Month: January 2011

Beatriz Espinosa on responsible oil and gas | Petrobras | Video

Posted on by The New Economy

Petrobras is a vast organisation, operating in 28 countries in all segments of oil, gas and energy. Recently it announced plans to double its oil production to over five million barrels per day by 2020 – but can it achieve this goal while maintaining its own energy efficiency and carbon strategy? Beatriz Espinosa explains the company’s approach.

The New Economy: How important is it for a company that is the size of Patrobras to have an effective carbon reporting methodology?

Beatriz Espinosa: Patrobras is an integrated energy company operating in 28 countries in all segments of oil, gas and energy. The company produces the equivalent of 2.5 million barrels of oil per day, it has 130 platforms, 15 refineries, around 7000 gas stations, 18 thermoelectric plants, 4 bioelectric plants among other installations. For the next year we plan to spend 224 billion dollars and we also announce that we will increase oil production from 2.5 to 5.3 million barrels a day in 2020. So we will double the oil and gas production and as a consequence we will increase the energy consumption and the C02 omissions. In this context we need to use energy in the most efficient ways we can, and have an effective carbon strategy. A foundation for a carbon strategy is a consistent omissions inventory in an effective carbon reporting methodology. By having such methodology it is possible to manage carbon omissions in order to improve the performance of your business units. That is the importance of having an effective carbon reporting for Pertrobras, to support the fast growth projected in our business plan was environmental sustainability.

The New Economy: So how do you measure the key components, the omissions inventory and quality attributes?

Beatriz Espinosa: Since 2002 Petrobras has developed and implemented a system called SIGEA, system for air emissions management which integrates all the company’s activities with more than 30,000 sources registered which provide an inventory on green house gasses and air pollution. Petrobras reports the emissions inventory in the sustainability report every year, as well as initiatives which contribute to climate change mitigation. The inventory is verified by a third party in that is in compliance with international guidelines as GHG protocol provided by the World Resources Institute and World Business Council for Sustainable Development. Also it is in compliance with American Petroleum Institute guidelines. The system supports business areas and operational units, to manage their omissions and increase their performance. All operational units provides data to the system which allows us to follow the results on a monthly basis. Additional to this, in 2002, we promoted training to our employees on emissions management in the sister news. So far we have trained more than 1,500 people in order to build a consistent inventory, that we understand is essential for our effective carbon reporting.

The New Economy: In a company the size of Petrobras, more than 100 platforms, 15 refineries, more than 7000 service stations, how do you roll out the implementation process?

Beatriz Espinosa: First of all we needed a top leadership commitment to the process,in order to engage the organisation at all levels. With this proposal Petrobras made it clear in it’s strategic planning, the commitment to sustainable development and it’s social and environmental responsibility. It is also clear in our business plan, our objectives to achieve excellence in energy efficiency and technology, in the renewable development and production. These are the important pillars for our carbon strategy. In order to deploy this strategy a corporate programme was designed and a governance was put in place, with the participation of all business areas, to follow up the initiatives implementation as well as emissions performance. Additionally, voluntary goals for our wider C02 emissions in our operations have been set since 2005. Our visible commitment has been a key element for helping to roll out the implementation process from the corporate to operational levels.

The New Economy: The Kyoto Protocol introduced us to the clean development mechanism, or CDM, what are the companies initiatives on CDM?

Beatriz Espinosa: Petrobras is a company with major operations and production in Brazil, has opportunities in the CDM mechanisms established by the Kyoto protocol and seeks to develop them. We also have huge investments in energy efficiency, fuel reduction, process optimisation, new technology and renewable energy. Some of these projects are measurable to CDM and we have a dedicated team to work on these opportunities. So far we have got to choose two gates from the UN, one is a wind power plant and the second relates to a project that aims to reduce nitrous oxides omissions in a fertiliser plant. We also have a further technology packed into the Petrobras named HBO which has had it’s methodology accepted by the UN, we are just waiting for the final certification. This process aims to reduce green gas omissions by using a vegetable and mineral oil mixture for hydrodis authorisation unit in our refineries. We will continue to look for new opportunities in the carbon market and we are also engaged in National and International initiatives and corporations, to better understand the climate change policies and science, and contribute to promote the transition to a low carbon economy.

The New Economy: How do you communicate your results to stakeholders?

Beatriz Espinosa: We openly communicate our results to stakeholders through several means. The main one is our sustainability annual report which has a high level of transparency and tailored information regarding performance from economical, social and environmental dimensions. In this report we publish the emissions inventory as well as our strategies and initiatives in climate change mitigation. It is available on our website, and our annual report has received a great amount of international recognition from institutions such as GRI (Global Reporting Initiative), UN Global Compact, Investor Relations Magazine among others. And now from The New Economy, for Best Carbon Reporting in Brazil. One of the results of this effort is that Petrobras has been part of the dow jones sustainability index since 2006. Another way of communicating our results is the Carbon Disclosure programme that we have applied since 2004. These relevant tools for quantifying and comparing companies carbon emissions, management and strategies impacts on corporate performance. I would say that open communication and dialogue with the stake-holders is part of our values, and is the basis for our business.

The New Economy: What lessons would you say could be learned from the experience of carbon reporting, from a company of this scale?

Beatriz Espinosa: Building a carbon reporting process in a company as big and diverse Petrobras requires a huge effort. It represents a challenge, not only for Petrobras but also to the energy industries. It helps Petrobras in increasing the performance and also learning and sharing with other companies, the experience of this issues. Carbon reporting allows us to show to our stakeholders how we manage our omissions and in addition to that, the process allows the engagement of and organisation at all levels. It promotes the awareness of the employees and the connections between the company’s strategies and operations. We realise that carbon management and climate change mitigation are complex and urgent issues that require contributions from all parts of societies, governments and companies in different countries. Energy is at the centre of this debate, so an energy company like Petrobras has a big challenge and a key role in this contribution, but as we are used to saying in Petrobras; challenges are our energy.

The New Economy: Beatriz Espinosa, thank you very much.
Beatriz: Thank you very much. We are really happy and appreciate this recognition. We congratulate The New Economy for their initiatives; you give us more enthusiasm to improve our performance.

Pompeii collapses spark worry and outrage

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“The city is suffering and losing its pieces,” said D’Alessio as he stood near the Via dell’ Abbondanza, the main street leading from the columns of the Forum in the ancient city that is a UNESCO World Heritage Site.

 D’Alessio is worried not only because he loves culture. He knows that the economy of his modern city of 25,000 people relies heavily on tourists who come from all over the world to see the famed archaeological site.

In November the “House of the Gladiator” and a long retaining wall in the garden of the “House of the Moralist” collapsed.

The collapses sparked charges of official neglect by Prime Minister Silvio Berlusconi’s centre-right government and calls for the resignation of Culture Minister Sandro Bondi, who has imposed cuts to arts spending as part of austerity measures.

“We don’t have the luxury of waiting. We can’t wait for other collapses. We need an immediate intervention to heal years of delays and neglect,” D’Alessio said.

Like many other cultural heritage sites in Italy, ancient Pompeii is an engine of local economic growth that supports hotels, restaurants, guides, transportation and travel agencies.

Minister under fire
Pompeii advocates have accused Bondi of being ultimately responsible for the decline of the sprawling site, which remained buried and undiscovered for almost 1700 years under ash until excavations began in 1748.

“In the last two years, the decisions regarding Pompeii have been made by politicians and not by experts,” said Tsao Cevoli, president of the national association of archaeologists.

Cevoli and other critics say that under Bondi’s administration, the culture ministry has concentrated on spectacular events rather than regular maintenance.

For example, money was invested in a hologram tour where the image of Julius Polybius, a nobleman of ancient Pompeii, guides visitors around a 3-D virtual version of his sumptuous villa.

“We must invest in regular maintenance. This does not attract attention but is very necessary,” said Cevoli, adding that removing weeds from roofs and walls is not as enticing as light shows and holograms but it does stop water infiltration.

Cevoli says there have been seven collapses in a year but not all of them have received the publicity they deserved.

“The fact that there have been so many collapses in such a short period means that something serious is happening. These are very dangerous signs,” he said at the site.

He said some €80m were spent in the last two years for what he called “spectacular but not indispensible restorations” of single structures such as the second-century-BC Great Theatre.

“The minister is responsible for having chosen a management style at Pompeii that favoured appearance over substance. No expert would have done this. Technicians, restorers and archaeologists were denied any say in the matter,” Cevoli said.

Pompeii, then home to about 13,000 people, was buried under ash, pumice pebbles and dust by the force of an eruption equivalent to some 40 of today’s atomic bombs. Two-thirds of the 66-hectare (165-acre) town has been uncovered.

