. It purchased 11 million barrels of petroleum products for $394 million, generating net profit of $2.8 million.

Algeria’s Sonatrach expects to surpass its gas export target of 57 bcm in 2017 as a new pipeline comes online in May bringing an additional 4 bcm.  Sonatrach had previously said gas exports from Algeria, a key supplier to the European Union, were expected to expand to 57 bcm in 2017 versus 54 bcm last year.

Despite the optimism over revival in the gas industry a cloud remains in the form of oversupply and price reduction in the USA. As explorers extract crude from the Permian shale in West Texas, they’re also producing gas. A jump in the number of rigs operating in the basin is adding to the so-called fracklog, or the number of drilled wells that are waiting to be connected. That’s a sign that gas output from the region will jump by about 25 percent over the next year, threatening to send prices below $2/mmBtu. Gas is already this year’s worst performer among major commodities, and the prospect of a torrent of supply from the Permian means 2018 may not be much brighter for gas bulls. Output from the basin would augment production from the Marcellus shale in Pennsylvania and West Virginia, which is expanding as new pipelines carry the fuel to major markets. Gas production from the Permian may total over 230 mcm/day in April, up 15 percent from a year earlier. The basin’s oil and gas rigs climbed for nine straight months through February, more than doubling from the 2016 low in May.

NLNG could unlock three times as much gas as the country’s proven reserves and create hundreds of thousands of jobs if it goes ahead with a proposed expansion plan, it said. NLNG is a venture between state-owned NNPC, Royal Dutch Shell, Total and Eni to produce LNG for export. It currently operates six trains, liquefaction and purification facilities, and the company is said to be ready to add another two trains. Building Trains 7 and 8 would require total investment of $25 billion. Nigeria has the world’s ninth largest proven gas reserves, at 5.2 tcm.  Train 7 needed assurances around supply because the six existing facilities were not full on an annual basis. NLNG, which has 23 LNG carriers, has generated $85 billion in 17 years with assets of more than $13 billion.

LNG: liquefied natural gas, HELP: Hydrocarbon Exploration Licensing Policy, DGH: Directorate General of Hydrocarbons, EU: European Union,  mmscmd: million metric standard cubic meter per day, mmBtu:  million metric British thermal units, CBM: coal-bed methane, bcm: billion cubic meters, tcm: trillion cubic meters, OALP: Open Acreage Licensing Policy, mcm: million cubic meters, boe: barrels of oil equivalent, KOGAS: Korea Gas Corp, CNOOC: China National Offshore Oil Corp, NLNG: Nigeria Liquefied Natural Gas Company, NLNG: Nigeria LNG, NNPC: Nigerian National Petroleum Corp, US: United States

Courtesy: Energy News Monitor | Volume XIII; Issue 44

IRRATIONAL EXUBERANCE OF THE INDIAN POWER SECTOR

Monthly Power News Commentary: October 2016

India

A 2011 paper for the Brookings Institute co-authored by the current governor of the RBI asked whether the exuberance of the Indian power sector had legs. The answer suggested by the paper was ‘no’. News emerging this week appeared to confirm the answer. A staggering $20 billion worth of debt split roughly equally between operational and under-construction power projects were reportedly at risk according to news items that cited a report by ratings agency Crisil. As per the Crisil report, around 17 GW of operational power projects with a debt of about $10 billion and another 24 GW of under-construction projects with roughly equal debt exposure were reported to be ‘high risk’. Cost-overruns, aggressive bidding at coal block auctions, issues over gas supply are among the reasons given but lack of demand for power was not mentioned.

While the Crisil report expected credit growth to the power sector to moderate to 5 percent over the next three years compared to an average of 18 percent in the last five years on account of the UDAY scheme (that shifts bank debt to the government balance sheets), it expected NPAs of the sector to increase from 1.3 per cent to 4.4 percent in FY16. The quick and easy take on this is that once UDAY wipes out debt from the long suffering discoms, the Indian power sector would sprint into a cheap, clean and profitable future with solar power.   To a pessimistic minority this may sound like irrational exuberance or exuberance that lacks legs as the RBI governor eloquently put it. The physics and economics of energy is on their side as both continue to favour centralised supply of uninterrupted energy generated by energy dense fossil fuels. A recent MIT report on solar power confirms this position as it observes that even if solar panels were given away free, coal based power will be cheaper for an industrial economy.

