Friday 31 October 2014

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Energy

 

Technological breakthroughs against climate change brighten the horizon

Posted by on 28/10/14

Humanity will be unable to combat climate change without profound transformations in the way it generates energy.

Two such transformations have been recently announced, one in Singapore, the other in USA.

In Singapore, a team of scientists of the Nanyang Technological University have developed a new type of ultra-fast recharging batteries which are claimed to charge a car battery up to 70% of capacity within five minutes. This breakthrough will revolutionise e-mobility in terms of range and costs and make electric cars superior to the most efficient diesel vehicles.

European manufacturers should therefore urgently reassess the situation and adapt their proven, but old-fashioned engine technology at the risk of losing out to US and Chinese competitors.

The new batteries will provide us with truly clean motor vehicles and give a powerful boost to solar and wind energy, because millions of cars may form big energy storage systems helping to overcome the inherent intermittences of renewable energies.

Separately, the US defence company Lockheed has announced a breakthrough in fusion energy. Within a year it will build a test reactor to be followed five years later by a prototype of a 100 MW reactor of tiny dimensions (2×3 meter!).

Assuming the problems linked to nuclear fission, in particular safety and waste storage, to be solved this might usher in an era of non-fossil electricity generation based on wind, solar, biomass and nuclear fusion.

The demand for oil and gas will also fall dramatically as the global car, shipping and possibly even aircraft industry will phase out the internal combustion engine, say by 2050, reinforcing the decline of C02 emissions.

Add to these two technological breakthroughs the introduction of a magnetic super high-speed train by the Japanese railways until 2045.

Running at a speed of up to 500 km/h the train will largely replace domestic air transport, also a significant source of C02 emissions. The Japanese industry will no doubt export the new train to other parts of the earth, from North America, to Brazil, Argentina, Russia and Europe, with the consequence that there too it is likely to replace domestic air traffic on distances of less than 1500 km.

The news from Singapore, USA and Japan unfortunately show that Europe has lost its momentum in coming up with courageous technical and political solutions both to tackle climate change!

We are closer than ever to technical solutions allowing for a largely emission-free future. By establishing strict emission targets heads of government will help accelerate the technological breakthroughs that are arising on the horizon.

In conclusion, one year ahead of the World Climate Conference in Paris, there is reason for guarded optimism, provided policy makers will show the courage to fix ambitious long-term targets and avoid getting again lost in minutiae.

Brussels 20.10 2014 Eberhard Rhein

Klima

Posted by on 24/10/14

An einem Klimagipfel teilnehmen zu müssen erinnert an Zähneputzen: Es ist wichtig, aber lästig.Lange schritt Angela Merkel beim Klimaschutz voran. Teils so forsch, dass sie sich den Titel Klimakanzlerin einfing. Jetzt ist das Geschrei groß: Statt bis 2030 EU-weit 30 Prozent Energie zu sparen, stehen nur noch 27 Prozent auf dem Papier. Merkel verrate ihren Titel, monieren Kritiker. Und tatsächlich verlässt Deutschland seine Vorreiterrolle als oberster Klimaschützer. Dies aber ist kein Einknicken gegenüber Kritikern wie Großbritannien oder Polen, sondern Strategie: Den Weltklimagipfel 2015 in Paris im Blick, weiß Merkel, wie wichtig die Einigung auf EU-Ebene ist. Nur wenn sich die 28 Staaten trotz unterschiedlicher Ansprüche verständigen, kann dies Beispiel geben für Paris.

The Paris Climate Conference must agree on abolishing fossil energy subsidies

Posted by on 21/10/14

During the last years international organisations from IMF to IEA have called for the abolition of subsidies on oil and gas consumption. At its meeting in September 2009, the G20 has also agreed to phase them out in the medium term.

Without much avail; most governments concerned continue to ignore these calls, whatever the negative impact of their subsidies on budgets, urban traffic, trade balance, pollution, human health and, of course, the global climate.

The amount of the subsidies does not show signs of decline. It continues to range about half a trillion USD, 0.7 per cent of global GDP!

Most of the subsidies are being granted by low and medium-income countries, which can least afford to squander huge amounts of money for giving wrong incentives.

The other category of sinners are rich oil- and gas- producing countries that seem to consider their oil and gas reserves big enough to indulge in the highest C02 per capita emissions on earth, topping the USA, Canada and Australia.

Fossil-fuel subsidies counter-act the efforts undertaken to reduce greenhouse gas emissions and help humanity survive in sustainable conditions. By keeping fossil-fuel prices even below low world market levels they push up consumption.

The 2015 Paris Climate Conference must therefore call for rising fossil energy prices in all countries, something that has never been done before.

The first step must be a rapid phasing out of fossil-fuel subsidies to be followed by a progressive introduction of fossil energy taxation, whatever its form.

Subsidies and taxes are easy to check: governments simply have to lay open their budget expenditures and revenues.

The Paris Conference needs to fix a deadline, say 2025, when the phasing out of subsidies should be completed and fossil fuel taxation should start. IMF or IEA should be tasked with monitoring and reporting on progress.

In view of achieving a consensus in Paris on this approach, the French government should dispatch several high-level emissaries to the major subsidising countries with the mission to convince the governments of the advantages from abolishing fossil fuel subsidies and introducing fossil fuel energy taxation.

It will be anything like an easy mission. But after five years of inaction the international community must finally take the courage to be tough with the “sinners”.

Eberhard Rhein, Brussels, 10/10/2014

Open Letter to the European Council, by Orgalime

Posted by on 20/10/14

President, Hon. Heads of State and Members of the European Council,

Orgalime, the European engineering industries association, whose members’ annual turnover is some 1800 billion euro and which employ over 10 million staff in the EU, is writing to you to urge you to adopt of an integrated European 2030 Energy and Climate Change Framework at the occasion of the European Council meeting on 23/24 October 2014.

Such a decision is urgently needed to encourage investments into innovative areas of cutting edge technologies that will pave the way towards Europe´s future low carbon, energy efficient economy with higher levels of energy independence, greater security of supply and overall sustainability of the energy system.

We believe that a binding EU 40% lead carbon target, coupled with EU-level commitments for energy efficiency and renewable energy sources beyond 2020, will provide a new impetus for sustainable growth and jobs in Europe and will overall boost the competitiveness of EU industry.

We particularly welcome the fact that the Commission has now closed the gap in its initial 2030 Framework proposal with a 30% energy efficiency target*, which we consider as both, feasible and reasonable, provided that the right instruments for implementation are put into place.

Indeed, if Europe wishes to deliver on its carbon target, control energy prices, increase the integration of renewables into its energy system and become world leader in this area, action inevitably needs to go hand in hand with energy efficiency and the development of an integrated energy system, including interconnected infrastructures. Increasing the efficiency of equipment, which is often reaching its technical limits, will not suffice. The challenge is to better exploit the energy savings potentials at system and market level, which requires a future energy retail model that facilitates greater involvement of energy end users and distributed generation in a truly consumer-centric, competitive energy market.

This can only be achieved through instruments, such as the governance process, the Energy Efficiency and Energy Performance of Buildings Directives rather than through further product regulation under the Ecodesign Directive or its pending review, which risks breaking today´s delicate balance between cost efficiency, environmental improvement, product functionality and affordability.

