Image Courtesy: UNSW
Happy World Environment Day
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Monthly Archives: June 2008
George Soros explains the oil bubble
Andrew Leonard at How the World Works – Salon.com
Soros listed four factors as playing a role
* “First, the increasing cost of discovering and developing new reserves, and the accelerating depletion of existing oilfields as they age. This goes under the rather misleading name of peak oil.”
* “Second, there is what may be described as a backwards-sloping supply curve. As the price of oil rises, oil-producing countries have less incentive to convert their oil reserves underground, which are expected to appreciate in value, into dollar reserves above ground, which are losing their value.”
* “Third, the countries with the fastest-growing demand, notably the major oil producers, China and the other Asian exporters, keep domestic energy prices artificially low by providing subsidies, therefore rising prices don’t reduce demand as they would under normal conditions.”
* “Fourth, both trend-following speculation and institutional commodity-index-buying reinforce the output pressure on prices. Commodities have become an asset class for institutional investors and they are increasing allocations to that asset class by following an index-buying strategy. Recently, spot prices have risen far above the marginal cost of production and far out forward contracts have risen much faster than stock spot prices.”
Andrew makes a good point about how it is tough to assign weights to these factors.
Interestingly, the subsidy of the Asian and middle eastern countries will stop providing the right signal to the market to develop renewable energy and in the long run this will hurt these countries more. However, if they risk increasing the price, there is the chance of stagflation.
Carbon Emissions Across the United States Graphic
Australian Cleantech Map
The Castellas brothers from Cleantech forum have produced a masterpiece in the area of Cleantech. They have created the first Australia Cleantech Map covering 300+ companies in this space in Australia. And it is free!
At the Beyond Carbon 2008 conference, I met Jeffrey Castellas. His speech on the cleantech market in India was one of the most bullish I have every heard in Australia. He sees opportunity where others see problems. And, he understands both Australia and India well. Jeff was kind enough to share a market intelligence report on how to create a clean energy company in India at the evening dinner. One of the best pieces of intelligence you can get in that area.
The entire industry is divided into six main categories of Air, Energy, Non Perishable Materials, Soil, Sustainable Technologies and Water.
Apart from the data, the design and presentation is excellent too.
Go, check it out.
Investment or Insurance perspective
In the Beyond Carbon 2008 dinner, Amanda McKenzie, National Coordinator of the Australia Youth Climate Coalition gave a fantastic speech. In her talk, she asked the audience about the probability of flying on a airplane with a 50% chance of survival but can take us to a nice place like a tropical island. Naturally, nobody was interested. Then, she questioned the chance of climate change happening. Would’nt that be the same thing?
Gene Sperling has more on this at Bloomberg.
Should a policy maker have to know beyond a reasonable doubt that climate change is caused by humans to support policies to address it?
The answer may depend on whether you take an investment or an insurance perspective to the issue of climate change.
From a conservative investment perspective, the prudent person chooses to invest new funds only where he believes it is more likely to get a higher return than leaving the money in low- risk bonds or money markets. From this framework, the skeptic needs a relatively high probability of certainty that climate change can be affected by changes in human activity before he could justify investing resources to address it.
Yet, if this investment perspective was appropriate for all areas of life, no one would ever buy a house or life insurance. After all, there is a very low probability that in any one year, or even over many years, that the purchaser of such insurance will see a return on his investment. Yet, I have still never heard anyone say, “Damn, what a poor investment I made buying fire and life insurance. It is New Year’s and I am still alive, and my house didn’t burn down. What a waste of money!”
People don’t need to know beyond a reasonable doubt, or even with modest certainty, that life or fire insurance will ever provide a positive return. They understand there is value in bearing modest costs to protect against the small chances of catastrophe.
The case for seeing climate change through an insurance lens comes more into focus once any cost-benefit calculation starts to include remote probabilities that the costs of inaction could be extreme.
The Chindia price
What is the single most important economic number that can make or break the climate change solution?
According to Vinod Khosla, it is the Chindia price.
SPENCER MICHELS: What do you call it, the Chindia price? China-India?
VINOD KHOSLA: Yes. I say most effective climate change technologies have to be on trajectory, they don’t have to day one be cheap enough, but they have to be on trajectory to meet the Chindia price, the price at which India and China would adapt these technologies for economic reasons. Because without India and China adapting these technologies, there is no cost effect, there’s no real climate change solution.
