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Issue 01 , December 201 6 Š LSE SU Energy Society www.lseenergy.wordpress.com Cover illustration: Dominici Werbeagentur Image attribution: Renewables, A Long and Winding Road (p. 11 ): Pexel Critical Moment for US Energy (p.1 3): Reuters Lights Out: Africa's Struggle with Electricity (p.1 6): Fadel Senna/AFP/Getty Images Race for Arctic Resources (p.1 9): Greenpeace Potential for Alternative Energy in MENA (p.24): AP Photo/Kamran Jebreili
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Dear Reader, It is my pleasure to present you with our first issue of the Energy Journal. Over the last weeks our writers have been busy conducting research and concluding their articles and I would like to gratefully acknowledge their efforts to make this project possible. Energy is among the biggest problems that our world faces as we move forward. The prospect of ever increasing global energy demand comes at a time when collective action needs to be taken to slow down ongoing climate change. Developing countries account for the highest growth in future energy consumption. Yet they are the most reliant on fossil fuels. Providing millions of people with access to electricity while at the same time maintaining a responsible emission profile may yet sound like a contradiction. However, it needs to become reality if we are to limit global warming to the 2 ºC stipulated in the recent Paris Agreement. Changes in the energy landscape and advances in technology lie at the very heart of overcoming these challenges. Going forward, energy will also be the solution to provide millions of people with a better standard of living. In “Energy for Tomorrow” our writers investigate some of these problems and opportunities. Volha Hrytskevich and Sean Kiely look at the current limitations of energy consumption in Africa and India respectively. Damian Virchow explores a potential remedy to millions of people in rural India. Giacomo Falchetta and Bojan Bogomirović look at the current state of renewable energy and explore some opportunities for development. Nicole Pavia examines the threat of terrorism to energy supply and the consequences of supply disruptions for energy stability in the EU. Roberto Tabet explores the consequences of the slump in oil prices on the potential for investments in alternative energy in the MENA region. Fernando Ramones explains how depleting oil fields have prompted an energy reform in Mexico. And finally, Parker McVey adds a US perspective to our issue by looking at the consequences of increased oil production on the transportation infrastructure in the US. Enjoy,
Simon Loschnauer Editor-in-Chief Michaelmas Term 2016 3
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Contents 8
Violent Non-State Actors and Energy Infrastructure
by Nicole Pavia
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Renewables, a Long and Winding Road
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A Critical Moment for U.S. Energy
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Lights Out: Africa's Struggle with Electricity
by Giacomo Falchetta by Parker McVey
by Volha Hrytskevich
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The Race for Arctic Resources
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Quo Vadis Renewables ?
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India's Energy Landscape
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The Potential for Alternative Energy in MENA
by Simon Loschnauer
by Bojan Bogomirović by Sean Kiely
by Roberto Tabet
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Dye-Sensitised Solar Cells and the Future ofIndia’s Energy Mix
by Damian Virchow
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The Energy Reform in Mexico: An Oil Perspective
by Fernando Ramones
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Violent Non-State Actors and Energy Infrastructure
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capita for resources. This situation makes a stable supply of traditional energy sources critical, at least in the short-term, and gives great power to those in control of energy sources. At the same time, many of the world’s significant oil and gas exploration and production sites are located in increasingly politically unstable areas, such as Algeria, Iraq, Libya, and Nigeria. As state institutions weaken, governments become less able to prevent violent non-state actors from launching attacks or making demands, allowing these non-state actors to grow in strength and number. Additionally, the world’s financial and energy systems are more interconnected than ever before, so energy insecurity in one area can produce a ripple effect throughout the economy and impact other areas.
n August of 2014, the Islamic State (referred to as IS) captured the strategic Mosul Dam on the Tigris River in Iraq. The dam not only provides water for irrigation and prevents flooding downstream, but is also home to Iraq’s largest hydroelectric power station, which generates 1050 megawatts of power and supplies the surrounding region with electricity. The capture of the dam was of great concern to Iraqis and to the international community as an unpredictable IS could have forged the water and power supply to Mosul’s civilian population into a weapon of war improper maintenance on or intentional damage to the dam had the potential to cause massive flooding and prolonged power outages. Kurdish Peshmerga forces, supported by US airstrikes, recaptured the Mosul Dam from IS control later that same month. However, this year’s on-going battle for Mosul and the city’s re-emergence in international headlines call attention again to the relationship between violent nonstate actors and energy security.
Because of this confluence of factors, non-state actor groups can target energy infrastructure to achieve group-specific goals. In 2013, for example, a rebel group in Libya successfully halted oil exports from a number of ports because the government would not agree to provide them with increased shares of oil wealth and territory. The rebels only agreed to reopen the ports after the government agreed to pay them compensation and reverse a military offensive against them. Because the oil and gas industry accounts for almost 70% of Libya’s GDP, the rebels had leverage with which to garner significant concessions from the government. Impacts were felt across the world economy, as the price of oil fell once the ports were reopened. Additionally, attacks on foreign-owned natural gas plants in Algeria this year by Al-Qaeda in the Islamic Maghreb intended to shut down energy production and dissuade foreign investment in the area. In response to these acts, these companies did withdraw foreign workers from the sites. Therefore, violent non-state actors operating in areas of weak statehood can generate regional and global attention while causing economic damage through attacks on local energy infrastructure.
Why do non-state actors and terror groups increasingly target energy infrastructure? While Western media outlets tend to focus on high-profile attacks with many civilian casualties, the battle over the Mosul Dam serves to highlight the fact that violent non-state actors are increasingly adopting the less-visible but highly impactful strategy of attacking energy infrastructure. To illustrate, the proportion of attacks on oil and gas refineries, production centres, and pipelines has increased significantly since the 1990s, when these attacks represented less than 2.5% of all terrorist attacks. In 2013, however, approximately 23% of terror attacks targeted the oil and gas sectors. “Hydro-terrorism” incidents, like that in Mosul, have been increasing and are particularly salient in areas vulnerable to IS or Boko Haram control. Why are attacks on these facilities becoming more popular? For one, the competition for a shrinking supply of energy resources is growing. Developing nations requiring increasing amounts of energy must compete with developed nations that continue to use high amounts of energy per 8
Kurdish Peshmerga forces after an IS attack on an oil field near Kirkuk, Iraq (Source: Reuters)
for instability. In 2009 for example, this risk premium amounted to about $10 USD of cost added to each barrel. Certainly, the on-going attacks by violent non-state actors on infrastructure create a great deal of uncertainty in terms of the supply of oil coming from impacted regions. In previous years, oil prices have fluctuated with energy security threats and resolutions (as in the case of Libya described above). However, extremely high crude oil inventories today, due to increased production from both OPEC and non-OPEC countries, have caused oil prices to drop precipitously. The risk premium on political instability has essentially been erased. It has yet to be seen whether, or more likely when, oil prices will begin to fluctuate in response to attacks on energy infrastructure again. The Energy Information Administration projected non-OPEC oil supply to fall this year for the first time since 2008, and OPEC does not have much spare production capacity to offer. Therefore, it is predicted that supply will level out and that a “risk premium” will need to be re-instated.
