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CPEC: The not so cool COAL corridor

Ali Salman Andani

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With energy comes wealth and with wealth comes prosperity! No one can doubt the veracity of this conclusion. But most of the times we forget to scrutinize the “energy” which generates that wealth and societal well-being. For a developing nation state like Pakistan, good infrastructure and plentiful energy are very necessary ingredients to grow and stabilize its economy. A friend in need is a friend indeed. China, the all time friend of Pakistan, showed the act of friendship in April 2015, when President Xi Jinping visited the country to oversee the signing of agreements aimed at building $46 billion (now worth $62 billion) China Pakistan Economic Corridor (CPEC) as a part of his One Belt One Road initiative between Pakistan’s Gwadar Port on Arabian Sea and China’s western region of Xinjiang. This multibillion-dollars project is intended to develop Pakistan’s infrastructure, transportation and very importantly will help the country alleviate chronic energy crisis. The mega project has been declared “a game changer” for Pakistan by its government, but I think that it has been failed in properly analyzing the costs and benefits of the project. There isn’t only a huge monetary cost associated with the economic corridor which Pakistan will bear- as it has to pay back the principal amount of loan with interest, that China is providing her in the name of CPEC, but will also incur hefty environmental cost .

A big portion of total cost of CPEC, nearly $33 billion will be invested in the energy sector of the country. Pakistan’s average demand of electricity (according to the International Energy Agency) is around 19000 MW, while its generation capacity is around 15000 MW, that is, a total energy deficit of 4000 MW. According to IEA’s prediction, by 2025 Pakistan’s per day average electricity demand would reach as high as 45000 MW. To help Pakistan getting out of this serious energy crisis, the multi-billion-dollar economic corridor has numerous power plant projects. Most of the energy which will be generated under CPEC will be from coal fired power plants. $5.6 billion worth of coal power projects are expected to be completed by 2019 in CPEC’s “Early Harvest” projects, but what about the environment?

There are certain compounds (mainly in the form of gas) which trap heat energy in the earth’s atmosphere, keeping the earth’s surface warmer than it would be if they were not present. Such compounds are termed as greenhouse gases. Ability of these compounds to trap heat energy is what causes greenhouse effect. Sun is the main source of heat energy on earth. Greenhouse gases allow sunlight, shortwave radiations, to pass through the atmosphere freely, where some of it gets absorbed by the earth’s surface and the remaining bounces back out towards the space in the form of heat. A portion of this is then trapped by the greenhouse gases present in the atmosphere. It is the shape of these compounds which allow them to trap and then re-emit the heat towards the ground which increases the temperature of the globe. Natural greenhouse effect maintains the temperature of the earth and makes it suitable for the life to exist. It shows that basically these gases have a great role in making the life possible on the earth – without them the average temperature on the earth would be -18 °C! But they become a source of great trouble when their concentration in the atmosphere grows to the level where they cause century-scale rise in temperature of the earth’s climate system, also known as global warming, and as a result of it we observe rise in sea level because of the melting of glaciers and ice caps, extreme weather events like cyclones, droughts and floods, increase in the rate of evaporation which causes extreme rainfalls and snow events around the globe and much more.

You may think what this explanation has to do with Pakistan, CPEC, coal and energy. The biggest problem associated with burning coal is that it releases a number of pollutants and airborne toxins which contribute to climate change and negatively affect human health. Carbon dioxide which is the major output of coal combustion is a forcing greenhouse gas! We call it forcing because it takes many years to leave the atmosphere. Methane also comes in the same category. It is not a by-product of coal combustion but is formed as part of the process of coal formation. Thus it gets released from the coal seam and surrounding disturbed rock strata when coal is mined. China Pakistan Economic Corridor, as I already have mentioned, includes majority of coal-fired power plant projects and with that it also includes project under which 1.57 billion tons of lignite coal will be extracted (3.8 billion tons per annum in first phase as “Early Harvest” stage of the economic corridor) from the allocated area of Block II in Tharparkar.

