Archive for January 22nd, 2009

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Zayed Future Energy Prize awarded to Dipal Chandra Barua

January 22, 2009

Michael Giberson

From the official announcement:

The first annual Zayed Future Energy Prize was awarded on January 19 … to Mr. Dipal Chandra Barua, Founding Managing Director of Grameen Shakti for his visionary efforts to bring renewable energy solutions to the rural population of Bangladesh…

Mr. Barua’s organization, Grameen Shakti (GS), has installed more than 200,000 solar PV systems that currently provide power for more than two million rural people. Under Mr. Barua’s leadership, GS has developed a number of other innovative initiatives, including a biogas technology that converts cow and poultry waste into gas for cooking, lighting and fertilizer. GS has installed more than 6,000 biogas plants and plans to construct 500,000 more by 2012. In addition, GS has trained rural women to be solar technicians hereby enabling green entrepreneurs through a highly successful micro-credit program.

Marc Gunther takes note of the prize announcement to applaud the work of Barua and Grameen Shakti, and quotes from his interview with Barua at the World Future Energy Summit in Abu Dhabi.

Barua told me that about 70% of the 150 million people who live in Bangladesh have no electricity. They typically use polluting kerosene lamps to light their homes at night.

“I tell them that for the cost of kerosene, you can buy a solar system,” he said.

The economics work like this: Total cost of a rooftop solar photovoltaic panel (imported from Japan), a battery and the required electronics is about $350 to $400. Customers typically put 10-15% down and pay the rest in monthly payments for three years. By then, they own a system that should last 20 years, without fuel costs. The panel makes enough electricity to power a few lights, a black-and-white TV and, most important, a cell phone. “Everyone wants a mobile phone,” Barua says.

It looks pretty good to Gunther, but he ends up worrying about the implications for “sustainable development.”

So is this really sustainable development? Up to a point. Of course it’s a good thing for poor people get electricity from solar power. The thing is, the electricity powers a mobile phone or TV that isn’t sustainable, and then one thing then leads to another and, before you know it, Grameen Shakti’s customers will be wanting iPods and dishwashers and cars, just like the rest of us. No wonder sustainable development remains such an elusive goal.

I’m not so sure that we ought to worry too much about the sustainability of development in the way that Gunther does here, at least not if it gives pause to anyone thinking about ways to make the world a better place as viewed by the people affected.  No doubt most poor Bangladeshi now benefitting from the efforts of Grameen Shakti would much prefer to be in a world where their biggest problems were deciding between dishwashers and cars, rather than between kerosene and cow dung.  To worry about the possibly detrimental implications of these small steps for this abstract idea, sustainable development, seems a little small minded.

(I’m guessing, too, in partial response to Lynne’s question, that for serving the population involved, solar panels are more economical than nuclear power.)

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Any good analyses comparing renewable and nuclear costs?

January 22, 2009

Lynne Kiesling

Today several items have floated across my radar screen contending that renewables are cheaper than nuclear power. Here, for example, is a snippet of a talk from Eric Schmidt of Google on the topic.

I can see the possibility, given the innovations in renewables, incorporating the savings in foregone wires construction (although that depends …), and the costs of construcing nuclear plants. I’m not sure either way, though, and it’s hard to get a good read because both industries have such convoluted subsidies. Moreover, researchers are working on cheaper, more modular, smaller scale nuclear plants, so the fact that both industries are experiencing innovation makes answering this question even more difficult.

Have you seen any good analyses comparing these costs? I’m keen to learn more.

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Fuel hedging: sometimes you get the bear, sometimes the bear gets you

January 22, 2009

Lynne Kiesling

One of my father’s default tag lines was “sometimes you get the bear, sometimes the bear gets you.” I use this phrase frequently when discussing hedging future price changes — if prices move in the direction you anticipated, you earn a profit, if they move in the opposite direction, you earn a loss.

Last quarter the bear got Southwest Airlines (hey, that’s a good pun too). Southwest reported a net loss last quarter, due in large part to their fuel price hedging position:

The loss included net charges of $117 million related to the falling value of its fuel-hedging positions. Without the charges, Southwest would have earned $61 million, or 8 cents per share, which beat expectations of analysts surveyed by Thomson Reuters, who forecast a gain of 5 cents per share excluding special items.

Recently, Southwest has cut back sharply on fuel hedging. It also said Thursday that it plans to reduce capacity this year by 4 percent and will rein in fleet-expansion plans.

In periods of uncertainty, you manage this risk by hedging your hedge, buy buying an instrument that in essence allows you to get out of buying the fuel at the price you contracted. I’m thinking of instruments like put options. Of course, you are unlikely to recoup all of your money by doing this, but you can mitigate your losses.

But, being the “glass is half full” person that I am, I focus on the fact that their net income before special items was higher than analyst expectations. I doubt that’s the case for other airlines in this market.

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