Oil sector ‘regulator’ needs a pipeline for talent

The DGH is looking to end the ‘revolving door’ culture

It may be time for the Directorate-General of Hydrocarbons to create its own cadre to avoid conflicts in its role

The clichéd stereotypes about government offices – as stuffy, overstaffed bureaucratic mazes – seem to slip-slide away at the Directorate General of Hydrocarbons, the nodal body tasked with overseeing many important aspects of the oil and petroleum sector.

That’s because although the DGH, which was set up in 1993, has an approved strength of 220, it has only about 150 people, many of whom are on deputation from public sector undertakings. It additionally has eight consultants with expertise in different fields. Given the expanding ambit of the DGH over these two decades and more, it is actually understaffed.

Set up at a time when private players were entering the oil exploration business in India and there was a need for a supervisory body, the DGH has no cadre of its own. It depends on staff on deputation from the National Oil Companies (NOCs), primarily ONGC and Oil India. But since these companies are themselves into oil and gas exploration, this raises questions of the DGH’s independence.

Over time, the DGH’s responsibilities have expanded. Besides monitoring the production in discovered fields, it is tasked with implementing the New Exploration Licensing Policy and opening up new unexplored areas and looking at futuristic hydrocarbon energy resources.

There have been repeated demands for the creation of a permanent cadre for the DGH or to allow it to recruit independently. But nothing has changed.

Conflict of interestOf all the concerns, it is the potential conflict of interest that worries industry players the most. Since the DGH oversees business across the public and private sectors, the fact that its staff is drawn from ONGC and OIL raises uncomfortable questions. “Remember, the DGH has access to all our data,” says an oil explorer from a large private sector company.

A former Petroleum & Natural Gas Ministry official says, “The system of rotation is unhealthy and ill-serves the independence of the DGH.”

Till recently, even the DGH chief was drawn from NOCs. Rajiv Nayan Choubey became the first bureaucrat without a background in the energy sector to head this upstream technical arm of the Ministry. Now, another career bureaucrat, Atanu Chakraborty, heads the organisation, but the Gujarat cadre IAS officer has served as Managing Director at Gujarat State Petroleum Corp.

So, is creating a cadre a solution or should the DGH get geological experts, petroleum engineers and others as consultants on market-based remuneration, as opposed to the PSU-style perks and incentives they are offered currently?

Niche, technical workThose in the DGH say that a cadre can be built only when the organisational strength is large and the work is of a generic nature. DGH work, on the other hand, is highly technical, and it has tough regulatory duties of monitoring exploration and production contracts. Considering this, the DGH can perform better if it has the flexibility to attract talent from diverse sources, admits a senior DGH official.

Deputations from PSUs typically last three years, extendable to five. How can people who come in for just a few years take complex decisions with long-lasting impact?

Senior DGH officials, speaking on condition of anonymity, acknowledge that short stints don’t engender a learning attitude. “Organisational memory is critical,” they say. Currently, officers expend the initial years of deputation in learning, but invariably, by the time they are trained, their deputation period has wound down.

There have been suggestions to appoint officers for long tenures with DGH and facilitate an assembly line for grooming talent.

DGH officials, however, dismiss concerns about potential conflict in their roles, noting that the responsibilities of officers on deputation are vastly different from their work in the PSUs.

So, why can’t the DGH hire people from the private sector? Earlier, expertise in exploration and production was only available with NOCs, but today the private sector too is talent-rich.

They don’t come cheap, but as a bureaucrat points out, the DGH has hired private sector experts in the past. “What draws experts to the DGH is a high level of motivation to serve with utmost integrity,” he says.

“If an individual is able to combine his knowledge and capability with organisational goals, the DGH will go the extra mile to hire and retain him,” he asserts.

Going forward, the fight for talent will only get more challenging if the DGH does not resolve its staffing issues one way or another.


View original post on Hindu Business line: http://www.thehindubusinessline.com/specials/the-babu-seat-middle-piece/article9459550.ece

All bets are off: 4 takeaways on what President Trump means for the power sector

The paradigm of decarbonization that’s guided utility sector investments for the past decade is now up in the air. How will the Trump victory impact other industries? Here’s what we know about the President-elect. 