Among the more entertaining news on electricity was the item that claimed that nearly 500 Samajwadi Party workers in a village of poll bound UP joined the ruling Bharatiya Janta party citing lack of electricity in their villages. The question that comes to mind is, if people can convert from one party to another for electricity should they also not be given the freedom to convert from one religion to another or one caste to another for similar economic or social benefits? Staying with entertaining news, it was reported that the Power Minister continued his attack on the Planning Commission for its approach of setting targets for power generation that supposedly led power companies to invest ‘irrationally’.  Once again the question that comes to mind is, if targets lead companies to invest irrationally, why then is his government setting targets for almost every form of energy?  Will not the exuberant targets for coal, nuclear and solar energy set by his government lead to irrational investment?

Rest of the World

The proposed coal based power plant in Rampal in Bangladesh continued to remain in the news.  A joint Indo-Bangla forum has apparently written to Indian Prime Minister demanding that the 1320 MW Rampal power plant be scrapped as it has potential to cause ‘irreparable damage’ to Sundarbans, the world’s largest mangrove forest. The power plant is located 14 kilometres upstream of the Sundarbans Reserve Forest in Bangladesh, a world heritage site declared by UNESCO.  The selection of the site by the Bangladesh government was said to be based on the fact that it was not densely populated (which would mean relatively lower number of re-locations) and close to the port for importing coal.   As it is often the case with environmental protests, it is probably the articulate urban dweller enjoying the benefits of industrial development such as life in a well-connected city in Bangladesh with access to electricity, air-conditioning, motorised vehicles and other comforts of modern housing funded by well paid jobs (presumably in the non-government sector with the mandate to oppose the very fuels that underwrite his or her life style) who is marching against the plant.  The people living in abject poverty in the area surrounding the Sundarban forests may actually want the power plant for it may offer better job prospects and also possibly electricity.  One cannot imagine many in these areas wanting to continue their wretched life as fishermen or subsistence farmers in mud huts that are routinely destroyed by storms. Rarely are these people consulted when such projects are debated. Organisations who supposedly represent them often assume that the poor in the Sundarban want the same outcomes as themselves.

The blackout across South Australia after a series of severe storms and lighting strikes was widely reported in the international press.  An independent review has been proposed to resolve the political divisions over the cause persisted. Australia’s Prime Minister who supports traditional coal and natural gas based power generation has blamed South Australia’s high dependence on renewables for the outage. Naturally his assessment is being criticised by other political leaders who accuse him of letting ideology drive his comments.

The World Energy Council’s 2016 report declared that smarter people and machines would enable smart grids, smart buildings, smart homes and offices, and smart cities to become the norm by 2060. The report expected advanced manufacturing, automation, telecommuting, and other technologies are expected to disrupt traditional energy systems. The report predicted that demand for electricity would double by 2060 on account of the growth of the middle class, rising incomes, and more electricity-enabled appliances and machines. Overall the report takes the popular position of being exuberant on both, the extent of renewable penetration and the death of coal and oil.

FY: Financial Year, RBI: Reserve Bank of India, UDAY: Ujwal DISCOM Assurance Yojana, MW: megawatt, GW: gigawatt, NPAs: Non-performing assets, UNESCO: United Nations Educational, Scientific and Cultural Organization 

Courtesy: Energy News Monitor | Volume XIII; Issue 21

SYNERGY FOR ENERGY: TIME TO REHABILITATE AN OLD IDEA?

