REFFconferrence & Changing Face of Wind Power India

REFF conference Mumbai 20th November and 21st November.

The global financial crisis has not dented the interest in Renewable Energy in India, as that was quite evident from the presence of participants from various geographies, various fields and with special interest to participate in various capacities (debt, equity, CDM off taker, Developer) etc.
Day one’s highlight was presence of Dr Pramod Deo, Chairman, CERC who is considered to be one of the evangelists, about Renewable Energy. During his leadership at MERC, Maharashtra came out with one of the most supportive RE Policy specifically for Wind Power which resulted in addition of over 1000 MW in wind power in last 3-4 years. He himself remembered those days and the kind of opposition the policy had to face when the policy was christened. But in the hindsight not only he is happy but also proved his opponent that he was correct. Economic times of 21st November, refers to hike in power tariff for Mumbaikars by over 1 Rupee per Unit. As I remember, my electricity bill from Reliance Energy Limited already quotes around 3 to 3.5 Rupees per Unit which I believe will soon touch the 5 Rupees tariff against which the Wind Power Tariff is 3.5 Rupees per Unit which is so called Feed in Tariff or preferential tariff. I think message from Pramod Deo was quite clear, support RE by giving policy which supports its growth which will ensure the Energy Security in longer term.
Also on the day one there was important discussion on Generation Based Incentive (GBI) by none other than Debashish Majumdar, CMD, IREDA, the nodal agency under MNRE for the said scheme, which is said to be first step in direction to incentivize the Generation based RE Power in country against the Depreciation based capital investment in RE. Although when the questions came about the applicability of GBI, its extension, air was not clear. One thing that was made clear was that the first 49 MW quota is already exhausted. About the extension, IREDA, CMD stated that it has already been submitted for further discussion and the decision is expected to be out with in one or two month. He also hinted that proposal is to extend GBI up to 2010-2011 year instead of having outer limit of MW. Frankly I believe the second phase of wind power has to come from IPP (Independent Power Producer) and GBI, REC instruments are going to play major role for the same.
Second days highlight was the introduction of Renewable Energy Certificates by Balwant Joshi, Managing Partner, ABPS Infrastructure. Definitely there are some last minute hurdles that needs to be sorted out to pave the way for such revolutionary (although this small cousin of CER (written from right to left REC)) and hopefully the concept will see the light of the day may be in coming days during the first budget of new (or congress) government.
Further on the second day a developer’s voice was also interesting to note. Mr. Mahesh Makhija, Vice President, Renewables, CLP India gave a true picture how and why the wind power market in India is developing in very balanced manner. Probably he still is loyal to his old manufacturer’s day as he lightly discussed during the networking session. The important aspect that he touched upon was the non inclusion of Cost associated with development of Power Evacuation for the new wind farms that were getting developed which usually do not get captured in the Modest Per Mw cost that goes in Tariff determination by various SERCs.

OPEN ACCESS:

the other important discussion that hog the limelight of abscence of implementation of Open Access in letter and spirit.

Changing face of Wind Power in India

Most of the discussion in the two days conference was concentrated on dissecting the past and the way wind power industry got developed in India with support of Tax incentive (Well it was also said that instead of paying tax, a tax payer can invest 30 % as equity in wind power and rest debt finance). But then question arise was this something that has happened first time in the world? Isn’t it similar to the likes of benefits/subsidy given by various governments around the world to promote various industries, leave apart Renewable (wind) energy? Had it not been these benefits could India would have been on the map of Wind Power as it is today? The famous remark doing round was : though it is being said that “Glass is half filled but had it not been the Suzlon or Enercon there would have been the Glass at all”.
What about future: Definitely future lies in IPP going forward and this is well established without any doubt. Today, Suzlon has got a special team which focuses primarily on IPP with special focus on Investments from International Investors. The IPP team not only discuss Energy Yield Assessment but host of aspects such as Operation & Maintenance, Health Safety Society and Environment (HSSE), Corporate Social Responsibility (CSR), independent third party wind resource assessment , Garrad Hassan (GH) verification, Wind Sector Management, Power Evacuation (PE) etc which were un heard of in last few years. Things are changing. Things are changing fast.
Sites with installation of above 50 MW will be a reality. In fact there are plans to have wind power complexes with 1000MW at single location. Probably this is the new face of wind power, new face of Suzlon.
Views expressed are strictly personal and are of writer himself and not of the organization he belongs to.

