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Ending India’s energy drought

Andy Mukherjee Bloomberg News
…An nationwide survey of small enterprises in 2002 cited power shortages as one of the top reasons for industrial sickness, far ahead of labor strife or mismanagement.

Why has India allowed itself to get into this mess?

At the end of last year, China had 622,000 megawatts of generation capacity. A fifth of this – almost equal to India’s total capacity built up over decades – was added in 2006 alone.

Why does India not invest more in energy, which is emerging as a major bottleneck for sustaining the current pace of 9 percent annual economic growth?

The seed of India’s power crisis was sown in 1977. That was when politicians first came up with the idea of subsidized electricity for farmers to win their votes. Then free power for agriculture became the norm, pushing state-run electricity boards into financial ruin.

…India has to adopt a multipronged strategy to end its power drought.

The country has to make better use of the 10,000 megawatts of idle generation capacity. Half of it is going unutilized largely because feedstock is unavailable.

Natural gas prices have tripled in the past five years. At $7.80 per million British thermal units, they are double what Indian gas-fired power plants can afford, given the limits on how much consumers can be charged for electricity.

Pending a meaningful reduction in subsidies, more expensive power must still be produced, but its cost must be passed on to those who can bear it.
(24 May 2007)
It’s odd that Bloomberg and the International Herald Tribune seem to be running this as a news story; it’s clearly an editorial or op-ed. It presents a point-of-view and advocates a specific policy. -BA

Iran’s decision to raise gas prices exposes economic vulnerability

Associated Press via IHT
Iran’s decision to hike gasoline prices has thrown new light on what could be its most-entrenched problem – a vulnerable, highly subsidized economy, and the political dangers that poses for its populist and hardline president as he faces international pressure over the country’s nuclear program.

Experts warn of the popular backlash that other countries have faced when dealing with the same need to raise long-subsidized staple prices. At the same time, they doubt the 25 percent price hike imposed this week on Iran’s gasoline will do very much, on its own, to solve the country’s underlying economic problems.

Even after Tuesday’s decision to raise gasoline prices from 800 rials per liter to 1,000 rials per liter (0.059 euros/liter to 0.074 euros/liter, 30 cents/gallon to 38 U.S. cents/gallon), Iran has some of the lowest gas prices in the world. Those rock-bottom prices have led to unnaturally high demand and have saddled the government with fuel subsidies that cost billions of dollars a year.

The demand also forces Iran to import more than 50 percent of the gasoline it consumes because it lacks the refinery capacity to keep up – a glaring vulnerability as the U.S. and its allies look for ways to pressure Tehran to give up its nuclear program.
(24 May 2007)
One should be increasingly careful about believing news stories about Iran, with ABC’s report that President “Bush has … put into motion a CIA plan that reportedly includes a coordinated campaign of propaganda, disinformation and manipulation of Iran’s currency and international financial transactions.” Some news stories may be planted and some sources may not be who they appear to be. -BA

Zimbabwe: Back to the dark ages

The Economist
IT IS hard to imagine that things could get any worse in Zimbabwe. But, sure enough, day by day, they do. Since the opposition, NGOs and church groups organised a protest rally that was brutally crushed in March… Meanwhile the inflation rate has passed 2,200%; last week the national power company announced that it would ration electricity in cities, possibly to a meagre four hours a day, just as the southern hemisphere’s winter is starting to bite.

Power cuts are already frequent, but the latest blackouts mark a new low. Residents of Harare, the capital, have been rushing to get firewood and paraffin, though a domestic worker’s monthly wage can buy only five litres (1.3 American gallons) of paraffin or two litres of cooking oil. Many companies, already operating at about 40% of capacity, say the cuts will force them to reduce their working hours even more.
(17 May 2007)

Gas rises as generators run dry

Nigel Wilson, The Australian
GAS prices in the eastern states are beginning to rise as water shortages restrict output from coal-fired power stations.

Graeme Bethune of Energy Quest said yesterday that gas production in eastern Australia jumped 20.1 per cent in the March quarter compared with the same period last year.

This reflected growth in gas-fired electricity of 67 per cent at a time when generation from hydro fell by 18 per cent and the total coal-fired generation had been flat – constrained in Queensland and Victoria by water restrictions.

Dr Bethune said strong demand for gas had pushed up wholesale gas prices, with average Victorian spot prices up 27 per cent to $3.38 a gigajoule on the 2006 March quarter.

Gas prices have also been on the move in Western Australia where gas is sold on long-term contracts.

After years of hovering around $2.23 a GJ, recent sales have been as high as $5.50 a GJ.
(25 May 2007)