Potential impacts of violent non-state actor activity on the EU economy Due to the interconnectedness of global energy markets, non-state actors do not have to launch attacks on energy production facilities in the European Union to raise energy security concerns for the EU, as the EU is currently quite dependent on energy imports from countries with weak states and increasingly powerful non-state groups. At present, OPEC countries provide the EU with 40% of its total crude oil imports, with Saudi Arabia, Libya, and Nigeria as the biggest individual suppliers. EU dependency rates for crude oil and natural gas in 2014 were 88.2% and 67.4%, respectively, and its overall dependency rate on imported energy was 53.5%. This overall dependency rate had increased over the 2004-2014 period from 40% to 53.5%. Any easing off of energy sources from Russia could have the EU increasingly looking toward North Africa as an alternative as well. As such, EU energy security remains directly susceptible to fluctuations in supply caused by compromised energy infrastructure. The risks of fluctuating supply will become especially salient again after the current glut of oil supply normalises and oil prices again respond to political instability. Traditionally, the presence of uncertainty in markets implies greater risk in trading commodities, and in times of risks in the oil market, a “risk premium” is added to each barrel of oil to account
Considerations for the EU’s secure energy future As competition for limited resources grows, attacks on energy infrastructure continue, and risk premiums on oil prices become more likely, it will be increasingly important 9
Conclusion
for the EU to take steps to decrease its energy dependence and improve its own energy security. In May 2014, the European Commission released an Energy Security Strategy, which “addresses long-term security of supply challenges” (European Commission, 2014). Two points made are extremely pertinent in addressing energy threats posed by violent non-state actors. The first is increasing domestic energy production, diversifying supplier countries, and effectively developing and utilizing more renewable technology. Any way to alleviate dependence on weak states is crucial in protecting the EU from potential energy crises and oil price fluctuations. The second is strengthening and protecting critical infrastructure outside the EU. Increased investment in technology, development of fortification methods, and coordination with local populations can better protect pipelines and increase awareness of planned infrastructure attacks.
As scarce resources must be allocated across a growing population and world markets grow increasingly interconnected, violent non-state actors work to achieve political and economic goals through attacks on energy infrastructure. These groups do not have to launch attacks on energy production facilities in a target country to raise energy security concerns in that country. Currently, destruction of energy infrastructure has energy and financial impacts on the European Union, and will continue to threaten EU energy supply and markets if the EU remains dependent on weak states with active non-state groups for oil and natural gas. As such, the EU must invest more in domestic energy production, utilize renewable energy sources, diversify suppliers, and protect necessary infrastructure outside of the EU to ensure its future energy security.
Renewables, a Long and Winding Road
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the main driver of global warming and climate change. According to John Cook, a researcher at the Global Change Institute of the University of Queensland, the consensus that human carbon emissions is causing recent global warming is
n broad terms, alternative energy describes energy sources which are an alternative to and possibly more efficient and less harmful to the local and global environment than the process of burning fossil fuels. Up to this day, fossil fuels – which include natural resources such as oil, coal and gas – are by far the most widespread.
Alternative methods of producing energy include the deployment of photovoltaic panels, solar thermal systems, wind turbines, nuclear energy, bioenergy, biofuels, biomass gasification, and hydroelectric systems. While these options are all fossil-free, not all necessarily provide clean, unlimited and naturally replenishing energy. In spite of this, the urgency to revert the predominance of fossil fuels and increasingly switch to alternative sources of energy stems from the release of carbon dioxide (CO2) during the process of burning of natural resources such as oil and coal. CO2 is a greenhouse gas, which is universally recognised as
(Source: 2014 BP Review of World Energy) 10
Renewable energy accounted for 77% of all new EU power installations in 2015. Wind power installed more than any other form of power generation accounting for 44.2% oftotal capacity installations.
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predominantly lithium-ion battery packs, are hence the instrument which could make alternative and renewable energy comparatively advantageous with regards to fossil fuel energy. According to a number of studies, storage costs of energy are expected to fall up to 20% over the next 20 years, while also the costs to install wind or solar energy plants are decreasing quickly.
shared by 90% to 100% of publishing climate scientists, as confirmed by several independent studies. Despite this evidence, many regions of the world are struggling to find rapid and efficient pathways to a prompt and effective way of switching to alternative sources of energy and of harnessing them. There are a substantial number of reasons behind this problem, including technical, economic, and social brakes. There are also factors related to powerful groups on behalf of the oil industry, such as the Organization of the Petroleum Exporting Countries (OPEC), which, according to the U.S. Energy Information Administration, represents the owners of around 73% of the world’s proven reserves of oil. But is it possible to overcome such barriers through governmental intervention and market forces? The short answer is probably yes, but in order to make alternative and renewable energy sources the norm rather than the exception, and hence to harness their potential so as to have enough energy to satisfy the
For instance, solar module prices have dropped by 75 per cent since 2008, and the more is built the less expensive it becomes. Moreover, every time the cumulative capacity is doubled by means of new installations, prices tend to fall by around 20 per cent due to economies of scale and technological improvements. Thus, the need arises for a continually improving process of research and development, so as to reach a point where the cost of one unit of traditional (fossil-generated) energy is greater than the cost of one unit of sustainable energy added to its storage cost. Thanks to plummeting costs of renewables and energy storage technologies, this relationship has to be satisfied in more and more locations around the globe, while the odds of succeeding are also being influenced by the social and
Storage costs ofenergy are expected to fall up to 20% over the next 20 years political role of institutional actors pushing to make the switch to alternative and renewable energy sources happen, often against the will of strongly carbon-dependent industrial groups.
Energy consumption in trillion MMBtu (Source: EIA)
With regards to such mechanism, several authors have reported and proved the existence of an “attitude-behaviour gap� for alternative energy, both at the macro-level among different countries and at the micro-level in different sections of their population. This gap implies a very heterogeneous panorama in terms of energy production from fossil-free and renewable energy sources in different countries, with nations such as Sweden, Austria, and Denmark being strongly committed to a rapid transition and already producing a significant share of their energy from renewable sources (53%, 33.1% and 29.2%, respectively, according to Eurostat, 2014) and other countries like the United States and Japan still lagging behind (8% and 4%, Eurostat, 2016) despite increasing investment.