Sindh Engro Coal Mining Company (SECMC), a joint venture company with the Government of Sindh, Engro Powergen and Affiliates namely, Thal Ltd. (House of Habib), Hub Power Company, Habib Bank Limited, China Machinery Engineering Corporation (CMEC) and State Power International Mendong (SPIM) will be responsible for the extraction of this coal which will be utilized by a mine-mouth power plant (a part of CPEC) having sub-critical power generation technology (emits approx. ≥880g CO2/kWh :Adapted from IEA, Technology Roadmaps, High-efficiency low-emissions coal-fired power generation, 2012) which is being established by Engro Powergen Limited, a Joint Venture Company of Engro Powergen, China Machinery and Engineering Company, Habib Bank Limited and Liberty Mills Limited. Commercial operation date for phase one of both Projects is expected to take place by mid – 2019.

There are total 7 coal-fired power plant projects under “Early Harvest” stage of CPEC. Out of these seven, 2 are currently operational, namely Coal-fired Power Plants at Port Qasim Karachi with generation capacity of 1320 MW and Sahiwal Coal Fired Power Plant with generation capacity of 1320 MW . Both are based on super critical technology which is efficient Up to 42%, emits 800-880g CO2/kWh and consumes 340-380g of coal per kWh. Other then these 2 plants 5 are either under construction or still need approval.

Engro Thar Block II 2×330MW Coal fired Power Plant (already discussed in paragraphs above), TEL 1×330MW Mine Mouth Lignite Fired Power Project at Thar Block-II and ThalNova 1×330MW Mine Mouth Lignite Fired Power Project at Thar Block-II which are collectively classified as Thar Block- II Coal Power Projects is currently under construction. This power station will use sub-critical power generation technology.

Sino Sindh Resources Limited (SSRL) Thar Coal Block-I Mine Mouth Power Plant (under-construction) , with generation capacity of 1320 MW will also have sub-critical power generation technology which is in general efficient up to 38% , emits ≥880g CO2 (Carbon dioxide) per kWh and consumes ≥380g of coal per kWh. These figures are same for all coal-fired power plants which use sub-critical technology. 6.5 million tons of coal per annum will be extracted from Block I of Thar coal mine. Never-ending hunger of coal!

China Power Hub Generation Company 1,320MW Coal-Fired Power Plant in Hub, Balochistan (needs approval of the provincial government of Balochistan) will have super-critical technology installed which is efficient Up to 42%, emits 800-880g CO2/kWh  and consumes 340-380g of coal per kWh. Again, these figures are same for all coal-fired power plants based on super critical technology. Thar Mine Mouth Oracle Power Plant, with generation capacity of 1320 MW was elevated to the priority list of projects under the China-Pakistan Economic Corridor (CPEC) in June 2017 but is still in pre-permit development stage.

It is crystal clear that Pakistan’s romance with coal has no place for the environment. Seven priority coal-fired power projects, out of which two are currently operational and very soon all will together be polluting the environment with tons of carbon dioxide being emitted. Furthermore, coal extraction from Thar coal mines block I and II will pump bulk of methane into the atmosphere and altogether both power generation and mining projects will contribute to increased greenhouse effect in Pakistan. It shows that the environmental cost of the economic corridor is much more than its economic gains. Indeed a bitter truth. Most shocking part of the story is that China itself is putting more focus on renewable energy resources for its electricity demands but  pushing Pakistan towards a fossil-fuel dominant energy structure. In 2017, China eliminated or suspended 65 gigawatts (GW) of coal-fired capacity which exceeded the national target of 50 gigawatts! The country has vowed to improve its notorious air pollution and upgrade its coal based energy structure by reducing coal consumption and boosting clean energy use.

According to the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (AR5), global greenhouse gas (GHG) emissions have accelerated to an unprecedented level. The report indicates that in 21st century the global average temperature is likely to increase by 0.3°C to 1.7°C for their lowest emissions scenario, and 2.6°C to 4.8°C for business as usual carbon intense emissions. According to the report, to limit the global average temperature by 2°C, global GHG emission must have to be curtailed by 40 to 70 percent. High rate of carbon dioxide and methane emission from coal combustion and mining is posing a greater risk to the climate of Pakistan than ever before. Greenhouse gas inventory of Pakistan for the year 2011-12 show that the total carbon dioxide emission was 369 million tons of carbon dioxide equivalent (MtCO2e) . 45.9% of the total CO2 emission was contributed by energy sector, 44.8% from agriculture and livestock sector, 3.9% by industrial procedures and 2.6% from forestry sector. The situation is alarming! 90.7 % of the total emission bulk comes from energy and agricultural sector.

