International Development

FSI researchers consider international development from a variety of angles. They analyze ideas such as how public action and good governance are cornerstones of economic prosperity in Mexico and how investments in high school education will improve China’s economy.

They are looking at novel technological interventions to improve rural livelihoods, like the development implications of solar power-generated crop growing in Northern Benin.

FSI academics also assess which political processes yield better access to public services, particularly in developing countries. With a focus on health care, researchers have studied the political incentives to embrace UNICEF’s child survival efforts and how a well-run anti-alcohol policy in Russia affected mortality rates.

FSI’s work on international development also includes training the next generation of leaders through pre- and post-doctoral fellowships as well as the Draper Hills Summer Fellows Program.

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This paper is part of a larger study on the historical experience of Independent Power Producers (IPPs) in countries undergoing transition in their institutions of governance. The study seeks to explain the patterns of investment in IPPs and project outcomes with the aim of using this information to plot alternative future models for IPP investment. This paper follows the research methods and guidelines laid out in the research protocol, "The Experience with Independent Power Projects in Developing Countries: Introduction and Case Study Methods".

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Publication Type
Working Papers
Publication Date
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Program on Energy and Sustainable Development Working Paper #32
Authors
Joshua C. House
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The electricity industry of China's Guangdong Province has been in a process of reforms since the 1980s. The reforms have so far greatly promoted the industry development, advancing the provincial electric power system to the largest in the country (Zeng, et al., 1999; Zhang, et al. 2001). Achievements notwithstanding, the industry is facing numerous difficulties that challenge both reform policy makers and academics. The province needs high speed capacity expansion and power imports in the foreseeable future to meet the continued demand surge. End-users in Guangdong are paying the highest tariffs in the nation. The technological structure of the existing generation capacity is highly undesirable because large number of tiny generating units and oil-fired capacity are adversely affecting economic and energy efficiencies of electric power supply.

Power generation is causing increasing environmental damages. However, the most challenging is probably the fact that there lacks an adequate mechanism to solve these problems and promote efficient and sustainable growth of the electric power industry. On one hand, reforms in the past twenty years not only have not fundamentally changed the traditional mode of central government planning of provincial electric power supply and development, but also have contributed to the evolving problems of the industry and showed their limitation. On the other hand, utility de-integration and market competition represents an attractive alternative to policy makers, but little is known of the reform roadmap and the potential impact.

This paper examines the utility market reform scenario in Guangdong Province and provides a basic quantitative assessment of the possible impact of the reform policy on electricity tariffs and system development.

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Program on Energy and Sustainable Development Working Paper #33
Authors
Chi Zhang
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David Victor and Mark Hayes, of the SIIS Center on Environmental Science and Policy (CESP) will speak on their research into the problems associated with governing in countries with high levels of natural gas exports.

Encina Basement Conference Room

Encina Hall E419-B
Stanford University
Stanford, CA 94305-6055

(650) 724-1714 (650) 724-1717
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Research Fellow
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Mark H. Hayes was recently a Research Fellow with the Program on Energy and Sustainable Development (PESD). He lead PESD's research on global natural gas markets, including studies of the growing trade in liquefied natural gas (LNG) and the future for gas demand growth in China.

Dr. Hayes has developed models to analyze the impact of growing LNG imports on U.S. and European gas markets with special attention to seasonality and the opportunity for arbitrage using LNG ships and regasification capacity. From 2002 to 2005, Dr. Hayes managed the Geopolitics of Natural Gas Project, a study of critical political and financial factors affecting investment in cross-border gas trade projects. The study culminated in an edited book volume published by Cambridge University Press.

Prior to coming to Stanford, Mark worked as a financial analyst at Morgan Stanley in New York City. He was a member of the Global Power and Utilities Group, where he was involved in mergers and acquisitions, financing and corporate restructuring.

In 2006 he completed his Ph.D. in the Interdisciplinary Program on Environment and Resources at Stanford University. After completing his Ph.D. at Stanford, Mark has taken a position at RREEF Infrastructure Investments, San Francisco, CA. Mark also has a B.A. in Geology from Colgate University and an M.A. in International Policy Studies from Stanford. From 1999 to 2002 he served on the Board of Trustees of Colgate University.