exponentially increasing global consumption, which is expected to double by 2030 with regards to 1990, several steps still need to be taken. Firstly, a number of technical questions are to be considered. The predominant one concerns the capacity to store the excess energy produced at each moment so to use it in a future time. As mentioned in Businessinsider by Wile (2013), there is a painful paradox affecting most forms of alternative energy: often it is not possible to control supply in spite of its abundance. Sometimes it is cloudy, or the wind is not blowing, or it is simply nighttime. How can this paradox be solved? Several storage technologies, including currently under development, have the potential to tackle the issue by storing energy produced in excess and as to greatly widen the time span of its availability for consumption. Batteries, and at least in the short-run
Besides these differences, the capacity of harnessing alternative sources of energy also implies the capacity of combining the exploitation of different energy sources at the 12
To conclude, it has to be acknowledged that there are several challenges deriving from the switch to alternative, low-carbon, and renewable energy sources, and a number of key actions are to be taken to effectively harness such systems. Alternative and sustainable energy is becoming ever more advantageous thanks to the development of costeffective equipment and due to the creation of economies of scale. Cars, houses and factories are likely to be powered only with renewable energy in the long-term future, and yet there is a long list of challenges to be dealt with to effectively and timely switch to renewables. Among these, energy production and storage costs, lobbying groups resistance and renewable energy contingent availability. It is only through infrastructure investment, research and development and political will that alternative and renewable energy sources have the chance of becoming widespread all around the world.
same time. Hence the present needs can be satisfied independently of the time of the day, of the weather or of the medium-term climatic conditions, i.e. of the contingent availability of a given resource (such as sunlight, wind, waterfall, etc.). A well diversified energy-mix is essential for the abandonment of carbon energy sources. Furthermore, intermediate solutions such as hybrid renewable energy systems (HRES) have a great potential, especially in developing countries. HRES are standalone power systems that combine two or more renewable energy sources together, thereby allowing to provide energy to a single device/household/factory, overcoming the limitations of each renewable-energy source and enhancing the chance of using 100% renewable energy despite lacking highly capable batteries for energy storage.
A Critical Moment for U.S. Energy
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too complex to discuss all the changes that take place as prices drop, so this article will focus on two different but equally vital facets: production and transportation (or upstream and midstream in oil jargon). The drastic changes that take place during price drops amplify the need for a greater public understanding of the industry as a whole.
he date was February 11, 2016 and the price of oil on the West Texas Intermediate fell to the lowest point in almost two decades. At $26 per barrel, countless oil and gas firms of every size and region across the United States faced a harsh and unfamiliar economic reality. Price per barrel affects every level of the industry, including consumers. Unfortunately, the entire narrative of the U.S. oil and gas market is far 13
about 2% of U.S. GDP. Clearly, low prices cause domestic production to fall which, in turn, unimaginably alters the sensitive economic environment of rural areas where drilling is the lifeblood of hundreds of thousands. This past summer I witnessed the immense power of higher prices in these rural areas. Interning at an exploration and production company with a focus on producing solely in the state of Wyoming gave me a focused perspective from a small player – unlike a broad view from the ubiquitous supermajors such as Exxon, Shell, or BP. By the end of the summer with price per barrel nearing $50 our company’s muchanticipated drilling program began, ultimately employing over 150 people and making news headlines in the small town of Casper. When a minor company can do something this spectacular due to a slight increase in prices, the impact of a multi-billion
Omitting the 2008 recession, price per barrel climbed consistently until mid-2015, as did many other sectors in the industry. Upstream production in particular skyrocketed (Figure 1). From 2007 to its peak in March 2015, production from domestic drilling shot up 287%. New technology led to the discovery of prolific plays such as the Bakken Formation in North Dakota and Eagle Ford Shale in South Texas. Production in these plays swelled the most 819% and 1,287% respectively (Figure 2). Starting in July of 2014, prices began to slip and have arguably never returned to a full bull market even to this day. However, since the price per barrel was well above $50 by the end of 2014, production output remained constant up to early 2015 when producers realized the price environment was not recovering. At this point in Figure 1, production began to plateau followed by a 13% decline from March 2015 to October 2016, or one million barrels of oil equivalent per day (BOED). One million BOED is a rather obscure number. To put it into perspective, it is enough oil to power all U.S. auto traffic for four uninterrupted hours. This is staggering, and in terms of total monetary value it’s equal to
Shipping receipts swell by 70% starting in 2007 dollar conglomerate is even greater. Today, prices are still hovering around $50 and production is beginning to pick up, yet the story does not stop here. This small uplift in prices triggers production to rise, necessitating a change in transportation. From wagons to railroads to pipelines, America’s transportation infrastructure has shifted rapidly, but not always in the safest direction. The chart in Figure 3 demonstrates the profound growth of transported domestic oil using refinery receipts as a measure. The correlation between a rise in production and an increase in shipping is clearly positive. The EIA shows shipping receipts swell by 70% starting in 2007. Perhaps one of the most surprising aspects in this data is the 2,700% surge in shipping by rail and 370% escalation in barge volume. One explanation for this is cheaper fuel prices, which reduce the cost of shipping by rail and sea. Another reason could be the lack of support for more pipelines. Keep in mind that although this growth is substantial, the comparable volume is not. According to the EIA, pipelines have a definitive lead in the midstream market - more 76% by volume. This remains true for now, however pipeline volume grew at one of the lowest averages per year over the past decade, which should be a major concern. Elements other than fuel prices contribute to the conversation about infrastructure. Safety is one aspect 14
section of pipeline is being built roughly half a mile away from the Standing Rock Sioux Indian Reservation, the tribe maintains sacred burial grounds and the Missouri River will still be damaged as a result of the current construction route. Countless demonstrators from across the country and the Obama Administration have joined forces with the Native American tribe to stop Energy Transfer Partners from finishing the pipeline. Unfortunately, their demonstrations are not always peaceful. Crowds violently clash with security guards and vigilantes carelessly attempt to shutdown other pipelines in order to emphasize their point. For better or for worse, social media amplifies activists’ efforts. On the one hand there is serious concern that construction will infringe on the Standing Rock Sioux’s rights. And on the other hand, there is fear that a disastrous pipeline spill is eminent. The latter fear is not only unsubstantiated, but it epitomizes this theme of an uninformed citizenry.
that is often misconstrued. While it is inevitably brought up in most discussions, safety statistics are often overshadowed by harshly negative views. Unfortunately, these views are not entirely unsubstantiated since over 1,400 pipeline spills have occurred in the U.S. between 2010 and 2013. While it is important to recognize the numerous accidents that occur, spill volumes are relative to total volume transported. According to the Association of Oil Pipe Lines, 99.999% crude oil is delivered safely by pipeline, making it the safest method of transport. Due to the shear amount flowing through pipelines, these spills are comparatively immaterial. This is not to say that all pipelines (and pipeline companies for that matter) are in the clear. Corroding pipes completed during the 1980s oil boom that never received proper maintenance cause almost all major spills. Perhaps there is something to be said about changing pipeline regulations, but one point is certain, new pipelines are not as problematic as old ones.
When reading any report regarding the DAPL or the industry in general, it is essential to remain skeptical and to review the facts. Public perception will play an increasingly important role in creating safer, cheaper, and greater energy in the future. Understanding more about the entire oil and gas narrative is a great start to shaping a well-informed opinion. Reading this general overview of the two segments is one way to begin a meaningful development but there are many other ways to continue online. As natural resource production is expected to rise for the foreseeable future, it is imperative that consumers understand and join the conversation about oil and gas right now.