Monthly Oil News Commentary: March 2017

India

The old idea of restructuring oil firms to create an integrated ‘oil major’ under the caption ‘synergy for energy’ re-emerged this month. The Krishnamurthy Committee set up to evaluate the merits of the idea advised against such a merger in 2005. The oil ministry has apparently decided that the idea needs to be revisited and asked state firms to prepare a plan for the merger. In their plan, companies have to indicate who they will prefer to combine with and what kind of synergy that will bring. The government is said to be planning to sell its entire equity stake in HPCL to ONGC for ₹ 440 billion in order to help build a company that will have a presence across the industry value chain. The government thinking is that a much bigger entity will give bigger negotiating power in activities globally such as the purchase of crude, technology, R&D expertise, as well as faster decision making and economies of scale. The motivation behind the move was that power had gradually shifting from oil and gas producers to consumers.

The oil ministry and the Department of Investment and Public Asset Management will oversee the process of integration. The idea of creating an integrated oil major germinated outside the oil ministry, and so it is entirely possible that the key decisions regarding this will be made outside. Therefore, it is not necessary that the plans state oil companies present will actually get adhered to, and the government may just direct them according to what it thinks is the best way to create an integrated player.

The issue of linking Aadhaar card for LPG connection was in the news this month.  In Kolkata, Aadhaar linkage for LPG has been extended as Aadhar linkage with banks is only 11-12 percent, while with oil companies it is 20 percent. Staying with Aadhaar, women of households BPL will need to enrol for Aadhaar by May 31 to be able to avail themselves of a free LPG connection under the Pradhan Mantri Ujjwala Yojana. Under the Ujjwala Yojana, the government aims to give 50 million LPG connections to BPL families by 2019 while absorbing the cost of ₹ 1,600 per connection. Nearly 16.7 million free LPG connections have been released under the scheme. This news-letter argued in 2015, that is before the scheme was announced, that India must give LPG as dowry to its poor daughters rather than provide them with clean cook-stoves as one UN project had proposed (ORF Energy News Monitor | Volume XII; Issue 23). The move to make Aadhaar mandatory will impact nearly 32.3 million BPL women who are still to benefit from the scheme. It is LPG that is likely to be more of an aadhaar for a poor woman and not an aadhaar card.  Access to modern cooking fuels will help women move into the market while an aadhar card will help them to move into queues for government handouts.

The roadmap to cut import dependence to 67 percent by 2022 from 82 percent received some traction with the award of DSF and the policy to extend timeframes for existing contractors for oil production. The winners of the DSF auction have signed contracts with the government which will help them take possession and start developing these oilfields. Of the total 31 contracts to develop oilfields, 24 have gone to newcomers. The government had received 134 bids for 34 of the 46 contract areas bid out in November. The cumulative peak production from the awarded fields is expected to be around 15,000 bpd and 2 mmscmd of gas over the economic life. Besides auctioning small fields, the government has introduced a raft of policy measures including a new exploration policy and higher prices for gas from difficult fields in the last two years to raise local oil and gas production.

The government estimates the total revenue from the awarded small fields of about ₹ 464 billion. The development of these fields is also estimated to generate 37,500 jobs. The next round will include fields that did not receive bids this time as well as new fields that belong to state-run companies such as ONGC and OIL but have not been developed yet.

India approved a policy allowing extra time to contractors of old blocks to unlock oil and gas reserves of more than 426 million barrels, worth over $21 billion, as it seeks to cut its dependence on imports. The policy approved by the Cabinet will help companies including Cairn India and ONGC that are exploring blocks awarded before 1999. During the extension period, contractors are expected to make an additional investment of more than $5.4 billion. During April-February, the production from these old oil and gas blocks was around 55 million barrels of oil and 965 mcm of natural gas. The Cairn-operated Barmer block in the desert state of Rajasthan accounts for about half India’s onshore production of crude oil.

In the current fiscal till January, the share of imported crude on the basis of domestic consumption stood at 82 percent. Most of crude oil production in the country is from ageing fields in the states of Andhra Pradesh, Assam, Arunachal Pradesh, Gujarat, Rajasthan, Tamil Nadu and offshore areas.