After a long election night, the American public elected real estate magnate and reality TV star Donald Trump as the 45th president of the United States. The Republican nominee’s win shocked political commentators across the spectrum, as most election models predicted a victory for his Democratic rival Hillary Clinton in the hours before polls closed.

For the power sector, Trump’s election is likely an unwelcome development. U.S. utility companies gave more money to Clinton than any other candidate this election cycle, while none made sizeable donations to Trump. 

Much of that support came from the fact that Clinton is more of a known quantity to the power sector. Because they invest in multi-decade assets, utilities desire certainty and predictability out of policymaking, and the Clinton campaign laid out a full energy platform promising to build on the model of carbon regulation and renewable energy supports pushed by President Obama.

The Trump campaign, by contrast, was hard to predict: Beyond promises to roll back EPA regulations and support fossil fuels, he laid out few concrete energy policy proposals. And because energy and climate policy rarely featured on the campaign trail this cycle, the details of how a Trump administration would plan to transform U.S. energy production remain unclear. 

In the coming weeks, much effort will be spent trying to decipher who Trump will appoint and how his team will handle the specifics of energy policy. But given that President Trump will likely come into office with a GOP-controlled Congress and a vacancy to fill on the Supreme Court, there are some broad conclusions for the power sector that we can already draw. 

1. The Clean Power Plan — and other air regulations — are in danger 

One of the most immediate impacts of Donald Trump’s election is that the Clean Power Plan now appears much more likely to be struck down. 

The CPP is the EPA’s first set of federal carbon regulations and seeks to cut CO2 emissions from the power sector 32% by 2032. Though the utility industry is largely on board with the plan, a group of conservative states and fossil fuel interests challenged the rules, saying they constitute an overreach of EPA’s authority. 

Those arguments came to a head in September, when the D.C. Circuit Court held an en banc hearing on the regulations. Due to the composition of the court — six Democratic appointees and four from Republicans — legal experts largely expect the rules to be upheld there

But the Supreme Court could be a different story. No matter who prevails at the D.C. Circuit, the high court is expected to take up the Clean Power Plan next year. The justices have already shown interest in the case, placing an unprecedented judicial hold on compliance until court challenges are concluded. 

After Justice Antonin Scalia’s death earlier this year, the Supreme Court has a vacancy, and Republican senators have refused to confirm President Obama’s nominee, Judge Merrick Garland.

If the Supreme Court were to hear the Clean Power Plan case with one seat vacant, energy lawyers told Utility Dive that a 4-4 split would be plausible, which would uphold the D.C. Circuit decision. But if Trump puts another conservative on the court — as he has promised — it could potentially give CPP opponents the five skeptical judges they would need to overturn the Clean Power Plan. 

Given that Trump will come into office with a GOP-controlled Senate, that judicial outcome is now much more likely. But even if the Supreme Court upholds the plan, a Trump administration and Republican Congress could still scuttle it by defunding the agency or simply halting implementation work. 

And while the Clean Power Plan is the highest-profile EPA air pollution rule at risk in a new Trump presidency, it is not the only one. Fossil fuel interests still bristle at rules like the Mercury and Air Toxics Standards (MATS), which regulates harmful coal power pollution, and the EPA’s new source pollution rules, which govern emissions from new power plants. 

Trump has indicated that he wants to overhaul the EPA. With him in the White House, the future of any clean air or water regulation remains uncertain. 

2. Renewable energy subsidies could be on the chopping block

EPA regulations are a relatively easy way for Donald Trump to weaken President Obama’s clean energy legacy, since many of them are facing current court challenges or could simply not be enforced. 

Renewable energy subsidies would take more of an effort to revoke. At the end of last year, Congress reached a deal to extend supports for wind and solar energy into the early 2020s, with subsidy levels decreasing over time. That tax credit extension is fueling a boom in deployment, with renewables expected to add the vast majority of generating capacity for the remainder of the decade. 

That could change quickly. Though Trump hasn’t laid out a policy position on renewable subsidies, wind and solar have been the target of frequent ridicule from the president elect. In one speech designated for energy policy, Trump lambasted solar energy as “very expensive” and accused wind turbines of “killing all the eagles.” 