Now that production and transportation are gaining momentum, it is time to narrow back our focus to improving transportation infrastructure so that the benefits of growth do not bottleneck, thereby hurting consumers. Altering regulation or constructing new and safer pipelines causes a great amount of frustration. An extreme example of rising resentment is the gaining momentum of people protesting the Dakota Access Pipeline (DAPL). For those who are unfamiliar with the DAPL, it is a 1,200-mile oil pipeline being built by Energy Transfer Partners that will have the capacity to transport 570,000 barrels per day from North Dakota to Illinois. Of course, this is not the only pipeline project in the country, but it has attracted many activists unlike others. Last month, construction halted due to groups claiming that a section of the pipeline will disturb sacred tribal burial grounds, violating the National Environmental Protection Act (NEPA). While the proposed
DAPL protesters stand against the police in October 2016 (Source: Reuters)
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Upon completion Morocco's solar plant Noor will be the world's largest, producing enough energy to power over one million homes by 2018.
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Lights Out: Africa’s Struggle with Electricity Electricity is a key driver for economic growth; it supports sectors from business and medicine to agriculture and export industries. Sub-Saharan Africa remains a region with the greatest electricity deficit and energy-related bottlenecks cost African economies 2-4 per cent of their gross domestic product every year. The demand for a policy to resolve the limited and unreliable power supply has been increasingly at the forefront of governments’ agendas. While policymakers and donors should make a combined effort to ensure universal access to modern energy by 2030 in the context of Sustainable Development Goals, there are immediate policy areas where local policymakers can make significant improvements. Short term strategies should target 1) simplifying connection processes, 2) improving reliability of power supply and 3) ensuring affordability of electricity.
utility companies, whether they are domestic or multinational in scale, to implement a transparent and straightforward connection process. By having a clearly established fee chart and deadlines, the connection process can become more formal and reduce unnecessary bureaucratic interactions and facilitation payments that customers need to undergo. Second, electricity distribution companies should streamline the process of getting electricity and reduce repetitive approvals that can be done in one window. Some utilities have already undertaken successful steps to streamline internal processes that can be replicated by others. The utility company in Kenya, for example, in 2015 invested in a geographic information system that increased technical precision of connection and speeded up the process of getting electricity.
Limited access to electricity unveils alarming reality: About 90 per cent of children in subSaharan Africa go to primary schools that lack electricity. In rural areas, where the majority of Africans reside, electricity distribution is almost non-existent. In places where electricity is available, the unreliable network with frequent and lasting power outages poses a challenging environment for both small and large businesses. It is not surprising that African entrepreneurs identify the quality of electricity and the process of obtaining an electricity connection as biggest obstacles to operate. According to the Doing Business report, the process of connecting to the electrical distribution grid in sub-Saharan Africa is the second worst globally. A typical customer in Africa needs to pay 3,800 per cent of income per capita to cover connection fees and facilitation costs and has to wait 120 days until electricity actually starts flowing. In view of such lengthy and bureaucratically burdened processes, it becomes imperative to simplify connection procedures. First, national regulators and policymakers should oblige
Electricity consumption in Africa per country (Source: World Bank) 17
Even when formally connected, intermittent power supply can cost local businesses thousands of dollars in interrupted manufacturing and spoilages of running equipment. Customers in sub-Saharan Africa experience on average 9 electrical outages per month, lasting a total of 63 hours. Unreliable power provision forces entrepreneurs to purchase expensive and polluting generators, which raise their production costs and decrease competitiveness. To minimize customers’ losses in case of unplanned outages, regulators must ensure reliable power supply and compensation mechanisms. To do so, regulators must set minimum quality standards for outage occurrences and require electricity companies to regularly report on these indicators. In absence of such measures, unregulated power companies are more prone to providing less quality for the price at which they sell electricity. One measure to protect customers is the adoption of automated systems to record power outages and restore electricity distribution. On average, economies with this type of monitoring mechanism have 14 outages per year with a total duration of 30 hours.
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limate change is causing the Arctic region to warm twice as fast as the rest of the planet. With an average decline of 13 per cent per decade Arctic sea ice is retreating at an unprecedented rate in human history. A key threshold in the discussion is a sea ice extent of less than one million square kilometres, in which case the Arctic Ocean is said to be ice-free. As climate models predict such ice-free summers in the region as early as 2020, Arctic waters become increasingly more attractive for the purpose of shipping: Choosing the Northern Sea route over the Panama strait shortens the journey between Pacific and Atlantic Ocean by about one third of the total. Throughout human history the opening of new shipping routes has been accompanied by fundamental economic and political change. In the Arctic it will be no different. Already, the interests of major oil companies follow the boundaries of summer ice extent as they withdraw northward.
A challenging task for policymakers is setting the right electricity tariff that is not too low to compromise profits for power companies, but not too high to hinder promoting affordable electricity among the poor. In some countries where electricity tariffs are prohibitively high, such as Sierra Leone, the population is forced to rely on inefficient and polluting traditional fuels, such as kerosene. In others, people opt to electricity theft. In 2016, stealing electricity cost 10 billion shillings to Kenya’s power distribution company. To allow lower-income groups enjoy the benefits of power provision, policymakers must set affordable tariffs below production costs through, for example, transparent subsidy regimes.
This comes as little surprise given that the region is considered among the richest in terms of natural resources. A report published by the United States Geological Survey in 2008 suggests that the Arctic seabed contains about 20%
Establishing a conducive environment through eliminating burdensome procedures and improving reliability of both electricity supply and its affordability should play a positive role in unlocking Africa’s economic potential. These interventions alone are certainly not sufficient to overcome the many barriers to electrification in sub-Saharan Africa. Securing sustainable energy for future generations, requires policymakers and donors to commit to considerable financial means and technical expertise to expand generation capacity, increase access to power, and secure alternative sources of energy.