India’s relationship with its neighbours is being cemented with pipelines for oil transport.  The latest was IOC’s plan to build pipeline to supply petrol, diesel and cooking gas to Nepal.  India has been a traditional supplier of fuel to Nepal, which receives its entire demand of about 200,000 kilo-litres of fuel every month from IOC. India is considering extending the natural gas pipeline from Gorakhpur in Uttar Pradesh to Nepal. GAIL (India) Ltd is building the proposed pipeline from Jagdishpur in Uttar Pradesh to Haldia in West Bengal, which crosses Gorakhpur. IOC and NOC will form a joint venture to market fuel in Nepal. IOC has agreed to supply petrol, diesel, kerosene, jet fuel and cooking gas to Nepal for the next five years, beginning April 1. Under the agreement, IOC will supply BS-IV grade fuel to Nepal and use Patna-Motihari-Amlekganj Pipeline, when it is built, to supply fuel. This pipeline can take fuel from Barauni as well as Haldia Refinery. IOC has been supplying fuel to Nepal since 1974.

Notwithstanding the policy to reduce crude imports, India for the first time imported petrol and diesel from China. India imported 18,000 tonnes of petrol and 39,000 tonnes of diesel in the first nine months of the current fiscal. Traditionally, Singapore and the UAE have been its biggest sources of petrol and diesel. During April-December 2016, India produced 27.1 MT of petrol against a consumption of 17.96 MT. In case of diesel, the production stood at 76.55 MT in comparison to 57.24 MT. India imported 8,20,000 tonnes of diesel and 4,76,000 tonnes of petrol in April-December.

In the first nine months of the current fiscal, the UAE toppled Singapore to become the India’s biggest supplier of petrol at 243,000 tonnes. Singapore supplied 169,000 tonnes of petrol. India has installed refining capacity of 230.1 MT, while the total fuel demand in 2015-16 was 184.7 MT. In April-January period of 2016-17, the fuel demand stood at 161.4 MT as compared to refineries producing 202 MT.

India’s oil consumption fell 3 percent in February, declining for the second month in a row after shrinking 4 percent in January. Oil demand fell to 15.886 MT in February from 16.339 MT in the same month last year. In January, the oil demand had shrunk to 15.617 MT from 16.238 MT in the year-ago period. The sale of diesel, which makes up about 40 percent of all domestic oil demand, fell 4 percent to 6.159 MT in February. The demand for Petrol, however, rose 3 percent to 1.897 MT. The sale of jet fuel also rose by a tenth to 575,000 T. The demand for LPG rose 3.5 percent to 1.809 MT.  Naturally one no longer sees stories of India taking the place of China in oil consumption growth in the media.

Rest of the World

OPEC production cuts, its implementation by member and non-member countries and its impact on price dominated the news this month. OPEC and 11 other leading oil producers including Russia agreed in December to cut their combined oil output by almost 1.8 million bpd in the first half of the year. A poll analysis said that OPEC will have to extend its oil output curbs in order to sustain a recovery in prices, as a revival in crude production outside the group may scupper its efforts to erode an overhang of unused inventory. OPEC is curbing its output by about 1.2 million bpd from January 1, the first cut in eight years. Russia and 10 other non-OPEC producers have agreed to jointly cut by an additional 600,000 bpd. Strong compliance by OPEC has helped the price of oil rally, but gains have been tempered by rising US shale oil production. Brent crude has averaged about $55/bbl this year but prices touched a three-month low on concerns over excess supply in the market following an increase in US output. OPEC compliance with output cuts remained high even though the group’s monthly report indicated a rise in global crude stocks and a production jump from Saudi Arabia, Goldman Sachs said. OPEC reported a rise in oil inventories and raised its forecast for production in 2017 from outside the group. Goldman Sachs said oil demand was set to overtake supply in the second quarter of this year and it was not in OPEC’s interest to extend the deal beyond six months as the group’s aim was to normalize inventories and not support prices. OPEC and its allies may prolong production cuts after they expire in June if the world’s crude inventories remain excessive, Saudi Arabia said. So far, Saudi Arabia has shouldered the bulk of OPEC cuts, trimming February output to 10.011 million bpd, which is below the ceiling imposed by the agreement. OPEC output in February was 1.39 million bpd lower than its reference level.

