[yt_dropcap type=”square” font=”” size=”14″ color=”#000″ background=”#fff” ] A [/yt_dropcap]ll seemed hunky-dory. The air was suffused with a sanguine current cascading through the markets and rallying up the prices touching a year-high of $53.73. Saudi Arabia aims to cut 2%-4% of total production and Russia also says that it will drain some 700,000 bpd. But the whole scenario was tinged with a shadow of askance.
Soon after Russia said that she is ready to cut production, Rosneft’s boss put a check on the growing positivism by infusing uncertainty into the air. He said that we will not participate in this cut or freeze program.
Few days back when Saudi Arabia and Non-OPEC members met in Vienna in order to mull upon the minutiae as preparation for the final November 30th deal. There is almost a whole month to go before the world see what might happen on that very day. But before it I would like to veer the reader’s attention towards some of the stones that the OPEC and Non-OPEC producers have to turn in their way to reach at their destination.
A Look at Fundamentals- Figures and facts tend to depict a picture that is not corrupted by subjectivity, sentiments and speculations. International Energy Agency in its last oil market report give us a peek into the latest trends. “Global oil supply rose by 0.6 mb/d in September, with non-OPEC up nearly 0.5 mb/d on higher Russian and Kazakh flows and OPEC at an all-time high”. Also, “due to OPEC growth” the world supply tumefied to 97.2 mbpd- a 0.2%increase. The rig count, calculated by Baker and Hughes (of-late, engaged in a merger with GE), has been rising for 17 weeks only to fall by 2 in the past one (ending October 28th) making the total rig count 441. The EIA states that the US production has fallen only 0.10% . The inventory level, as per American based EIA, has seen a huge build-up of 14 million barrels for week ending October 28 sending crude 3% low. The aforesaid is a kaleidoscopic picture imbued with a numerical color. Some good and some bad news.
Exemptions and Excuses- First it was only Iran now another country stands in the queue to receive the largesse of exemption from any sort of cut or freeze. The new country is Iraq. OPEC’s second largest producer says that it should be exonerated from any production cut as it needs cash to fight the balaclava wearing IS terrorists. Iran, with an unwavering stance, rejects any notion of curtailing its production by abducing a simple argument: after years of sanctions its pulverulent pumping jacks are now waggling the dust off and it will be a pure folly to halt its production. Libya is another contender waiting to be absolved. Nigeria hit by the recent spate of attacks by Niger Delta Avengers too. And both are in no mood to curb. Nigeria’s output is reaching to its pre-crisis level as pointed out by Nigerian oil Minister Emmanuel Ibe. Its Trans Niger Pipeline has also resumed operation. Libya, since September, has ramped up its production to 590,000 bpd. This puts the onus on Saud Arabia and Russia. The latter one also seems dubious for, albeit said to participate in the deal, the figures in their budget finds itself in a contradiction as they aim to extract more than 11mbpd in the coming year(s). Last month KSA’s production also broke the ceiling when it touched an all-time high of 33.6mbpd. Certainly, not a good recipe to heal the markets.
Agreement- Let’s assume the best of scenarios. At the table, Mr. Khalid Al-Falih stands up and sprinkles the words that send a wave of relief and a smile among his interlocutors. “We have decided to cut production”, he heralds with a sense of far-sightedness and sensibility deeming himself as the sailor who seem to take pride to steer away the Saudi boat away from the whirlpool of economic pressures that has caused a dent in one of the top 20 biggest economies of the world. Russia follows and Mr. Putin reverberate the same. Gasps. Some flabbergasted. Some happy. The markets revel. All back to normal (normal will now be $60-$70). An uncannily prosperous picture, indeed. But the question then swims from this sea of mirth and start to surface on the level i.e. how long will this deal hold? Russia has recently bought Essar oil company which gives it control in one of the biggest and burgeoning market of the world i.e. India. The Kashagan oil field has started oozing out black gold and it will further contribute to the current supply glut. There is no demand as the Paris based IEA also said in its October oil market report that the demand has further slowed down. China, the main driving force behind the demand, is tepid. Also, the metamorphosis of a cut into quotas can also be witnessed. “The High Level Committee of experts will meet again in Vienna on Nov. 25 ahead of the next meeting of OPEC ministers on Nov. 30, to “finalize individual quotas”. Again quoting IEA Non OPEC supply is expected to increase by 0.4mbpd in 2017.