Financial Crisis || Politics || Insider @ Play

Events/Acts/Actions that speaks for "relationship of politics and money and consequently/unfortunately about the crisis: Past, Present and may be Future.....

Past:
1) November 1999 : Repeal of the 1933 Glass-Steagall Act passed and signed by Bill Clinton ( Democrat), bill presented by congress senator, Phil Gramm of Texas ( a Republican)2) Commodity Futures Modernisation Act of 2000

Present:
Democrates:
Robert Rubin (ex- Goldman Sacs) adviced Clinton on economic front. Robert Rubin supported clinton pushing NAFTA(1994) and bail out of Mexico's banks(1998) both act allegedly helped Goldman Sacs. Rober Rubin moved to Citibgroup and later Citigroup acquired Mexico's major bank Banamex, a sale facilitated by NAFTA. Rubin is now adviser to Obama.
Republican:
McCain is adviced by Gramm.
Bush Administration:Henry Paulson, ex-Goldman Sachs( he holds 523.5 million USD in the company's stock), proposed 700 bn USD will definitely (Privatise the gain, socilize the pain), lift the ailing Goldman and will protect Paulson's money. Going a leaf ahead, not only finacially but the proposed move seems to be seeking to protect "involved" not only from oversight but also from prosecution in the case of wilful mismanagement. The act reads " Decisions by authority (read paulson) are non-reviewable and committed to agency discreation, and may not be reviewed by any court of law or any administrative agency": surprisingly this is worlds leading democracy.

Future:
The most difficult of all the three but defnitely cannot be different from the first two.

Background: Details about the GSA & Banking Holding Act
In 1933, in the wake of the 1929 stock market crash and during a nationwide commercial bank failure and the Great Depression, two members of Congress put their names on what is known today as theGlass-Steagall Act (GSA). This act separated investment and Commercial Banking activities. At the time, "improper banking activity", or what was considered overzealous commercial bank involvement in stock market investment, was deemed the main culprit of the financial crash. According to that reasoning, commercial banks took on too much risk with depositors' money. Additional and sometimes non-related explanations for the Great Depression evolved over the years, and many questioned whether the GSA hindered the establishment of financial services firms that can equally compete against each other.

Reasons for the Act - Commercial SpeculationCommercial banks were accused of being too speculative in the pre-Depression era, not only because they were investing their assets but also because they were buying new issues for resale to the public. Thus, banks became greedy, taking on huge risks in the hope of even bigger rewards. Banking itself became sloppy and objectives became blurred. Unsound loans were issued to companies in which the bank had invested, and clients would be encouraged to invest in those same stocks. Effects of the Act - Creating BarriersSenator Carter Glass, a former Treasury secretary and the founder of the US Federal Reserve Syste, was the primary force behind the GSA. Henry Bascom Steagall was a House of Representatives member and chairman of the House Banking and Currency Committee. Steagall agreed to support the act with Glass after an amendment was added permitting bank deposit insurance (this was the first time it was allowed).As a collective reaction to one of the worst financial crises at the time, the GSA set up a regulatory firewall between commercial and investment bank activities, both of which were curbed and controlled. Banks were given a year to decide on whether they would specialize in commercial or in investment banking. Only 10% of commercial banks' total income could stem from securities; however, an exception allowed commercial banks to underwrite government-issued bonds. Financial giants at the time such as JP Morgan and Company, which were seen as part of the problem, were directly targeted and forced to cut their services and, hence, a main source of their income. By creating this barrier, the GSA was aiming to prevent the banks' use of deposits in the case of a failed underwriting job. The GSA, however, was considered harsh by most in the financial community, and it was reported that even Glass himself moved to repeal the GSA shortly after it was passed, claiming it was an overreaction to the crisis.Building More WallsDespite the lax implementation of the GSA by the Federal Reserve Board, which is the regulator of U.S. banks, in 1956, Congress made another decision to regulate the banking sector. In an effort to prevent financial conglomerates from amassing too much power, the new act focused on banks involved in the insurance sector. Congress agreed that bearing the high risks undertaken in underwriting insurance is not good banking practice. Thus, as an extension of the Glass-Steagall Act, the Bank Holding Company Act further separated financial activities by creating a wall between insurance and banking. Even though banks could, and can still can, sell insurance and insurance products, underwriting insurance was forbidden.

