Draft Energy Policy: Several unanswered questions
The 2017 National Energy Policy (NEP), drafted by the NITI Aayog, takes the baton forward from the 2006 Integrated Energy Policy (IEP) in setting the trajectory of growth for the energy sector. The value proposition of the NEP is to present a broad framework for the overall energy sector, taking into account the multiple technology and fuel options. However, the NEP draft comes at a time when the energy sector is seeking clarity. In the face of claims of surplus power, even as rampant energy poverty continues to plague the country, the sector needs clear signals of the future pathways. This need has become particularly pronounced with the rapid decline in renewable energy tariffs, and an associated and projected scaling up of grid-connected clean energy. Highlighting the difference between the IEP and NEP, Piyush Goyal, Minister of Power, Coal, New and Renewable Energy and Mines, lauded the NEP for taking the sharp decline of crude oil prices, change in solar energy technology, heightened concern of climate change issues, and the government’s rural electrification agenda into account. However, apart from this, there is a stark difference in the broad approaches adopted by the erstwhile Planning Commission in framing the IEP and the NITI Aayog in framing the NEP. The IEP laid out a roadmap and provided a basket of specific measures to meet specific objectives. For instance, the section in the IEP on the advancement of renewable energy recommended the conversion of the Indian Renewable Energy Development Agency (IREDA) into a national refinancing institution on the lines of NABARD, specifically to advance clean energy. The NEP, however, contains a list of general courses of action for the government — identified objectives that could be considered for implementation. Going by the broad strokes of the NEP, credit is due to the NITI Aayog for recommending some revolutionary reforms, such as the opening up of the entire power sector value chain to private investment in order to create an efficient electricity market. However, it fails to provide an adequate framework for a number of issues that have arisen and intensified over the course of India’s ongoing energy transition, which is still in its nascent stage. On the renewable energy front, the NEP disappoints by failing to address the rampant uncertainties, specifically on issues around renewable purchase obligations (RPO) and renewable energy certificates (REC). The only half-hearted consolation on offer is targeted at the distribution companies (Discoms) which have been assured of government support for implementation of RPO and REC obligations. The RPO system has perhaps already served its purpose in nudging states with renewable energy potential to incorporate clean energy into their energy mix. As renewable power becomes more commercially viable, states could be left to decide how, when and what source of power to integrate into their system, as no clear measures are being adopted to provide the much-needed enforcement of the obligations. Policy uncertainty is further highlighted in the NEP’s focus on utilising coal powered thermal plants for securing the base load requirement to meet rising energy demand. The NEP’s reliance on thermal power fuels scepticism about India’s commitment to clean energy, and could distort investor confidence in the renewables sector. From both an air quality and a climate leadership perspective, it would not be ideal for India to stress on expanding its thermal power capacity to 441 GW in 2040 from 125 GW in 2012, as proposed in the NEP, without having adequate technology in place for improving the efficiency and reducing the emissions from these plants. The Ministry of Environment, Forests and Climate Change had come down hard on coal-fired thermal power producers in 2015, setting a December 2017 deadline for meeting revised norms on emissions. However, with developers being reluctant to absorb the high cost for retrofitting their projects to meet the new standards (around Rs 1 crore or $1.56 million per megawatt), the government is likely to push the deadline for compliance to December 2019. The NEP makes broad recommendations on how India should work towards developing and acquiring technology needed for the energy sector. However, it does not recommend consistent and strong policy and budgetary support for technology development. The NEP prescribes grid-based supply to all households to be India’s primary endeavour, with renewable energy implemented to address the access issue only in cases where grid power is unavailable. The NITI Aayog in this instance has used the term renewable energy interchangeably with decentralised renewable energy. A rationale for this position has not been indicated, even as the government continues to promote decentralised electrification programmes. Rather than promoting a particular means of electrification, the NEP could encourage context-specific electrification approaches, by considering economic viability, consumer demand and aspiration, affordability, as well as reliable provision of electricity. As India’s importance and role in the global energy markets continues to grow, it needs to be strategic in its energy planning. Josh Doctson Authentic Jersey
Loss of power supply from private companies won’t hit Gujarat, says state’s power utility chief