Mr. Fereydoun Barkehsli, Advisor of the Institute of International Energy Studies and Head of Vienna Energy Center in response to the question that what might be the issues impeding Nov. 30th deal, says: “Saudi Arabia was OPEC Swing producer for several years. The Kingdom was Quota-free under the condition that once market was under-supplied or over-supplied, Saudi Arabia would adjust its supply accordingly and an official price level would be maintained. But as crude oil prices plummeted during 1984-85 Mr. Zaki Yamani who was then Kingdom’s oil minister officially announced that his country could not cut down production any longer to maintain price and asked for production quota. Since then Saudi Arabia has persistently asked for pro-rata cut by all members. Iran is not the only member who is unhappy about cutting production, but all members who have already reached their production peak do not want to cut, because once demand and price was on the rise, Saudi Arabia got most of the market share ergo the dissent of other members. Russia and non-OPEC producers have a different story of their own. Russia has consistently jumped over OPEC shoulders and benefited from the organizations higher demand and price and never contributed towards OPEC sacrifices. I believe in 30 November’s Ministerial conference in Vienna the organization will have to fight at two fronts. Moscow is, behind the scenes, lobbying with Venezuela and Iran for exemption but neither of them is supportive of giant non-OPEC producer.”
Indonesia’s ‘Superheroines’ Empowered with Renewables
About a third of Indonesians, roughly 80 million people, live without electricity and many more with only unreliable access. In the country’s eastern Solor archipelago, a programme is looking to tackle this issue with an innovative approach, by empowering women with renewable solutions for rural and remote communities.
“In rural Indonesia, energy poverty affects men and women differently and there is a clear and important intersection between energy access and gender equality,” says Sergina Loncle, the Communications Manager at Kopernik, a non-profit organisation headquartered in Indonesia. “Although women have been traditionally restricted from access to information, assets and resources, in many cases they generally are the decision makers on energy issues at the household level, which makes the inter-linkages between energy and gender more pronounced.”
Kopernik believes that empowering women to become micro-social-entrepreneurs will help boost incomes and make clean energy technologies available in off-grid communities. To support this, the organisation launched Wonder Women, or in Indonesian, Ibu Inspirasi, which literally means inspirational women and mothers, says Loncle. The Wonder Women programme gives Indonesian women solar technologies on consignment and shares a margin on every sale — boosting the ability of women to support their families, helping to reduce the problems associated with inadequate and dangerous energy technologies, and improving the quality of life within the community.
A Kopernik survey suggests the programme is working. Reports show that after 12 months 26% of ‘Wonder Women’ know how to run a business and 21% become more empowered within their families — taking on a greater role in household decision making. Almost half of the survey’s respondents perceived an improvement in their self-status and 19% have increased their empowerment within the community.
Women in the programme are inspirational figures in their villages as they help make clean energy technology available to friends, relatives and neighbours, explains Loncle. Wonder women often become a pillar of support and inspiration for other women in the village, encouraging them to join the programme or support other business ventures.
“I am grateful because people in my community now use affordable, clean energy technologies,” says Maria Nogo, a Wonder Woman in Larantuka, East Flores who has been a part of the programme since March 2015. “By becoming a Wonder Woman, besides saving money, I also have opportunities to introduce these technologies to the people in my community, so I can support them to have a better life.”
A better life with renewables
In its market analysis for Southeast Asia, IRENA supports the Wonder Women programme and advocates for the host of socioeconomic benefits renewables bring to Indonesia and the countries in its region. IRENA shows that renewable energy solutions can reduce fuel expenditures — which drains the limited resources of the poor — and decentralised renewable energy access can substantially reduce poverty by empowering individuals and communities to gain control over their energy supply and reduce their energy spending.
