Opposing power projects is becoming a habit

There is a signature campaign going around mainly in web communities, students and professional groups vehemently opposing the re-opening of the Bataan Nuclear Power Plant (BNPP) and nuclear energy in general. I say vehemently because the organizers listed seven deadly sins of the plant and nuclear energy which ought to be opposed at all costs.

In Bacolod, environmental activists, with the prodding and aid from the clergy, have been mounting a scathing indictment of the geothermal project of Energy Development Corporation (PSE:EDC) in nearby Murcia. Specifically, they are opposing the entry of the geothermal developer into a tiny strip of land called the buffer zone between the existing field and power plant, on one hand and the Kanlaon National Park on the other.

In northern Mindanao, local groups are opposing the setting up a bioethanol plant because it is alleged that the planned processing plant would pollute the city’s watershed.

Why is it that certain groups have been opposing any power development with alarming regularity? It wasn’t too long ago that a prime mover of this coalition has sent a S.W.A.T.  unit to deface a coal plant in Luzon. More than a decade back, Kidapawan in North Cotabato had been the eye of a storm of protests against a geothermal plant. Now, that 106 MW geothermal facility has been supplying Mindanao with steady power, with not a whimper from any Philippine eagle that may have strayed within the geothermal reservation.

What is disturbing and disappointing with some of this highly organized opposition is sprinkling their arguments with supposedly scientific basis to make the presentation more palatable to those who are non-technically minded. I just hope that they get all their science right.

For the case of the BNPP, opposition to its opening and against nuclear energy are lumped together, as if these are two intertwined issues. Nothing could be farther from the truth. The construction of the BNPP has been tainted with scandal. Worse, the country ended up paying millions of dollars in loans and interest without getting a single watt of power.

But considering the nuclear option is a different matter altogether. Ever since Three Mile Island and Chernobyl, the nuclear world has changed a lot. Stringent standards have been put in place. Technology has advanced such that safety is becoming a non-issue.

True, the problem of final nuclear waste disposal still hangs—but who says the end user necessary takes the cudgel of burying the waste to oblivion? The usual arrangement is that the supplier could take responsibility of temporary storage.

Temporary storage of nuclear waste has been the bane of contention between the pros and cons, but the industry—if you call it that way—has an enviable record of safety.

Now, you ask, which is cleaner and greener, wind or nuclear energy? Nobody is pulling your leg, but if you go by science—this is probably a heresy—nuclear is cleaner than wind, according to an environmentalist who did the numbers. The carbon footprint of a nuclear plant is far smaller than a wind farm of comparable electrical output. Think of the manufacturing process of thousands of wind turbines and towers to equal the 600 MW size of a BNPP type.

Now, if you power New York City with wind energy, you would need a wind farm the size of New Jersey. Don’t get me wrong. I am not advocating the re-opening of BNPP—that is a political issue—but I am not closing my eyes altogether on the nuclear alternative, especially now that we would be facing a power crunch in the next few years.

For the case of geothermal, nearly all local projects have been met with some opposition. For the Mt. Apo (Mindanao) geothermal project, you needed some trees to cut and strips of land to bulldoze for the roads and pads, just like any other development projects, be it housing for the poor or a bridge to connect a far-flung barangay (village) to civilization.

For the Northern Negros project, some lepidopterans were surely disturbed, but t they have not abandoned their habitat. When the Bacman project was at full throttle, the native bats at Manito, Albay and Sorsogon, were probably irked at the drilling rigs. But since then, they have reclaimed their natural sanctuary.

On geothermal, it is difficult for the opposition to accept that the operator needs to preserve the watersheds, for these are the lifeblood of geothermal power. The hot water you are using to drive the turbines comes from the circulation of surface water which is abetted by a healthy watershed.

Even the greenest of them all, could have objections raised against them. Solar for example, needs hectares of land to be of any consequence to our energy mix.

What about the upcoming thermal ocean power which is slowly creeping into practical use?

Well, the residents of Donsol, Sorsogon would have the butandings to thank for to justify their opposition to a thermal ocean power turbine that could be place between Allen, Samar and the tip of Sorsogon. The residents of Bataan may have to invoke the rights of some melon-headed sharks to oppose the re-opening of BNPP.

 No, we are not condoning the use of polluting energy sources. While coal-fired plants are considered among the dirtiest—why do you think that the mighty U.S.A. is helpless in eradicating these smoke- and mercury-belching behemoths? Simple. It’s all about economics. Half of the American electric power comes from coal, and without it, the mightiest economy would grind to a halt.

What is important is we know how much power  we need, and if we need to generate that need, we should be at least confident that our choice is the most applicable given all the surrounding circumstances at any given time.

That choice should be grounded on sound science and engineering.

Can PSALM sell Calaca?