Gujarat will be able to withstand any loss of generation from the three stressed electricity plants of Tata Power, Adani Power and Essar Power that run on imported coal, the managing director of the state’s power utility said. The state has a diversified generation portfolio with a balanced fuel mix, Pankaj Joshi of Gujarat Urja Vikas Nigam Ltd (GUVNL) told ET in an interview. “Non- or less availability of generation from a particular fuel may have a marginal impact. However, there is no threat to the financial position of distribution utilities,” he said. GUVNL, the umbrella company managing electricity supply in Gujarat, is exploring blending of domestically produced coal with that imported from cheaper sources and increased purchase of the fuel from the spot market to insulate consumers from fluctuations in international coal prices, he said. In June, Tata Power, Adani Power and Essar Power each offered a 51 per cent stake in their Gujarat plants that use imported coal for Rs 1. These plants are under financial stress as they are unable to increase electricity prices to offset higher cost on imported coal. The reason for the higher cost on the fuel is changes in laws in supplier countries. The Supreme Court in April ruled that increase in coal prices due to such a reason cannot be cited for changing the terms of power purchase agreements. While SBI is drawing up various options, GUVNL is in the process of completing its due diligence. “State has received the proposal from generators offering stakes. State has yet not done detailed technical, financial and legal due diligence. Further, other states are also involved in the matter and their view also needs to be taken into consideration,” Joshi said. “Once it is done, it may enable the state government to take a suitable view in the matter.” Tata Power operates the 4,000 mw Mundra ultra mega power project that has power supply pacts with five states. Adani Power’s board has already approved hiving off its 4,620 mw Mundra plant and is exploring offering a majority stake in the resultant subsidiary to GUVNL that buys 2,000 mw from the project. Essar Power offered its 1,320 mw Salaya plant to Gujarat after the adverse ruling from the court. Tata Power has said lenders to Mundra project have suggested selling a stake to power procurers from the plant. He said Gujarat has adequate power capacity tie-ups on a long-term basis. “It is making constant efforts towards cost optimisation and may pursue purchase under long, medium and short term to optimise the cost,” Joshi said. D.J. Fluker Authentic Jersey
Ramp up capacity to achieve 100GW solar target by 2022: Study
India will need to add over 15,000 MW solar capacity every year to achieve the target of 1,00,000 MW by 2022, a study has said. The country’s installed solar capacity fell short of target of 17,000 MW by the end of the financial year 2016-17, according to the joint study undertaken by NEC Technologies and industry body Assocham. “The country will need to significantly ramp up the pace of solar capacity additions by 10,000 MW this fiscal and over 15,000 MW per year to meet the 2022 target of 1,00,000 MW (100GW), which the government set up in 2014,” it said. The biggest technological issue in terms of solar is the efficiency of solar cells, the study said. “Currently, the efficiency ranges from 12-20 per cent, though this continues to improve. The rest of the energy striking the panel is either reflected or is wasted as heat. The main issue with efficiency is that higher efficiency solar panels cannot be commercially mass produced,” it said. To achieve the 1,00,000 GW target by 2022, the focus has slightly shifted from indigenous manufacturing as policies to curb the imports from other countries are not benefiting the domestic manufacturing. Furthermore, the increase in taxes in the GST structure in solar from zero per cent to 5 per cent, coupled with reduced taxes in coal from 11.69 per cent to 5 per cent, may lead to slow adoption of solar in the Indian energy sector, the study said. Lack of uniform policies across sectors and implementation issues is also an area of concern, it said. “In India subsidy structure is complex and there are involvement of multiple agencies. Land allotment is a long procedure in India, which requires approvals at different levels from authorities.” Currently, the foreign investment in Indian solar industry is less than 20 per cent, the report said. Even 100 per cent FDI under automatic route and 74 per cent through foreign equity participation in a joint venture (without approval) have not paved the way for significant foreign investments in this sector, it added. Herman Edwards Womens Jersey
Rooftop solar target of 40 GW by 2022 ‘unrealistic’: Parliament panel
A Parliamentary panel today said the rooftop solar target of 40 GW by 2022 is “unrealistic” and it needs to be “reconsidered”. “The Committee feels that the rooftop solar target of 40 GW by 2022 is unrealistic and it is highly unlikely that this target will be achieved,” the Standing Committee on Energy (2016-17) of the Ministry of New and Renewable Energy said in its latest report tabled in Parliament today. The panel further said the Centre should give the scheme a “serious relook”, else, it will derail the target achievement of the National Solar Mission. “The Committee, therefore, recommends that the target of 40 GW through rooftop solar projects should be reconsidered,” the report said. The panel was of the view that rooftop systems were not remunerative for the consumers on account of cost of maintenance being high, the report said. “The Committee noted that out of the 100 GW solar power, 40 GW is to be achieved from grid connected solar rooftops in residential, social, institutional and government sectors in the country,” it said. The government had earlier announced raising the solar power generation capacity addition target by five times to 1,00,000 MW by 2022, which will entail an investment of around Rs 6 lakh crore. Damian Jones Jersey