To conclude, we call upon European regulators to set in place a robust 2030 Energy and Climate Change Framework in support of the EU´s Industrial Policy, and particularly the overall aim to reach a 20% share of
manufacturing output in the EU’s GDP by 2020.

Considering the international dimension of this debate, we encourage the EU to make the necessary efforts to obtain a global and legally binding climate agreement at the UN-FCCC in Paris in 2015. It is essential that other regions of the world show a comparable degree of ambition and take similar action.

Yours faithfully,

Sandro Bonomi

President, Orgalime

* Previously, Orgalime felt that a 40% energy efficiency target should be set considering the 2050 perspective. We consider the suggested
30% as a step in the right direction, which should be supported, while we ask for maintaining a forward looking, proactive attitude.

Mayors network listed – will Mayors take the lead on a climate deal?

Posted by on 19/10/14

National governments have proven that they do not have what is required to meet the global challenges of climate change and the unsustainable use of our planet’s resources. The shortcomings of the COP meeting since Copenhagen acts as testament to this. With the burden of recession and austerity, short-sighted national governments have thus far shown themselves unable to handle sustainable development issues.

Within the arena of sustainable development, the boundaries of responsibility are undergoing a monumental shift. This allows new actors to take pole position in the creation of new opportunities. Old infrastructures are being replaced by new ones that are better designed to cope with the challenges facing cities and regions.

We should stop directing our attentions and frustrations towards impotent governments. Instead we must focus on more localized models that simmer from below but come to influence and inspire national actors to greater action.

Better levels of engagement and the development of local and international networks have prompted a wider range of actors to become involved in sustainability, from both within and outside the market.

Over the past five years we have seen several strong international networks emerge from municipalities and regions. To get a wider understanding of this phenomenon I undertook some research that shows just how many locally-focussed organizations use their involvement in these networks to bring about sustainable solutions that can have a real impact.

Sweden’ s biggest Political Week event in 2015 – A Challenge for National Governments in front of UN Climate Meeting Paris

Next summer – between the 28 to the 30th of June – the Mayor of the Swedish Island Gotland will invite Mayors from all over the world to the event to debate and prepare to challenge national governments in front of the Paris UN Climate meeting in December 2015. The event is organised by Region Gotland, Stockholm Environment Institute, WWF, The Think Tank – Global Utmaning, The Nordics association, Kairos Future, Club of Rome and Respect Climate.

Send me an e-mail if you are interested to find out more –  kaj at embren.com.

Mayors 33 networks that can act are:

1. United Cities and Local Governments - http://www.cities-localgovernments.org/

2. United Cities and Local Governments of Africa (UCLGA) - http://www.afriquelocale.org/en/about-us/uclg-africa

3. Federación Latinoamericana de Ciudades, Municipios y Asociaciones (FLACMA) / Latin American Federation of Cities, Municipalities and Associations of Local Governments - http://www.portalambientallatinoamericano.com/

4. UCGL Euro-Asian Regional Section - http://www.euroasia-uclg.ru/index.php?lang=en

5. UCGL- Asia-Pacific - http://www.uclg-aspac.org/

6. Council of European Municipalities and Regions (CEMR) - http://www.ccre.org/en/

7. UCLG-Middle East and West Asia (MEWA)  - http://www.uclg-mewa.org/

8. METROPOLIS Network (World Association of Major Metropolises) - http://www.metropolis.org/

9. Union of the Baltic Cities  - http://www.ubcwheel.eu/

10. Local Governments for Sustainability – ICLEI  - http://www.iclei.org and ICLEI USA / National League of Cities / U.S. Green Building Council’s Resilient Communities for America Campaign:http://www.resilientamerica.org

11. C40 (Large Cities Climate Leadership Group) - http://live.c40cities.org/

12. Clinton Foundation’s Climate Initiative - http://www.clintonfoundation.org/main/our-work/by-initiative/clinton-climate-initiative/programs/c40-cci-cities.html

13. World Mayor Council on Climate Change - http://citiesclimateregistry.org/

14. Sustainable Cities Network  - http://www.sustainablecities.net/

15. United Nations Human Settlements Programme (UN-Habitat) - http://www.unhabitat.org/content.asp?typeid=19&catid=540&cid=5025

16. United Nations International Strategy for Disaster Reduction (UNISDR) - http://www.unisdr.org/campaign/resilientcities/

17. World Bank - http://blogs.worldbank.org/sustainablecities/about-us

18. Cities Alliance - http://www.citiesalliance.org/

19. World e-Governments Organisation of Cities and Local Governments (WeGO) - http://www.we-gov.org/history

20. Mercociudades - http://www.mercociudades.org/

21. Unión Iberoamericana de Municipalistas (Iberoamerican Union of Municipality Authorities – UIM) - http://www.uimunicipalistas.org/#/sobrelauim.txt

22. Federación de Municipios del Istmo Centroamericano (FEMICA) – Federation of Central American Municipalities - http://www.femica.org/

23. Cities Development Initiative for Asia (CDIA) - http://www.cdia.asia/

24. CAI-Asia – The Clean Air Initiative for Asian Cities  and CITYNET (The Regional Network of Local Authorities for the Management of Human Settlements) - http://www.cleanairnet.org/caiasia

25. Committee of the Regions (CoR) and Covenant of Mayors http://cor.europa.eu/en/activities/Pages/priorities.aspx

http://www.covenantofmayors.eu

http://www.eumayors.eu/index_en.html

http://ec.europa.eu/environment/europeangreencapital/index_en.htm

http://cor.europa.eu/en/

26. MEDCITIES - http://www.medcities.org/

27. Association of Cities and Regions for Recycling and Sustainable Resource management (ACR+) - http://www.acrplus.org/

28.Brazil – Frente Nacional de Prefeitos (National Front of Mayors – FNP) - http://www.fnp.org.br/home.jsf

29.India – City Managers Association of India (CMA) http://www.umcasia.org/content.php?id=67

30. China – China Association of Mayors (CAM) - http://www.citieschina.org/en/

31. South Korea – Governors Association of Korea - http://www.gaok.or.kr/eng/e01_intro/intro010.jsp

32. Canada – Federation of Canadian Municipalities - http://www.fcm.ca/

33. Sweden – Klimat Kommunerna – http://www.klimatkommunerna.se/

Ask the question – mobilise network, organisations and give your voice below or at LinkedIn  Rio+

 

 

A Power Shift in China and the EU

Posted by on 19/10/14

Just how fast can China and Europe change? And just how fast can the relationship between them change? The answer, at least sometimes, is very fast.

A recent report from the International Energy Agency (IEA) predicting that solar PV could, in one scenario at least, become the largest single source of electricity generation by 2050 made something of stir recently in the media. The report forecast that at solar PV could possibly account for as much as 16% of global electricity generation by 2050. These forecasts will almost certainly be revised as much can happen in the technology and economics of electricity generation in the next 40 years, but they are an indicator of the possibility for change.

Apart from the possibility that solar power will become a major source of energy, something else in the in the forecast is striking. As the following chart from the report shows, by far the largest growth in solar PV power will come from China. According to the report, at its peak China will contribute about 40% of electricity generation from solar PV in the world in 2030.

Chart 1: Forecast regional production of solar PV electricity Source: IEA

This suggests that in the future China will help change the world. However, that future is already arriving. In 2013 China was already the largest single market for solar PV installations in the world, accounting for 30% of net installations (new installations less facilities retired from service).

