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  • Annual Prices from 1970 – 1996, Quarterly Prices from 1997 - 2008
  • http://www.ppiaf.org/content/view/506/462/#footnote2
  • “ flooded cities from last year's string of devastating storms in Haiti, do-gooders across South Florida and the Americas felt compelled to act.” Several “back-to-back storms last year left nearly 800 dead, hundreds of thousands homeless and $1 billion in wreckage.”
  • Pew Center, Climate change mitigation in developing countries Brazil, China, India, Mexico, South Africa, and Turkey
  • Who is using MARKAL? Globally: IEA, EIA, ETSAP, EFDA Regionally: EC, BNL, EPA-ORD, NESCAUM, China, ASEAN Nationally: UK DTI/ERC, US BNL/EPA-ORD, numerous EU countries (Germany, France, Italy, Spain, Switzerland, Denmark, Norway, Sweden, Belgium, etc.), SEE-8, Russia, several developing countries (e.g., China, India, South Africa, ASEAN, Colombia, etc.) Other: several states (e.g., CA, CO, OH, TX), several European cities (e.g., Geneva, Torino, etc)

Platts guatemala june 2009 juan belt (june 2) Platts guatemala june 2009 juan belt (june 2) Presentation Transcript

  • Energy Sector Planning in the Context of Volatile Prices, Financial Crisis and Global Climate Change Initiatives Ju an A. B. Belt Presented at the Platts 12 th Annual Conference on Private Power in Central America Guatemala City, Guatemala, June 11-12 2009 Director, Office of Infrastructure and Engineering, US Agency for International Development (USAID). The opinions expressed in this presentation are those of the author and do not represent the views of the US Government. The author appreciates comments by Silvia Alvarado (Globeleq) and the support of the International Resources Group (IRG) who provided many of the slides related to MARKAL/TIMES. They are not responsible for any errors.
  • Outline
    • The present context: rapid increase in crude oil prices in 2008, financial crisis, Global Climate Change
    • MARKAL/TIMES: description of model & potential uses in Central America
    • US Government support for the power sector in Central America & Colombia
      • Past & on-going support
      • Potential Support under the Energy and Climate Partnership of the Americas
  • Will Prices Increase Again as the World Economy Bounces Back? Crude price doubled in real terms from the previous peak
  • Central America: Vulnerable to Oil Price Variability
  • Financial Crisis & Private Infrastructure Projects
    • Closure of private infrastructure projects Aug-Nov 2008 40% lower than same period 2007
    • Projects impacted through higher cost of financing, delays & cancellations
    • Local public banks, multilateral, bilateral & export credit agencies have been key finance providers
    • Investors’ appetite for new deals seems to be declining
    • Conclusion: Governments may need to further improve the environment for private investment
    • World Bank, Ada Karina Izaguirre, Financial Crisis Affecting New Private Infrastructure Projects
  • Havana, October, 2005, Ravaged by Wilma
  • Bolivia: Retreat of the Chacaltaya Glacier
  • World Bank: Latin American Responses to Climate Change
    • Many developing countries taking action to reduce greenhouse gas emissions growth
    • Efforts driven by imperatives for development & poverty alleviation, local environmental protection & energy security
    • Developing countries can use policies to leverage human capacity, investment, and technology to capture large-scale mitigation opportunities, while simultaneously augmenting their development goals
    • There are win-win policies; having a long term vision is necessary to identify opportunities for increasing sustainability of the energy sector
  • MARKAL/TIMES Model: Basic Structure Based on International Resources Group (IRG) Demand Conversion technology Primary energy
  • MARKAL/TIMES User Community
    • Widely used, proven and continually evolving model for assessing a wide range of energy, economic and environmental planning and policy issues
    • Flexible, verifiable and adaptable methodology for supporting global, regional, national and local decision-making
    ETSAP Partner Countries MARKAL/TIMES Users
  • What is the purpose of MARKAL?
      • To provide a framework for “what if” evaluation of the mid-to-long-term evolution of an energy system, from a least-cost perspective
      • To identify the technologies that are to play key roles in this evolution
      • To quantify the ancillary implications of the policies and programs that shape this evolution
      • To assist policy makers in the decision-making process that is based on technical rather than purely political parameters
  • Model Characteristics
    • Evaluates all options within context of entire energy / materials system by:
      • balancing all supply/demand requirements
      • ensuring proper process/operation
      • monitoring in detail each process’s capital stock turnover
      • adhering to user defined environmental & policy restrictions.