Frozen in time
What makes Pompeii rare, if not unique, is that it was frozen in time, offering a total picture of the ancient world.

Pliny the Younger witnessed the cataclysm 1,931 years ago from Misenum (today’s Miseno) on the northern shore of the Bay of Naples. He wrote: “A dense black cloud was coming up behind us, spreading over the earth like a flood.”

Some have said the only solution to saving Pompeii is to privatise it.

“Precisely because it belongs to all humanity, its management should be taken away from a state that has shown itself incapable of protecting it,” Italy’s leading business newspaper, Il Sole 24 Ore, said in a scathing editorial.

But privatisation of culture is still a politically loaded subject in Italy, so most observers see a mix of state ownership and some private sponsorship as the best solution.

Judith Harris, author of the 2007 book “Pompeii Awakened”, said it would be important that sponsors let archaeologists do what they feel is necessary.

“There is no glamour in pigeon control and weed removal but but they are necessary,” she said.

Prestigious ‘Arabic Booker’ plagued by criticisms

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Two Moroccans, two Egyptians, a Saudi and a Sudanese rounded out the list of authors in contention for the $50,000 International Prize for Arabic Fiction, with its guarantee of lucrative translations into English and other languages. The winner is announced in March.

The award, now in its fourth year, is one of many in the region but its association with the Booker Prize Foundation has given it an edge over others which are clearly associated with Arab governments, such as the UAE’s Al-Owais Award and Saudi Arabia’s Arab Thought Foundation awards.

The Al-Owais prize was infamously withdrawn from Iraqi poet Saadi Youssef in 2004 after he criticised Sheikh Zayed bin al-Nahayan, the founder of the United Arab Emirates, a Western-allied federation of dynastic monarchies in the Gulf.

The Arabic Booker has an elaborate structure of judges and board of trustees to ensure fairness, including Arabs of different nationalities based in the region and abroad as well as non-Arab literary experts and publishing figures. However, it remains financed by Abu Dhabi’s Emirates Foundation.

“This prize is yet another indication of the corruption of Arab cultural life and the extent to which Arab oil money insists on dominating all aspects of life,” said As’ad AbuKhalil, a Lebanese politics professor at California State University in the United States.

“This award has been criticised by many Arab writers and yet it continues with Arab oil money to award prestige to the UAE and its ruling families,” he said.

Gulf rulers have stepped up efforts in recent years to patronise the arts and transform a region with a traditionally limited output in terms of cinema, theatre, writing and other forms of expression into cultural centres.

Some efforts are globally accessible – Abu Dhabi is setting up branches of the Louvre and New York’s Guggenheim museums – and some are regionally focused: Recently, Qatar opened a museum of contemporary Arab art, to add to its Islamic Museum.

Sensitive subjects
Saudi novelist Abdo Khal’s Arabic Booker win in 2010 for “Spewing Sparks as Big as Castles” – which critiqued Saudi social distortions created by the oil boom of the past decade – suggested the award would not shy from sensitive material in Gulf countries, at least when it is presented as allegory.

It also reflected the rise of the novel as a popular art form in Saudi Arabia and the Gulf where political, social and religious oppression has for long limited literary output.

Some novelists complained in the Arabic press about Egyptians winning in the first two years, while an Egyptian critic resigned from last year’s jury saying her colleagues had stitched up the shortlist in a secretive manner.

The wide geographical distribution of this year’s shortlist suggests a certain political correctness is playing in the minds of judges, who this year comprise four Arabs and an Italian.

“They do not decide according to literary merit only. They divide the choices (on the shortlist) around the Arab world. This has to be criticised,” said Egyptian poet and journalist Usama El-Ghazouly.

With the works of many writers effectively banned in their own countries, the English translation can be the key to fame and riches and critics often say writers tailor their material accordingly. Naguib Mahfouz is the only novelist in Arabic to win the Nobel Prize for Literature.

Ghazouly pointed to some of the themes in the first award-winning book, Egyptian novelist Bahaa Taher’s “Sunset Oasis” as an example. It features lesbian relations and a character who questions Egypt’s right to control the Siwa oasis – “post-modern tastes”, in his words, that are set to play well abroad.

In this year’s shortlist, a former Moroccan culture minister, Mohammed Achaari, was nominated for “The Arch and the Butterfly”, in which a father receives a letter from al Qaeda informing him that a son who he thought was in Paris has died fighting Western forces in Afghanistan.

Bensalem Himmich, Morocco’s incumbent minister of culture, imagines an innocent man’s experience of extraordinary rendition and torture in a US prison in “My Tormentor”.

And Saudi novelist Raja Alem explores what the organisers term the “sordid underbelly” of life in the Islamic holy city of Mecca in “The Dove’s Necklace”, including prostitution, abuse of foreign workers and religious fundamentalism.

The sexy pitch
Publishers are scrambling to submit books such as these for consideration that lend themselves to the “sexy pitch” for the reading public outside of the Arab world, critics say.

“The publishers’ influence is more dangerous than the political one,” said Palestinian writer Elias Nasrallah. “At the moment the fight between the publishers and their lobbies is the most dangerous thing for this prestigious prize.”

M. Lynx Qualey, a Cairo-based writer who runs a blog called ArabLit (www.arablit.wordpress.com), said women authors had had trouble in getting onto the long and shortlists at first.

“Gender was an issue in the first couple of years, when publishers weren’t submitting books written by women, and thus women weren’t showing up on the lists,” she said. But many still see value in the prize, despite the criticisms.

“I do think it’s a worthwhile venture. It’s a very young prize,” Lynx Qualey said. “It’s also a different prize for the region in that it’s a single-book award (with) a longlist, a shortlist, and finally a winner, so that people can see very clearly which books and novelists are in play.”

Ghazouly said Gulf Arab initiatives such as the Arabic Booker were ultimately doing the Arab world a favour after the traditional centres of pan-Arab culture such as Egypt, Lebanon and Iraq were hit by various political crises since the 1970s that have damaged their cultural output.

“They are not trying to control culture; they are filling a certain vacuum. They have come to save us by using their money to the benefit of the Arabic-speaking nations,” he said.

Afghan government plans extravagant wedding ban

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Since US-backed Afghan forces ousted the strict Islamist Taliban in 2001, Afghans have revived the tradition of holding big weddings, costing thousands of dollars, in a country where the average annual income is less than $400.

Afghan weddings are celebrated by hundreds of guests in luxurious wedding halls with the groom and his family expected to foot the bill and agree to every request of the bride and her family.

“Wedding ceremonies among people are like a competition, no one wants to come last, people like to show off their wealth by feeding hundreds of guests in costly wedding halls,” said Justice Minister Habibullah Ghaleb.

“Families are the victim of such a wrong tradition and have to accept these heavy burdens,” he said.

Details of the planned ban on expensive weddings were still being worked out, said Justice Ministry spokesman Farid Ahmad Najibi, and he acknowledged it could be difficult to enforce because lavish weddings were so ingrained in Afghan culture.

State institutions were shattered during decades of conflict, with regional, ethnic and tribal differences also making it difficult to enforce laws. Violence is at its worst since the Taliban were ousted, making security a priority even while authorities try to rebuild the aid-reliant economy.

Rafi Kazimi, 24, and his family spent about $10,000 when he married Farima, 20, in October. The couple had 600 guests at their wedding in Kabul. Taxi driver Kazimi and his family are now repaying at least $6,000 in bank loans.

But Kazimi recently lost his job and his family — his wife, mother, father, grandmother, two sisters, three brothers and one of their wives — are surviving on his older brother’s salary of $410 a month, $300 of which is used to repay the loans.

“It was too much,” Kazimi said of the money spent on his marriage to his first cousin. “I was so worried about how to find this money. Her parents didn’t care if I had the money or not, they just said we must have a big wedding.”

While Kazimi thought a ban on expensive weddings was a good idea, he doubted if it would be accepted. Along with the wedding celebrations, a groom and his family are also expected to pay for ornate outfits for the bride and groom.

“A huge burden”
The government’s bid to regulate weddings follows similar moves by some tribal elders and provincial officials.

Late last month, elders from several villages in northern Jawzjan province banned expensive weddings and dowries in a bid to encourage young people to marry instead of postponing their nuptials because they could not afford it.

Under the rules, the cost of a wedding must be in line with the economic status of the groom, and if someone violates the ban then they will not be invited to any other weddings in the village.

“Marriage is everyone’s right and it must not be presented as a huge burden for the bride and groom,” said Azaad Khwa, an elder from Jawzjan. “Making the groom’s family pay for everything and feed hundreds is a big sin.”