Distribution of Arctic territories (Source: USGS) 18
The Race for Arctic Resources
poorly understood as pointed out by a report released by the International Oceanographic Commission. As environmentalists restlessly point out these difficulties, governments have gradually become aware of their responsibilities. Efforts have been taken to provide clear guidelines and conditions that companies need to satisfy if they are to be eligible for exploration and drilling activities in the region. Among these is the Bureau of Ocean Energy Management (BOEM), which was established in 2011 and aims to manage resources in the US outer continental shelf in an environmentally responsible way. In March this year
of the world’s oil and 30% of its gas reserves. Yet the exploration for petroleum in the Arctic is technically more challenging than in any other environment. It has only been in recent years that technological advances combined with a high oil price have allowed for significant advances in exploration. The most prominent of these exploration activities has been conducted by the Anglo Dutch oil giant Shell. The company was given permission under the Obama administration to drill offshore in an area known as the Chukchi Sea near Alaska despite heavy protests from environmentalists. Green campaigners accuse the industry of seeing the progressing ice melting as business opportunity rather than a warning. According to Greenpeace spokesman Ben Stewart, it would be impossible to clean up the mess stemming from an Arctic oil spill. Indeed, the prospect of an oil spill similar in dimension to the Deepwater Horizon catastrophe in 2010 should be alarming. What makes matters more difficult in the Arctic is that access to the region would be severely compromised as only a quarter of the region can be reached by boat in winter months. Extreme cold, moving ice floes, high wind and low visibility all contribute to making spill response operations extremely difficult. To complicate matters even further, many of the biological and physical processes operating in the Arctic are yet
The Arctic seabed contains about 20% of the world’s oil and 30% ofits gas reserves BOEM presented a first proposal for the 2017-2022 licensing program for US drilling activities in Arctic territory. BOEM is further seeking dialogue regarding activities in areas where there interests of oil companies clash with the interests of local communities. The circumstances have changed since Shell started to pursue drilling licenses in the Arctic. After spending $7 19
billion during the course of the project Shell declared last year to cease all offshore drilling in the region. Plummeting oil prices and abundant oversupply as the result of a global battle for market share have rendered the project unprofitable. Ann Pickard, Shell’s top executive for the Arctic, explained that oil from the Chukchi Sea could only be competitive at prices close to $70 a barrel. The current low around $50 a barrel has not only driven many US shale players into despair but it has also put a hold to more expensive offshore exploration activities in the Arctic.
Realising the importance of Arctic resources for future energy supply, the international waters of the Arctic region are increasingly becoming part of territorial dispute. The neighbouring countries of the United States, Russia, Canada, Denmark, Norway and Iceland are all claiming ownership of territories, which in addition to oil and gas are estimated to hold significant reserves of minerals and rare earth metals. Just earlier this year Russia presented a claim to the United Nations over a territory that extends beyond the 200-mile zone along the Russian polar sector. If the claim is accepted, Moscow will have oversight of drilling activities in the seabed area that includes the North Pole.
The recent downturn in the oil sector has also hit Russia, whose economy is heavily dependent on energy exports. Declining state revenues have prompted Russia to produce at unprecedented levels. This becomes apparent in Russia’s activities in the Arctic where it is taking the lead in offshore oil production as a way to make up for declining production
Russian activity in the Arctic is not limited to the exploration of new resources however. The country has recently added a 6,000-soldier permanent military force to the Arctic’s
Russian production from Arctic oil fields (Source: Bloomberg)
northwest Murmansk region and is expanding its submarine with new technologies and weapon systems. Admiral Haakon Bruun-Hanssen, Norway's chief of defense, is worried that Russian military presence in the Barents Sea has grown in recent years and that the gap between Russian and Western military capability is narrowing down. The last time this happened was during the Cold War and a NATO response will certainly follow.
in Russia’s biggest fields in West Siberia. Since the first offshore oil rig started producing in the Pechora Sea in 2014 production has ramped up significantly. Exports from Russian Arctic terminals have doubled since last year and combined exports from Russia’s northern coast now equal total exports from Libya. And yet, plans for the future are ambitious. Sergey Donskoy, Russia’s minister for Natural Resources, previously stated that the Arctic shelf remains a strategic direction for development and that the government has introduced tax reliefs for companies to stimulate exploration activities in the region.
Whether we are seeing a new arms race or not, much is at stake in one of the last untouched parts of nature on earth. Amid an uncertain future the current focus shifts towards the outcome of the recent presidential elections in the US. The unexpected victory of president-elect Donald Trump puts a damper on recent ambitions to tackle climate change. During his campaign he repeatedly denied the existence of climate change and stated his plans to reverse the Paris accords. While it is yet too early to say how things will play out, there is substantiated worry that the US is taking a new direction by deregulating the fossil fuel industry. With this in mind, it seems the Arctic race has just gone into the next round.
While Russia is taking the lead, other countries follow close. Earlier this year Norway has announced the release of drilling licenses to 13 oil companies in the Arctic region. Among these are such prominent names as the Norwegian oil giant Statoil, the US groups Chevron and ConocoPhillips and Britain’s Centrica. It was a historic occasion and the first time since 1994 that the country has opened a new sector to the petroleum industry. The decision comes as output from maturing fields is declining and the current low in oil prices is putting pressure on Norwegian state revenues. 20
Quo Vadis Renewables?
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cars. Used for high-scale energy storage, these batteries turn out to be unprofitable due to the short lifespan and the potential dangers arising from using them, for example overheating.
he year 2015 proved to be a year full of milestones for the renewable energy industry. For the first time, 25 per cent of the energy in the United Kingdom was supplied by renewables, outmatching power generated by coal-fired plants (22 per cent). For the first time did the generated solar power in the UK exceed that of coal, with solar panels producing 50 per cent more electricity than coal. For the first time since the late 19th century, Britain went momentarily 'coal-free' in its electricity production, with generation rates dropping to zero several times in May.Regarding these major achievements and the hazards fossil fuels pose, many raise the question why our society still has not gone completely fossil free and why the transition from fossil fuels to renewables still remains so controversial. What seems to be the problem with renewables?
Nonetheless, companies and governments accept these comparatively minor drawbacks in favour of environmentalism. In fact, prices for renewables have been decreasing steadily and considerably throughout the years. For example, the Fraunhofer Institute for Solar Energy Systems in Germany, Europe's largest institute for solar research, says that prices for a 10 to 100 kWp (kilowatt peak, the output power by a solar module at peak performance) photovoltaic rooftop-system fell from 14,000€/kWp in 1990 to 1,270€/kWp in 2015. Still, prices for renewables remain higher, although becoming increasingly competitive.