Now that you know greenhouse gases traps heat energy and when they re-emits it back toward the surface of the earth, results in the increase in average temperature, which we also called greenhouse effect. This effect is very prominent in Pakistan. According to the Asian Development Bank’s 2014 report, namely “Assessing the Cost of Climate Change and Adaptation in South Asia – Manila”, in the last century, warming trend of 0.57°C in the annual mean temperature was observed from 1901 to 2000 in Pakistan. From 1961 to 2007, an increase of 0.47°C, which was more accelerated, observed. According to the 2009 Technical Report by Pakistan Meteorological Department, winters got more affected as the average winter temperature for increased from 0.52°C to 1.12°C (province to province variation) . Highest increase in winter temperature was observed in the province of Balochistan. From 1960 to 2007, the average annual temperature in Pakistan got increased by 0.87°C (max) and 0.48°C (min) . The fact that winter temperature is increasing in all four provinces of Pakistan and that mean annual temperature showed an increasing trend, that is, increased by 0.57°C in 20th century makes it clear that greenhouse effect is very prominent in Pakistan and don’t forget to take into account the accelerated trend of warming, a rise of 0.47°C, from 1961 to 2007. Increasing winter temperature means more summer (warm days).

According to the Global Change Impact Studies Centre’s 2005 Final Technical Report for APN CAPaBLE Project , the annual and seasonal trends in the average annual temperature in different climatic zones of Pakistan from the year 1951 to 2000 are as follows : A) the average annual temperature has been increasing in most parts of the country. B) all the regions show an increasing trend for the pre-monsoon summer months (April-May). C) The Balochistan Plateau is getting hotter in all the seasons.

Increasing temperature affects water cycle in negative ways. A warmer climate means more evaporation from land (soil moisture) and water bodies (rivers, lakes, sea and oceans), thus it results in a rise in moisture holding capacity of the atmosphere, and when a storm passes through a warmer region holding more water, we witness heavy rainfall (an atmosphere with more moisture can produce more intense precipitations events, which is exactly what has been observed). For each degree rise in temperature, the moisture holding capacity of air goes up by 7%. Heavy precipitation doesn’t mean an increase in total rainfall over a season or over a year. This simply indicates a decrease in moderate rainfall, thus an increase in the length of dry periods. Moisture holding capacity of the atmosphere increases with increasing temperature but it doesn’t mean that increased moisture will fall evenly all over the country; rather some zones will see more extreme rainfalls while other areas will see less due to shifting weather patterns and other factors. Most immediate impact of heavy rainfall is the prospect of flooding. According to the statistics mentioned in Asian Development Bank’s 2013 report, namely, “Indus Basin Floods: Mechanism, Impacts and Management. Manila” , the super flood of 2010 in Pakistan, alone resulted in over 1,600 casualties. Furthermore, it inundated an area of 38,600 square kilometers and caused damage worth USD 10 billion! In addition to flooding, intense rainfall also increases the risk of landslides. When above-normal downpour increases the water table and saturates the ground, it results unstable slopes, causing a landslide. According to 2014 “Climate Change and Infrastructure, Urban Systems, and Vulnerabilities: Technical Report for the US Department of Energy in Support of the National Climate Assessment. Island Press”, heavy rainfall-induced landslides in mountainous urban centers have been observed in Pakistan.

Global Change Impact Studies Centre’s 2005 Final Technical Report for APN CAPaBLE Project says that annual precipitation has been increased by 61 mm in Pakistan from 1901 to 2007. Monsoon rains increased by 22.6 mm and winter precipitation got raised by 20.8 mm. The report summarized that annual precipitation has generally been increasing except coastal areas.