“Over 206,000 Indonesians are directly employed in the renewable energy sector, but there is growing body of evidence that renewable energy solutions support income generation and job creation beyond the energy supply chain,” says Rabia Ferroukhi, Head of IRENA’s Policy Unit and Deputy Director of its Knowledge, Policy and Finance Centre. She says renewables enable technologies that contribute to improved health, access to education, clean water and good nutrition, and can increase economic productivity.
To better assess the economic benefits of decentralised renewable energy in rural areas, poor urban communities, and remote islands of South East Asia, IRENA advises policy makers to look beyond the consumptive uses of energy (e.g. household lighting, cooking) and to also consider its productive uses.
“In remote and rural areas, like those found in Indonesia, renewables are not only the most cost-effective way to provide energy access, they’re a reliable way to support social services and economic development, and that’s a strong reason for governments in the region to support programmes like Wonder Women,” Ferroukhi adds.
Economic value of energy efficiency can drive reductions in global CO2 emissions
Ambitious energy efficiency policies can keep global energy demand and energy-related carbon-dioxide (CO₂) emissions steady until 2050, according to a new report by the International Energy Agency. Perspectives for the Energy Transition: The Role of Energy Efficiency shows that despite a near-tripling of the world economy and a global population that increases by nearly 2.3 billion, end-use energy efficiency alone can deliver 35% of the cumulative CO₂ savings through 2050 required to meet global climate goals.
Global energy demand grew by 2.1% in 2017 according to IEA estimates, more than twice the growth rate in 2016. At the same time, global energy-related CO₂ emissions increased for the first time in three years, as improvements in global energy efficiency slowed down dramatically to 1.7%.
“Among all energy trends in 2017, the one that worries me the most is the slowdown in energy efficiency improvements,” said Dr Fatih Birol, Executive Director of the International Energy Agency. “The rate of improvement that we saw is around half of the rate that is required to meet clean energy transition goals.”
IEA analysis in Perspectives for the Energy Transition: The Role of Energy Efficiency demonstrates that on top of a wide range of benefits including cleaner air, energy security, productivity and trade balance improvements, there is a compelling economic case for energy efficiency. But, without further policy efforts, these benefits are unlikely to be realised as less than a third of global final energy demand is covered by efficiency standards today.
Realising the full potential of energy efficiency will require a step-change in investments on the demand side of the energy equation, rising to USD 1.7 trillion per year through 2050, the majority of which is for energy efficiency and the electrification of transport. On the supply side, the focus is on reallocating investments towards renewables and other low-carbon technologies such as nuclear and carbon capture, utilisation and storage.
While the scale of the demand-side investment required may appear challenging, fuel cost savings over the lifetime of most technologies are larger than the investment required, which implies a strong economic benefit that arises from energy efficiency investment. Although there are still many low-hanging fruits that can pay back their initial investment quickly, payback periods are often too long to attract investment from consumers and businesses. Effective policy frameworks are needed to overcome economic and non-economic barriers to energy efficiency and to incentivise adoption of more efficient technologies.
Perspectives for the Energy Transition: The Role of Energy Efficiency demonstrates a compelling economic case for energy efficiency as being essential to make the energy transition affordable, faster and more beneficial to all. The IEA recommends that governments adopt a strategic approach to energy efficiency, supported by well-designed efficiency policies and a strong focus on implementation and enforcement.
Report: Powerful New Policy Options to Scale Up Renewables
A new report by the International Renewable Energy Agency (IRENA), the International Energy Agency (IEA), and the Renewable Energy Policy Network for the 21st Century (REN21), Renewable Energy Policies in a Time of Transition, is an unprecedented collaboration that sheds new light on the policy barriers to increased deployment of renewables and provides a range of options for policymakers to scale-up their ambitions.