Many elaborate wedding halls have sprung up around Kabul over the past nine years, compared with just a few that operated while the Taliban were in power from 1996 to 2001.

Guests attending weddings at City Star Hall in Kabul’s Wazir Abad neighbourhood drive through a lit-up moon to the entrance and a large silver star adorns the roof. It opened three months ago at a cost of $5 million, said manager Zabi Mujeeb.

It has four wedding halls and hosts about 70 weddings a month, with an average of 800 to 1,000 guests, Mujeeb said. Prices per guest range from $12 to $23 for the food. Music, a cake, decorations and a photographer are all extra.

“The people living in the city, they don’t like to have a lot of guests,” said Mujeeb. “But the people living in provinces, they like to have a lot of guests.”

In the largest of City Star Hall’s venues, staff were putting the finishing touches on decorations for the wedding of a couple from nearby Parwan province. There will be 1,600 guests at a cost of $16,000.

The opulence makes one’s head spin.

The bride and groom were to walk over a bridge above a fountain in front of mountain landscape mural. They descend onto an illuminated walkway under arches of fake flowers to a stage where they will be seated on silver-coloured thrones.

“The grooms find the money,” said Mujeeb.

Breaking an age-old mould

Posted on by Ben Debski

Micro financing is huge business in Mexico. Carlos Danel should known. He has helped turn a former non-profit organisation into one of Mexico’s fastest-growing banks. “I would say our mission is to provide opportunities and development for low-income households in Mexico through innovative large-scale models that enhance people’s lives.”

Although it’s a bank, Banco Compartamos sees financial services as a tool for low-income communities to develop their lives. In the new post-downturn world, the role of the micro finance industry is, more than ever, about financial inclusion claims Danel.

“In the developing world, perhaps there is a feeling that financial services are only for the top segment of the social-economic pyramid. But a lot of the products and services that many people from higher socio-economic groups benefit from, lower income households can benefit from too.”
 
Up and coming
So what the microfinance industry is doing could be loosely termed financial inclusion, not to mention bringing off substantial profits for investors (Banco Compartamos’ overall portfolio runs to more than $760m).

“We bring the low-income into the financial sector with products that enable them to save, or to purchase financial products that they need. In a downturn when people experience their income stream as more infrequent, or lower, access to financial services plays a bigger role than ever. Therefore its role as an up-and-coming industry looks here to stay.”

Julia González Cueto is a good example of the work Banco Compartamos is doing.

Julia began selling sweets and chocolate back in 1983. She then explored other markets by selling door-to-door.

Ms. González used her first microfinance credit to buy toys, tables and panels to provide more variety and a broader image to her business. In order to maintain her income during the year she decided to cultivate mushrooms and nopales. She now exports wild mushrooms to an Italian restaurant chain. She’s a huge success story not just herself but for her family and the wider local community that supports, in a variety of ways, her business.

Shifting role
But the role or perception of the microfinance industry is also changing says Carlos Danel. “There are two sides to it, I’d say. In the early 1990s, when we founded Banco Compartamos, we thought that the intervention of our services to our clients would drastically change their lives. We still believe that access to financial services will provide access to great value and wealth.” But Danel says Compartamos has now come to realise that what it brings to the table is simply a tool – a tool that enables clients to manage cash flow. But it’s the clients that do the real work and take it – not to mention themselves – to another place.

“I think the influence of microfinance in their lives is not always easy to measure. Some people will do better, some people will do not as well. But it’s an opportunity for them to add value to their lives, to change their lives and take responsibility for the direction of their life.”

There’s a second part to the jigsaw. Traditionally the microfinance industry aimed for very high standards in terms of what impact it would make on peoples’ lives. “We started originally talking about getting people out of poverty, of changing their lives in that way. But I think today many people in the industry think microfinance has achieved a lot of other important things, like taking a role in improving good quality healthcare and access to healthcare for instance.”

Silver bullet?
Microfinance also helps in improving basic community infrastructure such as housing and education – all of which are key tools in the developing world. “So as an industry, it helps us in the future to have a clearer idea of what type of impact we have on them in the long term. But clearly the promise of a silver bullet to end poverty? It’s really not about that. It’s about social and financial inclusion for them to change their own lives.”

Long-term, there are looming questions about sustainability and how Banco Compartamos helps the wider community. “We need to ensure that in order to be sustainable, we sell products that people can really benefit from. We’re a supply-driven industry. But now we want to know what is it about our products that people like, or works best for them, and then provide them the tools and products that give them the tools and choice that help them manage their cashbox.”

Danel wants to make sure that gaining access to financial services adds value to the whole community – including staff and investors. Banco Compartamos has 10,000 full-time staff, walking the streets or making themselves available in the local market place. We want to provide an opportunity working within the bank to become better individuals, better professionals. Last year we were voted the top company to work for in Mexico. That’s real value for these stakeholders.”

Issues loom about client education too, with tight regulations about consumer protection and financial literacy protection. Banco Compartamos clients, together with the bank, need to ensure they do not become over indebted. Part of the education process, on both sides, is recognising too that microfinance is not a silver bullet.

Profit-sharing
And, of course, it’s also about creating value for investors, making sure they understand all Banco Compartamos’ goals. “Microfinancing is a profitable, sound industry. It’s also a business that has been partially built on many assumptions – that supplying financial services to the low-income or disadvantaged is not profitable. That’s clearly not the case with Banco Compartamos, which has a proven scalable business model and a model that sets great store by the credit capacity of its clients.”

In the third quarter of 2010 the Mexican microfinance player achieved profits of almost $40m, about 36 percent higher than the year before. It had also expanded its client base as the microfinance loan market also widened (it grew by 23 percent compared to the third quarter of 2009). There’s clearly demand for credit – sustainable credit that benefits individuals, their families and communities. That’s profit-sharing by any measure.

Case study
Fabiola Luzant Martínez Camus and her husband began the journey to financial independence with their plant sale business. With their first Banco Compartamos credit they purchased bags and fertilisers with which they increased production. Sales increased and they then had to find larger premises. Today Fabiola offers maintenance services, garden assessments and sale of ornamental plants. Fabiola tries to create consciousness in her community’s young people, employing them to plant seeds, reforest green areas and promote the use of organic matter. “The Compartamos credit helps us as a family in our personal development, it helps us to spend more time together and to improve our economic possibilities and help our daughter get ahead in life.”

Further information: www.compartamos.com

The pension men cometh

Posted on by Ben Debski

Saving for a pension has always been a paradox.  Everybody pretty much knows you should in some form or other, but there are always several different obstacles in the way, the main one being that the best time to start this exercise is also the time in your life that you have the least chance of doing so (when you’re young).  Then when you near retirement age, more often than not, it’s too late and you rue not putting enough money aside in a pension vehicle of some sort in the first place.

The above will ring true for some, but this can only be so for those who were conscious of these facts at a time when they could take action.  Two things can alter this state; the first could be receiving some sort of financial education in younger years. The second is having someone else make the decisions for you before it’s too late.  The British government has gone with the latter route.  Well, sort of, because people will be able to ‘opt out’ if they wish, but more on that later.

From 1st October 2012, new employer duties are planned to come into force, whereby employers will have to enrol eligible workers into a qualifying workplace pension arrangement (Auto-Enrolment), and thereafter choose the qualifying pension scheme which comes with the new duty.  The choice will be to either make a minimum three percent contribution towards a defined contribution scheme (overseen by the company and their consultants/client managers from an asset management company for example) or NEST (the National Employment Savings Trust).

NEST will be a new, supposedly simple, low-cost defined contribution-occupational pension scheme. Defined contribution (or money purchase) is the transitional focus of the pension industry from defined benefit structures due to the transfer of risk from the employers to the employee. It will be trust-based, i.e. has a board of trustees, who superintend its functionality, and the NEST Corporation is a non-departmental public body that operates at arm’s length from government and is accountable to Parliament through the Department for Work and Pensions (DWP). The charges for being forced into NEST will be 1.8 percent of the value of each contribution to cover NEST’s start-up costs,
and an annual management charge of 0.3 percent of the value of the individual’s pension fund.

If the employer decides to be more paternal or already has a company pension scheme in operation, Auto-Enrolment will direct eligible employees (which is an employee aged between 22 and state pension age and earning above the income tax personal allowance (£7,475 in 2011/12)) automatically into their employer’s qualifying pension scheme (which has to meet certain minimum standards) without any active decision on the employee’s part.

The reasoning behind this idea is that there is a significant shortfall in pension saving in the UK. Many workers do not join their company pension scheme because they simply do not apply. It’s too difficult and unmanageable to place a pension saving duty on each individual in society, as not everyone can make decisions that require knowledge about complicated financial products. Furthermore, not everyone is in a position to contribute in the first place.