With increase in global temperature, it is observed that oceans are expanding (thermal expansion) and glaciers are melting, thus it results in global mean sea level rise.  Intergovernmental Panel On Climate Change (IPCC) Fifth Assessment Report (AR5) says that global mean sea level rose to 0.19 meter over the period of 1901-2010.  Sea level rise for Pakistan is estimated at 1.1 millimeter per year from 1856 to 2000 along the coast of Karachi (Arabian Sea coast). (Source: The Impact of Sea Level Rise on Pakistan’s Coastal Zones – In a Climate Change Scenario. 2nd International Maritime Conference at Bahria University, Karachi). According to IPCC’s fifth Assessment Report (AR5), mean sea level rise of 0.2 – 0.6 meter will be observed by the end of 21st century. Of course it will affect low-lying coastal areas of Karachi. Inundation of low-lying coastal areas, destruction of mangrove forests and reduction in fish and shrimp productivity (mangroves are breeding grounds for fishes and shrimps).

Let us now see the effects of climate change due to increased greenhouse effect (because of greenhouse gases emission, especially carbon dioxide and methane from coal-fired power plants and coal mining under CPEC respectively) on different sectors of Pakistan. Because of increase in annual mean temperature and precipitation, agriculture sector will be affected the most. Pakistan’s economy is agro-based, and it contributes 21% to the total GDP of the country. According to a report produced by World Wild Fund for Nature (WWF) Pakistan, by 2040, a rise in temperature (0.5°C to 2°C), agricultural productivity will decrease by 8-10 percent.(Source: A. Dehlavi et al. 2015. Climate Change Adaptation in the Indus Ecoregion: A Microeconometric Study of the Determinants, Impacts, and Cost Effectiveness of Adaptation Strategies. Islamabad: World Wide Fund for Nature (WWF) Pakistan). A study has shown that there will be a 6% decrease in wheat yield and 15 to 18% decrease in the yield of basmati rice will be observed across the country (except northern areas) by 2080. (Source: M. M. Iqbal et al. 2009. Climate Change Aspersions on Food Security of Pakistan. Science Vision. 15 (1). Islamabad.)

Due to increased greenhouse effect, increased recession of Hindu Kush- Karakoram- Himalayan (HKH) glaciers is observed. This will affect river flows in Indus River System. As Himalayan glaciers will be melting for next 50 years, water flow will raise in Indus River, but after that, because of no glacier reservoirs, flow will decrease substantially by 30 to 40 percent over the next 50 years. (Source: K. Hewitt. 2005. The Karakoram Anomaly? Glacier Expansion and the ‘Elevation Effect’, Karakoram Himalaya. Inner Asia. Mountain Research and Development: Special Issue – Climate Change in Mountains. 25 (4).). This variation won’t just affect the availability of water in upper and lower Indus but will also hit Pakistan’s overall agricultural sector. Increasing number of floods due to increase in heavy precipitation in the form of rain because of greenhouse effect, results in  high sediment inflows in artificial water reservoirs (dams) and therefore reduces storage capacity.

Greenhouse gases emission from coal-fired power plants and coal mines, which are and will increase greenhouse effect (increase temperature) will affect the energy sector as well. Hotter temperatures will increase energy demands (increase in air-conditioning requirements) in summers and as a result more dirty energy from coal will be generated and thus more greenhouse gases emission. Himalayan glaciers are melting because of high annual mean temperature, which will reduce the availability of water for hydropower generation. Floods as a result of heavy precipitation will damage power plant infrastructure. Increased atmospheric temperature increases the temperature of water bodies. Nuclear and coal-fired power plants use water for cooling purpose. Not so cool water won’t be effective for cooling purpose, thus the efficiency of these plants get reduced.

System of transportation also gets affected by greenhouse effect. Heavy precipitation events cause flooding. Because of old infrastructure of road railways and airports extreme weather events affect their quality. Landslides (as discussed before) affect mountainous transportation.