Chart 2: Share of net solar PV installations in 2013 Source: Earth Policy Institute

This fact reminds us how fast China, and the world is changing. Only a few years ago China accounted for a negligible share of installations. In 2009 China’s share of new solar PV installations was only 2%. The key cause of this change is that since 2011 the Chinese government has vastly increased support to the solar PV generation sector.

Chart 3: Share of net solar PV installations 2003-2012 Source: Earth Policy Institute

In the EU, the opposite has happened. As recently as 2010 the EU was estimated to account for about 80% of global installations, but it has now become a minor market. In 2013 the three leading markets were China, the US and Japan, which together accounted for 61% of installations. In 2009 Germany by itself installed over 50% of the solar PV added in the world, but in 2013 it accounted for only 9%. One of the main reasons for this has been a sharp reduction in support for the sector across Europe, especially in the eurozone, following the onset of the crisis in the EU.

Whatever these figures may say about the future of solar PV electricity generation, If nothing else, they are a reminder that nothing in China is constant, nor even in Europe. And the relationship between them, and their position in the world, can change rapidly.

Germany turning into an Electricity Importer

Posted by on 19/10/14

Germany is in the beginning of its nuclear phase-out to be completed by 2022.

To that end, it has to replace nuclear power accounting for 18% of its electricity supply, compared to more than half from coal, by higher energy efficiency and renewable energy.

It will also have to close some 30 conventional coal- and gas-fired power plants with a total capacity of 7 GW, which can no longer compete against wind and solar electricity.

To cope with these closures north-south grids  will be necessary to transport large volumes of wind power, but their construction suffers delays because of technical hiccups and public opposition. German utilities have therefore begun buying electricity from Austrian, Italian and French sources for the winters 2014-2016.

This is to be applauded. European power producers have an intrinsic interest to trade electricity according to daily and seasonal availabilities and costs.

The wider the geographic scope for trading wind and solar electricity the easier will it be to do without “stand-by” power plants: somewhere in Europe hydro, biomass, sunshine or wind should normally  be available. Gas-fired stand-by capacities should be an exception, as they are expensive to operate because of low capacity utilisation.

In order to obtain energy security and sustainable supply Europe will need pan European grids and optimal energy efficiency. That will take time and huge investments. The EU has laid out a strategy until 2050 to that end. It should start implementation 2014-20 with support financing from EU structural funds.

Eberhard Rhein, Brussels, 10/10/2014

Uncertain times

Posted by on 16/10/14

Oil prices surprise us again as Brent falls to below USD 90 on Thursday (9/10). What is going to happen next? Will the downward trend continue? Or should we rather expect the prices to hit USD 100 and above again? The answer depends on the time frame of expectations. In the short-term perspective, three sources of uncertainty may be distinguished. First, there are the geopolitical factors which have caused oil production in six North African and Middle Eastern countries to decline by a total of 3.5 million barrels a day, resulting in an escalation of tensions on the global oil market, which has been historically dependent on Saudi Arabia’s sizeable crude reserves – a bulwark against sudden price upswings. There are many indications that the production slump has reached its lowest point. The possibility of these missing barrels of oil returning to the market produces a price decline risk. The word ‘risk’ is used, because whether production in the region will continue to rise or not remains a major source of uncertainty. When I discussed oil prices a month ago, there were few reasons to believe that Libya’s crude production would go up. As it did, rising to some 900,000 barrels a day at present, the unexpected upsurge in oil supply of more than 500,000 barrels a day reversed the upward price pressure triggered by the Islamic State’s offensive in northern Iraq. However, considering the precarious political situation in Libya, the country’s oil production can fluctuate widely and is unlikely to increase any further.

Interestingly, IHS reports that the Central Bank of Libya currently has all of oil production and oil terminal staff on its payroll and is financing militia forces to protect vulnerable locations. With the central bank’s involvement, crude oil production and supply can be expected to continue uninterrupted over the short term. Although the turmoil and rioting in Libya persists, the unrest has been moved away from oil and gas infrastructure and city areas, which has further reduced the risk of production stoppages in the near future. In the long-term perspective however, the situation remains uncertain as the forces which will eventually gain control of the country may also attempt to take over its oil revenues. While the House of the Representatives, Libya’s democratically-elected and internationally-recognised government, has power in the east of the country, the west is governed by the General National Congress, which also controls Tripoli, where the central bank resides. For now, the central bank is willing to pay salaries to maintain oil supplies, but retains most of the revenue from selling the commodity in an attempt to forestall the conflict between the two rival governments. Currently, neither side is trying to take over all oil revenues, but the situation is bound to change some time. When one of the factions lays claim to the money, the country’s oil production may shrink significantly.

Libya is not the only country whose oil production has the potential to rise above expectations. Iran is still blocked by sanctions, which prevent some 1 million barrels of oil from reaching the market every day. As negotiations with the P5+1 (United States, Russia, China, Great Britain, France + Germany) continue, addressing the sanctions as one of many issues, the oil market is struggling with more uncertainty. This also applies to countries whose oil production has so far not suffered any long-lasting slumps on a scale which could materially affect the global oil market, such as Nigeria, Venezuela, Russia, and Iraq, the last country’s situation being the most worrying in the short-term perspective.

As for the sanctions imposed on Russia, they will likely have their toll on the global oil market in one or two years as the effects of stymied investment in oil production become apparent.

The second source of uncertainty has to do with how fast oil production is going to increase in the United States. The country’s rising oil production, along with the increasing supply from Saudi Arabia, Kuwait and the United Arab Emirates, more than offset the slump seen in North Africa and the Middle East, which has been instrumental in bringing relative stabilisation to the oil market. According to IHS, the potential increase in US oil production depends on whether the ban on American oil exports is lifted or not. The effects of the ban could be seen in the fourth quarter of last year, when the country’s market saw a steep decline in oil prices relative to Brent crude on the back of a seasonal decline in demand associated with repairs in American refineries. While unconventional oil extraction methods make drilling more and more wells necessary, low oil prices discourage any such investments. Lifting the ban on US oil exports could change the situation, as I argued in one of the previous posts.

Oil demand, which outside of the US has been growing at a slower rate than expected, will be the third factor of uncertainty in the coming years. What is uncertain in this case is economic growth in the Eurozone, which is facing the risk of deflation, and the condition of Asian economies, particularly China, which are grappling with an economic slowdown. The oil market is rapidly affected by stymied growth in the region due to still narrow refining margins. Russia and Brazil also contribute to the decline in crude oil demand.

However, there exist some concrete factors which will prevent crude oil prices from declining over the long term. Of these, production costs are the most important – if prices decline to a point where they are lower than production costs, oil production will be reduced, which will in turn cause the prices to go up again. A scenario where oil production declines due to low prices is particularly relevant in Saudi Arabia, where unconventional deposits account for a vast majority of the country’s reserves, and the United States, whose reserve potential is also unconventional in nature. While in Saudi Arabia the decision how much oil to produce is made arbitrarily (depending on economic factors), in the United States the same is based on individual decisions made by numerous independent entities, which are currently most affected by the oil export ban. This makes the US oil export policy, and any potential amendments to it, a crucial factor in shaping the situation on the American and global oil markets in the coming years.