However, the way around this is seen as requiring employers to act as the conduit through which retirement saving is forced. Through tax records, Government can see those employees who they know legitimately earn sufficient amounts as they deem appropriate to save for retirement, and thereafter impose on them the duty to put money aside for themselves, rather than the State pay the bill for their pension/care needs when they stop working.

Auto-Enrolment brings positives and negatives in my opinion. I’ve written and presented items on financial education in the past, and I am indeed still passionate about this matter. Yet it is much easier said than done. In my opinion, the place to make people become more comfortable with financial matters is the place we all become more comfortable learning information, in school, when the pupils reach an appropriate age. At the moment, this is still something mentioned in passing every now and again when people discuss financial matters and why the population finds them confusing.

Individual Savings Accounts (ISAs) are incredibly popular due to the fact that they are deemed simple savings products with tax advantages over normal savings accounts. In truth, although pensions are more complex, the bare bones of them are that you have a savings or investment vehicle with better tax advantages, you just can’t access your money until you reach a certain age. But until characters in soap operas start talking about them, the public will not begin to be engaged because they are not made to. You can take an ISA out at the age of 16, but you have to teach yourself about it unless your parents do it for you. So, we have the situation being proposed now, whereby everyone joins whether they initially want to or not. Interesting fact: at the start of 2008, there were an estimated 4.8 million private sector enterprises in the UK. Small to medium-sized enterprises (SMEs) accounted for 99.9 percent of all enterprises. 99.3 pecent of this 4.8 million had less than 49 employees, and drilling even further, almost 4 million of these SMEs were actually self-employed entrepreneurs. The owner/manager of a small business started the business because she thinks she can earn more money than she can in her current job. She’s thinking about putting food on the table and enjoying a better lifestyle now, not when she retires in x number of years. Even for those that are thinking about a pension, that’s still only a luxury for the future. Equally, for the businessman running a reasonable enterprise with seven staff, he now has to take the time and pay the fees for ensuring the people working for him, bearing in mind very few jobs are for life nowadays like in generations previous, receive retirement benefits when perhaps the SME has long disappeared (either through sale of the company, dissolution etc.). Is this fair? Is this workable?

I mentioned earlier that opting out is an option.  Workers who give notice that they do not want to participate during the formal opt-out period will be put back in the position they would have been if they had not become members in the first place, which may include a refund of any contributions taken following automatic enrolment. So after all of this, they can leave after a period of time anyway? Could be a nice earner for the pension consultants!

Apologies if I seem over cynical. I like pensions, I really do. I understand people’s distrust of them; defined contribution pensions are not guaranteed, and can therefore seem like a gamble, a gamble with a large amount of savings. Yet this need not be so. Auto-Enrolment has its heart in the right place, and people often need others to take control of matters like pensions on their behalf as there are always reasons to put it off – that’s life sometimes.  But for the SMEs, will it be a help or a hindrance? My fear is the latter. My opinion is that education and empowerment are the foundation to the pension gap Britain faces. I always relate pensions to smoking or drugs, except in the reverse. Not putting money aside for old age can cause long-term damage. The play The Iceman Cometh is about empty promises and pipe dreams. For some, NEST and Auto-Enrolment will work. For the rest, it may just be Much Ado About Nothing.

Smarter grids call for smarter interactions

Posted on by Ben Debski

Let us begin at the beginning: why grids need to become smarter. We can sum it up in a simple equation: three drivers + three accelerators = a smarter grid. The three drivers are: growing electricity demand; the need to reduce CO2 emissions; and the constraints on today’s electricity networks.

Electricity demand is growing all over the world. In new economies, this is driven by demography, industrialisation and urbanisation; in mature economies, it is driven by consumption (from appliances to electric vehicles) and is making it harder to manage the peak.

In addition, in order to fight climate change, we need to reduce our CO2 emissions. This will come mostly from energy efficiency (in homes, buildings and industrial facilities) on the one hand, and the development of renewable energy sources on the other. Lastly, the constraints on existing networks, such as limited generation capacity, limits on network extension, ageing infrastructure as well as the difficulty of integrating intermittent and distributed generation (eg. wind power), call for new solutions to solve the energy equation.

At the same time, three other changes are accelerating the ‘smartening’ of the grid: all sorts of new technology are now available; governments and regulators are taking an increasingly active role in the energy sector; and end-users are no longer satisfied with being passive consumers.

New IT technology is now widely available. Although it is making cyber-security a bigger threat, it is at the same time providing huge opportunities to add intelligence into more or less everything. Energy storage is no longer a distant dream, power electronics are becoming ubiquitous – and electricity networks are certainly a prime market for these new technologies.

Governments are taking a new, harder look at their energy sector. Whether for reasons of security of supply, price stability, opening of markets, pricing transparency or economic cost of blackouts, they are investing, regulating, supporting this industry. President Obama even made Smart Grids one of the cornerstones of America’s stimulus plan, with $3.9bn earmarked for their development. And last but not least, all of us, as consumers and citizens, want to know how much energy we use and to pay the right price for it and we want to contribute to CO2 emissions reduction through energy efficiency, electric vehicles, solar panels on our rooftops etc.

Electricity networks are becoming more complex and less stable all over the world. To continue to efficiently balance supply and demand, the grid needs to become smarter. The question is – how do we get there, how do we make the Smart Grid happen?

Today’s grid functions in a top-down way. Tomorrow’s smart grid will be bi-directional: electricity will flow out of homes and offices as well as into them.

Today, centralised, supplier-controlled power is fed into the grid based on consumption predictions and then adjusted at the margin according to peak demand. Tomorrow, demand and supply will interact intelligently in an efficient, decentralised interoperable grid.

Today, intermittent renewable generation is not always efficiently integrated. Tomorrow, smart grids will efficiently integrate intermittent energy from both renewable power plants and decentralised distributed renewable generation.

Today, providers must come and check meters on a regular basis. Tomorrow, consumption data may transfer automatically, giving pro-consumers and utilities a real-time estimate of electricity consumption.

Today, most people don’t know how much electricity they consume until they get their electricity bill. Tomorrow, consumers will be able to adjust their energy demand to moments when prices and demand are at their lowest.

Today, the causes of power cuts have to be manually identified on the grid. Tomorrow, software will detect where cables or equipment are damaged, making blackouts, which carry such a high economic cost, much rarer.

All this sounds great – but it also means that there can be no smart grid until all connected players are smart-grid ready. Schneider Electric is smart-grid ready. And we believe that energy-efficient buildings and facilities, together with  active end-users will drive smarter demand, which will help push smarter supply, and bring on the full development of the smart grid. This is why we are helping our customers in homes, in buildings, in datacentres, in industrial facilities and on the network be smart-grid ready too, by providing them with smart grid-enabling solutions for energy management and energy efficiency, demand-side management, flexible distribution and renewable energy integration.

And because smarter grids represent such a step change for the electricity network, it is creating a totally new business environment. In addition to traditional technology providers, energy producers and suppliers, system and network operators, and of course governments and regulators, smart grids also bring together active end-users, facility managers, small and large renewable energy producers, energy traders and aggregators, IT enterprise integrators, Energy Efficiency providers, data management suppliers etc.

This is why we, at Schneider Electric, support smarter interactions for a smarter grid – we not only connect our customers to the smart grid, but also connect them with each other. Facilitating these new connections, bringing value to these new relationships, is what will allow our customers to fully leverage the huge business opportunities of a smarter grid – and to mitigate the risks. And because we all recognise that smart grids are a whole new, complex space, we are collaborating and partnering with other, complementary providers – in particular IT enterprise integrators, which are playing a major role in making the grid smarter.

Together, we will experiment in new technology and new business models, to create new opportunities for our customers, to add intelligence in every part of the network. New demand- and supply-side management capabilities are just around the corner. ‘Software as a service’ will offer everything from data exchange, price signal and demand event response management, to 24/7 market and demand monitoring, carbon tracking and reporting, market monitoring, aggregation etc.

Together, we will make today’s grid greener, more efficient, more stable, easier to navigate – and smarter.

further information: schneider-electric.com

FR-EEandSolutions-Communications@schneider-electric.com

SSG makes sustainability a standard

Posted on by Ben Debski

Developing common standards within industry leads to greater availability, operational reliability, personal safety and thus also increased sustainability. SSG Standard Solutions Group has so far drawn up more than 450 technical standards.

