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.

ONGC's cost of oil production double of OIL's expense in 2009-10

 The average cost incurred by Oil and Natural Gas Corporation (ONGC) on production of crude oil in Assam in 2009-10 was $52.51 per barrel, almost double of what sister PSU explorer Oil India Ltd spent on crude production in the state, Parliament was informed. 

ONGC produced 1.191 mn tonnes of crude from its fields in Assam in 2009-10, incurring a cost of $ 52.51 on the production of every barrel of oil, Minister of State for Petroleum and Natural Gas Jitin Prasada told the Rajya Sabha in a written reply. 

In contrast, OIL produced 3.54 mn tonnes of crude at a cost of $27.16 per barrel. 

He said in 2008-09, ONGC produced 1.223 mn tonnes of crude oil at a cost of $ 50.64 per barrel. In comparison, OIL produced 3.432 mn tonnes of crude at an average investment of $ 27.02 per barrel. 

To a separate question, he said 271.1 mn tonnes of oil and 384.9 billion cubic metres of natural gas reserves were accreted in the first three years of the XIth Five-Year Plan (2007-12). 

In the Xth Plan, 425.5 mn tonnes of crude oil and 688 bcm of gas reserves were accreted. 

"During the 10th Plan, Rs 39,439.61 crore has been spent on drilling of exploratory and development wells. During the first three years of the 11th Plan (2007-10), Rs 49,285.89 crore has been spent for the same," he added.

Aegis to invest upto Rs 4 bn to build oil terminal

Aegis Logistics will invest up to Rs 4 billion to build an oil terminal complex at Pipavav Port in Gujarat, it said in a statement. 

Aegis Logistics Ltd , provides logistics support to oil, gas and chemical industries. 

Aegis Logistics last year acquired the Indian unit of Royal Dutch Shell , Shell Gas (LPG) India Pvt Ltd, to help it enter new markets.

CIL in talks for buying stake in Aussie firm

s reached an advanced stage in its negotiations for buying stake in Australian company Peabody Energy Assets, a top company official said here Tuesday. 

The deal is likely to be for less than $200 million. 

"The two sides are now engaged in talks on pricing, and there also the differences are narrowing," Coal India chairman Partha Bhattacharyya told reporters. 

"We have Rs.39,000 crore of money in our balance sheet. We need to find some good investment opportunity. As an energy company, we have to do that as India being a developing country has a vast energy requirement. So we can't kept this amount locked," he said. 

The deal includes buying stake in a particular mine of the Australian company besides a long-term off-take arrangement, he said.

Jaitapur nuclear plant gets conditional nod

The Expert Appraisal Committee of the environment ministry has given a conditional clearance to the proposed Jaitapur nuclear power project in Maharashtra. 

Final clearance for the project, however, will be given only after the Atomic Energy Regulatory Board (AERB) approves it, since assessment reports studied by the environmental panel does not deal with the issues related to radiation. A final decision on the project will be taken by environment minister Jairam Ramesh after this. 

Experts and civil society groups like the Konkan Bachao Samiti are opposed to the project, expressing concerns about the radiological safety of the proposed 10,000 mw plant. 

In a nuclear plant, 70-80% of the environmental impact is on account of radioactivity. The National Environment Engineering Research Institute (NEERI), which prepared the environmental impact assessment report, accepts that it does not have expertise to examine issues of radiological aspects of the project. 

There are questions about the quality of the environmental impact assessment report prepared by NEERI. The report is understood to be based on generic and incomplete inputs and is incomplete on issues of radioactive hazard. It would appear that project developer Nuclear Power Corporation of India Limited (NPCIL) submitted generic information to NEERI for the report. 

Concerns over safety refuse to be allayed as NPCIL has only submitted a preliminary safety assessment report, that too for the Flamanville project in France as a sample to AERB. Since the preliminary safety aspect report specific to the Jaitapur Nuclear Power project is yet to be finalised and submitted to the atomic energy board, AERB approval process is yet to start. 

AERB is responsible for giving final approval on account of design of plant from the safety, radioactive emissions, storage and disposal of low, intermediate and high level radioactive waste by products and impact on radioactivity on environment during normal operation and extraordinary events and after the service life of the plant. 

Another cause of concern is the issue of reprocessing spent fuel. The EIA report is silent on this issue. NPCIL had informed the Konkan Bachao Samiti in a meeting in August that the spent fuel would be taken to another facility for reprocessing. 

“The environment ministry should ask for a fresh environment impact assessment report for the Jaitapur Nuclear power project based on the comprehensive inputs only after final approval from AERB,” the Konkan Bachao Samiti has suggested. 

The proposed 10,000 mw nuclear power park will be set up near the Konkan coastal region in co-operation with French energy company Areva. There are only five other plants of this size in the world, and none of these have been commissioned. This raises issues of safety and waste disposal which have as yet not been addressed anywhere. 

On the other hand, the proposed Jaitapur project represents the actualisation of the civilian nuclear deals finalised by the UPA-I government. These factors make the decision before the environment minister tough. 

For its part, the environmental panel is understood to have stipulated some “stringent” conditions to counter adverse impact. However, civil society groups would argue that a clearance by the environment ministry at this stage is based on incomplete information.