Because the renewable energy supports are already in place, revoking them would take a legislative effort. That’s a heavier lift than in the past, since many Republican officials have renewable energy facilities or manufacturing in their states, boosting support for the industry among conservative lawmakers. 

But there’s also appetite in some circles to get rid of renewable energy subsidies altogether. Some fossil fuel and nuclear generators complain that the production tax credit for wind lets these facilities to bid into the market at lower prices, pushing down electricity prices and preventing their baseload plants from competing. 

If Trump’s energy team will listen to clean energy opponents remains to be seen. The president elect has also said he is “for” renewable energy on many occasions, even while criticizing it in the next breath. But whether he opts for a full-frontal attack on wind and solar subsidies or will simply turn his attention to boosting fossil fuels, the future for renewables in a Trump administration does not look as bright as it would under a Clinton administration. 

3. Fossil fuels will likely get a boost

If Donald Trump has sent mixed messages about renewables, no one can mistake his support for fossil fuels. 

Trump made the plight of the fossil fuel worker a centerpiece of his campaign, lambasting EPA regulations he claims are “destroying our energy companies” and promising to put coal miners, oil drillers and power plant operators back to work. 

As elsewhere, the details of how Trump would do that are scant, but he has promised to increase U.S. production of oil, natural gas and coal.

Energy analysts point out that’s likely impossible, since coal’s decline in the U.S. is chiefly attributable to competition from cheap natural gas. But there are things Trump could do to open up new production areas, such as lifting restrictions on offshore drilling and fossil fuel production on federal lands. 

On the flip side, a Trump administration is likely to rebuff any environmentalist efforts to restrict domestic fossil fuel production or transport — a recent priority for green groups, which have sought to halt the expansion of oil and gas pipelines. 

Taken together, those two factors mean a much friendlier market for U.S. fossil fuel extraction and the generators that burn that fuel, even if the details are yet to be filled in. As one industry analyst told the Wall Street Journal this morning, “U.S. oil companies have a better future today than yesterday.” 

4. The paradigm of decarbonization may shatter

More important than any particular policy proposal is the paradigm shift that Trump’s election represents for the power sector. 

For the past few years — particularly since Obama’s reelection — the narrative for the future of the U.S. power sector was clear: Utilities would have to decarbonize their power plant portfolios quickly, first turning to natural gas as a bridge from coal and then ultimately to a greater reliance on renewables, energy efficiency and advanced technologies like storage. 

The Clean Power Plan underpins much of this narrative, pushing the states with the most coal power to shift to cleaner sources in the coming decades. Through those rules, the Obama administration sought to show the world the U.S. was serious about combating climate change and provide a stable policymaking environment for utilities to make investments. 

With the world’s largest economy committed to decarbonization, over 190 nations signed a landmark climate accord in Paris last year to limit global climate change to 2 degrees Centigrade this century. And not only did U.S. utilities sign on to support the CPP in court, they began using the temporary extension of wind and solar tax credits to make unprecedented investments in renewables. 

For the first time, it appeared a new climate consensus was forming — that U.S. and global policymakers not only accepted the realities of global warming, but were seeking to craft international efforts to stop it. 

Now, that consensus may be gone. Trump has said he would pull the U.S. out of the Paris accord and openly disavows the concept of human-caused climate change, once calling it a hoax perpetrated by the Chinese government. How Trump’s election affects other nations’ decarbonization plans remains to be seen, but his disavowal of climate policy creates deep uncertainty for the power sector. 

From plants to pipelines, utility assets last for decades, meaning the investments companies make in the next few years will shape the power mix for decades to come. Under the CPP and current renewables incentives, most U.S. utilities are opting to replace retiring coal plants with wind and solar facilities.

But without those programs, the investment situation may start to look different for many utilities. Whereas Hillary Clinton was likely to build upon existing regulations on power sector pollution, the promise of less stringent rules could increase the appeal of fossil fuel assets. 

