By Felipe Calderón, Global Commission on the Economy and Climate
Over the next fifteen years, the world needs to invest more in new infrastructure and upgrades than everything that exists today. This means we have a crucial window of opportunity to build it right, reflecting the new international priorities of the Sustainable Development Goals and the Paris Climate Agreement.
If we continue on our current high-carbon economic model, the world will need to invest more than $90tn in infrastructure. But it won’t cost much more to build our energy, transport, water, and telecommunications systems in a low-carbon way. Making our infrastructure cleaner and more sustainable could add as little as 5 per cent to upfront costs, which could be fully offset by lower operating costs. It would also make our economy cleaner, more efficient, and more productive. Plus, it would reduce the enormous costs of adapting to climate change. Read more
FirstPower has a most perplexing problem for a Nigerian business: too much electricity. In a country with an enormous power deficit, where grid power is only available for a few hours each day, its 14 megawatt power plant in Ijora, an industrial hub in Lagos, has been ready since early 2015. It cannot be brought online because the local Distribution Company (Disco) – the regional government granted monopoly – has no incentive to “play ball”.
Despite the recent privatisation of Nigeria’s power sector, the electricity industry has not been deregulated. Rather, the old state distribution behemoth was carved into “Nigeria’s 11 primary Discos [which] are monopolies,” as the Nigeria Electricity Regulatory Commission (NERC) admits. As a result, competing private plants are routinely denied permission to distribute by the NERC. Read more
There can be no development of Africa, the world’s final frontier market, without access to modern, efficient energy. So how should we address the continent’s current power deficit, which leaves more than 600m people without electricity? Sub-Saharan Africa currently consumes less electricity than Spain. According to the Africa Progress Panel, based on current trends, it will not be until 2080 that every African has reliable access to electricity.
Nigeria presents a stark example. The Nigerian Bureau of Statistics recently almost doubled its estimate of the country’s 2013 GDP to 80.2tn naira ($500bn), meaning Nigeria has overtaken South Africa as the continent’s largest economy. It now ranks 24th in the world, yet its average annual per capita power consumption is only 130 kWh – 7 per cent of that in Brazil and 3 per cent of that in South Africa. Read more
Margrethe Vestager is one of the most influential women in Danish politics but it was her recent decisions as European Commissioner for Competition to take on both Google and Gazprom that turned her into a globally recognised figure.
The two cases are very different. Google’s dominance may be a fleeting one and its alleged ability to impose on its customers an inferior service – search algorithms favouring its own products – is limited by the availability of competing search engines. Gazprom, in contrast, fits better the textbook idea of a monopolist: switching to alternative energy sources is a considerably less trivial exercise than making Bing your new homepage. Read more
Twenty-one years after its genocide, Rwanda ranks 46th in the world for ease of doing business according to the World Bank, four spots below its former coloniser Belgium. This is flattering. And the rush with which international lenders financed its energy utility’s first solar public private partnership (PPP) demonstrates that this ranking is not empty academic musing. Yet, in the same manner in which Rwandans drew on their own internal reserves of strength and resilience to rebuild their nation, so too should they draw on their own reserves of capital to build the nation’s infrastructure. Read more
There are very few things on which economists overwhelmingly agree: free trade and apple pie are about it. But almost all of them will say that across-the-board subsidies for households and companies to lower the price of fuel are a terrible idea.
While advanced economies in general tax fossil fuels – or the carbon emissions that emanate from its use – emerging markets are still big users of subsidies and price caps. The IMF estimates that consumption of petroleum, electricity, natural gas and coal were subsidised by about 2 per cent of total government revenue in 2011 – and much more if compared to a hypothetical efficient tax system. Hydrocarbon exporters accounted for about two-thirds of the total. The subsidy of fossil fuels by oil producers and particularly within the Middle East and North Africa is extreme. Read more
A problem in a single electricity transmission line running between India and Bangladesh caused a nationwide blackout in Bangladesh on November 1. The outage lasted nearly 10 hours, making it the country’s worst incidence of power failure since a cyclone knocked out the national grid in 2007.
Insufficient energy production remains a major roadblock to Bangladeshi growth. Apart from such poorly maintained infrastructure, power generation is stifled by ancient land acquisition laws that impede mining and a severe shortage in the production of natural gas; coal and gas account for 70 per cent of energy generated in the country. Read more
By Melissa Stark, Accenture
A lot has been written about the shale gas and oil boom in the US and why that model cannot be replicated in other countries with plentiful potential resources. In fact, this does not have to be the case.
We have done extensive analysis on the potential for shale development outside of the US, from Western to Eastern Europe, across Asia Pacific, Latin America and even South Africa. The biggest advantage that countries like Argentina, Saudi Arabia and China have over the others is a strong, government-backed national oil company (NOC). Read more
While most Indians were celebrating the Diwali holiday last week, authorities in New Delhi slipped out an order that may bring an end to the state monopoly on coal mining.
Many analysts are now questioning, however, whether international mining groups will enter India if the government follows through on last week’s ordinance. And more to the point – even if they do, is this the answer to India’s acute energy shortage? Read more
By Timi Soleye of CRYO Gas
Seated on the dais at an investment conference in one of Lagos’s posher hotels are the luminaries of the Nigerian power sector: the minister of power, the head of the national electricity regulator, the chairman of the presidential task-force on power and chief executives of the newly privatised electricity generation companies and distribution companies. They are desperate for the money of the reluctant foreign private equity managers and local investors who mill about the room.