For Sweden the forest industry, which accounts for a quarter of the country’s total industrial investment, is of incredible strategic importance. The country will not be able to survive as a nation without ensuring long-term profitability for the forest industry. However, survival requires the Swedish forest industry to continue cutting costs and making its production more efficient. This is where SSG (Standard Solutions Group AB) comes in.

“Our owners and customers have amassed enormous experience in making investments. Our task at SSG is to refine that knowledge and transfer it into standards that can be used to support procurement, planning and design,” says Jonas Berggren.

SSG is owned by the seven biggest forest industries in Sweden, but the company’s services are also used by other process industries.“Our customers are now located in 26 countries around the world,” adds Berggren.

Major savings
A good example is the way that SSG has designed a common standard for how to plan pipe systems. “By reviewing the needs of the industry and its experiences, and making use of the best solutions on the market, we have created a standard that cuts the cost of purchasing pipes and parts for pipe systems by 30 percent through a manufacturing process that consumes fewer resources. In a recent project, the customer’s investment costs were reduced by SEK 1.8 million,” says Berggren. In total there are no fewer than 450 standards in the six technical areas of pipe systems, mechanics, construction, electrics, instruments and surface protection.

Lifecycle economy
Where there have previously been a number of different standards – since manufacturers have been able to set their own – it has been difficult to compare and contrast products with each other. SSG’s standards have enabled the industry to put pressure on suppliers more easily.

Those who want a chance in the procurement process need to meet the requirements set.

“And here it is important to stress how significant the concepts of sustainability and lifecycle economy are. Whatever the area in which we produce a standard, the emphasis is on meeting a need, but naturally with an eye on creating energy efficiencies and using as few resources as possible in the production process. In addition, the number of stock items can be reduced,” says Berggren.

In many cases, the biggest manufacturers are also on the committee that draws up a standard. That has been the case in the area of surface protection, for example, with regard to producing paints that can last for many years under tough conditions. Being able to bring the ideas and expertise of the paint manufacturers to bear has been important. In other words, common standards are a key stop on the necessary road towards increased sustainability.

Safer life for the contractor
Launched four years ago, SSG Entre – interactive safety training for industry contractors – is taking Nordic industry by storm. SSG Entre is helping to make major savings out at the industrial facilities, while also ensuring safer workplaces.

SSG Entre continues to grow and is now well on its way to becoming an industry standard. At the current time, 39 of Sweden’s pulp and paper mills require their contractors to have completed the SSG Entre Basic Training Course and to be equipped with an Entre passport. In addition, the concept has spread to a large number of other industrial sites in the steel, mining, chemicals, energy, engineering and sawmill industries.

“Almost 70,000 contractors have been approved since the start in late 2006. Many more industries are also in the pipeline. Large swathes of Swedish industry now take part in the collaboration. At the same time, a close partnership has been established with Finnish and Norwegian process industries,” states Johan Nylander, Business Area Manager for Health, Safety and Environment within the SSG.

Greater safety
The background to this massive focus on an industry-specific interactive safety training course is that contractors have previously been over-represented in accident statistics.

Traditional safety training has proven time-consuming, costly and ineffective. Contractors have been forced to go through similar briefings at several different mills before every large-scale maintenance session, which has unfortunately created low motivation and poor focus. At the same time, the industry usually pays for the contractors to attend these safety briefings. A lot of time has also been spent on keeping the information up to date, and on checking that the information has really reached everyone concerned.

Saves both time and money
SSG has also built up a web-based product database that holds around 600,000 articles with unique article numbers, descriptions and classifications.

The SSG Product Database is a strategic resource for uniform product data within the company, the group and the industry as a whole. Maintaining order in the article structure is crucial, helping companies signed up to the SSG Product Database to reduce tied-up capital, lower purchasing costs, increase plant availability and cut administration.

The article description is the same for all linked units and allows cooperation with other units, both within and outside your own company. Today, the concept is used in much of the Swedish forest industry, in an increasing part of the Swedish steel industry and in the energy sector.

Environmental certificate
The SSG Personal Environmental Certificate is an interactive, web-based environmental training course adapted for and aimed at all personnel in the forest industry. The purpose of the course is, at a low cost, to give all employees a basic level of environmental knowledge as well as an insight into the environmental effects of the plant’s activities.

The Personal Environmental Certificate comprises three different modules – The Landscape, The Forest and, if required, The Mill, which is an industry-specific module.

Having all the modules activated increases the scope to raise employees’ awareness of and expertise in the impact of their operations on the wider environment.

An energy policy for main street America

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The political landscape in America following the November 2010 mid-term elections appears to make it virtually impossible for President Obama to act on his promise to make sweeping energy reform the cornerstone of his legislative programme for 2011. The launching of an energy-cum-climate-change campaign would appear tantamount to political suicide for the President.

An Administration grappling with a trillion dollar deficit, an anaemic-jobless recovery, a hostile House of Representatives, and a Senate suffering from the worst form of sclerosis – and most of all an Administration desperately needing to reconnect with middle-American voters before the 2012 election – could not possibly afford to shoot the moon on behalf of energy policy reform in America.
 
What could he possibly say that would garner the attention, much less the votes of the likes of Republican Joe Barton (R-Texas) and his rabble-rousing colleagues in the House who are busy planning hearings to curtail the regulatory power of the EPA or possibly even to launch a major inquiry on the “sham” science of global warming?

But imagine for a minute if he were serious, and President Obama were to declare that for 2011 and 2012, he is going to make energy his number one domestic priority.

President Obama: “I am proposing that both Houses of the Congress put their priority focus on collaborating with me in finalising and passing one comprehensive, bipartisan piece of legislation, ‘The Economic Revitalisation and Long-Term Energy Security Act of 2011.’  As I promised late last year, this is my legislative priority for the next two years, and it is the primary achievement that I intend to leave behind as the historical legacy of my Presidency.”

First, we are going to take a serious bite out of current and future budget deficits by eliminating government subsidies and tax credits on production of all primary sources of energy on a step-down basis over the next three years.  These energy subsidies – for all kinds of different fuels and energy sources – are the sordid legacy of more than 50 years of politics as usual in Washington. They are bleeding our national treasury, and they result, essentially, in government intervening with an overwhelmingly heavy “hidden hand” to undermine the working of the free market when it comes to energy choices for Americans.

We have abundant, inexpensive energy sources in this country, particularly clean burning natural gas, and it should be the policy of the Federal government to allow the lowest-cost producers, not the best lobbyists, to meet consumer demand for energy. The proper role for government is to use taxation and regulatory policies to ensure that the full costs of all energy sources are reflected in the market, not to subsidise different energy sources at different rates in an incoherent fashion.

Second, in order to protect national security and to reduce the national balance of payments deficit, the Act calls for a 25 percent excise tax on gasoline, diesel, and other liquid or gaseous motor fuels made from petroleum and downstream feedstock chemicals. The tax will kick in at the pump on a month-by-month basis, over the coming year – far slower than the spike in gasoline prices we have experienced when the OPEC cartel has been able to gauge the American people periodically over the years. This tax is one that has been strongly advocated  by the US Chamber of Commerce, and Chamber President Tom Donahue said it best in 2009 when he told Congress to “Just damn do it!” This step is critical for our national security.

Every red-blooded American knows – in his or her heart – that were it not for our nation’s addiction to petroleum, we would have avoided much of the heartbreak and pain of the past decade as we have engaged in wars and conflicts around the globe in regions that are unimportant to America except for their links to our energy supply. It is time an American President told the truth, and took steps to defend this country from massive economic disruption of petroleum supplies before terrorists and the governments who harbour them take matters into their own hands. The Lord only knows how close we have come to Armageddon due to our petroleum addiction in recent years.

Third, to reduce the impact of the first two actions on wage earners, senior citizens and other low-income people, the Act immediately and permanently eliminates all payroll taxes on the first $30,000 of income and eliminates the current ceiling of $106,000 for Social Security taxes. It is time for Congress to address the fact that payroll taxes, and especially the capped Social Security taxes, are among the most regressive of all taxes on ordinary, working Americans. I recognise that, to some extent, by taxing gasoline, we are proposing to shift the burden to the transportation budget of working-class Americans, but people have a choice, especially over time, as to how they use their transportation budget, whereas the payroll tax is finite and fixed. The only way working people can reduce their payroll taxes is to work less.

Fourth, monies from the petroleum fuels excise tax will be allocated equally to an expanded Highway and Transportation Infrastructure Trust Fund and to a National Fund for Energy Research and Development. In the short term, we desperately need to rebuild the transportation infrastructure of this country, and the pain of trying repeatedly to convince Congress to authorise new monies for the Fund is far too great. The current process makes a mockery of good governance practices by inviting every legislator in Congress to earmark monies for his or her special pet projects rather than enabling the country to invest wisely and rationally into the infrastructure it needs to
keep the economy strong in the future. For the long run, we also need, once and for all, to embark on a 30-year programme to develop, perfect and prepare for commercialisation of the energy technologies that will propel forward and make competitive the American economy from 2050 onward.