 

ABC of the power segment – part 1

Posted by on 03/10/14

After discussing the crude oil and fuel market mechanisms in our ‘ABC of the crude oil and fuel prices’ series, it is now time to have a closer look at another key business segment. I have chosen to focus on the power segment, which lies at the very centre of the energy sector both in Poland and around the world. Not only does the power sector account for the largest share of the energy balance, but it also draws upon the widest range of competing technologies using all primary energy sources, including fossil fuels, nuclear energy and renewables. This is where we have seen a constant battle between technologies at different stages of maturity and energy efficiency. The idea is to generate energy safely and cost-effectively, both now and in the distant future. Security and continuity of energy supply is monitored and controlled by competent regulatory authorities, which are also responsible for setting the rules of the game in the power market, where the business community seeks to strike a balance between energy prices and new technology development. As a result, the power sector is the lifeblood rather than an ordinary sector of the economy. In the present series of posts, I will put a spotlight on selected technological aspects, the regulatory framework, and the rules of the market game, all which ultimately shape the prices of electricity and heat paid by households.

Since prices are typically associated with specific products, and pricing mechanisms with specific markets, we will start by defining the product and explaining how the power market is organised. We will also explain the meaning of certain terms denoting power and heat generation equipment.

What is the product on the power market?

Energy is traded on the power market and can take several basic forms, all of which constitute energy products:

Fuel is a form of chemical energy contained in a given substance. Fuels are broken down into three groups: solid fuels (such as coal, wood, peat, biomass, etc.), liquid fuels (fuel oils, etc.) and gaseous fuels (including natural gas, industrial and waste gases, biogas, etc.). This category of energy products also include nuclear fuels, such as uranium, where fuel energy is measured in a different manner than in conventional fuels.

In the latter case, the chemical energy content in fuel is measured in GJ (gigajoules). This is often referred to as calorific value of fuel, as calorie was historically used as the measure of fuel quality – one calorie equals approx. 4.2 J. Depending on the physical state of the fuel, its energy content is converted into fuel units. In the case of solid and liquid fuels, the standard unit is GJ/kg, and in the case of gaseous fuels – GJ/Nm3 (normal cubic meter); however, for comparison purposes, the uniform energy unit GJ/kg is used for all physical states of fuel.

When determining the amount of energy released by a unit of fuel, we often use terms such as calorific value or heat of combustion. Both these terms refer to the amount of heat released by fuel at complete combustion, which is expressed in J/kg. In the case of calorific value of fuel, the heat balance does not include heat remaining in steam contained in flue gases. However, it can make a difference for different physical states of fuel.

Heat as an energy product is the form of energy carried mainly by steam and water. Water, both as a liquid and in its gaseous phase, facilitates the conversion and transport of the necessary energy. Following the conversion (usually combustion) of fuel, its chemical energy is transferred to water or steam (depending on the pressure and temperature parameters), and may be transported by pipelines to another location and used for various purposes (for heating, as steam power to drive machinery, and in other applications).

Heat is measured and traded in GJ. Please note that water, as an energy carrier, also carries a certain amount of thermal energy. In heat generating systems, this energy is often referred to as condensate or return heat.

In the case of water and steam, the term ‘enthalpy’ is often used; it defines the potential of a given amount of energy carrier to perform work. For instance, 1 tonne of steam at the temperature of 250°C and the pressure of 0.75 MPa has much lower enthalpy then 1 tonne of steam at 550°C and 13 MPa, and, as such, offers lower potential for the performance of work. Therefore, feeding 1 tonne of steam with different enthalpy values into a turbine will generate different MW (megawatt) outputs. This means that the price of 1 tonne of high-enthalpy steam should be higher than the price of 1 tonne of lower-enthalpy steam. Although commercial settlements are GJ-based, the energy carrier must retain the pressure and temperature parameters (which are subsequently used to calculate the enthalpy value).

Electricity is generated from fuels as a product of the fuel’s chemical energy conversion processes. The conversion is associated with the notion of generation efficiency, whereby the amount of chemical energy purchased in fuel is compared with the amount of electricity sold to a power grid. In the power market, electricity is measured and traded in MW. As fuel energy and heat are measured and traded in GJ, to simplify the calculation of power generation efficiency we may assume that 1 MW=3.6 GJ

How is the power market organised?

The power market is divided into individual interconnected segments combined into one value chain:

  • Production (upstream) – The upstream segment supplies fuels containing the required chemical energy to the hydrocarbons-based power sector.
  • Generation – In the generation segment, various forms of energy (such as kinetic energy in the case of wind power or chemical energy in the case of combustion-based power plants) are converted into electricity.
  • Transmission – This is where electricity is transported over long distances from fuel generation sources to distribution systems (and, rarely, directly to end users).
  • Distribution – Just as in the transmission segment describe above, in the distribution segment electricity is also transported but over shorter distances, via lower-voltage lines, and primarily to end users.
  • Wholesale (Trade) – In this segment, market players purchase electricity (or related products such as certificates of origin or CO2 emission allowances) in wholesale quantities for subsequent resale to other market participants. These transactions include both physical delivery and virtual transactions (for speculative or hedging purposes).
  • Retail – Electricity is supplied by power companies to end users.

What kind of equipment is used to generate electricity?

Power generating turbine

Turbines are flow-through units in which an energy carrier flows through turbine stages and transfers energy to turbine blades, thereby driving the shaft. A turbine is referred to as a steam turbine if steam is the energy carrier, and a gas turbine if the source of energy are hot flue gases. Wind turbines are also used in wind power plants, in which case the rotor blades are driven by the force of wind. Turbines are the key power-generating units in the commercial power sector. Also in nuclear power plants, turbines are driven by steam generated in the process of cooling the reactor.

Steam generator (boiler)

Steam generators are used to combust fuel which releases heat to water and/or steam, thereby converting chemical energy of the fuel into thermal energy of steam or hot water. Steam generators may be fuelled with any type of combustible solid fuel (such as coal or biomass), liquid fuel (fuel oils) or gaseous fuel. Combined systems are also used, such as gas-and-oil generators.

Power generator

A unit which converts other types of energy, mainly mechanical energy, into electricity in power plants. Generators are driven by turbines or other power-generating drives, and use electromagnetic induction to generate electricity.

Turbine generator set

A turbine generator set is a drive unit which combines a turbine and a power generator. The two parts need to be installed at a close distance since they are connected with an energy transmission shaft; therefore, they share certain systems (such as oil and measurement systems, a common foundation, etc.). Both parts of a turbine generator set operate simultaneously and usually undergo planned repairs at the same time.

Steam condenser and steam turbine cooling system

A steam condenser is installed at the exit of a steam turbine, where used steam condenses and releases condensation heat to cooling water. A condenser usually consists of thousands of tubes through which cooling water flows, washed over on the outside with condensing steam. Condensate is collected in a condensate tank and pumped back into the steam generator.

Power plants fitted with a condenser unit are referred to as condensing power plants. Sometimes it is possible to use all steam exiting the turbine as process steam or as heat used for heating purposes. However, in that case a certain amount of steam enthalpy will be lost and will never be converted into electricity.

The cooling system may be open (water from rivers, lakes or seas is pumped through the condenser and heats up in the process) or closed (cooling water circulates between the condenser and e.g. a cooling tower).

Where availability of water is limited, air-cooled condenser or semi-dry systems may be used.

Steam-and-water unit

In a condensing power plant, a steam-and-water unit is a closed-loop system in which the energy carrier (water) circulates between the upper (steam generator) and lower (condenser) heat source, changing into water vapour inside the boiler and condensing again in the condenser. As a result, energy is transported and converted from fuel into mechanical energy which drives the turbine.