Polish power demand hits summer record as heatwave persists -operator
Polish electricity demand set a record for a summer morning at 23.82 gigawatts (GW) on Tuesday, the grid operator PSE said adding there is no threat to the system despite the increased use of air conditioning as high temperatures persist. The previous record for a summer morning (GW) was 22.88 gigawatts on June 28 2017. “We are carefully watching the system, but there is no threat and as of today the system is balanced,” PSE spokesman said. Poland, which generates electricity mostly from outdated coal-fuelled power stations, faces the risk of power shortages when temperatures reach extreme levels as increased demand overloads the system. Weather forecasters said some areas of Poland face temperatures of over 30 Celsius (86 Fahrenheit) degrees this week. Also, Poland’s two biggest power plants were closed last month for planned maintenance. Polish energy ministry said in June the electricity network would be able to handle a heatwave this summer, after a European power network lobby group ENTSO-E warned that prolonged heatwaves may cause problems for Poland’s and Italy’s electricity networks. Pierre-Edouard Bellemare Womens Jersey
OPINION: Open up LPG market to private enterprise
It is welcome the Centre has asked oil companies to raise domestic LPG (cooking gas) prices by Rs4 per cylinder every month until the entire subsidy of about Rs87 per cylinder is wiped out. Following the implementation of direct benefits transfer for LPG to below poverty line (BPL) households, it makes no sense to provide such consumption subsidies for the non-poor. We do need to better allocate resources, for much-needed social and physical infrastructure. Note that the amount involved in providing subsidies on household fuels is huge and rising, about Rs30,000 crore per annum. Subsidised kerosene, a sooty pre-modern fuel and a poor source of light, needs to be promptly replaced with aids like solar lanterns. It should hugely improve public health. We also need to revamp market design for domestic LPG, complete with norms for sharing bulky infrastructure for supply and storage. What’s required is proactive policy to have parallel marketing of LPG, instead of simply mandating the trio of public sector oil companies to monopolise and corner the market. The efficiency gains from a more competitive LPG market would be very significant indeed. It would boost entrepreneurship, step up supply and is actually likely to reduce costs and prices going forward, transparently. Piped supply of gas in towns would be cheaper than distribution via cylinders. Composite cylinders would lower costs, as compared to steel ones. The government had earlier asked the LPG retailers to revise prices by Rs2 per month, to gradually remove the subsidy involved. The move now is to fast-track the price revision, so as to better allocate scarce resources. The upfront subsidy distorts the market, breeds corruption and comes in the way of efficiency improvement. Jordan Reed Authentic Jersey
GAIL under CCI scanner for breaching competition norms
The Competition Commission is investigating at least seven cases of alleged abuse of dominance by GAIL in dealing with its customers, the outcome of which could potentially redraw the rules of the gas marketing business in India. The Commission has clubbed for investigation two cases from this year and five from the previous year in which customers – Rathi Steel, Mohan Meakin, Rico Auto, Omax Autos and Rico Castings -have alleged GAIL abused its dominant position by incorporating unfair terms and condition in the Gas Sale Agreement (GSA) and imposing take-or-pay (ToP) liability. ToP requires customers to pay for 90% of the contracted volume even if it lifts less in a year although the unlifted amount can be taken later. GAIL has denied allegations by customers. “GAIL reiterates that obligation of contract termination and other contractual terms under the GSA reflect the obligation entered into by GAIL under its upstream contracts. Therefore, it is not correct to allege that GAIL has imposed arbitrary/unfair terms & conditions and/or abused dominant position,” GAIL said in an emailed response to ET. The investigation would examine almost every aspect of GAIL’s procurement, price determination, the way company imposed take-or-pay liability on all customers in 2015, and how it commits ToP liability to its upstream customers. The complainants have alleged that many of the provisions related to the quality of gas or the purchase terms favour GAIL more than customers. The most important dispute is linked to the imposition of the take-or-pay liabilities on customers for the year 2015, when changes in the global market had made long-term gas more expensive than spot, encouraging more consumers to switch to spot where possible. “The conduct of Opposite Party (GAIL) in implementing such Take or Pay liability from the year 2015 appears to be a modus to ensure de