Mining of coal in Thar Block II by SECMC (Sindh Engro Coal Mining Company- as discussed above), is done by open pit mining procedure because the coal is buried inside layers of ground water . Therefore, the water has to be pumped out of the mines and then it has to be stored somewhere. SECMC has planned to build an effluent disposal reservoir (near Gorano village) in which this waste water will be stored for two and a half years (or more). In 2016, people living in this area protested to stop the construction of reservoir. The waste water will contain Total Dissolved Solids (TDS) , the quantity of which is around 5000 ppm, which is much higher than the World Health Organization (WHO) standards, that sets the maximum contaminant level for TDS at 1000 ppm. People of Gorano village are worried about the seepage from this reservoir, that will possibly damage the quality of the underground water which is being used by them for drinking, farming and other daily life purposes. Furthermore, coal mines puncture and drain groundwater reservoirs in its vicinity and thereby depriving communities living around from the precious natural resource – water! Before burning coal, it is washed to clean it from impurities. This wastewater, full of harmful toxins has to be disposed off somewhere. In Pakistan where no one cares about following rules and regulations, this water could end up being disposed in nearby lakes and rivers. On one hand it makes the water undrinkable and on the other, destroys fresh water habitat.

Combustion of coal not only pollutes air with carbon dioxide, but also with other harmful pollutants, which negatively affect human health. Mercury emissions from coal fired power plants damage nervous, digestive and immune system in human beings. 1/70th of a teaspoon of mercury deposited on a 25-acre lake can make fish unsafe to eat. Sulfur dioxide (SO2), which is produced when sulfur in coal reacts with oxygen, when reacts with other molecules in atmosphere it produces acidic particulates. When these particulates are inhaled they can cause asthma and bronchitis. Sulfur dioxide is also responsible for acid rain! These plants also emits nitrous oxides (NOx), which when inhaled can cause irritation of lung tissues and make the inhaler susceptible to chronic respiratory diseases like pneumonia and influenza.

Coal ash, which is the by-product of coal combustion and contains concentrated heavy metals, including many known carcinogenic and neurotoxic chemicals, is either buried underground or stored in open reservoirs. During heavy precipitation event, this highly toxic ash mixes with water that runs off into nearby fresh water bodies and pollutes them.

So what is the ultimate purpose of CPEC? At such hefty environmental cost, all that economic prosperity becomes meaningless. You are digging in the land of Thar for coal and at the same time depriving the communities living there of fresh water! Because of greenhouse effect, Himalayan glaciers are melting which is affecting water flow in Indus river system has been affected, crop yields are reducing, people are dying from extreme weather events like floods, droughts and heat waves, coastal land is inundating due to sea level rise, transport infrastructure is being destroyed by heavy precipitation and people are inhaling polluted air and drinking water full of carcinogenic and neurotoxic pollutants because we want energy form coal! World is progressing. Countries, including China are reducing their fossil fuel energy infrastructure and boosting the use of renewable energy resources. Protecting climate is necessary. For Pakistan burning coal for energy is like firing your own house for some heat! Stop it! Stop burning coal!

Sources:

Columnist, blogger and social activist. Studying Economics and International Relations. My writings on socioeconomic issues, foreign affairs and culture frequently get published in DAILY TIMES, ARY NEWS Blogs and DUNYA NEWS Blogs. Twitter: @an_alisalman

Energy

Potential of Pakistan’s Power Sector

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A few years ago, several hours of load-shedding in Pakistan was very common, even in Islamabad, the capital of Pakistan was without electricity for 6 hours on daily basis. Thanks to CPEC, thanks to China, who has completed several power projects and the people of Pakistan are relieved a lot. Now there is still load-shedding but only for couple of hours. The country was able to produce 16000 MW of electricity in the 7 decades almost. And most of the mega projects were completed in 1960s or 1970. Last 4 decades the nation was unable to add any significant amount of power into national grid.

China helped Pakistan to over-come its power shortage and just within few years, under CPEC, the country was able to add 11000 MW of power into National Grid. There are several power projects under execution or in the pipe line. It is believed, that next couple of years and we may get rid of load-shedding absolutely. However, it is also expected that due to planned industrialization, the demand may also increase tremendously. We still need to focus on the power generation, transmission and distribution. As the transmission is rather old and line losses are rather high. There is a need to up-grade our transmission system on urgent basis. The major issue is still the distribution, which resulted in theft of electricity. Line losses and theft made electricity rather expensive as it has to be recovered from consumers.