Step-up transformer

A step-up transformer is used to transform generator-level voltage (low voltage at approx. 20 kV) to transmission-level voltage (high voltage at 220 or 400 kV). The transformation process depends on the voltage in the network to which the power unit is connected.

 

Heating Buildings only to 16 Centigrade?

Posted by on 29/09/14

Vitali Klitschko, the mayor of Kiev, has recently warned his citizens that they might have to do with home temperatures of no more than 16° during the next winter in order to cope with gas and coal shortages, due to the tense economic and financial situation of the country.

For the average European, let alone American citizen this is unimaginable, except for Europeans who have experienced the years from 1945 to 1948.

But will this be unthinkable forever?

Who guarantees that we shall not be hit again by reduced gas supplies from Russia and difficulties to rapidly replace them by alternative alternative sources?

And more dangerous, though less immediate, are we sure that we must not one day radically reduce our coal, oil and gas consumption in order to put a brake on climate change?

This should normally happen by switching to renewable sources and higher energy efficiency, including through perfectly insulated buildings. But that may not be enough to allow us the luxury of heating our housing and offices at 22-24°! We better remember venerable traditions of wearing sweaters and warm shoes at home to feel well at only 18°. It would save a lot of energy and money.

Our grandchildren will be grateful.

Eberhard Rhein, Brussels, 25/9/2014

Humanity must stop building new and phase out existing coal power plants

Posted by on 28/09/14

The UN Climate Summit on September 24, 2014 has once again underlined the threat of global warming and climate change for future generations but stopped short of responses to what constitutes the overriding challenge for Humanity.

A mobilisation event is not enough, even if the thousands of people that flocked the streets in USA and Europe have been impressive.

Action is required; and it must come urgently and be effective. Bottom-up approaches by cities, regions or corporations are welcome but too tiny to have a global impact.

To keep the planet temperature from rising beyond the critical two centigrade humanity must reduce C02 emissions between 40 and 70% until the middle of the century, which only the EU has pledged to do so far, with its 80-95 reduction target.

In order to be successful the international community must focus on the major countries and sources accounting for the high and rising level of C02 emissions:

  • China, USA, EU, India, Japan, Russia, Brazil, Indonesia, Korea, Canada and Australia are jointly responsible for more than three quarters of total emissions. Without them joining the efforts there will be no effective action and no way to prevent havoc: USA, EU, Japan, Russia, Korea, Canada and Australia will, of course, have to deliver much more than emerging countries.
  • Fossil energies are the main sources driving climate change accounting for roughly 80% of the global C02 output.

Humanity has become fossil-addicted; very few people can imagine 9-11 billion human beings doing without fossil energies by 2050-2100.

Coal being by far the worst polluter the international community should in a first step agree on a halt of new coal-fired power plants and a phasing out existing ones by 2050.

To that end, the December 2015 Paris climate conference should agree to:

  • prohibit the construction of coal-fired power plants that are not equipped with CCS as of 2020;
  • withdraw annually at least 5% of non -CCS coal-fired power plant capacity;.

The USA has started the process of replacing coal by shale gas which emits only half as much C02 as coal-fired power plants. Between 2012-16 it plans to retire 60 GW of the total capacity of 310 GW.

The EU is sending mixed signals.

On the one hand, major coal countries like Poland and Germany continue expanding lignite/coal fired power.

On the other ,UK is preparing to build a 450 MW demonstration plant that will capture 90% of its C02 emissions and store them in deep North Sea waters. UK aims to phase out its coal-fired power and become one of the world leaders in carbon capture and storage technology, a strategy for which it deserves praise.

Politically, it will be anything but easy to conclude an international agreement to stop commissioning new and phase out existing coal-fired power plants.

Carbon capture and storage (CCS) should be the way to overcome the understandable resistance, in particular from emerging countries like India that have hardly contributed to global climate change so far.

It is therefore urgent to build demonstrations plants like the UK is doing.

In parallel, utilities should invest in power plants operating on shale gas, LNG, wind/solar and biogas as alternatives to lignite/coal.

The first step is for the EU to take: it must urgently freeze and start phasing out its lignite/coal-fired power capacity.

This would constitute a strong gesture to the international community.

Eberhard Rhein, Brussels, 20/9/2014

Better security through knowledge

Posted by on 25/09/14

Security was the leading theme of a closed expert debate organised by the Polish Institute of International Affairs and its Turkish counterpart – the Centre for Strategic Research of the Ministry of Foreign Affairs of the Republic of Turkey (SAM – http://sam.gov.tr/about-sam/). Inspired by the discussion, and the more unofficial opinions voiced behind the curtain, I have decided to re-visit the issue of energy security, this time from a slightly different perspective.

Not long ago, while discussing the draft of the Polish Energy Policy until 2050, I underlined those aspects of energy security which go beyond physical security and access to energy resources. Energy security is a system centred around policies pursued by individual countries and international institutions. At the same time, it requires policies and a business climate that promote investment, progress and innovation to ensure that adequate supplies and infrastructure will be available in a timely way in the future. Since these two aspects, politics and investment, are interwoven, it is difficult to improve energy security without international cooperation (coordination). However, cooperation alone is not enough, because the problem of energy security resembles a prisoner’s dilemma where mutual trust is necessary to improve the situation for all parties. And trust is based on credibility. The case at hand is about the credibility of one’s economic policy, of which energy policy is an important component.

Can a policy’s credibility be evaluated? Yes, it can, as financial markets demonstrate on a daily basis. How can we do that? Let’s consider a relatively simple example – monetary policy. Using their knowledge of and information on the economy, experienced participants of the market (let’s call them analysts) create models which simulate how the economy is going to develop in the near future. Central banks do the same. In a given state of knowledge and with universal access to information, both analysts and central banks obtain largely similar projections of economic growth, job markets and inflation. Knowledge of economics also indicates how central banks should react to future changes in the inflation rate. The credibility of central banks follows from the fact that they base their decisions on solid factual information which the markets can read. If central banks make surprising decisions which they are not able to justify, risk increases and investors sell off risky assets or demand greater returns.

Despite being much more complex, energy policy may also be evaluated. Suffice to say that any policy is comprised of regulations which the government uses to achieve such results as higher capital expenditures or lower energy consumption per production unit. At the heart of each such regulation lies a cause-and-effect relationship linking the instrument (regulation) to the outcome (desired result). Even if this relationship is highly complex, it should lend itself to a factual evaluation, as the regulator must have connected the effect and cause somehow. Seeing that such a mechanism exists, we may ‘replicate’ it using our economic and social knowledge to verify whether it can deliver the expected results.

This is facilitated by appropriate tools (models), which must be prepared in advance, however – a task which requires systematic and interdisciplinary research. Research into the effects of regulations has an additional benefit in that it allows us to identify areas where our knowledge is imperfect. Discussing the risk emerging when a policy takes a leap into the unknown, Noble Prize winner Edmund Phelps says: “At the simplest level, economics can better show us the consequences of our actions. Less simple are cases in which we don’t have the knowledge to predict the full consequences. Global warming and climate change is an example. Actions that we believe will remedy a perceived problem may in fact lead to an unintended consequence… Generally speaking, global energy systems are so complex that interfering with them will almost certainly lead to unintended consequences” (First Things, Economic Justice and the Spirit of Innovation, October 2009).