facto exclusivity of the contractual arrangement. This, besides prohibiting the buyers from shifting to alternatives or terminating the GSA in the event of closure of their business, also appears to create entry barriers for alternative suppliers to enter the market or build up a viable customer base,” the Commission has said in its order in the case filed by Rathi Steel. “While imposition of ToP liability as per contractual terms cannot per se be regarded as abuse of dominant position, the same being imposed in an exploitative manner without justification or to ensure de facto exclusivity thereby hurdling potential entries or expansion of competitors warrants investigation under the provisions of the Act prohibiting abuse of dominant position,” the commission said. It would make sense to have norms to separate cross-country gas supply from distribution. We need to overhaul market design in natural gas. To have a system of competitive prices, we require gas hubs to better match demand with supply. And pending a more extensive pipeline network, what’s required is forward-looking price regulation to incentivise supply in a scenario of huge, unmet gas demand. The downstream oil and gas regulator needs to be suitably empowered. Delon Wright Womens Jersey
India refiners outshine Asia peers with new output, rising local demand
Indian refiners are outperforming their competitors in South Korea and Thailand as they have ramped up output from new fuel and chemical capacities to meet rising domestic demand that could further lift their earnings over the next two years. Asia is adding net refining capacity of 360,000 barrels per day (bpd) this year, according to Wood Mackenzie, with units coming online in China and Vietnam that could keep most of Asia well-supplied and weigh on refining margins for export-oriented refiners in South Korea and Thailand. India, though, where refiners have already ramped up capacity that has come online, will likely be shielded from the pressure on margins by strong local demand, analysts said. “Indian refiners are a bright spot in Asia because of rising fuel demand,” Hindustan Petroleum Corp Ltd’s Chairman M K Surana told Reuters. Surana expects Indian demand growth of about 5 percent a year up to 2030 as a rising population and increasing affluence drive up oil use in the world’s third-largest crude importer. Indian oil minister Dharmendra Pradhan on Monday indicated a slower growth pace, but still said the country would consume 226 million tonnes (4.95 million bpd) of refined products in fiscal year 2021/22, up from 205 million tonnes in 2017-2018. “We expect India to lead global oil demand growth, contributing to one-third of the growth expected in 2017-2030,” Goldman Sachs analysts told clients last week. Indian refiners Bharat Petroleum Corp Ltd, HPCL and Reliance Industries could see their shares rising, with gains between 11 percent for Reliance and 25 percent for BPCL over the next year, the analysts said. Among the refiners that have recently added capacity are BPCL, which is ramping up output after an expansion at its Kochi refinery, and Indian Oil Corp, which is planning to run its Paradip refinery at full capacity this year. Indian oil refiners are being undervalued, the Goldman Sachs analysts said. “Multiple re-rating could continue as investors give more credit for diminishing regulatory headwinds and sustainable earnings growth,” the analysts said. Regulatory changes in India that allow refiners to charge market rates for fuels, they said, have also improved the profitability at domestic refiners. Analysts at Japanese investment bank Nomura said in July that their top investment recommendations for Asian refineries were IOC, BPCL and HPCL, “owing to refinery volume increase, deregulated petrol and diesel prices, and undemanding valuations.” In contrast, Goldman said added capacities across Asia could dampen gross refining margins. The bank expects Singapore complex refining margins to drop to $7.70 and $7.30 in 2018 and 2019, respectively, from $8 this year. That means valuations for Asian refiners are stretched, it said, and recommended investors sell SK Innovation, owner of South Korea’s largest refiner, S-Oil Corp, and Thailand’s Thai Oil PCL and IRPC PCL. With low oil prices helping to drive India’s demand, though, and capacity additions slowing, its market is likely to remain snug, said Tushar Tarun Bansal, director at consultancy Ivy Global Energy. “Only a few secondary units are expected to come onstream in the next five years,” he said, while India’s strong economic growth will continue to drive rising oil demand going forward. Jamal Adams Authentic Jersey
India’s LPG imports likely to rise 10% in fiscal 2017-18: traders
