Reforming the Indian Electricity Supply Industry
Institutions and Gas Market Security
The developing LNG trade does not have symmetric participants. LNG buyers in continental European and Japan tend to be monopoly gas and electricity companies with incentive and financial ability to sign long-term contracts. In contrast, prospective LNG buyers in the US and the UK participate in competitive wholesale markets and regulatory oversight with disincentives for volume commitments. As a result, integrated LNG sellers use US and UK as "markets of last resort" with implications for variability in actual LNG deliveries and for the division of rents in the growing LNG trade.
This text is a working paper version of Chapter 5 in Mark Hayes' doctoral dissertation to be published in 2007 by Stanford University Press.
Indian gas study findings released
PESD has concluded a two year collaborative study on the Indian natural gas market with three India research groups- A.T. Kearney, Indian Institute of Management - Ahmedabad, and Integrated Research and Action for Development (IRADe). The study explores gas demand to the year 2025 in the three main gas consuming sectors within India - electricity generation, nitrogenous fertilizer production, and industrial applications - under a range of different policy and economic scenarios.
Regional air pollution constraints in the power sector - already underway in certain parts of India could reduce carbon dioxide emissions by over 100 million tonnes per year. Reforms underway in the Indian coal sector, however, could bring a surge in new supplies, which would undermine the opportunities for gas in the power sector.
From an international supply standpoint, India doesn't appear able to guarantee the offtake of a proposed large natural gas pipeline from Iran within the next 10-15 years, making the project very difficult to justify from a financial risk standpoint.
Regulating Competition in Wholesale Electricity Supply
Abstract
The experience of the past ten years suggests that the potential benefits from electricity industry restructuring are small relative to those that can be achieved from introducing competition into other network industries such as telecommunications and airlines. In addition, the probability of a costly market failure in the electricity supply industry, often due to the exercise of unilateral market power, appears to be significantly higher than in other network industries.
A major theme of this chapter is that electricity industry re-structuring is an evolving process that requires market designers to choose between an imperfectly competitive market and an imperfect regulatory process to provide incentives for least-cost supply at various of stages of the production process. The fundamental goal of the market design process in the wholesale market regime is to limit the ability of suppliers to exercise unilateral market power either explicitly through market price-setting mechanisms or implicitly through the regulatory price-setting process.
There are a number ways the regulator can limit the ability of suppliers to exercise unilateral market power-namely, (1) alter the market structure, (2) change market rules, (3) impose penalties and sanctions on market participants for their behavior, and (4) even explicitly set the prices that market participants receive for their production. This chapter provides a theoretical framework for understanding how to make these choices in order to design a wholesale market that benefits consumers relative to the former vertically-integrated utility regime. The paper uses this framework to understand the causes of the disappointing experience with wholesale electricity restructuring in the US. This discussion points to a number of ways to increase the likelihood that restructuring in the US will ultimately benefit consumers.
Wired Magazine interviews Jeremy Carl on Clean Coal
Coal is dirty. But coal is driving the U.S., Chinese and Indian economies. And therefore, coal is not going away. Renewable energy sources like solar and wind generate only 1 percent of the world's electricity. Do the math: Making coal burn cleaner might be the most pressing environmental problem that no one talks about.
Despite recent estimates that pollution from China's booming coal industry reaches U.S. shores in as little as five days, the green-tech investment boom that has funded the rise of biofuels has bypassed coal. Even the head of the World Coal Institute recently proclaimed the last 10 years "a lost decade" for clean coal, saying it's time to play catch-up.
Stanford's Jeremy Carl, a research fellow in the Program on Energy and Sustainable Development, couldn't agree more. He spoke on the phone with Wired News to discuss China, the holy grail of clean coal and how many coal plants he'd trade for Kyoto's accomplishments.
Stanford research fellow Jeremy Carl says, "Coal is as dirty as it gets," but warns against throwing the possibly cleaned-up baby out with the dirty bathwater.