Mark Hayes Speaker

School of International Relations and Pacific Studies
UC San Diego
San Diego, CA

(858) 534-3254
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Professor at the School of International Relations and Pacific Studies and Director of the School’s new Laboratory on International Law and Regulation
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David Victor Speaker
Seminars

During the 20th century electricity spread from tiny islands of experimental service to become the world's most important energy carrier. The fraction of energy converted to electrons before consumption has risen inexorably and approaches 40% worldwide. Few would argue with the judgment of the U.S. National Academy of Engineering that electricity was the most important innovation of the past century. Electricity transformed homes, factories, and offices, the work we do, our health and comfort, and how we spend our time. How will electricity transform the 21st century?

More flexible and cleaner for the end-user than the coal, gas, and other sources of energy services that it replaced, electricity will likely be the form that 55%-60% of energy takes in four to five decades as more and new electrical machines appear in the market. How might life change as this imperial technology conquers new domains?

And what about the 1.6 billion people who today lack access to electricity? Will global electrification be achieved in the coming half century or even sooner? If some regions defy electrification, what are the reasons? How might electrification change occupations and lifestyles of the poor?

During a two-day workshop on the implications of global electrification, we aim to assemble a fresh picture of visions for electrification, its trends in time and space, and selected implications for health, environment, and social and economic organization. We are inviting diverse experts to comment on these issues from the vantage of their disciplines, practice, and research. We are asking each to talk about their current work, ideas, and speculations rather than commission new studies. The novelty of the meeting lies in the diversity of perspectives and the chance to contrast and integrate them. Global electrification is far advanced and may be nearly complete in the coming decades. What will it take, and what may result?

Oksenberg Conference Room

Conferences

Liu Institute for Global Issues
6476 NW Marine Dr.
Vancouver BC V6T 1Z2

(604) 827-4468 (604) 822-6966
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Affiliated Faculty
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Hisham Zerriffi is an Assistant Professor and the Ivan Head South/North Research Chair in the Liu Institute for Global Issues at the University of British Columbia. Prior to joining the UBC Faculty, Dr. Zerriffi was a Postdoctoral Fellow with the Program on Energy and Sustainable Development. At PESD, he led a new project on the role of institutions in the deployment and diffusion of small-scale energy technologies. The centerpiece of this on-going study is a comparative analysis of different organizational and business models used to provide rural electricity on a local level.

Dr. Zerriffi received his Ph.D. from the Engineering and Public Policy Department at Carnegie Mellon University. His dissertation, "Electric Power Systems Under Stress: An Evaluation of Centralized Versus Distributed System Architectures" examined the reliability and economic implications of implementing large-scale distributed energy systems as a way to mitigate the effects of persistent stress on electric power systems. He has a B.A. in Physics (with minors in Political Science and Religion) from Oberlin College, Oberlin, OH and a Masters of Applied Science in Chemistry from McGill University, Montreal, Quebec, Canada. Before joining CMU he was a Senior Scientist at the Institute for Energy and Environmental Research.

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Anton Eberhard writes that South Africa will experience routine electricity blackouts in a few years unless new electricity policy and investment decisions are formulated and implemented this year.

South Africa will experience routine electricity blackouts in a few years unless new electricity policy and investment decisions are formulated and implemented this year.

This is the inexorable conclusion that emerges from scenario and modelling exercises undertaken separately by the National Electricity Regulator, Eskom and large energy-intensive industries.

Growing electricity demand will outstrip existing national supply capacity next year or the year thereafter, assuming a prudent reserve margin to allow for maintenance and unscheduled plant shutdowns.

Hydro-electricity imports, mainly Cahora Bassa in Mozambique, will provide respite for about another year. Thereafter, we need further generation capacity or significant energy savings and demand-side measures.

Eskom has started re-commissioning old moth-balled coal-fired power stations to meet this challenge. Camden, the first plant, will be relatively easy to re-commission and work has commenced. Grootvlei will be more difficult and Komati, the last plant that Eskom plans to re-commission, will be the most uncertain and expensive.

If successful, these old generating stations will give us a breather until around 2008. And then we need new generation capacity.