Voila. In the short term, economic stimulus, budget deficit reduction, tax relief for those who need it most. Importantly, a big step to assert national security before the next terrorist event or political crisis disrupts global petroleum supplies.

For the long term, a level playing field for American energy policy that is likely to lead to more affordable, cleaner energy supplies in the future – a continuing push to natural gas as a primary energy source, and the gradual electrification (or re-electrification) of the American transportation system. That is an energy supply chain that can be subtly taxed, regulated and made more efficient through American technological ingenuity in coming decades to target President Obama’s admirable goal, articulated in 2009, to reduce CO2 emissions by 83 percent below 2005 levels by 2050.

President Obama’s speech would also open up a national debate about the hodge podge of energy subsidies, pork-barrel projects, and “white-elephant” governmental boondoggles that constitute our national energy policy – all in the name of energy independence, or under the banner of “cheap abundant energy supplies for America.”  What have we as a nation accomplished in the four decades since Richard Nixon proclaimed in November 1973: “Let
us set as our national goal, in the spirit of Apollo, with the determination of the Manhattan Project, that by the end of this decade we will have developed the potential to meet our own energy needs without depending on any foreign energy source.”

The fact is that America is stuck with a staggering labyrinth of energy-related policies and regulations, the sum total of which has resulted in very detrimental consequences for the best interests of our country. It is bad enough that America is further from energy independence than when President Nixon spoke. It is even worse that our national energy policies since then have basically undermined national security, exacerbated the national debt, corrupted a huge slice of the American economy under a system of “crony” capitalism that is far from the American ideal of free enterprise, and contributed to serious environmental degradation and the build-up of greenhouse gases in the earth’s atmosphere.

So, let’s be clear.  There is no question that the Act as President Obama proposes it would bring disruptive change across the entire landscape of the “business as usual energy lobbies” in Washington. Oil producers would actually live with the tax, but suffer the most from the elimination of the hidden and deeply embedded subsidies. The renewable energy interests, newly nurtured on the mother’s milk of Washington’s breast, need the subsidies in their current incarnation. Nuclear energy advocates and ethanol producers – the recipients of the lions’ share of “new energy” subsidies awarded in recent years, and poised to receive hundreds of billions of new subsidies in coming years, would see their so-called private funding sources shrivel overnight. But, the real question to ask is, would this Act constitute good long-term energy policy for America?

In a Rolling Stone interview, Mr Obama made a sweeping statement about why energy policy, and specifically ending the dependence on oil, is so critical to the nation’s future, saying “…it is good for our economy, it’s good for our national security, and, ultimately, it’s good for our environment.”  If he believes this, he needs to make the case, not to the Democrats or Republicans on the icy shores the Potomac River, or even to the Tea Party members scattered across the hinterlands, but rather to Main Street America. They will get it. Hey, Mr Obama, aren’t those the folks who got you elected in the first place?

More for feminist finance?

Posted on by Ben Debski

When Malaysian Aida Othman signed up for the new law programme at the Islamic university, she did not expect to become one the few women with their hands on the levers of the world’s $1trn Islamic finance sector.

“There are not many women involved my job,” Aida, who manages the sharia advisory practice at Malaysia’s biggest law firm, says. “I’m glad to be able to show to young graduates and young scholars in my field if you’re interested enough there is a way into sharia advisory,” the 41-year-old, who went on to study at Cambridge and Harvard, said.

Islamic finance has embraced women relatively rapidly in its 30-year modern history, as burgeoning demand for expert lawyers and growing female education rewrite the rules of the business. As Islamic finance expands 15-20 percent a year and enters new markets from Australia to South Africa, so the need has grown for more sharia advisers who can structure financial transactions according to Islamic rules that crucially include a ban on interest.

Sharia advisers are typically Islamic law scholars who are able to marry sharia with international banking and legal practices to help banks devise sharia-compliant products ranging from mortgages to hedge funds. There are 221 Islamic finance scholars globally but only a handful are in high demand, with the top six occupying almost a third of the 1,054 board positions open to Islamic experts, a Funds@Work report shows.

This small circle of men dominate the boards of Islamic banks but there are now about 10 women sharia advisers in Malaysia, home to the world’s largest market for sukuk, or Islamic bonds.

The number of women sharia scholars in Malaysia has more than tripled in the last five years according to some estimates. There are no official figures, but practitioners say there are no women sharia advisers in the Middle East.

Mideast lags Malaysia
While the culture has opened the way to the rise of female advisers in Malaysia, more conservative social mores have kept women sidelined from the Islamic finance industry in the Gulf Arab region, experts say. “The need for sharia advisers will increase,” said Mohamad Safri Shahul Hamid, deputy chief executive at Malaysia’s MIDF Amanah Investment Bank, a sukuk arranger.

“Will we see more women? In Malaysia, we will because they will want to follow the footsteps of noted women scholars. I’m not so sure about the Middle East. I still think they have to address the cultural issue. But they are moving in the right direction as, at least commercially, there are a lot more avenues for women to join the workforce.”

More than half of Malaysia’s 27 million people are Muslim and follow the Shafi’i branch of Sunni Islam, which is regarded as taking a more moderate stand on many issues. The Middle East is home to different strands of Sunni and Shi’ite Islam which means Muslim women enjoy vareying degrees of freedom. In the United Arab Emirates, for instance, Muslim women face few restraints compared to Saudi Arabia, where they are forbidden from driving and travelling unchaperoned.

Malaysian Muslim women face little, if any, restrictions on their movements, have equal educational opportunities and women comprise about half of the country’s total workforce. Muslim women in Malaysia routinely hold political office, run large corporations and the country’s central bank and capital market regulator are both led by women.

EONCap Islamic, the sharia banking arm of Malaysian financial group EON Bank, and the local unit of Kuwait Finance House  both have women chief executives. Women scholars also advise Bank Rakyat and Bank Islam, which is Malaysia’s second largest sharia-compliant lender, as well as AmIslamic Bank and the local Islamic banking arms of HSBC and Standard Chartered.

The rise of women sharia advisers in Malaysia was partly due to a central bank ruling that a scholar can only advise one bank and one insurer at a time to avoid conflicts of interest.

A significant minority?
Men still outnumber women five to one at sharia scholar conferences in Malaysia, but women have had a hand in major controversial rulings such as approving the bai inah sale, which fed into fierce theological debates that divide the industry. With or without women, different legal schools of Islam mean some deals are acceptable to some Muslims but not to others.

“Sometimes banks have no other options,” said Shamsiah Mohamad, a Standard Chartered Saadiq Malaysia adviser who has sanctioned the use of the Islamic sale and buyback structure. “Based on the Shafi’i school of thought, inah is sharia-compliant but it is not accepted in the Middle East. We gave our approval reluctantly.”

Shamsiah, who wears a headscarf and traditional Malay dress, speaks only a smattering of English and utters her views in barely audible tones, but confidently fields questions on complex topics like foreign exchange forward contracts. The 43-year-old is part of an 11-member team of national level sharia advisers, which issues rulings governing the world’s largest sukuk market. But she says her career ambitions take into account her family and her limited grasp of English.

 “In Islam, we need our husbands’ approval,” Shamsiah, who has a five-year-old son, told Reuters at the university where she teaches Islamic banking. Most women advisers say they have not experienced gender discrimination although some say they are not always taken seriously at conferences, for instance.

 “My duty is to speak out because to me that is my view. It is not a matter of whether people accept you or not,” said HSBC Amanah Malaysia adviser Rusni Hassan, one of eight children raised by a single mother in a village in northern Malaysia. “I am used to it. I just say whatever I want to say.”    

And regardless of any setbacks, Aida is optimistic about the prospects for women who want to get into the sector. “Traditionally issuance of Islamic rulings and fatwas have been monopolised by men,” she said. “There are no express rulings prohibiting women from being involved in it. There are opportunities for many more, for ladies who are willing to step up.”

A mighty wind blows

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Most people are agreed – save for the vested interests – on the efficacy of promoting clean energy as an alternative solution. Factor in growing evidence the planet is undergoing profound climatic change and it would appear to
be a no brainer.

Most promising of the available technologies – in the nearer term at least – is wind power. Irrespective of technology however the key economic metric is grid parity – i.e. the point at which alternative means of generating electricity is equal in cost, or cheaper, than grid power.