However, Pakistan possess potential of 65000 MW hydropower generation. Some of the sits are natural dams and suits for electricity production easily. Building big dams or mega dams, require a lot of investment as well as technical expertise too. But, small dams are easily constructed by our private sector. The requirement of investment is within the reach of our private sector and the technology required is also available within the country.

Dams also store water which will be additional value for Pakistan. As Pakistan is a country which faces water related disaster twice a year. During the rainy season, heavy rains causes flood every year and damages our crops, cattle’s, villages and loss of human live. Floods cause spread of seasonal diseases and epidemics also cause a big loss to nation. Just after a few month, Pakistan faces drought season too. During the drought season, water shortage cause big damage to human life and animals’ and husbandry. Crops suffered heavy losses due to shortage of water.

If appropriate dams are built, it may generate power to meet the national requirements as well it stores water during rainy season to avoid floods and utilize water during the drought season. We can overcome some of our serious problems by indigenous technology and domestic resources, without going to International donors.

Usually building big dams requires a long time 10-15 years, but our political system is based on 5 years tenure term. Most of political parties do not initiate any project, which cannot be completed within their tenure and they get benefits of completed projects during the election. As a practice, most of political parties never takes any initiatives, which may goes to credit of next government. But recently, Pakistani voters have become matured and they understands the worth of long term projects and may vote for those who are visionary leaders and sincere with Pakistan, and take long tern initiatives for the best interest of the nation. Our political parties may also up-date their strategies accordingly.

Not only hydropower, even Pakistan is rich with coal. Only Thar coal can meet the nation’s energy requirement for next 500 years. Coal technologies are on its path of rapid development. There exists technologies to convert coal into natural gas, or diesel. Coal can also help the whole downstream hydrocarbon industry too. Clean coal technologies are already applied in the field. Pakistan can be major beneficiary of its coal reserves.

God has blessed Pakistan with unlimited solar energy. There are areas in Pakistan, where the Sun shine duration is above 300 days in a year, and upto 18 hours of Sun shine on daily basis. This unique potential may be exploited for green and clean energy. Wind is also one of our strength.

What do we need? An enabling policy from Government of Pakistan. The policy may be focused to attract local entrepreneurs based on incentives. Sustainable and long term incentives, and protection may be the priority of Government. Our private sector possess the potential of rapid growth. It may include International market too. But the indigenous know-how and domestic investment may be given priority.

If PTI government can deliver something like this, their next elections are guaranteed to win.  As per my perception, Imran Khan, the prime minister of Pakistan has vision, has will and sincere with the nation, based on our understanding, we expect he will take serious notice of things and include power sector in its priority too.

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Energy

Back to the future

Laszlo Varro

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In the classic Back to the Future movies, the future was powered by a decentralized clean-energy system. Houses and flying cars ran on fuel cells fuelled by residential garbage. The technology itself isn’t particularly far-fetched – not the flying car bit, but the process to power a fuel cell from hydrogen produced by methane from garbage is relatively straightforward for today’s biogas plants.

But time travel aside, what the 1980s vision of the future missed are the actual technologies that emerged started to reshape our energy system in the last three decades since the movies came out – namely wind, solar and battery electric cars. While the present of the energy system is strikingly similar to the 1980s with a practically unchanged domination of fossil fuels, the expectations of what will follow shifted. This is a very different future and one that creates a delicate challenge for the electricity sector.

Transport is a huge and growing energy consuming sector. It represents 28% of total final energy consumption, and is responsible for almost 60% of global oil demand. Electricity is used in transport, though today mostly in electric railways compared to which electric cars are still minor.

If garbage, or, in a more scalable fashion, biomass or hydrogen produced from natural gas, were to provide a clean-energy alternative for transport, the transport sector could move away from oil without integrating more deeply into the electricity sector. There would be no need to deploy new infrastructure to support electric car charging, no concerns about charging times and impacts on power flows, it would be business as usual for electricity.