2008 might seem years away, but investment decisions, environmental impact assessments, plant construction and commissioning take many years. For a hydro-electric or pumped storage scheme, this could take ten years. A coal-fired power station could take six years or more, and gas turbines - two to four years.

If our economy grows faster, or we are not able to implement effective demand-side measures, new power generation capacity might be needed even earlier.

Government is aware of this situation. The President confirmed, in his state of the nation address in parliament in May, that a tender for new capacity will be awarded early in 2005.

The Department of Minerals and Energy has appointed technical advisors to prepare and manage this tender. However, their work schedule indicates that the contract with a new Independent Power Producer will only be concluded early in 2006, and this will only happen if the bid manages to comply with National Treasury's Public Private Partnership regulations. The DME will have to show that Eskom cannot build a new plant more cheaply - an interesting possibility given Eskom's competitive cost of capital and the potential for transfer-pricing with its current portfolio of extremely low-cost generating plant.

Given these tight time constraints, it is not unlikely that we shall have to resort to buying, on an emergency basis, a series of highly expensive, paraffin-burning open-cycle gas turbines.

There is a dangerous assumption that the current tender process for new generation capacity answers concerns about supply security. It does not.

The challenge is not only to manage the current tender process within tight time-constraints. We need to make decisions this year about procuring much more capacity than the approximately 1000 MW anticipated in the current tender.

A likely planning scenario indicates that this year, 2004, we need to make investment decisions on a new pumped-storage scheme, a new pulverised coal-fired plant and a green-field coal fluidized-bed combustor or a combined-cycle gas turbine. In short, we need to start placing orders for a range of new power plant. In ensuing years we shall need to continue to order new plant.

These challenges raise the question of whether a part-time committee of government officials, assisted by consultants, is the most appropriate and sustainable mechanism to continue to procure new power? It also provokes debate about what market structure is appropriate to encourage the most efficient and cost-effective investment decisions?

Following the 1998 While Paper on Energy Policy, and a number of subsequent studies, Cabinet decided, in May 2001, to restructure the power sector by unbundling Eskom's electricity transmission division into an independent company and selling-off 30% of Eskom's generation plants. New capacity would be provided by private investors and an electricity trading market would be established comprising a power exchange and a parallel market for bilateral power contracts and financial hedges. None of this happened.

What is emerging is a quite different market model. In her budget speech, the Minister of Minerals and Energy stated that "the state has to put security of supply above all and above competition especially". The Minister of Public Enterprises has indicated that Eskom will not be privatised and that a strong state-owned utility is important for social and economic development.

Eskom is thus likely to continue to dominate the market. It may even be permitted to build new generation plant. Private sector investment will be permitted only on the margins in the form of Independent Power Producers. They will sign long-term power purchase agreements with Eskom (or with an independent transmission company or system operator, if these are eventually separated form Eskom).

Government will now need to clarify whether the emerging market model for the electricity sector is its preferred model or is merely a temporary measure to secure emergency supplied. This is not a trivial question - for it strikes at the heart of the cost and efficiency issues in the power sector, and will have long-term consequences for electricity prices in this country.

Few remember the controversial electricity price-hikes by Eskom in the late 1970s and 1980s when it made investment mistakes that resulted in huge unused power generation capacity. History demonstrates the potential weaknesses of the old industry model where state-owned monopoly utilities simply pass the costs of poor investment decisions to consumers.

The current tender process is also full of risk. A small number of officials and technical advisors will decide how much new power is needed, using which fuel sources, when and where. While a degree of (once-off) competition might be possible through the tender bids, long-term power purchase agreements could tie-up non-competitive electricity prices for decades.

Plans for a new market structure, where investors have to compete to sell their power in a power exchange or a contract market, have been sacrificed in the face of security of supply concerns.

Periods of supply uncertainty and shortages are never a good time to design and implement new competitive market structures. The long period of large capacity surpluses that provided a window of opportunity for major reform has disappeared. Now we have to patch the current system and prepare for the future.

The default IPP/ single-buyer model that is emerging now requires the establishment of a robust and sustainable institutional structure (probably best attached to the power system operator) that will be responsible for long term planning, security of supply and procurement of generation capacity.

We can avoid future black-outs. But we need to act now.

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