Saudi Arabia expects its crude oil supply to be stable at around 10 million bpd in the next few months, fully in line with the country’s OPEC quota and regardless of possible fluctuations in monthly production. Riyadh has stressed the importance of focusing on its supply rather than output as supply includes crude delivered to the market – domestically and for export – from the wellhead and from storage.  Iraqi Oil Minister said the market is a decisive factor in deciding whether to extend into the second half of this year a global agreement on reducing oil output. Any decision to extend OPEC production cuts past June would have to include the continued participation by the non-OPEC members of the November accord, OPEC Secretary General said.

Much to the disappointment of environmental activists in North America, the US President signed an executive order to advance the project, which will link Canadian oil sands to US refiners, soon after taking office in January, saying it would create thousands of jobs. TransCanada tried for more than five years to build the 1,897 km pipeline, until Obama rejected it in 2015. The company resubmitted its application for the project in January, after Trump signed the executive order smoothing its path. The multibillion-dollar pipeline would bring more than 800,000 bpd of heavy crude from Canada’s oil sands in Alberta into Nebraska, linking to an existing pipeline network feeding US refineries and ports along the Gulf of Mexico.

China’s Sinopec will pay almost $1 billion for a 75 percent stake in Chevron Corp’s South African assets and its subsidiary in Botswana to secure its first major refinery in Africa, the companies announced. Sinopec, Asia’s largest oil refiner, said the assets include a 100,000 bpd oil refinery in Cape Town, a lubricants plant in Durban as well as 820 petrol stations and other oil storage facilities. Chevron Global Energy Inc said that Sinopec’s bid was selected in part because of the better terms and conditions it offered, including a commitment to operate the businesses as going concerns and the opportunity to reap strategic value for its longer-term strategy in Africa. With a growing middle class, demand in South Africa for refined petroleum has increased by nearly 5 percent annually over the past five years, to a current total of about 27 MT, Sinopec said.

China’s stockpiling of crude oil appears to have increased in the first two months of the year, despite prevailing higher prices caused by OPEC and its allies curbing output. In the first two months of 2017 the total amount of crude available from net imports and domestic output was 96.72 MT, equivalent to about 11.97 million bpd.

MT: million tonnes, LPG: liquefied petroleum gas, NOC: Nepal Oil Corp, mmscmd: million metric standard cubic meter per day, bpd: barrels per day, mcm: million cubic meters, DSF: discovered small fields, bbl: barrel, BPL: below poverty line, R&D: research & development, ONGC: Oil and Natural Gas Corp, IOC: Indian Oil Corp, HPCL: Hindustan Petroleum Corp Ltd, OIL: Oil India Ltd, US: United States, UAE: United Arab Emirates, OPEC: Organization of the Petroleum Exporting Countries

Courtesy: Energy News Monitor | Volume XIII; Issue 43

 

DOMESTIC COAL PRICES: NOT READY TO BE FREE?

India

The Coal Ministry was reportedly opposed to NITI Aayog’s draft Energy Policy as the draft policy threatens to take away CIL’s monopoly on pricing. The draft National Energy Policy has recommended aligning domestic coal prices with international rates. While there is some truth in the observation that there is reluctance on the part of CIL to let go of control one must also keep in mind that power tariff is regulated which limits CIL’s ability to set prices.  The power sector consumes most of the coal produced by CIL and so if coal prices are de-regulated, power tariff must also be freed of all formal and informal controls.

Other news that was reported this week betrayed the lack of demand for coal. Not only was coal import declining, off-take of domestic coal too appeared to be below expectations. The onset of winter in the Northern part of the country may increase demand as people begin to turn on their heaters.