In addition, garbage is easy to store, and fuel cells can regulate their production in a flexible fashion. In technical terms this creates decentralised dispatchable clean-energy production – meaning it can collect power into a central system, much like the current system. Such a technology would enable the continuation of a hundred-year paradigm of regarding electricity demand fluctuations as a given and managing the system from the supply side.

But, this market is tiny. Only a few thousand residential fuel cells are sold in Japan each year, nothing compared to the millions of solar panels sold around the world. To be sure, solar production varies with the weather and it is often not well correlated with demand. A solar rooftop with a battery in the garage seems like a perfect distributed dispatchable solution and generates increasing attention. However, more than 99% of the solar panels are deployed without batteries – their variability is handled at the system level rather than at a project level. In fact the optimal location is of batteries is often not next to the solar panel but in specific network nodes where their operation can relieve bottlenecks.

Solar and its twin brother, wind experienced a radical technological progress, cost declines and are rolled out at an impressive scale. While the energy system will continue to rely on a diversified set of fuels and technologies, the rapid growth of wind and solar will have to play a key role in tacking  disruptive climate change. Nevertheless, both of them generate electricity which accounts for only 20% of energy consumption today.  The full potential of wind and solar will be realised only if a much higher proportion of energy is consumed by electrifying other sectors, including transport. Such electrification not only reduces direct fossil fuel use in vehicles or buildings, but if done smartly it unlocks need new flexibility sources that wind and solar will need for really large-scale growth.

The transport technology that generates the most excitement is electric cars. Although personal cars represent only a minority of the oil use of the transport sector, electric cars capture public imagination in a fashion that is disproportional to their energy footprint. As a result, they tend to dominate discussions on the future of energy even though ships, aircraft or heavy trucks are most likely to continue to use oil for a considerable time. Linking electric cars to wind and solar creates major opportunities but also challenges. Cars and wind and solar production will need to interact through an interconnected system. An EV can’t be self-sufficient when coupled with a residential rooftop solar panel since solar production is low in the winter precisely when the car has a higher electricity need. In temperate climates, nearly all solar households remain connected to the grid with a changed utilisation pattern and wind is evolving towards a quintessential utility scale big business where technological progress makes wind turbines bigger and bigger rather than small and decentralised.

While early adopter electric cars used in suburban commuting can take advantage of the existing network and charge in the garage of the owner for mass adoption and long distance travel a new infrastructure development will be needed. High capacity chargers will require network reinforcements as well as a careful coordination of when the cars charge. Due to the energy density of hydrocarbons, it is not possible to copy the gasoline lifestyle to the electricity age. Plugging in and quickly filling the car at sunset will be part of the problem, responding to changes in wind with smart charging will be part of the solution.

A dominant role of electricity is not a new dream. The 19th-century science fiction novels of Jules Verne are full of electric cars, battery powered submarines and even electric helicopters. This electric future was delayed by the century of oil, but it is now arriving. Its features are becoming increasingly clear: A new electricity network that is more robust and more flexible at the same time. A new market design that is able to orient and optimise millions of producers, consumers and prosumers giving value to time and location. A new transport system where parking vehicles are not idle but act as active system assets.

Because of its security implications and importance to modern society, electricity will remain a heavily regulated industry where government policy plays a crucial role in guiding the transformation. This complex interplay of technology, investment, policy and regulation shaping the growing role of electricity will be depicted in the upcoming World Energy Outlook focus. In special effects, it might not be up to Hollywood’s standards, but it will be as exciting and innovative.

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Israel’s Gas Ambitions are Valid but Challenges Remain

Antonia Dimou

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The discovery of Israel’s natural gas resources promise important benefits of energy security and economic gains. Israel is a leading country because preparations to extract gas are already at advanced stages despite that its gas fields’ development has proved to be a lengthy process.