As Tim Buckley, portfolio manager at Sydney-based Arkx Investment Management puts it: “Wind is probably three or four years ahead of solar and geothermal, and wave maybe five years behind solar.”

A case in point is the European Commission’s September 2010 ‘EU Energy Trends to 2030’ report. Compiled by the National Technical University of Athens, it forecasts 333GW of new electricity generating capacity to be installed in the EU between 2011 and 2020 alone, with wind accounting for 136GW, or 41 percent of all new installations. Currently, there is 80GW of wind energy capacity across the EU. The report added that it expects 64 percent of new capacity to be renewable energy, 17 percent gas, 12 percent coal, four percent nuclear and three percent oil. 
Breaking the numbers down, wind energy is forecast to account for 14 percent of EU electricity by 2020, against five percent now. Renewables as a whole will make up 36.1 percent of total electricity generation in 2030.

Industry body the EWEA (European Wind Energy Association), which is projecting 400GW of wind power capacity by 2030, has already dismissed the EU forecast of 280GW as too conservative and has taken issue in particular with the report’s claims that the increase in wind power capacity will slow from an annual average of 13.6GW in the decade up to 2020 to 5.8GW in the decade to 2030.

Irrespective of how the targets pan out the drive towards renewables is part of a grander scheme encapsulated in EU Directive 2009/28/EC. Collectively known as the 20-20-20 targets, these include a reduction in EU greenhouse gas emissions of at least 20 percent below 1990 levels, 20 percent of EU energy consumption to come from renewable resources and a 20 percent reduction in primary energy use compared with projected levels – all of these to be achieved by 2020 through energy efficiency improvements. For Tim Buckley meanwhile, Arkx Investment Management draws little distinction between the available technologies from an investment standpoint – companies targeted being ‘technology driven with proven track records demonstrating repeat sales of size’.

“We avoid investing in the multitude of ‘very exciting’ cleantech start-ups where ever-optimistic founders talk about what their companies are going to do (if only the market would give them the cash to prove it). We are looking at market opportunities that are real and current, not blue sky potential.”

The key issue with renewables as Buckley sees it is that they’re still a high cost source of energy. However, the real cost of fossil fuel-based energy will rise materially when the full cost of carbon pollution is added in, significantly narrowing the cost gap to renewables. In addition, renewables can significantly reduce a country’s energy security risks and trade imbalances from importing fossil fuels – a key motive for China, the US & Germany. Finally, the technology and scale gains are driving down the cost of renewables each year – whereas fossil fuel costs are rising as ever more expensive sources (deep sea drilling, Canadian oil tar sands) are tapped.

Noteworthy is US-listed Chinese solar wafer and module manufacturer Renesola. With a market cap of $840m, based on a stock price of $9.73, it has been the best performing (large) solar energy stock in the last year with a 73 percent return. Much of the 20 percent gain post reporting its Q2 numbers in August came on the back of a forecast 26 percent increase in cost per unit efficiency, with manufacturing capacity set to rise 50 percent in 2010 and a further 50 percent in 2011.

To demonstrate its seriousness the company, which barely existed four years ago, invested $570m in total in calendar years 2008-2009, with a further $130-140m pa set for 2010 and 2011. Total wafer manufacturing capacity is forecast at 1,800 MW p.a. by Q2 2011.

Wafer costs meanwhile have fallen from $1.10/W in Q1 2009 to $0.62 in Q1 2010 (-44 percent), and further to $0.56 in Q2 2010. Renesola forecasts wafer costs to fall to $0.54 in Q4 2010 (-26 percent) and $0.46-0.48 (-13 percent) by end 2011.

Elsewhere, First Solar US has reported a Q2 2010 module cost of $0.76/w with a 2014 target of $0.52-0.63/w.

First Solar’s global capacity will rise from 716 MW to 2.24 GW by 2012. The company’s realised per watt costs have fallen from $1.59/w in 2005 to $0.76/w in Q2 2010 (a 14 percent pa compound reduction in manufacturing costs).

“The Rensola and First Solar stories mirror those of all the major solar firms,” says Buckley, “adding massive capacity annually in anticipation of the coming solar boom with producers passing on cost savings in the form of lower prices.” Buckley adds that solar will probably not reach grid parity in Australia until 2015, despite the introduction of a carbon tax locally and rising electricity prices.

If grid parity Down Under is unlikely before 2015, in Germany it may come as early as 2013 – proof positive that wind power isn’t necessarily the only game in town. Indeed, Germany consolidated its position in H1 2010 as the world’s largest photovoltaic (PV) market – system installations there amounting to an estimated three GWp. Last year, it accounted for approximately one of every two newly installed modules worldwide, with total installations amounting to 3.8 GWp, according to Germany Trade & Invest.

However, a recently announced reduction in feed-in tariff (FiT) rates has marked what for many claim amounts to a partial retreat in government policy. Against this backdrop the Merkel government also confirmed the nation’s four nuclear operators (RWE, E.ON, EnBW and Vattenfall Europe) will be allowed to extend the lifespans of their plants by an average of 12 years. FiTs were first established in Germany 10 years ago under the 2000 RES Act and designed to run for 20 years. As of 2009 they were in operation in more than 60 jurisdictions globally. A FiT is a policy mechanism designed to encourage the adoption of renewable energy sources and to help accelerate the move toward grid parity.

Under a FiT regional or national electric grid utilities are required to buy renewable electricity (electricity generated from renewable sources, such as solar, wind, tidal and geothermal power, as well as biomass and hydropower) from all eligible participants. In the case of Germany greater emphasis is now being placed on people with rooftop systems of less than 500kWp who intend using the energy they generate.

Effective July 1st, however, FiT rates were reduced by 13 percent for rooftop installations and eliminated entirely for cropland field installations. From October 1st rates were reduced by a further three percent. Despite this, tariff rates remain relatively attractive.

In China – despite an exponential increase in wind and hydropower production – expectations are that solar and wind power will meet just two percent of the nation’s energy needs in 2020 – coal making up 58.5 percent, with oil/natural gas 26.5 percent to name two, according to Liu Zhenya, chairman and CEO of China’s largest grid operator, State Grid Corp. of China, at the World Energy Congress in Montreal in September.

Despite the numbers the replacement of fossil fuels by clean energy as a whole will reduce carbon emissions by 1.6bn tons a year. Much of the impetus for this saving is expected to come from the nation’s ‘Golden Sun’ programme. Launched in 2009, it offers a 50 percent subsidy for investment in solar power projects as well as relevant power transmission/distribution systems connecting to grid networks.

For independent photovoltaic power generating systems in remote regions with no power supply, the subsidy will rise to 70 percent. Grid companies are required to buy all surplus electricity output from solar power projects that generate primarily for the developers’ own needs, at similar rates to benchmark on-grid tariffs set for coal-fired power generators. To qualify for the subsidy, in addition to other requirements, each project must have a generating capacity of at least 300KW peak, while construction will have to be completed in one year and operations will have to last for at least 20 years.

The government plans to install more than 500 megawatts of solar power pilot projects in the next two to three years. Total generating capacity in such pilot projects in each province should, in principle, not exceed 20 megawatts.

In the US, meanwhile, the Obama-Biden New Energy for America plan envisages the creation of five million new jobs over the next 10 years by strategically investing $150bn ‘to catalyse private efforts to build a clean energy future’.The plan aims to save, within 10 years, more oil than the US currently imports from the Middle East and Venezuela combined.

Another objective is 10 percent of energy production coming from renewable sources by 2012 (25 percent by 2025), as well as implementation of an economy-wide cap and trade programme to reduce greenhouse gas emissions 80 percent by 2050. Although The Department of Energy (DOE) projects electricity demand to increase by 1.1 percent p.a. over the next few decades the Obama-Biden plan is looking to cut demand 15 percent from the DOE’s projected levels by 2020., saving consumers – it is claimed – $130bn.

A portion of this goal would be met by setting annual demand reduction targets that utilities would need to meet. The rest would come from more stringent building and appliance standards. In the investing sphere, Silicon Valley-based Firsthand Alternative Energy Fund, run by SiVest Group Inc, has already hit the ground running – its investment philosophy based on targeting companies/technologies deemed to be helping to ‘accelerate the adoption of alternative energy production and energy efficiency’.

”We take a slightly different approach to investment selection than some other alternative energy funds, driven in part by our background as technology professionals.” says company spokesman, Phil Mosakowski.

“The difference is we tend to focus our investments in companies developing, not deploying, new technology. This is, in part, based on our experience in investing in technology companies and also reflects our belief that there are often better margins in providing underlying technologies than in providing finished products or services, such as power generation.”