If that happens, it could scuttle any remaining chance of meeting the Paris Accord. Already this year, Oxford researchers estimated if we want to meet the 2 degree goal, “no new investment in fossil electricity infrastructure (without carbon capture) is feasible from 2017 at the latest.” Given that the transport and industrial sectors continue to increase emissions, researchers said that “2 degree capital stock” is likely already depleted. 

In other words, scientists say the world is already behind the needed trajectory of emissions reduction to meet the Paris goal, and investments in more long-lived fossil fuel assets could commit the world to see the most catastrophic consequences of climate change if they are not retired early. 

But it may not all be bad news for renewables. Wind and solar have come down precipitously in price over the past decade, and energy storage costs are declining quickly as well. Even with Trump in the White House, renewables will likely continue to enjoy strong growth and grow their portion of the U.S. power mix. 

Even if that’s the case, wind and solar growth in the U.S. can’t make up for the possible end of a global climate consensus and the enhanced appeal of fossil fuel assets at home and abroad.

Unlike political paradigms, the scientific one won’t change when Trump walks into 1600 Pennsylvania Ave. on January 20.

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Renewables could lose European power grid priority, documents reveal

Industry concern after confidential impact assessment models scenarios for paring back the ‘priority dispatch’ system for clean energy

The sun reflects off a solar collector assembly at the Andasol solar power station, southern Spain. Retroactive changes to funding rules have caused disputes and cutbacks in several countries, notably Spain.
 The sun reflects off a solar collector assembly at the Andasol solar power station, southern Spain. Retroactive changes to funding rules have caused disputes and cutbacks in several countries, notably Spain. Photograph: Marcelo Del Pozo/Reuters

Paring back the “priority dispatch” system could increase carbon emissions by up to 10%, according to a confidential EU impact assessment seen by the Guardian. But the document goes on to model four scenarios for doing just that, in a bid to make Europe’s energy generators more flexible and cost-competitive.

Some industry sources have told the Guardian they are alarmed and think it highly likely that priority dispatch for clean energy will be scrapped from the EU’s renewable energy directive, which is currently being redrafted for the post-2020 period.

Oliver Joy, a spokesman for the WindEurope trade association, said: “Removing priority dispatch for renewable energies would be detrimental to the wind sector, which would face more curtailment across the continent. It also seems to be at odds with Europe’s plans to decarbonise and increase renewables penetration over the next decade.”

“Investors took priority dispatch into account when projecting revenues in the original investment decisions, and it could have a bearing on existing projects if they are not protected from the change.”

The issue of retroactive changes to funding rules for renewables in Europe has been a cause for disputes and cutbacks in the wind and solar sectors of several countries, notably Spain.

Senior industry sources say they will push for financial compensation and access to balancing markets to help prevent a significant industry contraction, if priority dispatch is ended.

“We have had enough instability and retroactivity in Europe and going forward, the difference between existing and future assets should be well distinguished,” said one industry source.

“I would be extremely worried if they just removed priority of dispatch and did not touch other key issues around market design. It would mean that the commission was taking measures against the same renewable industries that they defend in public.”

Fossil fuel power providers argue that renewables have the lowest operating costs and so would anyway receive priority access to the grid network.

They also say that taking the clean energy sector out of priority dispatch would prevent “negative prices” – where more energy is produced than can be sold – and eliminate anti-competitive subsidies.

The EU’s assessment views the abolishing of priority dispatch as a step towards the creation of a “level playing field” for energy generators.

But without such a system, renewable sources may be the most likely to be taken offline because of the relative ease of switching off a wind turbine compared to a coal or nuclear plant.

The energy source with the lowest marginal cost – almost always renewables – is usually the first in line to be shut down by power grid operators.

As things are, a Europe-wide trend towards ending financial support has constrained the forward march of renewables on the continent, and siphoned off investment to elsewhere in the world.

“Everyone is investing in renewables outside Europe right now,” said one industry source. “If you want to bring investors back you have to send very relevant signals.”

Removing wind and solar power from priority dispatch may be intended to help reform the capacity market system, which currently pays gas generators to remain idle. Ironically though, it could lead renewable generators to demand an extension of the same mechanism to their own sector.