Since 2012, renewable energy has accounted for more than half of capacity additions in the global power sector. In 2017 alone a record-breaking 167 GW of renewables capacity was added worldwide. 146 million people are now served by off-grid renewable power, and many small island developing states are advancing rapidly towards targets of 100% renewables.
One of the main rationales behind the call for a higher share of renewables in the energy mix is the urgent threat posed by climate change. Of the 194 parties to the United Nations Framework Convention on Climate Change 145 referred to renewable energy in their nationally determined contributions (NDCs), and 109 included quantified renewable energy targets. Air pollution is also a pressing issue, with an estimated 7.3 million premature deaths per year attributable to household and outdoor air pollution. Energy security is another influencing factor, with small island states particularly affected by security issues and resilience in the face of natural disasters. Finally, countries looking to expand energy access in rural areas are increasingly turning to renewables as the most cost-effective, cleanest and most secure option.
But the pace of the energy transition needs to be substantially accelerated to meet decarbonisation and sustainable development objectives. As outlined in IRENA’s recently-released Global Energy Transformation: A Roadmap to 2050, to achieve the two-degree goal of the Paris target, the share of renewables in the primary global energy supply must increase from 15% today to 65% by 2050. Gains in the electricity sector must be matched in end-use sectors such as heating and transportation, which together account for 80% of global energy consumption.
Renewable Energy Policies in a Time of Transition provides policymakers with a comprehensive understanding of the diverse policy options to support an accelerated development of renewables across sectors, technologies, country contexts, energy market structures, and policy objectives, to scale up renewable energy deployment. An updated joint classification of renewable energy policies to illustrate the latest policy developments around the world.
Key areas of focus:
Heating and Cooling
Heating accounted for over 50% of total final energy consumption in 2015, with over 70% of that met by fossil fuels. To increase the use of renewables, a range of policy instruments are required. These include mandates and obligations, which can offer greater certainty of increased deployment; building codes, which implicitly support renewable heating and cooling from renewables by setting energy performance requirements; renewable heat and energy efficiency policies that are closely aligned to leverage synergies and accelerate the pace of transition; fiscal and financial incentives, which reduce the capital costs of renewables; and carbon or energy taxes, which provide important price signals and reduce externalities.
Transport is the second largest energy end‑use sector, accounting for 29% of total final energy consumption in 2015, and 64.7% of world oil consumption. With the exception of biofuels, there is little practical experience of fostering renewables in transport. Policies and planning should help overcome the immaturity or high cost of certain technologies, inadequate energy infrastructure, sustainability considerations and slow acceptance among users as new technologies and systems are introduced. They should also build improved understanding between decision makers in the energy and transport sectors, so as to enable integrated planning and policy design. Removal of fossil fuel subsidies is also essential, especially in shipping and aviation.
Although the power sector consumed only about a fifth of total final energy consumption in 2015, it has received the most attention in terms of renewable energy support policy. Investments in the sector are largely driven by regulatory policies such as quotas and obligations and pricing instruments, supported by fiscal and financial incentives. Quotas and mandates cascade targets down to electricity producers and consumers, but require a robust framework to monitor and penalize non-compliance. Administratively set pricing policies (like feed-in tariffs and premiums) need to continuously adapt to changing market conditions and the falling cost of technology. Auctions are being increasingly adopted, given their ability for real-price discovery, and have resulted in a five-fold price reduction between 2010 and 2016, though auction design is crucial.
A number of countries and regions are reaching high penetrations of VRE in their power systems, and implementing policies to facilitate their system integration. Strategies for system integration of renewables are crucial to minimise negative impacts, maximize benefits and improve the cost effectiveness of the power system. As VRE shares grow in the power system, so do the challenges of system integration.
A wide range of policies have been adopted to support the growth of renewable energy around the world. The nature of those policies in a given country depends on the maturity of the sector, the particularities of the market segment, and wider socio-economic conditions. As this report shows, as deployment of renewable energy has grown and the sector has matured, policies must adapt and become more sophisticated to ensure the smooth integration of renewables into the wider energy system – including the end-use sectors – and a cost-effective and sustainable energy transition.
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