Wired News: Why'd you get into clean coal?
Jeremy Carl: I looked at the numbers. It's a question of where the big sources of emissions are and where we can attack them.
WN: Can you give us an idea of the scale of coal power? Can you put coal in context as an energy source?
Carl: Only oil makes a bigger contribution to global energy. In terms of energy in the industrial world, it's about 40 percent of electricity production.
WN: How dirty is coal?
Carl: Coal is as dirty as it gets. Coal has every element in the periodic table. And depending where in the world you get it from, "coal" can mean 100 different substances. If you sent the sort of coal you might use in a typical Indian plant to a supermodern boiler in Japan, it would shut the place down.
WN: But there's got to be good things about coal.
Carl: It's cheap. And coal doesn't have the kind of extreme risk that nuclear power has. You're not going to build a dirty bomb out of coal. And unlike other fossil fuels, it is really widely distributed, so there is less of a coal OPEC.
WN: And that distribution would seem to make resource wars less likely to break out over coal?
Carl: Yes.
WN: Is there an energy source that could replace coal?
Carl: Natural gas is the only viable replacement, and it's not clear that the natural-gas supply could scale up to replace coal.
WN: So, how can we can make coal cleaner?
Carl: The most-well-known is flue-gas desulfurization, which takes sulfur dioxide out of smoke stacks, and came out of concerns about acid rain. There are other pollution-control devices for nitrogen oxide and mercury filters.
WN: What about up-and-coming technologies like carbon capture and sequestration? Can you tell us about that?
Carl: You're taking carbon from a smokestack and pressure-injecting it into a geological formation of some sort. We actually already do this process at an industrial level. We know how this works.
WN: Seems like we're spending a lot of time on the backend scrubbing pollutants out. Should we be designing in a cleaner process on the front end?
Carl: A lot of people point to integrated gasification-combined-cycle (IGCC) plants, which gasify coal before burning it, as the holy grail because they get you a cleaner process. It gives you a more concentrated stream of carbon that you can sequester underground more cheaply. The capital cost is very high, though, and we don't have a lot of experience in designing them.
WN: We hear a lot about China's coal industry. Can you compare it with the U.S. industry, which ranks second in the world?
Carl: We mine about (1.1 billion tons) of coal per year. China was at about 1.4 billion tons seven years ago. Now they are at 2.4 billion tons. So, they essentially took the second-biggest coal industry in the whole world and replicated it in seven years. And if you look at the Chinese plans, they plan to ramp it up even more in the future.
WN: Given the obvious environmental impacts of these plants, why don't we have better answers for these problems than the Kyoto Protocol (which the United States didn't sign, and which exempted China and India from emissions restrictions)?
Carl: I'll give you a speculative, personal answer. It has to do with the politics of the type of people who were negotiating Kyoto. And the pressure put on by environmental groups that were uncomfortable with coal. There was just so much pressure on the symbolic importance of getting a deal done.
WN: What would you have rather seen?
Carl: I think there has been some really good criticism that says, "Was the U.N. really a good forum for this? Or would it have been better to have taken the 10 countries who consume 60 percent of global energy and do something with real teeth in it?" I think that would have been a much better approach.
I would have happily traded every emissions gain from Kyoto for eight clean coal plants sequestering carbon in different countries. Because then we could have a real discussion that says, "This works. Now let's see who has to bear the cost."
WN: Why would that be such a big deal?
Carl: Because right now we're having a conversation with China and India where we're trying to get China and India to build clean coal plants by saying, "Here's this thing that's never been tried before at a mass scale. You should build one." And that's not going to work.
Indian Gas
PESD has concluded a two year collaborative study on the Indian natural gas market with three India research groups- A.T. Kearney, Indian Institute of Management - Ahmedabad, and Integrated Research and Action for Development (IRADe). The study explores gas demand to the year 2025 in the three main gas consuming sectors within India - electricity generation, nitrogenous fertilizer production, and industrial applications - under a range of different policy and economic scenarios.