Renewables are, amongst other things, used for electricity supply and fully depend on the current availability of their energy source. Scarce or missing source supplies mean limited or no energy generation at all, which is also known as intermittency. Put into context, if the sun does not shine or the wind does not blow, there is no energy. In this case, fossil fuel plants serve as a back-up electricity source in order to provide sufficient energy supply. Essentially, intermittency is the determining factor preventing
Prices fell from 14,000€/kWp in 1990 to 1,270€/kWp in 2015
Development of solar panels (Source: Bloomberg)
According to a Bloomberg analysis about Australia's electricity generation, electricity from a new wind farm is 14 and 18 per cent cheaper than from a new coal and gas plant, respectively. Similarly, investments in renewables have been soaring. As capacities increase and costs fall with time, the profitability of renewable energies grow, unlike fossil fuels whose low prices yield low profit and, thus, keep investors away. Investors have realised that in the long-term renewables will be more lucrative and, therefore, invest in
renewables from their establishment as optimal and reliable energy source. The current approach to the solution of the intermittency problem is storing the excess energy (excess supply) during low demand in pumped hydroelectric energy storage or batteries, in particular lithium-ion batteries, used, amongst others, in laptops, mobile phones and electric cars in larger quantities. However, these lithium-ion batteries are not only costly, which also explains the high price for electric 21
them. The Renewables Global Status Report (REN21) found that investments for renewables reached a new maximum of $285.9bn in 2015 and, for the first time, outstripped investments in both coal and gas. However, the 'energy revolution' has been met with divided responses so far. The UK government decided in 2015 to introduce a 65 per cent subsidy cut to households installing rooftop solar panels and in July 2016 approved of building Hinkley Point C, a nuclear power plant financed by Chinese and French investors. Not only do these developments show quite plainly that sometimes economic and political interest takes priority, they have also led to job losses in the solar energyindustryand adrop in green investments in the UK. In the meantime, countries in Africa and Latin America are making considerable progress. Morocco recently started a solar energy project. Over the period of 2015 to 2020, the country plans to construct five solar power stations and expects renewables to account for 42 per cent of the total power capacity by 2020. Morocco is only one example of how countries can achieve energy security and create new industry sectors while cutting down on greenhouse gas emissions and tackling climate change. Other countries, on the other hand, face the problem of the fossil fuel industry being too interwoven with their economies and generally the population's lives – through cars, flights, heating, electricity, household items – making it more difficult to give up on fossil fuels. Improving the capacity of renewable energy is, consequently, urgently required. Numerous technology start-ups have emerged, introducing new concepts for battery storage enhancement and optimisation. One of the new type of rechargeable battery being researched on is the flow battery. With higher energy density and limitless longevity, allowing for a higher
energy capacity over long duration, easier manufacturing and cheaper production costs, flow batteries are certainly more suitable for industrial-sized energy storage during excess supply than lithium-ion batteries. Due to constant progress and refinement, it may take some time for these batteries to be fully established, but until then, lithium-ion batteries will prevail and are predicted to do so for the next decade. Other approaches include 're-inventing' lithium-ion batteries and minimising their drawbacks. These changes range from pushing up the energy density over accelerated charging to longer durability. Tesla, a US car and energy storage company, launched the PowerWall in 2015 and PowerWall 2.0 in 2016, a rechargeable lithium-ion battery for households that permits to store unused energy from their solar roof panels during the day and be used later in the evening, rather than be lost. The same applies here, start-ups and researchers constantly contribute with innovations. Looking from a more general perspective, there are alternative ways of dealing with renewable energy. Interconnectors enable the transport of energy flows within a country or between countries. This means that renewable energy could be transferred from regions with abundant reserves to regions in need of energy. The North Sea Offshore Grid, a proposed interconnector by the European Commission, would connect Norway and other EU countries, enabling an exchange of wind and hydroelectric power. Furthermore, smart home technologies are able to control household appliances and alter the electricity usage according to current energy prices, making electricity consumption more economical. All in all, the renewable energy sector promises plenty of interesting and highly needed advances in the future. Without a doubt, the current progress in technology and its implementation must occur as soon as possible, on the environment's and our behalf.
Local women transporting coal from an Indian coal field in 2012 (Source: Reuters) 22
India’s Energy Landscape
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ndia is among the fastest growing economies: World Bank data shows that GDP growth since 2005 has averaged 7.6% annually while GDP per capita has grown at a rate of 6.12% per year. Electricity has been key to India’s success. As with any economy, growth varies directly with electricity consumption. This relationship is simplified by looking at the kilowatt hour (kWh) per capita metric. A kilowatt hour is simply the amount of electricity produced by a watt of generation in sixty minutes. In 2013, the last year for which data is available, India consumed 765 kWh of electricity per capita. To put into perspective, this is about 86% less than the average U.K. household.
It’s obvious that coal is a major component to India’s generation mix and has been critical to its economic ascension. Moving forward however, shifting away from coal is one of a number of energy challenges India must address. Coal has a number of benefits. It continuously produces a lot of of power and once the generation station is built, the fuel is relatively cheap. Coal fired power plants are known as ‘base load’ resources. They produce power non-stop, which is critical to a stable power grid. Resources like wind and solar only produce when it is sunny or windy - they are intermittent. Despite these benefits, coal is a notoriously dirty resource. India alone produces 4.5% of global greenhouse gas emissions and has signed the Paris Agreement. Prime Minister Narendra Modi has committed to producing 40% of the country’s electricity from renewable sources by the year 2030. Today, including hydroelectric dams, India only produces around 28% of its electricity from renewable sources. Manish Bapna, managing director of the World Resources Institute said that India has one of the boldest renewable energy targets in the world, thereby making it destined to be a major player in solar and wind markets. As bold as this target may be, there is also a lot of potential for India to reduce its emissions by improving the efficiency of its current coal generation. Generation efficiency is a measure of how much energy is used to generate one kWh of electricity, it is simply a measure of how much you get from how much you put in. From 2009 to 2011, India’s coal generation efficiency was just 27%. The weighted average efficiency for coal in all countries in 2011 was 35%. If India were to raise the efficiency of its plants to the weighted average efficiency, they would reduce emissions by 43%.
In total however, India produces markedly more generation than the U.K. due to the size of its population. Where the U.K. produced a mere 356,800,000 megawatt hours (MWh) India produced a mammoth 1,208,400,000 MWh. So how does India produce its electricity today? First, understand the difference between energy and power. Power is defined as the rate of producing or consuming energy, energy is the amount consumed in total. Talking about how much energy India or the U.K. consumed refers to energy. One kWh is produced when one watt of power generates electricity for 60 minutes. Figure 1 shows India’s current power generation as a mix of resources broken down by percent.
This is easier said than done. India’s coal fleet is very old and in many cases the costs associated with increasing efficiency may be prohibitive. Furthermore, India is currently facing a shortage of the components that would need to be replaced such as boilers, turbines, and generators. While keeping emissions in check, India also needs to increase the reliability of its electrical grid, extend power
Figure 1: India's current power mix by resources
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to an estimated 400 million Indians who aren’t connected to the grid, and increase overall capacity to meet future demand. From the Prime Minister’s rhetoric and actions since taking office it appears that India’s strategy will be similar to that of the United States: an ‘all of the above’ approach that will expand renewables as a percentage of total capacity but still increase gas and coal generation. The problem of reliability was made obvious in 2012 when a black out left more than 620 million people without power. This is an economic problem as well. India’s industry cannot rely on the state forcing huge and redundant private expenditure. As a result, Indian car giant Tata Motors has already built its own power grid. Many experts claim that India raced to build out its infrastructure without committing to spending enough capital. Twenty years ago,
42% of Indian households were connected to the grid. Today this number is up to 66%. Beyond quick expansion, India’s grid is plagued by corruption, where politicians encourage diversion of power to their constituencies, or encourage their constituencies to steal power from the grid. This must be addressed moving forward. While the causation is not proven, there is a direct correlation with grid efficiency and economic growth. India has a difficult path ahead if it intends to improve reliability, expand access, increase capacity, and keep emissions in check. No doubt, the way India responds to this challenge will shape the power market through fuel prices and clean energy innovation.
