Green panel defers decision on Posco's Orissa steel project

The decision on the Rs 54,000-crore Posco project in Orissa has been delayed further with the Expert Appraisal Committee (EAC) of the Union Ministry of Environment and Forests (MoEF) seeking additional information on the impact of the company’s proposed captive port at Jatadhari Muhan in Jagatsinghpur district.

The next meeting of the EAC is likely to be held in January 2011.

"Today, there were discussions on some technical points of the Posco project. The expert panel of the MoEF is meticulously scrutinizing the comprehensive EIA submitted by Posco. The committee has also sought additional information on the proposed port project, including the technology to be used and the impact of the port on the environment,” an official source told Business Standard.

"The panel wants to assess the combined impact of Posco India’s steel plant, captive port project and township project on the environment. Posco India has clarified that its steel plant and township does not fall under the CRZ area,” he added.

MoEF had issued an environment and Coastal Regulatory Zone (CRZ) clearance for the captive port project in May 2007.

During the previous EAC meeting on November 22, the Orissa government reiterated its stand on issues related to environment and CRZ clearance for the project.

An earlier inquiry report into the matter had concluded, by majority view, that there were serious lapses and illegalities in the environmental impact study

Gas output from RIL's K-G Basin fields drops 15%

Reliance Industries’ prolific D1 and D3 gas fields off the east coast have seen a 15 per cent drop in production to about 45-46 million standard cubic meters per day (mscmd) because of reservoir complexities.

The Dhirubhai-1 and 3 fields, known as D1 and D3, in the Krishna-Godavari basin have seen output fall from 53-54 mscmd achieved in mid-2010 to 45-46 mscmd, sources privy to the development said.

D1 and D3 are the largest among the 20 oil and gas finds that Reliance and its Canadian partner, Niko Resources, have made in the Krishna-Godavari basin KG-DWN-98/3 or KG-D6 block off the Andhra coast.

“The reservoir is a complex reservoir and has not behaved as previously modelled,” a source said.

Besides D1 and D3, D-26 or MA oilfield in the same block, is producing about 8 mmscmd as associated gas. Together, the output from KG-D6 currently stands at around 54 mscmd.

Reliance has been forced to restrict production from the MA field to under 20,000 barrels per day (bpd) due to high water and gas output, sources said, adding the field was yielding more water than oil and even 8 mscmd of gas in comparison to 20,000 bpd of oil was considered quite high.

A company spokesperson did not immediately revert to calls made for comments.

KG-D6 block, had earlier this year, hit a peak of 60 mscmd after which the output has fallen, sources said.

Adding, Reliance will have to drill more wells to boost output to the approved peak of 80 mscmd. Currently, 18 wells on 

D1 and D3 have been completed and hooked to production system but only 17 are producing.

The company is not drilling any production well at the moment as it is concentrating on completing the mandatory appraisal of other discoveries it has made in the block.

In the absence of drilling appraisal wells to delineate the discovery in a prescribed timeframe, Reliance would lose that area of the block.

The company is currently selling 14.5 mmscmd of gas produced from KG-D6 to fertiliser plants, 26.5 mmscmd to power plants and remaining 13 mmscmd to other sectors like sponge iron plants, LPG, city gas distribution, petrochemical plants and refineries.

Reliance had previously stated that it is carrying out further optimisation exercises at the MA oilfield in view of increasing water production levels.

The field has five oil producing wells and one gas injection-cum-gas producer well

BHEL looks for minority partner in JV with SAIL

 Bharat Heavy Electricals Ltd, the state-run power equipment maker, may offer a minority equity stake to a third technology partner in its proposed joint venture with Steel Authority of India Ltd (SAIL) to manufacture high-grade steel.

“We are in discussions with SAIL for setting up the plant. We estimate this will take five-six months to finalise. We are also looking for a third technology partner,” BHEL chairman and managing director, B P Rao, told Business Standard.

When asked if the third partner would have any stake in the venture or it would be just a tie-up for technology, he said, “We will offer a minority stake… BHEL and SAIL might have equal stake in the venture.” He, however, refused to give any detail.

The high-grade steel used to make power equipment is currently imported. BHEL's move is aimed at securing domestic supplies of essential raw material like CRGO steel, alloy steels, castings and forgings, among others.

Its order book is Rs 1,44,000 crore and it has the capacity to manufacture power equipment with a cumulative generation capacity of 15,000 Mw per annum, to be increased to 20,000 Mw by the end of 2010-11. It also plans to increase investment on its research and development to Rs 1,200 crore by 2011-12, from Rs 829 crore in 2009-10

To diversify into other segments, the company has also appointed Crisil as the consultant for working out modalities to float a non-banking finance company (NBFC). The consultant will undertake a feasibility study on the proposed foray and give a report in the next two to three months, Rao said. The NBFC would be the company’s investment arm for financing of power projects. BHEL will have a minority stake in the proposed NBFC and get other strategic investors on board, is the idea.