After Suez Energy backed out from the sale of the 600 MW and forfeiting close to $15 million bid bond, the Power Sector Assets and Liabilities Management (PSALM) Corp. which is tasked to privatize government’s power is now in a quandary what to do with the plant.

The failed sale effectively stalled the power sector reforms under the Electric Power Industry Reform Act (EPIRA) because the failure sets back the level of privatization to only 54%, well below the 70% threshold for the open-access regime to take off.

“We will try to re-bid Calaca this year despite the financial market uncertainties,” PSALM president Jose Ibazeta told reporters at the sidelines of a congressional hearing on the failed biddings. He said PSALM, after two failed biddings, has now the option to enter into a negotiated sale with any interested buyer.

Good luck. PSALM needs a lot of it.

Suez’ bid of $787 million through its corporate vehicle Emerald Energy Corp. (EEC) puts the price at $1.31 million per MW of installed electricity which is at the high end of recent privatization sales of power assets.  It is only topped slightly by the similar 600-MW coal-fired Masinloc plant at $1.45 million/MW.

But Calaca is much older, and the two 300-MW units are severely battered that PSALM advertised it on an “as-is-where-is” basis which is a polite euphemism of an asset close to junk. The generating plants have been in operation since 1985 and 1995, respectively and are now close to end of their useful life. The former National Power Corporation (NPC) has been notorious for running down the plants under its wings—and it is not only due to lack of funds for proper maintenance.

Apparently, the interested bidders pinned their hopes on the eventual restoration of the units to full capacity which could probably economically justify the acquisition. Six hundred MW running continuously, the generated power easily sold at the wholesale electricity spot market (WESM) and a rosy 5% projected growth in GDP year in, year out—how can you not see green, as in green bucks, all around?

This is asking too much.

The 232-MW coal-fired power plant of STEAG AG in Mindanao was recently built at a cost of $305 million; that puts it at $1.31 million/MW which is exactly equal to the acquisition price of Suez Energy.  On this basis, it would have been more prudent to construct a new state of the art, more efficient and less polluting coal-fired plant from scratch.

Even if the units were restored to full capacity, there have been reports that the dispatch of its maximum power would pose some tricky problems due to transmission line limitations. Again, the price could have been hinged on a major upgrade of the transmission line capacity which might not come on line at the proper time based on NPC’s track record or a lack of it.

Suez blamed the deterioration of the plants since the bidding date as its main reason for backing out. And this is supposedly due to the exclusive use of local Semirara coal on the units. Unit 1 of Calaca was designed to use imported, high heating value coal while Unit 2 was designed to use a blend of local and imported coal. Still, it is doubtful if it is the only reason.

So, how much would you buy Calaca for?

During the first round of bidding, the highest bid was $288 million which was rejected as below the (secret) floor price set by PSALM. The plant was originally built at a total cost of $590 million, so the selling agency would have been looking at around this price, including a premium and if some depreciation is considered. This price would also be acceptable to politicians--most of whom have no idea on how to value such assets—and should conform to some silly rules which say in effect that one should not dispose government assets at a loss.

Really, the offers during the first round were already generous—the government should have taken the money and run. At this stage, the possible bidders would already have been doused with cold water after more and more information is revealed on Calaca. The longer the delay, the less chance of a successful sale.

For PSALM to reach the 70% level of privatization once more, it has better chances in Limay co-generation plant and on the geothermal plants slated to be sold this year.

Probably, the asset should now be considered as slightly more valuable that the mothballed diesel plants of the former NPC which have been successfully disposed of.

 

Palawan power crisis once more highlights weakness of electric cooperatives

Palawan business leaders have been feeling the pinch of persistent and prolonged power brownouts in the province and the city of Puerto Princesa and warned the problem “could get worse” and could jeopardize efforts to make Palawan a major international tourist destination.

In the past few months, local business leaders have noted that the power interruptions have become longer and more frequent, and have become a major disincentive to business and tourism.

According to the National Power Corporation (NPC), there are some 40 megawatts (MW) of installed electrical capacity in the province while the peak demand reaches only 21 MW, so the problem could only lie within Palawan Electric Cooperative (Paleco), the local distribution unit. NPC is however silent on how much of the installed capacity is dependable, but it is unthinkable that half of it cannot be dispatched.

In many rural areas and island provinces, power supply has been a major complaint regarding basic necessities, and the common denominator of these areas is that power distribution is being handled by poorly managed, inefficient electric cooperatives. Electric cooperatives which have been given passing marks by their consumers are the exception.

Perhaps, it is about time to have a radical re-think about electric cooperatives. With no shareholders breathing on their necks, management of many of these cooperatives does not have real incentives to professionalize its operations. Oftentimes, management and members of the board are handpicked, or beholden to local officials, if not directly controlled.

