A series of politically-charged
electricity outages over the summer has brought power to the top of President
Morsi’s in-tray. The inability to assure round-the-clock electricity in peak
demand periods has been exposed, and the outbreak of riots and protests
accompanying these events shows that power is a hot political issue for a
government that is under pressure to improve the quality of public service
provision. BMI expects these issues to gain in currency in the forecast period,
but the challenge of ramping up supply is immense – despite attempts to
prioritise natural gas feedstock for domestic use rather than exports, the
strength of demand is beyond the capability of the government to resolve
quickly. The state’s strategy for the long-term energy challenge confronting
Egypt will remain essentially bifurcated; on the one hand, it needs to ensure
more feedstock availability for existing and planned gasfired generating
capacity. This means hard choices in what Egypt does with its hydrocarbons
endowment; the reality is that the argument appears to be swinging towards
prioritising domestic users, including power plants, rather than generating
hard currency through exports. On the other hand, the government needs to do
more to increase hydro and renewables capacities, given that nuclear remains
off the nearterm agenda.
Key trends and recent developments in the Egyptian
electricity market include:
- With large tracts of Egypt struck by
power shortages over the summer period, the need to improve capacity has become
an even more urgent policy priority for the new government of President
Mohammed Morsi. Consequently, BMI expects the authorities to focus strongly on delivery
of electricity generation projects over the next decade, with more investment
yielding more capacity. We envisage overall capacity growing by close to 5% in
2013 to 156.1 TWh, and for a 5-6% increase rate to be sustained for the
subsequent eight years. This will result in capacity of 223.7TWh by 2021.
- Overall, Egypt’s power generation will rise by an annual average of around 5-6% annually in the period up to 2021, reaching 188.2TWh in 2017, before rising to 223.7TWh by the end of our forecast period. These increases will be underpinned by substantial uplifts in gas-fired power generation, which in 2015 we expect to peak at over 6% growth and then to maintain plus-5% annual growth for the rest of the forecast period (though the downside risk here is challenged feedstock availability).
- There are plans to promote
waste-to-energy as a potential concept. The PPP Central Unit in Cairo has
requested Chemonics of the US to carry out a feasility study on three
waste-to-energy projects, with sites at Cairo, Giza and Helwan identified. These
will each seek to process up to 3,500 tonnes a day of household waste into
electricity.
Buy your copy of Egypt
Power Industry Market Report @ http://www.rnrmarketresearch.com/egypt-power-report-q4-2012-market-report.html
Colombia’s
government continues to rely upon hydroelectricity to meet nearly all its
energy requirements, but this strategy is not without its problems. In terms of
existing energy generating capacity, the forecast that the El Niño phenomenon
will return in late 2012 means that lower rainfall will affect energy
production at hydroelectric power plants. Other problems specific to Colombia
include the fact that many hydroelectric power stations – both planned and
current ones – are in areas that the guerrilla group FARC considers to be its
territory. A series of FARC-led sabotages of electrical infrastructure
illustrate some of the problems associated with harnessing hydroelectric power
in remote areas. However, there has been positive news, including: Isagen’s
announcement that it has successfully obtained funding for the Sogamoso
hydroelectric project, EPM’s new finance agreement with the French Development
Bank and the awarding of a COP1.8bn contract to the consortium CCC Ituango for
the civil engineering works at the Hidroituango power plant.
Hydroelectric
power continues to contribute to over 80% of total consumption in Colombia,
despite the inherent problems associated with this source of energy. A series
of tenders awarded in late December 2011 and January 2012 included three
thermal projects, but even so, hydro will dominate the energy mix. During
2011-2016, BMI forecasts that Colombia’s overall power generation will increase
by an annual average of 4.1%, reaching 72.0 terawatt hours (TWh). Driving this
growth are annual gains of 3.6% in hydroelectric power generation, while coal
and gas-fired generation are forecast to increase by an annual average of 10.6%
and 6.3% respectively.
Following
a rise in real GDP of 5.9% in 2011, BMI expects average annual growth of 4.5%
between 2011 and 2021. Net power consumption looks set to increase to 58.4TWh
by 2016, rising to 70.4TWh by 2021. The theoretical net export capacity by 2016
is put at 1.71TWh and Colombia’s export capacity will decrease to 0.3TWh by
2012. The news that the transmission line between Colombia and Panamá has been
postponed indefinitely will affect our forecasts of Colombia’s export capacity.
Key developments in Colombia’s
power sector this quarter include:
- EPM
awarded a contract for the civil engineering works in the construction of the
hydroelectric power plant at Ituango to the consortium CCC Ituango in August
2012, formed of Brazil’s Comercio Camargo Correa, and Colombia’s Conconcreto
and Coninsa-Ramón H.
- Security
concerns arose when guerrilla group FARC damaged electrical infrastructure,
affecting EPM’s ability to distribute energy from the Porce hydroelectric power
plant.
- State-controlled grid operator ISA and Panamá’s Etesa announced their plans to postpone the launch of the tender for the Colombia-Panamá interconnection line in August 2012.
Buy your copy of Colombia’s power sector Market Report @ http://www.rnrmarketresearch.com/colombia-power-report-q4-2012-market-report.html
Loss-making
utilities, struggling in the face of increased inflation and electricity price
caps, were given some good news in late August 2012 when the government floated
plans to review the energy sector. The creation of a government commission that
will review utilities on a case-by-case basis was viewed positively by
investors, and energy companies are optimistic that this will help them return
to profits, however low they might be. BMI views any moves to improve
Argentina’s operating environment positively, as there is currently little incentive
to invest; but how President Cristina Fernández improves the business
environment remains to be seen, as she has historically been against the
unpopular option of raising energy tariffs. Other developments this quarter
include a renewed interest in hydroelectric sources of power, a reassurance of
the safety record of Argentina’s nuclear power sector and growing levels of
consumption – even despite a warmer-than-expected winter.
Between 2011 and 2016, Argentina’s
overall power generation is expected to increase by an annual average of 3.2%,
reaching 135 terawatt hours (TWh). Driving this growth is an annual 5.21% gain
in coal-fired generation and a 4.21% rise in gas-fired generation. Following
estimated real GDP growth of 8.9% in 2011, BMI forecasts average annual growth
of 4.3% between 2011 and 2021. BMI calculates that net power consumption will
increase from 103.0TWh to 117.5TWh by 2016. During 2011-2016, the average
annual growth rate for electricity demand is forecast at 2.68%, but it will
increase later in the decade to average 3.5% from 2016-2021. Energy demand continues
to rise, but the sector suffers from a lack of investment, with high rates of
inflation and capped price tariffs acting as disincentives to invest. The
government is starting to take steps to deal with this problem, but it is, as
yet, unclear how it aims to improve the operating environment. Argentina’s
power supply shortfall is likely to increase over the short term, but should
fall appreciably later in the decade as new capacity comes online. The theoretical
net import requirement by 2016 is forecast at 2.0TWh, but it should be no more
than 0.42TWh by 2021.
Key developments for Argentina’s
power sector this quarter include:
- Cash-strapped utilities – most of
which posted losses during H112 – were given some good news when they met with
the government in August 2012: a new commission will examine individual utilities’
cost structure and a cost-plus pricing model will enable them to return to
(marginal) profits.
- In August 2012, the government announced that a tender for the Cóndor Cliff-La Barrancosa hydroelectric power plant (to be renamed Néstor Kirchner-Jorge Cepernic) would be relaunched in December 2012.
- The start date of the Atucha II
nuclear power plant has been postponed to mid-2013.
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