Boston Strategies International (BSI) recently completed a study of renewable energy costs and value chains for a branch of the Mexican government’s Instituto Nacional de Ecología y Cambio Climático (National Institute of Ecology and Climate Change). BSI compared the costs and value added of environmentally sustainable technologies for the power generation sector (large scale solar, wind and geothermal, vs combined cycle natural gas technology) to support decision-making in environmental mitigation. The study analyzed the principal actors, elements and processes, as well as costs, value added, and barriers to entry attributable to each segment of the value chain, as inputs to energy policy formulation.
The Instituto Nacional de Ecología y Cambio Climático (INECC) produces valuable scientific and technical information on environmental issues and the training of human resources, in order to inform society, support decision making, encourage the protection of the environment, promote the sustainable use of natural resources, and support the Mexican Secretary of the Environment and Natural Resources in reading its goals. It aims to be a leader agency in applied environmental research, that develops and promotes scientific cooperation projects that contribute effectively to resolve the major environmental problems of Mexico, and support the conservation and restoration of the environment in the whole country.
Boston Strategies International is a consultancy that compresses lead time and reduces cost in gas, oil, and renewable power supply chains. Clients typically hire us to cope with legislative reform, technologically challenging projects, cost over-runs, strategic diversification, and major capital programs. We build ongoing project management competency and leadership by transferring our knowledge, analytical tools, and data to in-house staff during every engagement.
Contact us for more information on how we can help your organization.
Multinational carbon taxation needs to be executed carefully in order to manage the market value impact in the conventional energy sector.
Of the 190 countries that have ratified the Paris Accord will need to tax carbon in order to meet their goal of limiting global average temperature increase to below 2°C above pre-industrial levels and 1.5°C from current levels. Forty-two countries have a carbon taxation or emissions trading plan in place, and fifteen of the major countries that currently tax carbon (Australia, Chile, Costa Rica, Denmark, Finland, France, Iceland, Ireland, Japan, Mexico, Norway, South Africa, Sweden, Switzerland, and the UK) are doing so at a rate equivalent to 18% per barrel of oil. The number of countries and their level of carbon tax will increase as these countries are tasked with setting more ambitious targets every five years, developing national climate action plans, and establishing accountabilities for execution.
Carbon taxation will pose an existential threat to some conventional oil and gas companies, and significantly impact power producers. Even if there is a long ramp-up period, few oil & gas companies will be able to handle this level of tax without profoundly restructuring their operations and business portfolio.
Economically, the optimal solution would be to apply the tax quickly enough to incentivize diversification into renewables, but slowly enough to allow fossil fuel producers to adapt. The phase-in period, and the structuring of the tax, will need to be tailored to each region, country, and fuel.
Boston Strategies International’s unique knowledge of oil, gas and power costs at every step in the supply chain can help you evaluate alternative scenarios of operating and capital cost adaptation, as well as alternative structures and time-phasing of potential taxes and mandates that would generate the greatest benefit for your organization. We know how much tax can be passed through, how much cost can be shed, and how much synergy can be realized between various types of conventional and renewable power.
BSI is your best partner for adaptation advisory. We consult to the largest energy companies, lenders, law firms, government agencies and nongovernmental organizations. We have served national oil & gas companies including Saudi Aramco, PdVSA, and Gazprom; international oil & gas companies such as BP, Total, and American Energy; and power producers such as Vattenfall and Iberdrola. Our analytic tools have helped industry majors reduce cost by up to 30%. In addition, our Principals have written hallmark policy and methodological handbooks, including Optimal Supply Chain Management in Oil, Gas, and Power Generation (PennWell 2012); Guide to Supply Chain Management(The Economist 2009); and The High Cost of Low Prices(Business Expert Press, 2017), and we have been leaders in education at Boston University’s graduate school of business and training through numerous professional associations.
A team from Boston Strategies International (BSI) submitted a proposal for the Ellen MacArthur Foundation’s Circular Design Challenge, and it was among the top 100 selected by the committee!
There were over 600 proposals from around the world and we are proud of the innovative and exceptional work all the contestants are doing to solve urgent needs around this important topic.