Coal beneficiation was also in the news which is a good sign. If the coal sector wants to remain competitive in a challenging environment the focus must shift from quantity to quality. Though India is ranked third in the world in coal production in terms of quantity it slips to fifth place in terms of quality. For every 1 tonne of coal mined in Australia, India has to mine 1.5 tonnes of coal to obtain the same energy content. India cannot afford to sustain this inefficiency.

Increase in domestic tax on coking coal was also reported widely this week. Apart from regular taxes, mining now involves the payment for DMF, payment of NMET, both as a percentage of royalty, and clean energy cess that has been increased to Rs 400 per tonne for FY17 in addition to auction commitments. Unless there is some change in tax policy Indian coking coal may lose out to competition from imports.  This is not necessarily in national interest.

Rest of the World

China reportedly imported 24.26 MT of coal in September, up more than a third from a year ago according to Reuters. The reason behind this is said to be government-enforced mine closures which forced coal users to turn towards imported coal. For the year to date, imports increased 15.2 percent to 180 MT. China’s coal import behaviour has traditionally been based on price arbitrage. In 2009, China, a traditional net exporter of coal, suddenly imported a record breaking 126 MT of coal which accounted for 15 percent of globally traded coal. As per a study, China’s sudden coal import behaviour did not represent a structural shift in the global market but rather a cost-minimisation strategy that would involve both buying and selling coal in the international market to take advantage of the arbitrage opportunities in the price of domestic and globally traded coal.

China’s coal imports also betrayed its geopolitical clout as it imported coal from North Korea ignoring western sanctions. China reportedly imported 2.465 MT of coal from North Korea in August, the highest on record, and 61 percent above what was bought in April, the month sanctions were supposed to take effect.  Coal from North Korea is anthracite, a high grade coal used in steel and other industries.  Mongolia has reportedly recorded a 50.1 percent increase in coal exports to China and Indonesia an increase of 18 percent.

FY: Financial Year, MT: Million Tonnes, CIL: Coal India Ltd, DMF: District Mineral Foundation, NMET: National Mineral Exploration Trust

Courtesy: Energy News Monitor | Volume XIII; Issue 20

CLEAN POWER: PUSHING SUBDUED DEMAND

Monthly Non-Fossil Fuels News Commentary: March 2017

India

The state led push on solar energy is obviously showing results. India’s solar power generation capacity has crossed 10 GW more than three-time jump in less than three years when NTPC commissioned a 45 MW solar power project at Bhadla in Jodhpur, Rajasthan. As much as 14 GW of solar projects are currently under development and about 6 GW is to be auctioned soon. In 2016, about 4 GW of solar capacity was added, the fastest pace till date. According to power ministry estimates, another 8.8 GW capacity is likely to be added in 2017, including about 1.1 GW of rooftop solar installations. Government is targeting 100 GW of solar and 60 GW of wind energy capacity by 2022.

The government’s decision last month to double solar park capacity to 40 GW in three years has opened up a new business opportunity worth up to $200 billion for power transmission companies. Adding new 50 ultra-mega solar parks to the 34 under construction in 21 states, will need to significantly widen the green energy corridor—the transmission network for the solar parks SECI said. The ongoing ₹ 130 billion green energy corridor-II project connecting the 34 parks under construction and new transmission projects will be identified keeping in mind the location of the new parks, SECI said. According to Power Grid Corp of India Ltd, which prepared the road map for the green energy corridor-II, not all the proposed new solar parks may come up at new locations and many could be in the solar and land resource rich states such as Madhya Pradesh, Rajasthan, Tamil Nadu and Gujarat, where such parks are already operating. Under the green energy corridor project-II, 32 transmission projects are being constructed.  If economics is any guide it is demand that justifies transmission lines and makes them viable but in this case it is supply that is pushing transmission expansion.  What is good for the government may not be good for the market.