Knowing the limits of our knowledge is necessary to evaluate whether policymakers venturing into the unknown are fully aware of the risk or whether they do so because they lack knowledge which is objectively available.

In the first case, where such actions are born of necessity, we must consider a comprehensive spectrum of possible scenarios and then evaluate their outcomes, which will help us identify what risks can materialise when the policy is implemented. This is the approach we chose three years ago when contemplating shale gas projects in Poland. We identified three possible directions in which the sector might develop depending on how current conditions encourage investment, progress and innovation, and then investigated their outcomes.

The second situation should never come to be, and to prevent it from happening in Poland we need strategic, systematic and interdisciplinary research into the energy sector, which should look into strategic aspects of energy and climate policies and into the actions taken by the government/state and companies. Security is one of such strategic matters requiring a systematic approach. Energy security is a public good and as such lies within the remit of the state, which decides how to ensure energy security today and in the distant future. However, the actual ‘delivery’ of energy security is accomplished by companies which, acting within a framework imposed by applicable regulations, ensure uninterrupted energy supplies at an acceptable price. And it is those companies that are first to evaluate the practical cost of the regulations – the cost of security. We should therefore take their opinion into account when researching the energy sector, which should allow us to reduce our ignorance in areas where its cost is the highest.

Improving energy security requires a well-designed and durable strategy, which can only be achieved with appropriate knowledge and interdisciplinary research. It is high time we began working on it.

 

Shale gas will be no panacea for Poland’s energy policy

Posted by on 21/09/14

Poland has been a laggard in European Climate Policy. Its substantial coal reserves, second to those of Germany, and a powerful coal lobby have prevented the country for a long time from waking up to the climate challenge.

No wonder that coal continues to account for more than half of its energy consumption and more than  80% of its electricity consumption, that its per capita C02 emissions (8 tons) have remained higher than in most EU countries and that the government has not yet succeeded in  enacting an effective strategy for lowering  green house gas emissions.

On the contrary, it continues building new coal power plants.

By  2020 11 GW  additional capacities should be on the grid,not a wise decision considering that they will remain operational until the middle of the century  when the EU aims at having reduced its CO2 emissions  by at least 80%.

More recently, under pressure from the EU and rising dependency on Russian oil and gas imports, which cover  almost 40% of the energy consumption, the government  seems to have become a bit more active in  searching for alternative energy sources.

Among these shale gas figures high. Poland  has more shale gas reserves than any other European country, with the exception of Ukraine. But over the past four years the government had to temper excessively high hopes and lower initial  estimates  from more than one trillion to only 300-700 billion cubic meters. None of the exploration wells have so far  been successful, so that some of the concessionary companies have left the country.

But despite these drawbacks the efforts should go on, because domestic shale gas would constitute a big step to make Poland a bit less dependent on Russian imports and C02-intensive coal and lignite.

Poland will, of course, have to put in place an appropriate regulatory framework, especially for the protection of groundwater. But this should be a Polish  rather than EU concern.

In addition,the government has decided to bet  on nuclear power to generate emission free electricity. In January 2014, after almost 10 years of deliberations, it has  approved a new strategy for installing two nuclear power plants with a  total capacity of 3 GW to be operational by 2035. This is an ambitious undertaking in terms of safety and financing, considering the substantial cost-overruns  of the  most  recent nuclear reactor  being built in Finland and the German nuclear exit strategy.

Renewable  energy, especially wind, solar and biomass, would be a cost-effective alternative to nuclear electricity. Poland plans to install 0.5 GW annually and reach  a capacity of 6.6 GW by 2020. But this will be impossible to achieve considering further delays on the renewable energy legislation.

This is a pity as the Polish off-shore wind capacity is estimated at 20 GW.

Ideally, the Baltic riparian countries should create a joint wind power grid to serve as a virtual power storage system. With the support from the EU Commission, the interested countries – Denmark, Germany, Poland,  Lithuania, Latvia, Estonia, Finland and Sweden-  stretching  over a coastline of several hundred km – should prepare a feasibility  study  for  such a project that might be completed by 2035.

Last not least, Poland should step up investments for thermal renovations of buildings to reduce the demand for heating during the cold winter months. It should use a  big chunk of the financial assistance from EU structural  funds 2014-20 for this purpose.

Eberhard Rhein, Brussels, 20/9/2014

Words of praise and criticism to Poland

Posted by on 18/09/14

First a few words of credit to Poland. During my work with evaluation and auditing in DG Enlargement, I visited Poland a few times before its accession to EU. Later on, after turning to public administration reform, I had the opportunity to attend a EUPAN conference in Krakow during the Polish presidency. It was always a pleasure to discuss EU issues with our colleagues from Poland.

Another credit I want to give to Poland is inspired by my heritage trip last August. I visited Krakow, Lublin and Zamosc. Overall it was impressing to witness how Poland is preserving Jewish synagogues and cemeteries who were destroyed by Nazi-Germany during the Holocaust.

In the past it might have been Jews abroad who initiated and funded such restorations. Now very often the initiative comes locally, from town and villages where no Jews are left, and with funding from EU, other international aid programs, and national co-financing. The sites are visited by Polish tourist groups and visitors from other countries. This work can stand as a model for other EU member states.

The way how Poland is restoring or even recreating and reliving, Jewish sites – take e.g. the former Jewish quarter Kazimierz in Krakow – pays tribute to its effort to overcome past prejudices. It also contributes to a historic reconciliation between two nations who were living side by side for hundreds of years.

So why complain? Today’s article in EurActiv (18.9) on the use of EU funds for energy renewal in Poland seems to require a response by both Poland and the European Commission. According to the reports quoted by EurActiv, Poland is using billions of euros from EU carbon credits and emission allowances on coal plants and the budget deficit.

The intention was of course to support Poland in diversifying its energy mix, increase its use of renewable energy sources and reduce its carbon emission. How is this possible? Obviously because of Poland’s current reliance on coal fueled power plants and its reluctance to change course.

But it was perhaps made possible by the lenient rules in the relevant regulations and agreements which according to EurActiv are not legally binding or written in the form of recommendations.

EurActiv also writes that “the decision to bolster Poland’s dominant coal industry at the expense of other energy sources and to cut the country’s deficit budget rather than invest in cleaner energy was made under Tusk’s watch.”

The Polish prime minister was recently elected to next president of the European Council. In his first press conference (EurActiv 3/9), he referred to other sources of energy: “This is a very important moment because I’m convinced that my legacy, my personal experience and our European dreams can become an important source of energy.”

True but don’t forget the energy sources which are fuelling our power plants, warming our buildings and driving our transport means. The challenges of climate change are enormous.

Interview with Mr Abdullayev, President of SOCAR

Posted by on 16/09/14

The President of the State Oil Company of Azerbaijan Republic (SOCAR), Mr Rovnag Ibrahim Abdullayev, discussed with Dimitris Rapidis, Director and Project Coordinator at  Bridging Europe, on a string of issues ranging from energy supply and production, regional cooperation, ongoing and forthcoming projects and partnerships, to the risks of climate change, corporate social responsibility, and the special relationship with Greece as the linking corridor towards the expansion of the company in the Western Mediterranean Basin and the European Union.

*The interview was first published by Bridging Europe. It is republished here.

What is the positioning of SOCAR in the global energy run in terms of production and supply?