The Potential for Alternative Energy in MENA
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The vast Saharan desert, stretching from the Atlantic Ocean, across North Africa and the Arabian Peninsula, to the Persian Gulf, is perceived by many to have the potential to develop solar technology. With its exposure to the sun and the vast swaths of empty land, the Middle East and North Africa (MENA) region has the potential to fully realize an alternative energy market. However, the potential has not been realised fully as of yet, realistically years behind the
ven with its geographical advantage, the Middle Eastern and North African countries will require further market reform in order to realise the full potential of alternative energy, specifically solar.
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requirements have been forecast to grow. OECD statistics show that MENA aggregate energy is expected to continue to increase above the world average, at around 3 per cent per year up to 2030, with electricity demand growing at 6 per cent a year over the same period. Furthermore, the security of the current energy sector has been questioned with the recent drop in oil prices. The provision of a secure supply of energy at affordable prices has not been a major area of political or economic concern for the region historically. Supplies have mostly come from either domestic sources or, through preferential contracts with other Arab nations that helped limit the risk of any supply disruption (such a case applies to Morocco, Jordan, and Lebanon).
United States, Europe, and Australia (places with notably less sunshine). Only now has a combination of demographic pressure, low oil prices and technological readiness primed the MENA states for more investment in solar power. The MENA region is considered by most to be the heart of the modern energy sector. Home to more than half of the world’s crude oil and more than a third of its natural gas reserves, the MENA region has, for the past fifty years, gained enormous significance as a global producer and exporter of energy. The Middle East alone accounts for over half of OPEC’s membership and more than a third of international production in 2016.
Figure 1: Regional trends in energy use, compound average annual growth, 1971-2010
Figure 2: Regional trends in energy intensity, compound average annual growth in consumption, 1985-2010
However, a new angle to the story develops when one observes the domestic markets. MENA states have experienced growth historically faster than most other regions in relation to energy consumption, peaking during the 1970s (a decade representing vast expansion in the region’s oil producers in particular). Even though demand has decelerated to around 2 percent, this only places the region second to the rapidly-growing economics of South and East Asia (Fig 1 & 2). Furthermore, for many of the Gulf States, consumption has grown faster than the regional average. According to the Oxford Institute for Energy Studies, aggregate Gulf demand (including the GCC economies, Iran, and Iraq) has risen five-fold since the 1980s for primary energy, making it the world’s fastest energy demand growth for any region when disaggregated from MENA demand.
With such growth in mind, Alternative energy such as solar could play a significant role in satiating growth with its regional and potential cost advantage. However, the issue surrounding solar and other renewables does not lie in their acceptability, or the economic and social benefits they provide, but relates to scale and economic feasibility. The key to determine any technology’s development is the comparative cost advantage it provides relative to existing technology. In this regards, renewables have faced more difficulty than other energy technologies due to the lengthy lifecycles they require to recover their high initial capital costs, the lack of externalities being considered in calculating the full cost of energy sources, and the additional cost of integrating new sources of technology into stable power systems. Even though the MENA region is considered a strong candidate for solar technology, suggesting that lifecycle costs would be lower relative to other regional markets, its mechanisms for pricing energy domestically is what has limited alternatives from taking hold in the MENA
Due to expectations for improving standards of living and increasing industrial investment programs across many MENA oil and gas producers, the region’s energy 25
economies. This can be derived from the structure of the social contract; electricity is considered a public good provided by governments, if not for free, at a fraction of the price most nations charge their citizens. As demonstrated by Fig. 3, the only nations that match European electricity prices are Morocco and the Palestinian territories.
run utility firm whose mandate is to provide a public service. Furthermore, private households can also be considered private sector participants, and their access and willingness to invest in PV installations can play a vital role in promoting renewables at a grassroots level. A liberalised market can further promote renewables uptake through the promises of costs saving - provided fuel input prices reflect economic costs and renewable energy source favourably compare with fossil fuels.
Furthermore, a transition towards renewable energy would require a radical market shift from its oil dependent economy. Plans for such shifts have been accelerated by the recent decline in prices. For example, Saudi Arabia’s “Vision 2030” is a blueprint for a post-oil era for the nation
The ways that MENA states are able to implement private sector access to the utility sector are numerous: Changes in
Figure 3: Cross-country comparison of average residential electricity prices in selected MENA and non-MENA countries, 2008
legislation can encourage public-private partnerships, allowing for gradual shift to private ownership of production. The state can still conduct utility provision, but it may over time also be liberalised, in order to provide consumers free choice over providers. In addition, a clear line towards capital must be drawn, potentially requiring government regulation to ensure that renewables projects are met by local banks and financial institutions. Capital risk in these projects is high, and investors may require additional guarantees such as feed-in tariffs. Islamic finance has also been considered a financial product to promote renewable energy investments, having been successfully used in Jordan and Morocco.
through a number of government led initiatives, such as increasing non-oil revenue by 300 million riyals ($80 Million), cutting water and electricity subsidies and the “preparation and implementation” of income tax on residents. However, such a transition will be difficult for a nation whose oil and gas sector accounts for about 50 per cent of gross domestic product and 85 per cent of export earnings. Expect growing pains. However, all is not lost. There are many routes to growth. The overall consensus is to shift responsivity of the energy sector away from government and into the free market. The majority of MENA nations comprise of centrally planned economies. As such they exhibit draconian measures of control on, what would be in the west, private industry. Bringing in private sector participants could be a critical factor in creating greater investment in the sector, in both new overall capacity and in renewable-based capacity itself. The private sector can alleviate many issues that MENA governments face with every project they take on. Private firms can shoulder project risk, and can respond to financial incentives faster and more effectively than the single, state
The desert is vast and harsh, but it provides a great opportunity for the entrepreneurial and determined. Solar is poised to grow in the region, and whilst it will stay subordinate to oil and gas for now, it is primed to become a more prominent part of the energy mix in the MENA region. However, this will require government to adapt to new market mechanisms that reflect costs and help build systems that preserve, rather than destroy, value. 26
Dye-Sensitised Solar Cells and the Future of India’s Energy Mix
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ith India soon to surpass China in terms of population size and with hundreds of millions still living disconnected from the power grid, the future of energy consumption in India is deemed to massively impact the future of energy politics. Dye-sensitised solar cells might not be the answer to supplying electricity to disconnected rural areas, but the state of Kerala is at least looking into making this a temporary solution…
Girl using solar lantern to study (Source: ChildFund)
With approximately 300 million people living without any access to power and millions more with only sporadic and limited access - roughly two thirds of these in rural areas of India - Prime Minister Narendra Modi’s promise to electrify all villages with affordable power by the end of 2019 seems at least somewhat utopic. Before any such large-scale infrastructure investments are fully put into effect, many states are looking into alternatives to provide electricity to disconnected, rural villages faster and potentially decentralised energy production, to diversify away from the country’s unreliable power grid to avoid widespread blackouts which for instance left roughly 600 million Indians without power in 2012.