The fund, launched in October 2007, has targeted three major areas to date: solar photovoltaics, wind and energy efficiency. While some limited investments have been made in other areas, such as battery technologies and geothermal, the three core areas are deemed to have the most profit potential for now.

In terms of specific investments, positions have been taken in firms at all points along the solar industry supply chain, including cell and module manufacturers (JA Solar, Suntech, SolarFun), manufacturing equipment providers (GT Solar, Meyer Burger), and materials suppliers (MEMC, Praxair).

Over the 12 months through June 2010, the fund was down 6.85 percent, against a 16.73 percent decline for the WilderHill Clean Energy Index and 14.43 percent gain for the S&P 500 Index. Corresponding figures since inception were -16.79 percent; -34.66 percent and -11.96 percent. On a smaller scale, meanwhile, is the New Earth Solutions Recycling Facilities Investment Sub-Fund, managed and promoted by The Premier Group (Isle of Man) Limited. It focuses on waste management by investing directly in New Earth Solutions Group Ltd, the sustainable waste treatment and renewable energy business founded in 2002 by former landfill entrepreneur, Bill Riddle. By August 2010 its share price had increased 24.3 percent since its inception in July 2008.

Fund director David Whitaker says: “When we launched the fund we were aiming to provide investors with the opportunity to obtain long-term capital growth by investing in New Earth Solutions  – proven, effective and efficient waste management technologies.

“This remit has since been expanded to include sister company New Earth Energy, which is committed to developing and delivering innovative advanced thermal technologies to support the use of waste-derived feedstock for ‘green energy’ power plants and direct heating supply schemes for both public and private customers.”

The fund helps to finance New Earth’s roll-out of waste and waste to energy facilities across the UK and provides investors with an opportunity to participate in a market not normally available to the individual investor. On the other hand, the Osmosis Climate Solutions ETF (launched in February 2010 by London-based asset management boutique, Osmosis Investment Management) has a wider global reach.

Focusing on products and services supporting the transition to a low carbon environment, the fund currently has a geographical spread of Asia 41 percent, Europe 23 percent, North America 33 percent, Others (mainly EM) three percent.

However, June Aitken, partner at Osmosis Investment Management, is quick to point out that geographic diversity isn’t an objective of the fund. Indeed, breadth of exposure is simply being achieved as a result of the diversity of the technology, products and services the managers believe will form part of the transition to a lower emission environment.

For example, renewable energy production companies tend to be in Europe (early feed-in tariff policies) or Asia (low-cost solar products), whilst pure play smart grid infrastructure companies are often US-based. Exposure to specific companies is based on a number of filters such as market capitalisation, trading volume, and ensuring the majority of the company’s revenues are derived from the products, services and technologies used in a lower emission economy.

Irrespective of the available investment funds on offer there is little doubt that the drive towards renewables is an irreversible one. Whether the targets set by Governments globally are achieved or not is, in many ways moot, given the industrial landscape is likely to be profoundly different in 20 years than it is now.

Energy, telecoms and IT collaborate

Posted on by Ben Debski

The strategies for climate change mitigation are based on the company’s vision of becoming one of the five major integrated energy producers in the world, with the mission to operate both profitably and safely, with social and environmental responsibility and committed to sustainable development.

As the biggest company in Brazil and in Latin America, Petrobras has an important leadership role for sustainable development. Petrobras’s 2020 Strategic Plan emphasises the importance of climate change mitigation, establishing objectives in order to achieve standards of excellence in the energy industry with regard to the intensity of emissions in processes and products. Petrobras believes that climate change mitigation requires a comprehensive strategy focusing on energy efficiency, flaring reduction, renewable energy production, and research and technological development.

In 2002, the Company implemented a System for Atmospheric Emissions Management named SIGEA®, which integrates all company activities with more than 30 thousand source entries registered, providing a detailed inventory of greenhouse gases (GHG) and regulated air pollutants and assists, with the data gathering, consolidation and report assessment, a critical analysis of emissions and the optimisation and continuous improvement of processes.

Petrobras reports its GHG emissions inventory, which is verified by a third party, every year in the Company’s Sustainability Report, as well as the initiatives taken to reduce GHG emissions. In 2005, the company incorporated the climate change issue into its corporate strategy and set voluntary goals. In 2007, the Strategic Climate Change Project was created, setting guidelines to increase the energy efficiency and to identify opportunities in new technologies to reduce emissions and new energy sources. With the measures adopted over these years, Petrobras will invest $200m in research and technological development on climate change mitigation over the 2010-2015 period. This is a voluntary commitment, and considers an attenuation of the emissions growth curve, without limiting business expansion. These objectives are attained with the deployment of energy efficiency projects, through operational improvements, flaring reduction, implementing new technologies and by using renewable energies. 

Recently the discovery of over 10 billion barrels of oil equivalent (boe) in recoverable volume (Pre-Salt Cluster) has been announced, which represents the increase of one million boe per day installed capacity production until 2017. Petrobras has assumed a pro-active stance and, prior to any regulatory requirement, voluntarily defined as a basic directive for the production development project in the Pre-Salt Cluster not to release the CO2 associated with the natural gas produced, by the use of CO2 reinjection techniques. To achieve this ambitious target, several technological paradigms need to be overcome, including offshore CO2 capturing, its separation from the natural gas produced, and finding the adequate alternative for the final destination of the CO2 produced.

Petrobras has set up two technological programmes to tackle the challenge of CO2 capture, transportation, and geological storage: PROCLIMA (the Technological Programme for Climate Change), created in 2007, which is both wide-ranging and long-term in nature, and PRO-CO2 (the Technological Programme for the Management of CO2 in Pre-Salt Development), set up in 2009, and focused on the issues raised by CO2 in developing the Pre-Salt Cluster and, therefore, with shorter-term goals. Also in the area of R&D, Petrobras is contributing with the Climate Network, a technical cooperation and financial support initiative for science and technology entities throughout Brazil.

Created in 2008, and currently composed of 12 research institutions, the network seeks to develop national qualifications and infrastructure to capture, transport, and store CO2. It also researches issues such as impacts, vulnerabilities and adaptation to climate change.

A total of $30m was invested between 2006 and 2009 in the areas of carbon sequestration and climate change, and an additional $200m will be invested over the 2010-2015 period.

Energy efficiency and flaring reduction
An Internal Energy Conservation Programme has been in place since the 70s. The Programme has its implementation through 48 Internal Commissions for Energy Conservation. Projects of energy efficiency enhancement are implemented and they have the purpose of both reducing fuel and electricity consumption in all company units. Over the past five years, more than $170m has been invested in energy efficiency projects, achieving savings of approximately 3,000 barrels of oil equivalent per day.

In relation to flaring reduction, the Company invested $200m in the Programme of Optimising Associated Gas Use, seeking the reduction of gas flaring in 24 platforms. With 93 initiatives implemented, including installation and adaptation of compressors, new gas pipes and optimisation of processing units, the company achieved significant improvement in the recovery of natural gas in recent years. The potential gain in the gas utilisation was 4.2 million m3/d. Apart from the programme mentioned above, $98m was invested in two reservoir injection projects in the Campos Basin, enabling storage, in the reservoir rock, of up to 2.4 m3/d of associated gas in the case of upset in the processing, transport or in the market.

Petrobras has adopted as a corporate strategy the plan to “act globally in the biofuel segment, with significant participation in the biodiesel and ethanol businesses.” In 2008 a Biofuel subsidiary was established to be responsible for the development of production and management of biodiesel and ethanol projects. The Biofuel Company owns four biodiesel plants. A total of $3.5bn will be invested over the next five years, with a substantial part of this – $530m – earmarked for the research and development of new technologies including second-generation biofuels. The production of bioethanol and biodiesel, in addition to contributing to climate change mitigation, is in line with company’s directive to support sustainable production by applying its R&D resources in species of biomass that are native to the Brazilian semi-arid regions, and will increase the use of family-run agricultural businesses. Since the 70s, the Company has operated in a number of industrial production stages of ethanol, through the National Ethanol Programme – Proalcool – which allowed Brazil to avoid the emission of approximately 800 million tons of CO2 from 1975 to 2007. The company was also the first one to convert its fleet to ethanol, using engines with components that had been developed and tested at its Research Centre.

In addition to investing in the improvement of process and products, Petrobras sponsors projects aimed at the conservation of natural resources and at the raising of ecological awareness. These projects are included in the Petrobras Environment Programme, which will invest about $250m by 2012. Besides supporting projects related to the theme water, the programme includes issues relating to carbon fixation and avoiding emissions. Considering the area planted and the area of avoided deforestation, the projects avoid the emission of up to 6.8 million tons of CO2.

Further information: www.petrobras.com