The study concludes that coal is likely to remain the dominant fuel in the power sector, but opportunities exist for gas in reducing regional air pollution and providing peaking power. For the fertilizer sector, significant opportunities exist to import cheap fertilizer, thereby reducing domestic gas demand, but political constraints will likely buoy gas demand. Industrial consumers will benefit from increased supplies from LNG to displace expensive liquid fuels, but cheap coal remains the dominant fuel for many industrial applications.
Regional air pollution constraints in the power sector - already underway in certain parts of India could reduce carbon dioxide emissions by over 100 million tonnes per year. Reforms underway in the Indian coal sector, however, could bring a surge in new supplies, which would undermine the opportunities for gas in the power sector.
From an international supply standpoint, India doesn't appear able to guarantee the offtake of a proposed large natural gas pipeline from Iran within the next 10-15 years, making the project very difficult to justify from a financial risk standpoint.
Natural Gas in India: An Assessment of Demand from the Electricity Sector
PESD has concluded a two year collaborative study on the Indian natural gas market with the Indian Institute of Management - Ahmedabad. The study explores gas demand to the year 2025 in the electricity sector under a range of different policy and economic scenarios.
The study concludes that coal is likely to remain the dominant fuel in the power sector, but opportunities exist for gas in reducing regional air pollution and providing peaking power.
Regional air pollution constraints in the power sector - already underway in certain parts of India could reduce carbon dioxide emissions by over 100 million tonnes per year. Reforms underway in the Indian coal sector, however, could bring a surge in new supplies, which would undermine the opportunities for gas in the power sector.
The Future of Natural Gas in India: A Study of Major Consuming Sectors
PESD has concluded a two year collaborative study on the Indian natural gas market with three India research groups- A.T. Kearney, Indian Institute of Management - Ahmedabad, and Integrated Research and Action for Development (IRADe). The study explores gas demand to the year 2025 in the three main gas consuming sectors within India - electricity generation, nitrogenous fertilizer production, and industrial applications - under a range of different policy and economic scenarios.
The study concludes that coal is likely to remain the dominant fuel in the power sector, but opportunities exist for gas in reducing regional air pollution and providing peaking power. For the fertilizer sector, significant opportunities exist to import cheap fertilizer, thereby reducing domestic gas demand, but political constraints will likely buoy gas demand. Industrial consumers will benefit from increased supplies from LNG to displace expensive liquid fuels, but cheap coal remains the dominant fuel for many industrial applications.
Regional air pollution constraints in the power sector - already underway in certain parts of India could reduce carbon dioxide emissions by over 100 million tonnes per year. Reforms underway in the Indian coal sector, however, could bring a surge in new supplies, which would undermine the opportunities for gas in the power sector.
From an international supply standpoint, India doesn't appear able to guarantee the offtake of a proposed large natural gas pipeline from Iran within the next 10-15 years, making the project very difficult to justify from a financial risk standpoint.
Making Small Work: Business Models for Electrifying the World
Despite over a century of investment in electric power systems, there are roughly 1.6 billion people who lack access to electricity service, mainly in rural areas. While there are some open questions regarding the precise cause and effect relationships between rural electrification and human welfare, it is generally considered an important social, economic, and political priority to provide electricity to all.
Rural electrification is a challenging task because it involves delivery of a service to populations that are remote and dispersed and whose consumption is low. This means it is generally more expensive while at the same time the customer base is generally poorer and less able to pay the full cost of service. Combine these factors with utilities that are often poorly managed and have limited finances, and it is often not feasible to expect extension of the grid to unserved rural populations in the near future. Such conditions are also challenging for the development of new renewable energy technology markets.
This paper discusses the role that electricity plays in the development process and its importance in rural areas; the contest between centralized and distributed solutions and their relative competitiveness; the previous experience and research on distributed generation and which business models fare successful; and broader lessons that can be extracted from the work.