There seems to be a lack of incentive to modernize the equipment, or at least maintain properly the existing ones. Customer service is farthest from the minds of these minnows pretending to be running a basic service provider.

Why is it that there is no concrete strategy to ultimately privatize these distribution units?

It used to be that these basic services (power distribution, telecommunications, and water) were thought to be a natural monopoly of the state, and therefore, should be run, or at least controlled by local government units. Not anymore, as shown by the telecommunication and water distribution—at least in major urban areas—industries.

Whenever there is clamor to privatize an electric cooperative, there seems to be a helluvah of opposition. But if you listen carefully above the din, the noise one seems to hear is that of local political interests who are likely to lose some perks and wealth once control is transferred to the private sector--not the consumers who silently groan under inefficient services and high rates.

Palawan is but a sorry example of our sordid, highly inefficient electricity distribution systems in many parts of the country.

Petrobras going against the flow; boosts oil exploration spending

If you were the head of a major oil exploration and development player and crude oil prices have fallen hard from a high of $147 a barrel to the current level of about $41, what would you do?

It’s a no-brainer: cut oil exploration spending which is deemed too risky, right?

Both oil majors like ExxonMobil and ConocoPhillips as well as minors and wildcatters like Marathon Oil and Husky Energy have already announced hefty exploration spending cuts for 2009.

Apparently, CEO Jose Sergio Gabrielli of Brazilian oil giant Petroleo Brasileiro S.A., (SAO.PETR4, NYSE: PBR) better known as Petrobras, begs to disagree.

This was his message in yesterday’s no holds barred grilling by Stephen Sackur of the program Hardtalk in BBC News Channel. There will be no let-up in exploration spending which news wires said that the amount needed is $174.4 billion over the next four years, which is higher than the original $112.4 billion Petrobras had planned for 2008-2012.

More striking is Gabrielli’s revelation that the spending is based not on the recovery of oil prices, but on a crude oil price of $37 a barrel for 2009; $41 in 2010; and only $45 from 2011 onwards. Petrobras therefore sees the current world economic slowdown would linger for many years to come which caps the increase in demand for energy.

However, Gabrielli says people will not stop using their cars, businessmen and tourists (not to mention migrant workers whom we have a-plenty) will still travel by air and goods will have to be transported—and these required old-fashioned fossil fuels. Gabrielli sees the investment plans as “very important for Petrobras’ continuity in growth.

One should take a leaf from Gabrielli’s notebook: One cannot afford to relax one’s investment and development in a very basic necessity such as energy. In fact, the best time to invest in energy infrastructure is when there is an apparent lull in demand.

Gabrielli can afford to be patient. After all, producing an oil field could take several years and even decades since the commencement of exploration.

Also, Petrobras has much oil reserves waiting to be developed, like its deepwater Tupi field, considered the largest oil discovery in the Americas for a very long time, since the discovery of Mexico’s Cantarell field in 1976.

Would it be too expensive to develop such a field? Sackur tried to outbalance Gabrielli. Yes, the latter replied, but over the years Petrobras has developed home-grown talent and accumulated years of experience doing such development—another lesson for energy companies who see technical talent as easily replaceable as a broken rig.

Is Petrobras trying to supplant its neighbor Venezuela, which is a partner in some projects, as the dominant Latin American crude oil producer? Not really, Gabrielli clarified. Petrobras is aiming to be a dominant petroleum refiner where the products generated have more value added, rather than just be a crude oil exporter.

With its strategy, Petrobras may be the “best-positioned” major oil company in the world to benefit during an oil price rebound, according to a Goldman Sachs Group Inc.  report.

It is amusing to watch how Gabrielli deftly parries all of Sackur’s underhanded thrusts--from accusations that Petrobras is beholden to the government and politicians, to child labor in its sugar cane suppliers’ farms, and to its pipeline across the Amazon jungle.

One may not agree with Petrobras’ or Gabrielli’s plans and actions, but at least he should be given credit for clearly articulating his company’s mission and vision.

He belongs to a rare breed of bold and talented CEOs who are steering large and influential conglomerates in these perilous times.

____

Note added, Feburary 6, 2009:

Shortly after this item was posted,  Bloomberg reported February 5 that Petrobras will take delivery of 33 new oil rigs by 2012, with 11 of them to be delivered this year. The company’s program targets production of 3.66 million barrels a day by 2013, up from 2.4 million barrels a day last year. Many of these wells will be drilled in waters more than 2,000 meters deep, and require deep water floating platforms. The program includes developing the Tupi field.