Let me first share the vision of SOCAR with you. SOCAR aims to become a vertically integrated international energy company resting upon advanced experience on operation efficiency, social and environmental responsibility, and so far has undertaken major steps to  strengthen its international presence both in terms of energy production and supply.

SOCAR positions itself as a reliable energy partner of Europe. We truly believe that diversification of energy supply is one of the most important topics of today’s energy policy of the European Union, and SOCAR is here to support its European partners.

From historical perspective, the Caspian region always has been and is again re-shaping itself as a hub for global energy supply. SOCAR is currently working on development of a number of upstream and midstream projects together with 25 global companies, which are involved in oil and gas projects in the Caspian region.

Being one of the major players in the industry in the region SOCAR is seeking to raise its own gas production from new fields it is exploring in the Caspian Sea. SOCAR hopes to see its gas production soar in the coming years as production capacity is expanded at existing fields and new ones are discovered and brought into production. Most of the gas produced is likely to be exported to consumers in Europe via forthcoming TANAP and TAP pipelines.

The formation of export routes was crucial for exporting our hydrocarbon potential to the global markets, with the large-scale production of oil and gas only possible once the BTC oil pipeline and SCP gas pipeline had been commissioned. The pace of the next phase of SOCAR’s output growth is to be set by the construction of export routes, especially TANAP and TAP pipelines that will carry the gas produced from Shah Deniz 2.

Which are SOCAR’s existing and forthcoming projects?

Today, SOCAR is actively involved in several significant projects both in a regional and in an international context. In these projects we closely cooperate with well-known global companies and highly experienced teams. Currently OGPC (Oil and Gas Processing Complex) is considered as the largest downstream project of SOCAR in Azerbaijan, which is of strategic importance. The construction of the Complex includes an Oil Refinery with around 9 m. tons, a Gas Refinery with 12 billion bcm capacities and a Petrochemical Plant. The Complex is planned to be fully operated in 2020.

The President Aliyev signed a decree in February establishing a closed joint-stock company (CJSC) for effective management of projects within the second phase of Shah Deniz gas and condensate field’s development, expansion of the South Caucasus Pipeline, Trans-Anatolian Gas Pipeline (TANAP) and Trans Adriatic Pipeline (TAP). The gas which will be produced at the second stage of Azerbaijan’s Shah Deniz field development will be the main source of the Southern Gas Corridor, which envisages the transportation of the Caspian gas to European markets.

In addition to the main projects developed by SOCAR, there is a number of projects and business activities run by our daughter companies in Europe as well as in UAE and Singapore. Fuel retail networks in Georgia, Ukraine, Romania and Switzerland together with the infrastructure projects in UAE, Turkey and Georgia are amongst the most notable ones.

As an example of the diverse nature of projects run by SOCAR’s foreign subsidiaries we can mention “PETKIM Value-Site 2023 Refinery-Petrochemicals-Energy-Logistics Integration” project in Turkey. The project implies construction of a brand new Star refinery, new petrochemical plant facilities, STEP energy plant and Petkim Container Port in Turkey.

Another significant project is the recent acquisition of Greek Natural Gas Transmission system Operator (DESFA). This is work in progress at the moment as this asset provides an excellent diversification opportunity for SOCAR’s investment portfolio.

What is the goal of SOCAR’s Summer School

As part of talent acquisition strategy to develop and attract young professionals to oil and gas sector each year SOCAR purposefully launches sets of diversified projects. Summer School Project initiated by SOCAR since 2010, is one of the decisive activities respectively serving the mission of attracting young, potential and competent students, and retaining young professionals already working at different divisions of SOCAR, through creating deep understanding of SOCAR’s culture and activities both in domestic and international markets. As was clearly mentioned, the program has been launched since 2010, and year by year, every possible development is implemented to make program more comprehensive and useful for the participants. The project is based upon prearranged program, which covers all the chains of energy sector, starting from geology and geophysics of oil and gas wells, and continuing with drilling, production, transportation, refining of produced oil and gas.

The last but not the least, during the program the participants gain deep information on the sales and marketing of produced oil and gas products. It is worth noting that the program is not restricted only to lectures, but also excursions to different production units of SOCAR are organized in accordance with the topic of the day. Overall, the project has substantial positive outcomes in staff development and recruitment strategies of SOCAR.

Baku High Oil School

On 29th of November 2014, the Baku High Oil School was established under the aegis of SOCAR. The Baku High Oil School signed a cooperation agreement with Heriot-Vatt University of the United Kingdom with the purpose of specialists training under a Bachelor Degree Program in the fields of oil and gas engineering and chemical engineering. Since its establishment Baku High Oil School has managed to create modern infrastructure, to form professional administrative and academic personnel.

This higher education institution continues to successfully expand its international ties and attract advanced educational programs and technologies widely applied in Western countries. In the short run, it is expected that the Baku High Oil School will be able to train highly educated in-house specialists who will make their valuable impact in country’s dynamically developing industry and contribute to effective implementation of SOCAR projects both inside and outside of our country.

Baku French Lyceum

The Baku French Lyceum (“BFL”) was established in accordance with an agreement on establishment and activity of the Baku French Lyceum signed between the governments of the Republic of Azerbaijan and the Republic of France on 07.10.2011. BFL commenced its activity on 15.09.2013. Currently 120 children attend kindergarten and school functioning under the lyceum. A supreme governing body of BFL is a Management Committee. The Management Committee consists of 4 persons representing the Heydar Aliyev Foundation, the Ministry of Education of the Republic of Azerbaijan, the Embassy of the Republic of France in Azerbaijan and SOCAR, by one representative from each organization. The Principal of the school and main teachers are citizens of France. Lessons are held in accordance with curriculum of international french schools with observance of requirements of the Law on Education of the Republic of Azerbaijan.

What do you expect from the 2nd SOCAR Oil and Gas Processing and Petrochemical Complex Forum (OGPC) held in November 2014?

SOCAR OGPC Forum is designed to provide a detailed presentation of the new Oil and Gas Processing and Petrochemical Complex (OGPC) to be constructed by SOCAR. In April 2012, we organized the first forum devoted to SOCAR’s Oil-Gas Processing and Petrochemical Complex Project. During that Forum, the extensive discussions and productive meetings   have greatly benefited to both SOCAR and other participants of the event. Over two years after the first Forum, the OGPC activities have advanced considerably. Now, we are completing the FEED for the Gas Processing Plant and passing to EPC tendering. The works on the Petrochemical Plant will run in parallel. We have also completed the OGPC constructability study and other site surveys. At the same time, the FEED for utilities and off-sites and conceptual design for off-plot facilities has been carried out. As you see, the Project is now passing to a more significant phase. We are receiving more and more requests from various companies to organize another forum, which would help companies to obtain sufficient information about current stage of the Project and discuss the possibilities of further cooperation. That is why we decided to organize the second OGPC Forum, which we hope will help to establish close connections and promote cooperation and discussions on Project related issues at one single platform between potential stakeholders such as engineering companies, EPC contractors, licensors, manufacturers, vendors, service providers etc. We believe this event will play a crucial role in the future sustainable development of the Project.

In November 2014, the 2nd SOCAR OGPC Forum will be organized in Fairmont Hotel located in Flame Towers complex in Baku. Let me use this opportunity to invite our Greek colleagues to visit us in Baku in November!

How are you dealing with the climate change problem and environmental advocacy?