It is a tough call. On November 1 a year will have passed since the effective privatisation of electricity generation and distribution in Nigeria and it must now be acknowledged that the privatisation is on the brink of collapse. Yet this is a good thing for Nigerians and for future investors. Read more
By Amitabh Dubey of Trusted Sources
Elections this week in the states of Maharashtra and Haryana offered the first popular gauge of India’s reformist government since it won its big parliamentary majority in May, and underscored its dominance of Indian politics. But an equally important test has emerged in one of the country’s most troubled sectors, coal, after the Supreme Court’s mass cancellation of captive coal block allocations last month. How Prime Minister Narendra Modi handles the issue will be the first major test of his capacity for reform affecting a vital industry which finds itself in a dire situation. Read more
Argentina’s energy sector is a constant headache for the government – the fact that there are tankers charging hefty daily fees as they queue up offshore to unload liquefied natural gas because there is nowhere to store it is just the most recent example.
But YPF, Argentina’s biggest energy company, has been a beacon of light in the gloom, with the country’s energy deficit being the single biggest reason why it is running out of dollars.
YPF has notched up a string of achievements since the state took back a majority stake in 2012, most recently announcing on Wednesday a $170m deal with Ecuador’s Petroamazonas to optimise production in the mature Yuralpa oilfield. Read more
A long-running dispute between Croatia and Mol, the Hungarian oil and gas company, over control of Ina, Mol’s Croatian counterpart, has flared up again.
Zagreb is seething over a statement issued by Mol after talks on Friday which said the latest round of negotiations had achieved precisely nothing. The ministry told beyondbrics the Mol statement was “a lie” and threatened to publish a recording of the negotiations unless Mol withdraws it. Read more
Although the violence in Iraq has so far had a muted impact on global oil markets, if prices continue to rise there could be some nasty consequences in store for the more fragile of emerging market economies (see chart below).
And while a spike would hurt countries that rely on energy imports, it won’t necessarily translate into quick and easy economic gains for EM hydrocarbon exporters, say analysts. Read more
For Ghana, which is battling a massive fiscal crisis, the answer is football. The government has ordered one of the country’s biggest industries to reduce production to guarantee enough electricity for television coverage of the World Cup.
The West African country, which is expected to suffer a double-digit fiscal deficit in 2014 for the third year in a row, told the Volta Aluminium Company (Valco), to “reduce energy consumption during periods when Ghana would be playing”. Aluminium smelters are among the biggest consumers of power and, with limited supplies, the country was facing rolling blackouts during the next few weeks when millions of television sets will turn on simultaneously for the football matches. Read more
European advocates of shale gas – and they do exist – have been hoping that the Ukraine crisis might galvanise governments into dropping objections to controversial fracking. But despite a growing and belated recognition that Europe must do more to diversify its energy sources, in Bulgaria at least the unpopular shale movement is going backwards.
Last month, US energy giant Chevron quietly closed its Sofia office, three years after it was awarded a licence for shale exploration that was scrapped months later. The company did not publicise its withdrawal and it has gone largely unreported. But the move is indicative both of the political challenges that frackers still face and of Bulgaria’s frustratingly inconsistent treatment of energy investors. Read more
It’s not often a country’s president flies more than 1,000 miles to inaugurate a gas storage tank – more of a job for the local mayor, you might think. But that’s what Michelle Bachelet, Chile’s president, has just done: in a country as energetically-challenged as Chile, a new gas tank is a big deal.
This one, the biggest in Latin America, represents one more step in Chile’s efforts to solve its chronic energy shortfall once and for all. Read more
Is Pemex, the Mexican state oil company, close to dumping its 9 per cent stake in Spain’s Repsol petroleum company? It certainly looks like D-day is getting closer.
Here is what Mexico’s energy minister, Pedro Joaquín Coldwell, has to say on the subject:
“Selling the Repsol stake? Well, that’s a decision that is in the hands of the management and hasn’t been put before the board yet. But I have to say that the incentives for Pemex to remain in Repsol are very low.”
Pemex, Repsol’s third-largest shareholder, with a stake valued at just over $3bn, hinted last week that news could emerge this week – which certainly sounds like a sale is brewing. So far, though, nada official. Read more
By Rajeev Mantri, Navam Capital
Energy and clean technology investing has proven to be disastrous for venture capitalists. Capital allocated to clean tech fell to less than half in 2013 from the $3.7 billion invested in 2012, and new clean tech-focused funds were able to raise less than $1 billion last year, compared to $4.5 billion raised in 2012.
High-profile flameouts like Solyndra, A123 Systems, Konarka, Miasole, Better Place and Fisker Automotive have, appropriately enough, made investors very wary. Billions of dollars of equity has evaporated. Successes, such as Tesla Motors and Nest Labs, have been extremely rare. Read more
Energy-hungry importers across Asia complain about an “Asian premium” in gas prices. India and Japan are even mulling clubbing together to cut costs.
But could such moves stymie major investment plans to move new gas supplies from west to east? Canada worries that they just might. Read more