Solar power generation costs are set to dip further during third and fourth quarter of FY17, helped by expected softening of interest rates and a drop in solar panel prices due to a supply glut in the international market. Solar power costs had hit a low of ₹ 3.30/kWh last month, which is equal to average generation tariffs of NTPC, which produces bulk of its power from coal. NTPC’s lowest cost of generation from one of its old plant is around ₹ 1.80/kWh, but on an average solar power prices are expected to become significantly lower than thermal power as solar generation prices fall further. In February, solar tariffs in the country touched a low of ₹ 2.97/kWh for the first year of generation and an average tariff of ₹ 3.30/kWh at a bidding for solar plants at Rewa in Madhya Pradesh.

After the success of the recent central government-sponsored auction of wind power capacity, Karnataka is said to be looking at open auctions for wind power. Wind power companies have always sold energy at rates fixed by the respective State electricity regulatory commissions, and these feed-in tariffs have ruled around ₹ 4.50/kWh.  Tamil Nadu, which has the largest wind capacity pays ₹ 4.16/kWh. However, in the country’s first tariff-based auctions, held last month, the market-determined tariffs slid to as low as ₹ 3.46/kWh.  Rajasthan is also said to be interested in competitive bidding for wind. The prospect of prices dropping as a consequence of competitive bidding was just what the wind turbine manufacturers feared, because the low tariffs would put pressure on the selling prices of their turbines.

Germany is expected to provide additional funding of €200 million to India’s energy efficiency programme, taking its total commitment to the green initiative to € 600 million. The total German commitment for better energy efficiency in India stands at €600 million (₹ 42 billion). EESL uses the funds to invest in energy efficiency measures in various sectors like domestic households, public buildings, street lighting, water supply and other public facilities, agriculture and industry. It is a follow up to the earlier programme ‘Energy Efficiency in Public Buildings and Infrastructure’ which has implemented the DELP resulting in an estimated 600,000 tons of CO2 emission reduction annually. Besides, a financing agreement of €500,000 (₹ 35 million) was signed with IREDA. IREDA will use these funds to assure the quality of solar PV projects and to mitigate the challenges faced in solar rooftop PV projects by establishing an implementation structure.

As much of the success of renewable energy reported above is being achieved at the expense of conventional power at a time when demand for power is subdued, conventional green power options such as hydro power which do not necessarily have the visible hand of the state helping them are suffering. Out of 44 HEPs under construction presently, 20 HEPs totalling 6,329 MW are reported to be stalled/stressed and an amount of about ₹ 300 billion has already been spent on these HEPs. The total hydro power generation in the country (from HEPs above 25 MW capacity) in FY17 is 113.53 BU. The government has sanctioned the proposal regarding basin-wise reassessment of hydro potential in the country. The work has since been taken up by the CEA through WAPCOS Ltd for completion in about 30 months period.

Adhering to its global commitment, India launched the country’s latest plan to phase out one of the key refrigerants, HCFC, under its ultimate goal to end use of ODS. Though the fresh plan is meant for the 2017-23 period, the final goal is to phase out consumption and manufacturing of the ozone-depleting refrigerant under an accelerated plan by 2030. HCFCs are currently used in various sectors including refrigeration, air-conditioning and foam manufacturing. Over 190 countries had in 1987 reached an agreement under Montreal Protocol to phase out the ODS in a time-bound manner. Under the Protocol, India has already successfully phased out the earlier generation of refrigerants, CFCs and Halon. The country is currently phasing out HCFCs in a gradual manner. A multilateral fund, set up under the Protocol, has approved $44.1 million for India’s HCFC management plan for the 2017-23 period. The money will be used to help industries to switch over to alternatives and train manpower. Domestic industries are, however, expected to invest in R&D to find clean alternatives.

The CEA has estimated that all coal-based thermal power plants need to brace for drastic fall in capacity utilisation to as low as 48 percent by 2022 as additional non-thermal electricity generation capacities come on stream. CEA has predicted that by 2022 many plants may get partial or no schedule of generation at all – meaning many thermal power plants may have to be kept idle for lack of demand.