First of all, I would like to note that the dealing with climate change is an ethical issue for us and SOCAR has been taking regular actions to deal with climate changes. Moreover, we actively work with a variety of international institutions on climate change.

After Azerbaijan Republic ratified UN “Framework Convention on Climate Changes” and SOCAR enhanced its financial capabilities, it has started to pay more attention to enforcement of global ecological conventions and ecological issues in all company premises.

In 2008 SOCAR approved its Ecological Policy and actions were taken in the same year to enforce Framework Convention on Climate Changes.

It has been 7 years since SOCAR has been taking inventory of greenhouse gas (GHG). After inventorying process, steps were taken to conceive and implement new projects’ ideas regarding minimization of potential GHG emissions having adverse climatic effects. So accumulation and supply to consumers of associated gas produced with oil, substitution of old power-consuming equipment with modern power-saving equipment may be brought as examples. During these years to enforce these processes successful cooperation affairs have been established with the World Bank, GGFR, European Bank for Reconstruction and Development, Asian Bank of Development, companies from Germany, Norway, Japan and other countries. In frame of these cooperation activities such documents as “Plan on minimization of flue-gas emissions”, “Strategy for minimization of adverse effects of climatic changes” were developed.

Concurrently with the foregoing SOCAR also takes focus-oriented steps in other directions regarding environmental protection. Thus, in order to ensure ecological security, regular ecological monitorings are conducted at SOCAR in all offshore and onshore activities, including also oil-gas, petrochemical operations. Currently Environmental and Social impacts of SOCAR projects are assessed and preventive measures are being identified to minimize them. Mining sites traditionally polluted by oil and oil products are reclaimed and recovered to the natural-landscape design. Provisions were made to control in a closed system of produced waters extracted during the production on SOCAR oil-gas operation sites. Besides,  maintenance was provided on biological purification plants of all production facilities.

The discharges from vehicles globally along with other areas of industry also cause one of the most serious ecological problems.  Ecological impacts are crucial due to the growing number of vehicles in our country. In this regard, SOCAR Ecological Measuring Center conducts ecological diagnosis of vehicles.

One of the priority issues in SOCAR’s environmental protection activity is waste management. Work in this area is organized according to requirements of a Waste Management Plan approved by SOCAR. All types of industrial wastes generated at SOCAR facilities are taken over in Waste Management Center (WMC) being a part of a valid waste management system.

Expansion of plantation sites is one of the major directions of ecological policy in our Republic. SOCAR also contributes to planting activities implemented on a national scale. One of the essential environmental projects implemented by SOCAR was designing and constructing the Ecological Park. The main objective of laying out this Park was to create a contemporary form of society-environment relations, and to show that environmental propaganda, environmental upbringing and protection of the environment is a first priority duty of every citizen. It has been 3 years since SOCAR launched the project titled Eco-Park. As a result of the works performed in this scope, 574434 different types of trees-bushes and flowers were planted in an area of 400 ha. Ecological awareness and enlightening activities are implemented  in conformance with the SOCAR’s “Action Plan on Ecological Awareness”. In the frame of the plan, ecological days are celebrated at SOCAR enterprises and facilities, and cooperation with international ecology-oriented organizations is continuously broadening. In order to enhance environmental protection, to develop “approach to the environment with care” traditions and to educate the youth in the spirit of sensitive approach to the environment SOCAR expands its ecological awareness activity from year to year.

What are the major fields of involvement when addressing to corporate social responsibility (CSR)?

There are several key fields of the CSR in our day-to-day work and we think of corporate social responsibility across SOCAR in a strategic way.

Mainly, it is the idea of implementation of sustainable solutions in all areas of our operation. This implies working on strategy to improve working conditions, to integrate labour standards into our business practice, to monitor our facilities, and to collaborate with our partners in order to drive industry-wide change.

The next level concentrates on our employees and on making SOCAR a place where people can build their careers in a positive work environment. Particularly on this point, SOCAR has been a pioneer in developing various activities on employees’ health and labour safety in accordance with the requirements of Single management system for labour protection in the Azerbaijani oil industry.

Another key field in corporate social responsibility for us is the environment. For instance, SOCAR developed its own “Waste Management Plan” in order to ensure that the systems designed to manage waste, generated at our facilities work efficiently and that collection, sorting out, transportation, utilization of waste is conducted in line with the industry practice. Also, Environmental Department regularly carries out the quantitative and qualitative monitoring of harmful wastes in gaseous, liquid and solid forms emitted to the atmosphere as a result of natural and anthropogenic impacts at enterprises and companies subordinated to SOCAR.

Our CSR policy does not stop here of course, there are number of other projects that SOCAR is involved in, however I am afraid that we will need to have another interview to discuss them all.

What is SOCAR’s involvement in Greece? Do you perceive the country as a strategic partner for your company’s expansion in the West?

As you may be aware, SOCAR has been selected as the preferred bidder in the DESFA privatisation process that is still in progress and that is expected to be finalised within the course of coming months. DESFA is SOCAR’s first project of this scale in the European Union and we are very happy to collaborate with our Greek partners towards the success of it. Furthermore, Greece is one of the “TAP countries” and it certainly plays a central role in realisation of the TAP project.

As a result of our increasing activity in Greece, it was decided to open the country office in Athens so that we have our permanent presence in the country as well as in the region. Now, when SOCAR Energy Greece S.A. has been fully established it shall be much easier for us to manage our relationship with our existing counterparts and look at further business opportunities in Greece.

Indeed, Greece is a good friend and a reliable strategic partner of Azerbaijan. Perhaps, one of the most significant indicators of the friendship between our countries is the fact that our collaboration is not limited to the oil and gas industry and that it had constantly evolved during the past years. I believe that the relationship and the economic cooperation between our countries will grow even stronger in the future. I think that numerous official meetings of the Azerbaijani and Greek leadership and the recent official visit of the President Aliyev to Athens only support my point of view.

What is the company’s project plan for energy supply in the EU?

At the times when Europe needs reliable suppliers, supply from SOCAR and Azerbaijan is viewed as a part of Europe’s strategic goals. The challenges to security of supply could be political, technical or even due to extreme weather and demand. I would like to stress that SOCAR met its supply demands during the harsh winter of 2012 due to its storage facilities and strong commitment to meet its contractual obligations. Recently, SOCAR has engaged in expansion of its storage facilities in order to continue to be a reliable supplier.

Instead of selling to regional markets, SOCAR decided to embark on a chain of mega project to export gas to Europe: a chain that crosses 7 countries, deals with six regulatory systems, involves 12 investing companies, includes 12 gas buyers and requires 45 billion USD of investments. By the way, this chain of projects is called the Southern Gas Corridor, or shortly SGC. The mega project will be able to facilitate the transportation of gas not only from Azerbaijan but also from Central Asia and Middle-East countries. The pipeline is being built with the potential to double the capacity and can be scaled up to 30 bcm/a. This is the first project in decades to introduce new gas supplies into Europe rather than simply re-routing existing supplies, thus diversifying sources.

As we plan, the first gas explored from the second stage of the Shah Deniz field will be delivered to Turkey through TANAP in 2018 and then to Europe through TAP in 2019. Today successful execution of these projects is of top priority for SOCAR. The Southern Gas Corridor will be a strong catalyst for interconnectors across Southern Europe, while the TAP section will be able to connect Caspian gas to multiple European markets. In addition, there are signs of strong commercial interests in adding a component of the project into the Balkans.

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