The argument for preserving Glass-Steagall (as written in 1987):

1. Conflicts of interest characterize the granting of credit – lending – and the use of credit – investing – by the same entity, which led to abuses that originally produced the Act

2. Depository institutions possess enormous financial power, by virtue of their control of other people’s money; its extent must be limited to ensure soundness and competition in the market for funds, whether loans or investments.

3. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses.

4. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real investment trusts sponsored by bank holding companies (in the 1970s and 1980s).

The argument against preserving the Act (as written in 1987):

1. Depository institutions will now operate in “deregulated” financial markets in which distinctions between loans, securities, and deposits are not well drawn. They are losing market shares to securities firms that are not so strictly regulated, and to foreign financial institutions operating without much restriction from the Act.

2. Conflicts of interest can be prevented by enforcing legislation against them, and by separating the lending and credit functions through forming distinctly separate subsidiaries of financial firms.

3. The securities activities that depository institutions are seeking are both low-risk by their very nature, and would reduce the total risk of organizations offering them – by diversification.

4. In much of the rest of the world, depository institutions operate simultaneously and successfully in both banking and securities markets. Lessons learned from their experience can be applied to our national financial structure and regulation

Source & referrence: Frontline Magazine, October 24, 2008 , Investopedia, WikiPedia

Financial Crisis and way forward

The recent financial crisis and the consequent crisis management specifically by US has become hot topic for discussion. To add to the confusion the world has become so dynamic that the debate/discussion before people(not the immediate) can read, the perspective changes broadly.

One of the recent article "The Argentine Way" by Jayati Ghosh in Frontline issue October 24, 2008 is good example of what is happening and in fact "How fast it is happening"? The said article praised the way Argentine Economy fought the financial crisis in Year 2001 wherein the country was hit with declining employment & output, increasing poverty rates and political instability. The article does also touches upon rather in sarcastic way the role of IMF in speeding up the fall of Argentines economy. Then the article praises the rise of government of Nestor Kirchner and consequent remarkable recovery to become one of the fastest growing economy.

Changed times: Now comes the twist in story by the time people reads the article the news are doing the round that Argentina has failed to make a debt repayment to the World Bank that fell due on 14 November. Well such is the fast pace of world and rather financial world or to say the kind of integration that a article/discussion/debate losses its importance/meaning by the time it get consummated.

Frankly i am not sure whether the neoliberal supporting/promoting liberalization, deregulation, privatisation of public assets and giving more thrust on role of "foreign capital' for any country to develop or the the said way in which Argentina brought back (at least till 2008) the economy by keeping the exchange rate constant encouraging exports, discouraging exports and helping the domestic consumption to feed the economy rather than relying on "external capital" or in fact defying the neoliberal vision that external capital can help improving the economy but virtually insulating the imports and "foreign investments".

But one conclusion can be definitely made and is that no strategy can remain correct always and strategy needs constant revision based on the underlying scenario and developments.

Source & referrence: Frontline Magazine, October 24, 2008