An extensive interview at PBS. Check it out.
Data system for Australian ETS
Data is the key to getting the emission trading system right in Australia. The discussions in Beyond Carbon 2008 was about managing the compliance issues around carbon. Data will play a major role in this.
According to ZDNet, the federal government has put out a tender to create a registry system.
The tenderer will have to supply and implement a registry — an
electronic database to store and manage these units — according to the
tender documents, as well as provide operational support and system
hosting.
This registry needs to connect to the international transaction log (ITL), which makes it compatible with other ETS’s around the world. It should also connect to the OSCAR (Online System for Comprehensive Activity Reporting) system which collects emissions data from large emitters and Federal and State government offices around the country. In fact, I have been trained and used the OSCAR system and its predecessar EDGAR to update emissions data for our organisation.
The first stage will be ready by the end of the year.
Green Airport in India
The recently launched International airport in my hometown of Hyderabad is a green airport.
The airport is Asia’s first airport to register under USGBC LEED NC certification for silver rating, and is going to be the world’s first certified green building (Edit: May be for a airport).
The airport consumes 25% less energy than what a similar facility without the environment-friendly features would consume. According to the data provided by Central Power Distribution Company of Andhra Pradesh, the airport’s average electricity consumption per month is 55,43,470 units.
The notable features of the new airport which makes it energy efficient are reduced overall conductance for the walls and roof, high performance glass with low shading coefficient and optimum visual light transmittance, overhangs and vertical fins to reduce solar gains, efficient chillers, efficient lighting using T5 lamps, amply day lit common spaces with photo sensor-controlled electric lighting, economiser and primary and secondary chilled water pumping for increased energy-efficiency.
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“The energy consumption without the green features would have been around 23 million KWH per annum but with all the green building technology the actual consumption is estimated to be 17 million KWH,” said a spokesperson for the GMR group.
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The cost of green building has also come down over the years. “The cost of first green building in India, the green business centre in Hyderabad, which came up in 2003 was 18% more than the conventional buildings, but the gap now is just 5%-8% more than a conventional building,” said S Raghupathy, Sr Director & Head, Green Building Centre (GBC).
Interesting numbers all along. In view of the climate change action plan, efficiency standards will be implemented by the market in view of the incentives from clean tech. The extra capital expenditure of green buildings are also coming down to international standards.
India’s draft climate change action plan targets efficiency
From the Indian Express
India has decided to stick to the safe path on dealing with climate change. In the much-awaited draft of its national action plan, there is no word on carbon cuts or caps on industry. Instead, it is “avoidance of emissions.” In the penultimate draft, there were caps specified for various sectors, including industry, which have been dropped — for now. The catchword for the action plan is “saving” or “efficiency” rather than capping.The key points of the action plan:
• Setting up eight missions for “multi-pronged, long-term and integrated strategies” for achieving goals on climate change in areas that include solar, enhanced energy conservation, sustainable habitats, agriculture, water and sustaining Himalayan ecosystems, Green India project.
• The Green India project, which is already backed by a Rs 7,500-crore corpus, will aim at greening 6 million hectares over a period of 10 years.
• The water mission will aim to increase water use efficiency by 20 per cent through pricing and regulatory mechanisms. The agriculture mission would devise strategies on new developing new varieties of crops that would withstand extreme weather and variable moisture.
As the TOI suggests, the discussion on caps/standards or efficiency measures was also based on sending the right political signals to the international community.
GEs Solar Business – $1 Billion in 3 Years
A solar bonanza for GE.
General Electric Co expects its nascent solar-energy business to hit the $US1 billion annual revenue mark over the next three years or so, the head of its energy arm said.
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The unit currently has over $US100 million in revenues…”If you think about the solar that’s on the market today, it’s six, seven times more expensive than wind,” Mr Krenicki said. “Solar requires material science breakthroughs, which is something that GE is good at.”
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The Fairfield, Connecticut-based conglomerate expects to apply lessons learned in quickly building its wind business — which is on track to hit the $US6 billion revenue mark this year –to solar, Mr Krenicki said.“We’re not going to dabble in the solar business,” Mr Krenicki said. “We will put the pedal to the accelerator once it is very clear what our competitive advantage is.”