Partially also driven by the global movement towards renewable energies, the Kerala State Council for Science, Technology and Environment (KSCSTE) is making steps towards investing into dye-sensitised solar cells (DSSCs) after meeting with representatives of the Taiwan DSSC Photovoltaics Company to install DSSC-systems in selected rural areas. The way DSSCs work has often been referred to as “artificial photosynthesis”, in which the dye absorbs photons of a spectrum of wavelengths of light, which excites electrons in the organic dye molecules. These electrons then pass through an external circuit via a nanoparticle semiconductor, increasing the cell’s efficiency, over to the platinum electrode where the electron reduces the electrolyte, before oxidising the dye molecules again. Taiwan 27
technologies continues. A report by Global View Research expects the DSSC market to grow at roughly 12.4% per annum from $49.6 million in 2014 to $130 million in 2022, which could potentially be amplified even further by Prof. Jong-Beom Baek and his team’s findings. Investing in DSSC technology in Kerala forms part of combatting the problems caused by the lack of access to electricity in rural areas such as the negative impact on rural education and healthcare, which further increase the wealth gap between India’s urban and rural areas. The new technology helps, for instance, by enabling children to study in the evening using DSSC powered lamps, or to a certain extent by dampening the mass “urban migration which put extra pressure on the urban infrastructure”, so the director
DSSC PV General Manager Mr Lai has pointed out the fact that DSSCs can harness sunlight and indoor lighting in addition to being low-maintenance, cheap to install and flexible. Hence they are an attractive option for the Kerala state to consider as a short-term solution before tackling the bigger issue of producing and distributing affordable and clean energy throughout India. The ability to absorb a variety of wavelengths allows DSSCs to generate electricity in low-light conditions. What is usually a major issue associated with solar power generation, is their main advantage when compared to more common photovoltaic solar panels. Moreover, the fact that all materials involved are easy to manufacture, while regular photovoltaic solar panels require an expensive purification of silicon, make them an interesting option to consider for the future of solar energy
Blackouts left roughly 600 million Indians without power in 2012 of the Chennai Chapter of the India-based Observer Research Foundation. Or by enabling small businesses to continue to work longer hours and hence increase their revenues. Although recent developments could mean huge growth for the DSSC industry, it is clear that in the near future it is nowhere near enough to satisfy the energy needs of a world trying to move away from fossil fuels. This presents a harsh reality the world needs to face: Continuing to increase the use of fossil fuels in order to generate power for the growing world population and their needs or cutting fossil fuel production and greenhouse emissions at the expense of not giving many people in developing countries the living standards they aspire. Especially in India, with the soon to be largest population in the world, CO2 emissions are expected to increase by 90% by 2030. Even if the ambitious 35% decrease in emission intensity per unit of GDP by 2030 is achieved, this would mean a level of greenhouse gas emission similar to EU and US.
Figure1: Simplified Setup of a Dye Solar Cell (Source: Gamry)
production. However, an issue that is currently being tackled is the use of expensive platinum as an electrode in DSSCs. A team of Korean researchers from four universities headed by Prof. Jong-Beom Baek have developed an alternate counter electrode based on a mixture of graphene and selenium powder, which drastically reduces the cost of DSSC production and supposedly minimises internal energy loss of the cell. Although it is most likely not going to impact Kerala’s DSSC project, this new development has the potential to accelerate the commercialisation of DSSC technology not only in India, but worldwide as the search for new renewable energy
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The Energy Reform in Mexico: An Oil Perspective production. Ten years later, this share is down to 12%. Meanwhile, the public expenditure in PEMEX during the last 8 years has been increasing, for example from 2008 to 2009, the public expenditure rose to 247%. The combination of these circumstances and the fact that Mexico has the potential to increase its production of oil through investment in deep water offshore fields, led to the energy reform.
After more than 70 years, on December 20 2013, the Mexican Congress approved the modifications to articles 25, 27 and 28 of the Constitution in order to permit the entrance of private companies in the hydrocarbons sector in Mexican territory. Specifically, the Congress approved the exploration and extraction of crude oil. The purpose of the following document is to explain why the energy reform happened, what have been the steps to achieve the reform and what are the prospects for the Mexican energy market over the next years. Before the change in the law, Petróleos Mexicanos (PEMEX) was the sole company in charge of the upstream and downstream sector in Mexico. In the last fifteen years, PEMEX produced an average of 2,876 thousand barrels per day (tbd). Figure 1 shows that Mexico’s oil production, from 2000 to 2004, was rising from 3,012 tbd to 3,383 tbd. Since then, oil production has been in decline until 2010, where production settled around 2,500 tbd. After 2014, when the energy reform took place, oil production started to decrease again.
Figure 2: History of production at Cantarell field (Source: SIE)
Since the constitutional changes the first step of Mexican authorities was to assign PEMEX a sufficient number of fields (see Table 1) for the company to be able to compete in the market. This process was called Ronda Cero (Round Zero). The principal result from this policy was an assurance of production for PEMEX of 2.5 million barrels per day (mbd) in the next 20.5 years. These resources came from the assignment of 20,589 millions of barrels of crude oil equivalent plus a number of prospective resources. After the Round Zero assignment, the Mexican Energy Department and the National Hydrocarbons Commission submitted the guidelines for the first bidding procedure of oil fields, known as Round One. There, the authorities established what would be the type of fields and the prospective resources. In summary, within a pool of 169 blocks, where 109 are exploration blocks and 60 are extraction blocks, private companies and PEMEX can bid for a total of 3,782 MMboe of 2P reserves and 14,606 MMboe of prospective resources.
Figure 1: History of total Mexican oil production (Source: Sistema de Información Energética)
The main reason for the decline of crude oil production in Mexico is the depletion of the Cantarell field during the last eleven years (see Figure 2). In 2004, production from Cantarell represented around 63% of Mexico’s total oil 29
Figure 3: Round Zero results (Source: SecretarĂa de EnergĂa)
Finally, even though the current conditions are not ideal due to the recent downturn in the oil market , opportunities in the Mexican oil market persist. Currently, the National Hydrocarbons Commission is bidding in the fourth stage of the Round One process. This includes ten deep water fields, located in the Gulf of Mexico. The prospective resources that are expected to be obtained from these areas amount to 4, 823 MMboe. In that manner, while the international oil market is correcting itself, it is important to know that Mexico is ready to negotiate when the demand for oil recovers to balance the oversupply that exists today.
While the energy authorities where managing the bidding process, the Mexican Congress on August 11 2014 approved what are called the secondary laws of the energy reform. For the oil market, the most important were the Hydrocarbons and the Revenue on Hydrocarbons Law. The first one explained the rules that regulate the supply chain for the petroleum market. The Revenue on Hydrocarbons Law, on the other side, explained the expected fiscal revenues from companies and PEMEX for the Mexican government.
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