India’s LPG imports are expected to rebound from July onwards and is on track for a 10% annual increase in the current fiscal 2017-2018 (April-March), after plunging to the lowest in two years in June, trade sources from four oil and gas companies in India said recently. India, which is competing with China and Japan to be the world’s largest importer of LPG, imported 597,000 mt in June, down about 25% year on year, the lowest since June 2015, data from India’s Petroleum Planning and Analysis Cell, showed. “India’s domestic LPG production is not rising at the same pace as consumption; hence, imports will go up by at least 10% this fiscal,” one of the trade sources said. The other trade sources agreed with his projection. Domestic LPG production in April-June 2017 increased 0.2 million from April-June 2016, but domestic consumption over the same period rose 0.5 million mt, data published by PPAC showed. Half of India’s LPG demand last year was met by imports, S&P Global Platts data showed. The June LPG imports were 20% less than the imports of 748,000 mt in May, as domestic production rose 10% from June last year to 1 million mt this June, PPAC data showed. Traders also attributed the dip in June to healthy imports in the months before, which led to congestion at the ports. Indian buyers looked to first dispose of their cargoes, due to the backlog of ships waiting to discharge at Indian ports, before taking in fresh imports. “The ships standing in Indian ports for more than 15-20 days did not make economic sense”, an Indian oil company source said. India is one of the biggest buyers of butane in Asia. The lower imports in June has led to a narrowing of the propane-butane in April when June cargoes were traded. The propane-butane spread narrowed to minus $3/mt on April 26, the narrowest in eight months due to little demand for butane. The spread was last narrower on August 1, 2016, when it was at parity, Platts data showed. The propane-butane spread widened again to minus $26/mt on June 28, as buyers sought bargains for butane. The recovering butane market had also prompted Saudi Aramco to set its latest contract prices for August with a wider propane-butane spread at minus $40/mt, as Indian buyers emerged before the market recovered further at the onset of the North Asian winter in Q4. “[The] spread was quite low in June, so many people bought butane,” a South Korean trader said. The spot price of FOB Arabian Gulf butane came off from this year’s peak of $611/mt on February 2 to $351/mt on June 23, the lowest in nine months. The price for CFR Japan butane plunged from this year’s high of $643/mt on February 2 to $374.5/mt on June 23, the lowest since September 29 last year. The FOB Arabian Gulf and CFR Japan butane prices have since increased to $466/mt and $487/mt respectively, on Monday. India’s imports of LPG, which is mainly used for cooking, rose by 23% year on year in fiscal 2016-2017 to about 11 million mt, the PPAC data showed. The propane-butane-mix in India’s LPG consumption is now about even, compared to 60% butane and 40% propane in earlier. In April 2017, India overtook Japan as the world’s second-largest importer of LPG, as Prime Minister Narendra Modi pledged in May last year to provide cooking-gas cylinders to every household. The Prime Minister’s ambitious scheme, Pradhan Mantri Ujjwala Yojana, led to a record 31.6 million new cooking-gas connections during fiscal 2015-2016, Indian oil minister Dharmendra Pradhan said. Total LPG consumption in India has increased for 46 months in a row, with a 15.9% rise in June from May, the PPAC data showed. Guy Lafleur Jersey
Pakistan interim PM-designate faces NAB inquiry over LNG contract
The Pakistan Muslim League-Nawaz (PML-N) nominee for the post of interim Prime Minister, Shahid Khaqan Abbasi, is facing a Rs 220 billion corruption inquiry by the National Accountability Bureau (NAB) over a liquefied natural gas (LNG) import contract. Abbasi, the former Petroleum Minister, is a principal accused in a NAB case registered in 2015, Dawn newspaper reported. The other suspects in the case are former Petroleum Secretary Abid Saeed, Inter State Gas Systems (ISGS) Managing Director Mobin Saulut, private firm Engro’s Chief Executive officer Emranul Haq and the Sui Southern Gas Company’s (SSGC) ex-MD Zuhair Ahmed Siddiqui. According to NAB documents, the contract for the LNG import and distribution was awarded to the Elengy Terminal, a subsidiary of Engro, in 2013 in violation of the Public Procurement Regulatory Authority (PPRA) rules and relevant laws. The case was registered on the complaint of Shahid Sattar, an energy expert and former member of the Planning Commission and the SSGC board of directors. It is still under an investigation contrary to NAB Chairman Qamar Zaman Chaudhry’s claim that he had introduced a new strategy under which the process of complaint verification, inquiry, investigation and filing of reference took 10 months, said the newspaper. Sattar had accused Abbasi of misusing his authority and causing a potential $2 billion loss to the national exchequer in 15 years. The NAB documents said that it had been recommended that the names of all accused in the case, including Abbasi, should be placed on the Exit Control List. After the removal of Nawaz Sharif by the apex court in the Panama Papers corruption case, the PML-N has nominated Abbasi as its candidate for the Prime Minister’s post for an interim period before Punjab Chief Minister Shahbaz Sharif replaces him for the remaining 10 months of the government’s term. The election of the new Prime Minister will be held on Tuesday and Abbasi is set to be elected in view of his party’s comprehensive majority in the National Assembly, said the report. Talking to reporters on Sunday, Abbasi said he was not afraid of any reference, adding that those levelling allegations against him should search their own souls and be ashamed of their deeds. “Not only one case but get registered 10 references against me,” he said in reply to a question about Awami Muslim League chief Sheikh Rashid Ahmed’s decision to approach the Supreme Court against him regarding the NAB proceedings. Jordan Bell Womens Jersey