GreenGold shows the jatropha way

A little-known company GreenGold Ray Energies, Inc. (Other OTC:GRYE) issued a press release yesterday that its biodiesel refinery in Nasipit, Agusan del Norte should be opening within 90 days. The GRYE Processing and Refinery Plant which is capable of producing 680 million liters (180 million gallons) of biodiesel a year is designed to use jatropha oil as its feedstock.

To support its plant, GreenGold has been acquiring lands and growing jatropha plants in plantations in Mindanao and Marinduque and has forged supply agreements with local jatropha planters. It has also established a research and development center for jatropha in Cagayan de Oro City.

A model of GreenGold's biodiesel refinery

The investment is seen as a response to Republic Act 9367 or the Biofuels Act of 2006, which requires the use of biofuel blends of up to 10% on vehicle engines within four years. The Philippines is projected to need 150 million liters of biodiesel a year for the next few years to meet the Biofuels Act mandate.

While there are several biofuel plants in various stages of development in the country, the only other large-scale biofuel plant in operation is that of Chemrez Technologies Inc. (PSE: COAT) which uses coconut oil as feedstock. It has a capacity of only a third of GreenGold’s refinery.

Jatropha (Jatropha curcas) has been touted as a viable biodiesel plant since it grows almost anywhere, even on marginal lands. Proponents have endorsed it since the oil is inedible, and should be exempt from the food for fuel controversy.

However, agronomists from the UP Los Baños have shown a few years back that jatropha that grows on marginal lands cannot yield commercially-viable biodiesel, and the only way to increase the yield is to grow it as if it were like any other agricultural crop: fertile land, irrigation and use of fertilizers.

The government, through the PNOC Alternative Fuels Corporation has an ongoing jatropha initiative although it has not yet entered into the commercial phase.

Jatropha as biodiesel

Among the advantages of jatropha crude oil over fossil diesel cited by GreenGold engineers are: (1) it is biodegradable; (2) has higher flash point than petrodiesel ; (3) emits less carbon dioxide;  and (4) can be used alone or mixed with other fuels for vehicle use.

The disadvantages cited are: (1) it is more expensive than petrodiesel; (2) less suitable in cold weather because it may form a gel; and (3) tends to reduce fuel economy on vehicles running using pure biodiesel.

The potential of jatropha as a viable fule was recently demonstrated when Air New Zealand used a 50/50 mix of jatropha oil and jet fuel is a successful test flight. Last month, Houston-based Continental Airlines tested jatropha fuel on one of its jetliners.

If anything, GreenGold is trying to show that the jatropha plant can be made viable as a source biodiesel if grown scientifically and provided with proper requirements just like any other agricultural crop—and not just letting it grow on marginal lands as the government planners originally proposed.

What's capacitors got to do with energy?

When specialty capacitor manufacturer KEMET Corporation (Other OTC: KEME) recently announced it has successfully developed a 35V rated polymer tantalum capacitor, it was promptly picked up by Renewableenergyworld.com, a major campaigner for renewable energy. Likewise, the 2009 Advanced Capacitors World Summit 2009 to be held on March 31 to April 2, 2009 at La Jolla, California, merited attention from renewable energy practitioners.

What's the importance of a capacitor--that passive electronic component normally protruding in many printed circuit boards--in energy?

It turns out that capacitors; specifically, tantalum capacitors, could make or unmake the renewable energy industry.

Capacitors used to be bulky electronic components which occupy so much space and have limited range of operating conditions to be effective in modern circuits. However, tantalum capacitors which are characterized by high reliability, low equivalent series resistance (ESR), high volumetric efficiency (high efficiency for a small size) and benign failure modes, among others,  have appeared in the 1990s which allows electronic devices to shrink in size. Tantalum capacitors are found in DVD players, cellular phones, game consoles, flat-panel TV displays, laptop computers, MP3 players and virtually in any modern gadget.

There are competing technologies of course like the niobium capacitors, the multi-layer ceramic capacitors (MLCC) and the aluminum-polymer capacitors, but by far, the tantalum capacitors have stood their ground.

The tantalum (and the recent variant the tantalum-polymer) capacitor is robust and can operate at temperatures above 100 degrees centigrade. But until very recently, its maximum voltage rating is around 14V. It was only less than a year ago that the 20V rating barrier was broken. And now, the 35V rating.

Such high voltage rated capacitors could find their way under the hood of hybrid, flex-fuel or electric vehicles; in power supply or filtering circuits in storage systems for intermittent energy sources like wind and solar; in instruments used in drilling for oil and geothermal--just to name a few potential uses.

Their potential applications are only limited by one's imagination and creativity.

This breakthrough in capacitor technology is but a relevant example of a major technical barrier being broken by a development in an unrelated field.

For all we know, the technological barrier to low solar energy efficiency for example, could be solved by developments in nanotechnology or novel synthetic schemes in carbon chemistry.

Breakthroughs, like love, could come from unexpected places.