Tata Power to Shun India's Solar Auction as Projects Maybe Unprofitable

ion on concerns that terms set by the government will make it difficult for projects to be built profitably.

“We haven’t bid for the National Solar Mission,” Banmali Agrawala, executive director of strategy and business development, said in an interview in Mumbai on the plan to generate 20,000 megawatts of power from the sun by 2022.

The decision by Tata Power, the generating unit of India’s biggest industrial group, not to take part in the first bids highlights concern that the plan is failing to draw companies with the skills and resources to jumpstart the program.

That could delay the development of India’s solar industry, which potential investors including the World Bank and atomic reactor maker Areva SA see as one of the world’s most promising. India gets about 300 sunny days a year in most of the country.

“These are bad signs,” said Ashish Sethia, lead analyst at Bloomberg New Energy Finance in New Delhi. “Many large players have either not bid very aggressively or stayed away from bidding.”

European governments including Spain, Germany and France are curbing solar subsidies that set off a boom of investment and spiraling state renewable-energy costs. India is seeking to avoid such problems in part by awarding capacity to developers offering the deepest discounts to the rate at which they’ll sell their electricity.

‘Piece of Cake?’

That could backfire should developers submit bids underestimating the cost and complexity of setting up solar plants, Agrawala said.

Some of the bids may be “a little aggressive,” Agrawala said. “We do hope that the people who are bidding those numbers understand what it means to set up a solar project. It’s not a piece of cake.”

The government set an initial selling price of 17.91 rupees (39 U.S. cents) a kilowatt-hour for solar photovoltaic projects and 15.31 rupees for solar thermal projects. Bids have been submitted offering discounts of as much as 4 rupees to those rates, he said.

“There is definitely a risk that a number of projects might either be delayed and some even be shunned completely at later dates” as developers find themselves unable to execute at quoted rates, New Energy Finance’s Sethia said.

State Alternatives

India’s wealth of sunny days provides 5,000 trillion kilowatt-hours per year of solar energy equivalent, according to the Ministry of New and Renewable Energy. In comparison, India’s projected total energy consumption this year is a fraction of that, 848 billion kilowatt-hours, a ministry report showed.

The country’s Solar Mission initiative seeks to draw investment to the sector by offering incentives including special tariffs and a power-bundling arrangement designed to assure projects of a buyer for their electricity. It has also set restrictions, including limits on solar equipment imports and a 5-megawatt limit on any one developer.

“To restrict the size to just 5 megawatts per business group we felt was too small,” Agrawala said. “Also, you’re not allowed to import equipment. As an owner, I’d like to discover what is the least possible price in the global markets.”

Tata Power determined it would have trouble raising loans from banks under the program because it wasn’t clear whether the designated power buyer, a unit of state-run utility NTPC Ltd., has the financial backing to ensure developers are paid for what they generate, Agrawala said.

Mumbai-based Tata Power is setting up a 25-megawatt solar plant in western Gujarat under a separate state program, Agrawala said. It expects to sign a power purchase agreement with Gujarat state this month and commission the plant by the end of 2011, he said.

“Serious players are still exploring other state-based mechanisms and the success of the sector will also be dependent on the success of those schemes,” Sethia said.

Asian Development Bank boosts support for clean energy development

The Asian Development Bank (ADB) said Monday it would infuse 40 million dollars into two private equity funds that target promising green companies and projects in the region.

The Manila-based bank said its Board of Directors approved equity investments of 20 million dollars each in the Clean Resources Asia Growth Fund and the Renewable Energy Asia Fund.

The Clean Resources Asia Growth Fund, sponsored by Asian brokerage firm CLSA Capital Partners, aims to invest in companies engaged in clean energy-related operations.

The target fund size is 200 million dollars, mainly focused on China and India, the bank said.

The Renewable Energy Asia Fund, managed by Britain's Berkeley Energy, seeks out renewable energy projects in India, the Philippines and other South-East Asian countries.

The fund, which expects to make investments ranging from 5 million euros (6.6 million dollars) to 25 million euros, has a target size of 150 million euros, the bank said.

"ADB's participation in these funds will help them achieve their target fund size and provide confidence to private investors to come on board," said M Shin Kim, head of private equity in the bank's Private Sector Operations Department.

"It will also aid capital markets development by filling a financing gap and encourage support for other private equity funds interested in the sector," he added.