Delays are attributed to the fact that the fields’ development is capital intensive and entails risks that unsettle investors. A major risk is the lack of energy transportation infrastructure in Israel. Leviathan field partners namely Noble Energy, Avner Oil Exploration, Ratio Oil Exploration and Delek Drilling are likely to develop infrastructure used exclusively by Leviathan, blocking out competitors and endangering prospects for future gas discoveries in Israel. In particular, the likelihood that competitors will have to finance their own transportation infrastructure, raises the costs of developing smaller fields at prohibitive levels. Concurrently, the Israeli Leviathan field’s development, the largest exploration success since December 2010,is capital intensive given that it requires significant investment that will be carried out in two stages: the first stage foresees four development wells with an annual capacity production of 12 billion cubic meters (bcm) of gas, and, the second, four additional wells that would increase production capacity by another 9 bcm.

In regional terms, Israel’s efficiency as a gas exporter is significant. This is evidenced by the signing in early 2018 of two agreements valued $15 billion between Leviathan and Tamar fields’ consortium and Egyptian company Dolphinus Holdings for the provision of 64 bcm of gas over a ten-year period. The agreement are expected to produce three benefits. First, Egypt is a viable export market for Israeli gas and will thus generate interest from foreign energy companies to bid for licenses in future Israeli international auction rounds. Second, the Israeli government would benefit financially from royalties on sales and taxes on profits. Third, Leviathan partners will secure funding for the field’s development.

Reservations however subsist when it comes to the transportation of Israeli gas to Egypt via the existing pipeline infrastructure in Sinai as terrorist attacks on the pipeline could halt exports from Israel as it happened in 2012. The prospect of terrorism raises the cost of the Israeli fields’ development because of the increased risk premium. It is in this spirit that the construction of a subsea gas pipeline that connects Israel to Egypt could present a safer option. In any case, transportation of Israeli gas to Egypt is not only a milestone in regional gas cooperation, but also supports authentic Israel-Egypt normalization.

Israeli government interference in the form of heavy regulation and bureaucracy is a self-inflicted wound that prevents foreign energy companies from participating in bidding processes. Despite the approval of a revised framework for gas regulation by the Israeli government,  the first Israeli bidding process received limited attention taking into account that only a Greek energy company and a consortium of Indian companies participated. Notably, the main outlines of the revised gas regulatory framework included the mandatory sale by Delek Group Ltd, Avner Oil & Gas LP and Delek Drilling LP of all their rights in the Israeli Tanin and Karish fields that are currently owned by Greek Eneregan Oil & Gas Company; and, a stability clause which foresees that the Israeli government guarantees regulatory stability for ten years.

On a parallel level, overlapping maritime claims between Israel and Lebanon over a 854-square kilometer maritime boundary carry the risk of escalation. The January 2018 signing of Lebanon’s first exploration and production agreement (EPA) with a consortium of companies led by French Total as operator, and Italian Eni and Russian Novatek as partners signals competition that could evolve into confrontation over energy resources. Undoubtedly, in the absence of mutual diplomatic recognition between Lebanon and Israel, no trans-boundary natural resource sharing initiative can be taken. The consortium’s announcement that no operation within 25 km of the disputed area will happen leaves room for a third party mediation to minimize the risk of armed conflict and to work on reciprocal acceptance of the 2012 American proposal so that consensual and authorized economic activity becomes feasible. Noteworthy, the 2012 American proposal involved division of the disputed area granting Lebanon a larger share with the aim to serve as basis of bilateral discussions and be deposited with the UN.

To fulfill its energy potential, Israel should speedy proceed with the supply of gas pumped directly from the Leviathan and Tamar fields to LNG plants in Egypt as this will benefit both Egypt’s natural gas industry and development of Israeli fields.  Israel should also invest in security of its energy supply to refute the notion of insecurity that prevents foreign energy companies from investing in the country’s gas fields. Equally important, risks that concern investors like export sustainability should be addressed by guaranteeing a certain amount of financial recovery though the existing compensation mechanism. A transparent and predictable Israeli regulatory environment for foreign investors and access to external sources of project finance and loan guarantees and production commitments in Israel are important for the development of export oriented gas resources.

Unquestionably, decisive steps have to be taken by Israel so that a new horizon is revealed; the horizon of indigenous energy development.

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