Rest of the World

Dubai completed a solar plant big enough to power 50,000 homes as part of a plan to generate three-quarters of its energy from renewables by 2050. The 200 MW plant sprawls over 4.5 km2 of desert and includes some 2.3 million photovoltaic panels. It is the second phase of the Mohammed bin Rashid al-Maktoum Solar Park, which is scheduled to pump out a grand total of 1,000 MW by 2020, according to the Dubai Electricity and Water Authority. The solar park’s first phase came online in 2013, with 152,000 panels producing 13 MW.

The European Commission cleared a Belgian support scheme to compensate the operators of three nuclear reactors for potential financial risk, saying the measure was in line with EU state aid rules. Belgium had agreed with operators Engie and EDF that the companies would invest €1.3 billion in three ageing reactors to keep them running for another 10 years, in exchange for certain guarantees. The companies would receive compensation from Belgium if the state decided to close the reactors earlier or change the level of nuclear tax. The Commission said that while the two companies were given an economic advantage Belgium was able to prove that there would be no undue distortions of the country’s energy market. Engie will each year sell a volume equivalent to its share of the annual production at the three reactors concerned on regulated electricity markets, which the Commission said would increase competition.

Apple said it has partnered with component supplier Ibiden to power all of its manufacturing in Japan with 100 percent renewable energy. To meet the commitment, Ibiden will invest in more than 20 new renewable energy facilities, including one of the largest floating solar photovoltaic systems in the country. Ibiden’s products help bring together the integrated circuitry and chip packages in Apple devices. Their renewable energy projects will produce over 12 MW of solar power, more than the energy they need for Apple manufacturing and support Japan’s nationwide efforts to limit its carbon emissions. Apple and its suppliers will be generating over 2.5 billion kWh/year of clean energy for the manufacturing of Apple products by the end of 2018, equal to taking over 400,000 cars off the road for a year. Apple has taken significant steps to protect the environment by transitioning from fossil fuels to clean energy. Today, the company is powering 100 percent of its operations in 23 countries and more than 93 percent of its worldwide operations, with renewable energy.

The German spot power price for day-ahead delivery fell, weighed down by increased output from renewable wind and solar source, and a forecast decline in consumption. Electricity demand in Germany is seen falling by 1.4 GW day-on-day to 75.5 GW, according to data. Power output from wind turbines will jump by nearly 5 GW to 14.8 GW, while solar power production will increase by 1.3 GW to 3.6 GW during the same period, the data showed.

Thousands of coal truck drivers descended on South Africa’s capital Pretoria to protest against the country’s renewable energy program, after President Jacob Zuma expressed support for the sector. Zuma said state utility Eskom would sign new renewable energy contracts, angering coal transport workers who say such contracts will lead to 30,000 job losses in the coal industry. Coal is used to generate the lion’s share of South Africa’s power supply and job cuts are a particularly thorny issue in a country where the unemployment rate is almost 27 percent. Coal Transportation Forum said about 2,000 protesters marched to Zuma’s offices in Pretoria and handed over a list of demands. The utility said the trucks only supply a portion of its coal, most of which is transported to its power plants from mines through conveyer belts and by rail. Producers of solar and wind power have put pressure on Eskom to sign more new renewable energy contracts. Industry experts have said that Eskom slowed the pace of agreeing new renewable energy contracts after power supply in South Africa stabilized last year, following shortages in 2015 that led to power cuts across the country. Most of the World’s dirty dictators seem to be supporting clean power probably because it not only cleans up their image but also attracts western investment and reduces their chances of being targeted by the West. The question that must be answered is whether it is foreign policy or energy policy?

FY: Financial Year, MW: megawatt, GW: gigawatt, kWh: kilo watt hour, BU: billion unit, SECI: Solar Energy Corp of India, EESL: Energy Efficiency Services Ltd, DELP: domestic efficient LED lighting programme, HEPs: hydro-electric projects, IREDA: Indian Renewable Energy Development Agency, CEA: Central Electricity Authority, HCFC: Hydrochlorofluorocarbon, ODS: ozone-depleting substances, CFCs: Chlorofluorocarbons, R&D: research & development,   EU: European Union

Courtesy: Energy News Monitor | Volume XIII; Issue 42