The bank noted that Asia's booming economies and surging demand for clean energy were making the region one of the most attractive destinations in the world for environmentally friendly investments.
It cited China, India and the Philippines as among the most promising economies.

How important is the COP16 climate summit for the smart energy industry?

The COP16 climate change summit in Cancun is unlikely to bring any festive cheer to smart energy technology vendors. However, the expected lack of outcome in terms of a binding international agreement will do little to affect the movements of individual governments in setting energy-efficiency policies that will drive the adoption of smart technology.

As the US lurches to the right politically, climate change will become virtually unmentionable in federal energy policy, but in a highly fragmented market, state regulators and governments will hold the key to the adoption of smart technology. It is here that policies will be set to drive the US toward a smarter world, irrespective of the Republican resistance to climate change-driven policies.

Cancun will not deliver a globally binding commitment to climate change

There is near-unanimous consensus that the Cancun summit will not deliver a globally binding agreement on a new, credible, and meaningful climate change framework. It will certainly offer nations the opportunity to discuss a replacement to Kyoto under a far less intense media spotlight than that shone upon world leaders in Copenhagen, but the best we can hope for is the laying of a more solid foundation for future summits. As delegates arrive in Mexico, it is timely to question whether COP16 matters to the smart energy technology industry and whether a failure to deliver any binding agreement on climate change will affect the future of the industry.

Divergent political will and obstinate politicians are of course the major stumbling block for any ground-breaking consensus in Cancun. However, a failure to meet agreement at the most basic level will have little impact on investments in smart energy technology. Governments the world over are adopting their own energy-efficiency policies, irrespective of the outcome of COP16 and any subsequent conferences. While the drivers for adoption of smart energy technologies might differ, the net result is positive and should give optimism to observers that are hoping for the success of the Cancun talks.

Central governments will continue to drive smart technology adoption in Western Europe and across Asia

The EU has led the global charge to reduce greenhouse gas emissions, but across Western Europe the attitude to renewable energy is by no means homogeneous. Residential smart metering penetration is mandated to reach 80% by 2020, and transmission and distribution companies across the continent are investing in upgrading networks using smart technology. In addition, a commitment to renewable energy, particularly on the Iberian Peninsula and in Denmark, has seen wind generation gain significant penetration.

In Asia, China, which is now the world's largest emitter of greenhouse gases, is also pressing forward with a renewable energy policy that will see heavy investment in solar power. China is also providing subsidies for cleantech companies. It is subsidizing manufacturers of solar film, wind turbines, and electric vehicles, and is offering subsidies to consumers to purchase electric cars. Other Asia Pacific countries are also forging ahead, with Australia, New Zealand, Singapore, South Korea, and Taiwan already having smart meter strategies in place.

As the US lurches to the right, smart energy technology adoption will be driven by individual states

The US is a hotbed of cleantech innovation, but US-based vendors are finding non-domestic markets far more accessible. California-based smart meter vendor Echelon has only a small proportion of its installed base in its home market, and its US competitors Itron and General Electric are also looking overseas for growth. Likewise, smart grid specialist Current has a couple of contracts in Colorado and Texas, but has many more in Europe.

While the US market has benefited from a healthy environment for cleantech equity investments, as well as government-sponsored American Recovery and Reinvestment Act funding and company-specific subsidies, the federal government is fundamentally unable to pass any legislation to drive energy efficiency. With a new Republican majority in the House of Representatives, the country is politically lurching to the right, cementing an ingrained ideological opposition to renewable energy. The American right is increasingly outspoken about its skepticism of the notion that burning fossil fuel has had an impact on climate change, which does not bode well for any summit designed to tackle the issue.

In addition, the US suffers from a highly fragmented energy market, in which even the largest utilities are dwarfed by their European counterparts. Significant investment in smart technology is being earmarked by some US utilities, but many lack the balance sheets to fund these investments, and regulators and end users are becoming increasingly skeptical of the benefits of going "smart."

However, the aging infrastructure that underpins the US electricity grid is creaking under the pressure of modern-day energy demands, and requires new investment. A federal push for energy efficiency is unlikely anytime soon, which virtually kills off the prospect of success at any COP summit. The Republican right must first embrace smart energy technology as a way of solving long-term energy security, which will then allow it to dodge its skepticism about climate change.

However, individual states are far more receptive. California, traditionally governed by a Republican, is heading toward state-wide deployment of smart meters to combat capacity constraints. While the easy dollars will be earned in Europe and Asia Pacific, US investment in smart energy technology will happen regardless of federal government or what happens in Cancun. It will just be a little patchy.