“If priority dispatch is removed, then renewables must be given a fall-back option of access and renumeration in the balancing markets to help stabilise the system, or clear levels of compensation in the event that curtailment is necessary,” Joy said.

Priority dispatch is supposed to be mandatory under current EU rules, although the UK, Sweden and the Netherlands are among countries that do not comply.

The study says that “the biggest impacts on generation [from ending priority dispatch] would be observed in Denmark, Great Britain and Finland, where biomass holds a large share of generation capacity”.

But this would be felt more in terms of bioenergy’s “expensive” production costs than its carbon emissions reduction potential, which is disputed inside and outside the commission.

“The removal of priority dispatch for biomass would indeed, in the first instance, imply an increase in GHG [greenhouse gas] emissions,” the paper says.

The four scenarios for scaling back priority dispatch involve an increase in CO2 emissions of 45m-60m tonnes.


View original post on : https://www.theguardian.com/environment/2016/nov/01/renewables-could-lose-european-power-grid-priority-documents-reveal

Methanol blending for petrol unlikely till 2030

India’s quest for ‘methanol economy’ may not become a reality until 2030.

The National Democratic Alliance government plans to move towards a clean fuel economy, in sync with its commitment made by ratifying the Paris climate change deal to reduce carbon footprint. As part of this strategy, ministries of petroleum and natural gas, and road transport and highways are working towards blending of methanol with petrol.

Blending of methanol will help in cutting down oil import. The Narendra Modi-led government plans to halve its oil imports by 2030. Methanol can be produced from coal, municipal waste and biomass.

This comes at a time when the government is promoting the ethanol-blended petrol (EBP) programme. Ethanol—a form of alcohol produced from sugarcane and corn—is blended with petrol by oil marketing countries (OMCs). At present, the permissible limit under the EBP programme is 10%. However, during financial year 2014-15, OMCs reached only 2.3%.

“It will be difficult to say as to when methanol will be taken up completely but we are pushing for it as it is one of the cleanest forms of alcohol and causes less pollution. Currently, ethanol blending is being operationalised after which methanol shall be taken up therefore, nowhere before the next decade. However, it is being monitored closely and we are in touch with the transport ministry as well,” said a petroleum ministry official requesting anonymity.

“Methanol is in its early stages now. Niti (National Institution for Transforming India) Aayog has formed an expert committee to create a roadmap for the viability of methanol as a fuel. It will be difficult to set a deadline before Niti Aayog comes out with its report,” said another government official who also didn’t want to be identified.

India currently imports one-third of its energy needs and is currently the world’s third-largest consumer for crude oil after China and the US. India imported 202.85 million tonne (MT) of crude oil in 2015-16 at a cost of Rs.4.16 trillion. In 2014-15, the country imported 189 MT of crude oil amounting to Rs.6.87 trillion.

The science behind methanol works for it in the Indian context.

“Methanol is a pure form of alcohol. Talking about it in terms of organic chemistry, methanol does not have any carbon to carbon bond which is why there is minimal emission of smoke when it is inflamed,” said Sebanti Basu, associate professor for organic chemistry at Scottish Church College, Kolkata.

Queries emailed to the spokespersons of Niti Aayog and ministries of transport and petroleum on 14 October remained unanswered.

According to a 6 September government statement, Nitin Gadkari, road transport, highways and shipping minister, “pointed out that methanol is the future for the country… As rural areas are a source of feedstock for methanol, it would provide additional income and also become a source of livelihood for rural folks.”

India has stepped up its efforts to promote the usage of clean fuels. Shortly after launching a programme to run two-wheelers on compressed natural gas, the government now plans to fuel vehicles with liquefied natural gas (LNG). Going forward, the strategy is to fuel long-haul commercial vehicles and trains with LNG.

Experts are convinced by the fuel’s efficacy.

“It is good that we are opting for alternatives that will lessen our dependence on imports. We will have to wait and see as to what the reports say only after that should we draw conclusions. Ethanol has proved to be a good option as of now,” said Raju Kumar, partner at EY, a consultancy.


View original Post: http://www.vccircle.com/infracircle/methanol-blending-petrol-unlikely-till-2030/