    • Computes an equilibrium on energy markets that takes into account impact of policies on:
      • energy and product prices
      • technological development
      • energy security (trade)
      • attaining environmental goals
      • consumer behavior (e.g., miles driven, warming/cooling homes)
      • industrial output and profitability.
  • How does it differ from other energy models like NEMS?
      • Employs least-cost optimization in a fully integrated modeling framework
      • Open and transparent (source code and data assumptions)
      • Data driven, so more a model generator conforming to a set of well-defined rules than a program or specific model
      • No iteration between modules
      • Rapid response times (though very large multi-region models may take an hour)
      • Long-standing international commitment to the ongoing development and use of the model
      • A robust user support system “shell” overseeing all aspects of working with the model
  • What are the key inputs?
      • Characterization of the current stock of existing technologies
      • Resource supply (step) curves, and cumulative resource limits
      • The characterization of future technology options
        • Fuels in/out, efficiency, availability, technical life duration
        • Investment, fixed and variable O&M costs, and “hurdle” rates
        • Emission rates
        • Limits on technical potential
      • Demand breakdown by end-use
        • Demand for useful energy
        • Own price elasticities
        • “ Simplified” load curve
      • Discount rate, reserve margin
  • What are the key Outputs?
    • Total Discount System Cost
    • Resources levels and marginal costs, if constrained
    • Technology
      • Level of total installed capacity
      • Annual investments in new capacity and expenditure
      • Annual fixed and variable operating and fuel costs
      • Annual and season/time-of-day (for power plants) utilization
      • Marginal cost, if constrained
    • Energy consumed by each technology (sector), and marginal price (by season/time-of-day for electricity)
    • Demand marginal costs and change in levels, if using elastic MARKAL (or MACRO)
    • Emission level by resource/sector/technology for each period, and marginal costs, if limited
  • How does the model's analysis work?
    • Encompasses entire energy system from resource extraction through to end-use as represented by a Reference Energy System (RES) network, and
    • employs least-cost optimization
    • looking to maximize producer/consumer surplus by
    • identifying the most cost-effective pattern of resource use and technology deployment over time under varying constraints and alternate futures.
  • What types of policy questions is it good at answering?
    • Impacts of technology development programs
    • Mandatory micro-measures in each sector: building code, building retrofit programs, modal-split incentives in freight and passenger transports, energy efficiency programs, etc. vehicle standards
    • Energy taxes, investment subsidies (e.g., green and white certificates, clean/efficient technologies)
    • Renewable portfolio or performance standards
    • Energy security evaluation (oil/gas/nuclear fuel imports energy options evaluation)
    • Emission targets and mechanisms (e.g., cap and trade, taxes, sector intensity)
    • Merits of education, information dissemination
    • Impact of social constraints, e.g. nuclear
  • What types of policy questions is it not so good at answering?
    • Preparing energy, technology, emissions, economic forecasts (exception: SAGE variant at US-EIA)
    • Representing and studying the behaviour of monopolistic markets
    • Evaluating the amount of available fossil or renewable reserves and ultimate resources
    • Analysing the effects of non co-operative games (exception: the Nash equilibrium version at GERAD, Canada)
    • Studying the global climate and its effects (exception: the climate equations have been internalised in TIMES)
    • Studying the social behaviour towards energy options, in term of consumer preference or acceptability of an option
  • Central America: Why Use of MARKAL or Other Models
    • Identify policies to:
      • Reduce risk associated with volatile prices
      • Exploit economies of scale at the regional level
      • Reduce carbon emissions efficiently
  • Central America & Colombia: Past & On-Going Programs
  • Past Programs in Central America: Promoting Reform and Integration in the Midst of Conflict
    • Panama: demand side management
    • Costa Rica: law to permit co-generation
    • Support to reforms in Nicaragua & Honduras
    • Comprehensive reform of the power sector in Guatemala and El Salvador
    • Central America regional power pool: USEA support to ACERCA
  • Colombia: “fine tuning” the reforms
    • Fine tuning a system working relatively well; the most sophisticated power market in LAC
    • EGAT staff, consultants, FERC, Texas regulator
    • Auction system for capacity payments
    • Strengthening market surveillance
    • Rationalizing subsidies & universal access program
    • Regulation for commercialization companies
    • Results: over $2 billion in investment that will increase the reliability
  • Nicaragua: Support for Sector Governance and Efficiency
    • Donor coordination
        • World Bank
        • IDB
        • USAID
        • Other bilateral donors
    • Strengthening regulator
        • Texas PUC / NARUC Partnership
        • TA to measure losses
    • Energy efficiency
    Momotombo Volcano
  • Clean Energy and Global Climate Change
  • Global Climate Change: Some Principles
    • The reduction of poverty is a moral imperative
    • Going “with the grain of the market” is more efficient than going against it
    • USAID can be most effective in supporting developing countries if it works at the policy level where effects can be systemic
    • Energy efficiency, renewable energy, demand side management will not work if the power sector is “sick”
    • Therefore, further reforms are necessary to promote investment in clean energy by the private sector & convert climate change issues into a solid business opportunity for the region
  • “ Most of the required investment, however, must come from the private sector. In order to mobilize that investment, major policy and regulatory reforms are needed in many countries. Neither public nor private utilities and their investors can generate the capital required to expand access to clean, sustainable energy supply, for example, when regulatory regimes prevent them from recovering their direct and indirect operating costs. ” Secretary of State Hillary Clinton Answer to Question for the Record Posed by Senator Lugar
  • Promoting Clean Energy
    • Bilateral programs
      • Energy sector reform to create sustainable business models for developing efficient programs
      • Promoting renewables mainly through legal/regulatory reforms
      • Energy efficiency
      • Demand side management
    • Regional programs
      • Power pools & other forms of cross border energy trade to encourage fuller utilization of clean energy (mainly hydropower and wind )
  • Some Countries Requesting Clean Energy Support from USAID
    • Afghanistan (renewables & reform)
    • Egypt (renewables)
    • Jordan (renewables, reform, efficiency)
    • Liberia (reform, renewables, capacity building)
    • DR Congo (reform, capacity building)
    • Pakistan (renewables, reform, efficiency)
    • Philippines (renewables, reform, efficiency)
    • Central America power pool (reform)
  • Energy & Climate Partnership of the Americas
    • “ By increasing green energy cooperation, we will set our economies on a clean energy growth path and curb global greenhouse gas emissions” 
    • … a voluntary and flexible framework for advancing energy security and combating climate change.  Countries will be encouraged to suggest tangible ideas for cooperation, including on energy efficiency, renewable energy, cleaner fossil fuels, and energy infrastructure. 
    • President Obama expressed his commitment to working with his regional counterparts toward a strong international climate agreement at Copenhagen. 
  • SICA: political body; Unidad de Coordinación Energética del SICA (UCESICA) ES CRIE: regional regulator GU ACERCA: “club” of regulators P CR N ES G H Ente Operador Regional: Independent System Operator ES & other GRIDCOs Empresa Propietaria de la Red GRIDCO CR Key CA Institutions NARUC: OPSI or OMS DOE: FERC NARUC: State regulators USEA: ISO USEA: GRIDCO PURC: training all market participants Possible alliances IDB/USG conference to launch CA market IDB & World Bank significant support for regional power market MARKAL/TIMES
  • Conclusions
    • Energy planning models like MARKAL do not provide forecasts but are useful for determining the costs & benefits of different strategies/policies
    • MARKAL & similar tools can be used to model energy policies such as:
      • Reduction in the reliance on liquid fuels and the importance of promoting fuel diversification & a well-balanced energy matrix
      • Reduction of carbon emissions
    • Governments must provide an investor-friendly environment
    • Full integration of the Central American power market, including Mexico & Colombia, can lead to:
      • Reduced exposure to crude oil price variability
      • Cheaper power & optimization of the use of renewables & other domestic sources of energy
    • Partnerships with appropriate US institutions, IDB & World Bank can contribute to the consolidation of the regional power market
  • Any questions? Juan A. B. Belt Director Office of Infrastructure and Engineering (I&E) Bureau for Economic Growth, Agriculture, & Trade (EGAT) US Agency for International Development (USAID) E-mail: [email_address]