The Circular Design Challenge seeks to inspire creatives to design solutions for plastics packaging to stay in the economy, and out of the environment. Love them or hate them, plastics are everywhere around us. They protect our food, make our cars lighter and hospitals would not run without them. In fact, plastics are so useful, their demand is expected to double in the next 20 years. Yet our plastics system is broken. Only 14% is recycled, resulting in a loss of $80-120 billion per year to the global economy. If nothing changes, there will be more plastics than fish in the ocean by 2050.
The BSI team proposed a new design that would avoid small-format plastic packaging waste. Since small-format packaging is used for so many items across a broad range of merchandise, our challenge to design solutions was compelling.
Boston Strategies International (BSI) recently conducted a study to assess the potential uses of batteries for energy storage in Mexico. The Mexican Energy Reform has brought up the creation of an electricity market in Mexico, where private generators and large industrial consumers can buy and sell power.
BSI provided an overview of the energy marketplace in Mexico and analyzed the technical, regulatory and economic aspects affecting energy storage systems in Mexico. The study compared principal actors, elements and processes, as well as costs, value added, and barriers to entry attributable to each segment of the value chain, and provided product development, marketing, and commercialization recommendations for energy storage systems.
The study was conducted on behalf of Nippon Electric Company, Limited (NEC Corporation), Japan’s first joint venture with foreign capital, which was established in 1983 by Kunihiko Iwadare in association with the U.S. firm Western Electric Company (presently Alcatel-Lucent). The NEC Group is currently focusing on leveraging its strengths in information and communications technology (ICT) to offer Solutions for Society capable of increasing the sophistication of infrastructure systems and services indispensable to society. Through these business activities, NEC remains committed to collaborating closely with each and every one of its stakeholders to create an “information society friendly to humans and the earth” based on value that helps ensure safety, security, efficiency, and equality, enabling people to live more abundant lives.
Boston Strategies International is a consultancy that compresses the lead time and reduces cost in gas, oil, and renewable power supply chains by up to 30% through technology development, value chain engineering, strategic sourcing, and supply contract negotiation. BSI leverages its proprietary economic models and frameworks to advise oil, gas & power operators, regulators and policy-makers, lenders, equipment providers and service providers in the formulation of national and energy tax, subsidy, and investment promotion policies. Our broad experience across all aspects of industrial value chains, combined with our strength in economic analysis, provides robust and trustworthy roadmaps for growth.
Boston Strategies International’s President Mr. David Jacoby spoke on the Comparative Economics of Combined Cycle, Solar, Wind, Hydro, and Geothermal Power at the University of Calgary’s Haskayne School of Business (HSB) in Calgary, Alberta, Canada on October 19, 2017.
Renewable energy transformation is fashionable everywhere, but in most geographies, combined cycle power plants fueled by coal and natural gas will continue to dominate for a long time. Solar, wind, hydropower, and geothermal fired plants will compete for their shares of power generation, as coal and even oil recede and biomass fails to reach economic scale.
In the image (Left to Right): Dr. Jaydeep Balakrishnan (Professor, Operations and Supply Chain Management), Mr. David Jacoby (President, Boston Strategies International), and Ms. Bea Ewanchuk, Associate Director-HSB Development
The EU has issued clean energy mandates, Asia has established leadership in low-cost supply of equipment, and Latin America is following the guidance of the Paris accord. Nearly everybody agrees that green is a desirable direction, and solar and onshore wind have lower capital costs than conventional power generation plants, but gas-fired combined cycle plants can in many cases deliver a lower Levelized Cost of Electricity and generate more jobs than solar and wind. The battle for lowest cost production has yet to be played out. Fossil fueled power costs can be driven lower still through smart midstream technology such as UAVs, Radar/LIDAR, Infrared Imaging, and Smart Pigging. The political and economic battle for the best energy sources will ultimately also need to consider economic impact and energy independence.
This keynote speech provided a perspective as to the comparative economics of combined cycle, solar, wind, hydro, and geothermal power generation alternatives, and put the comparison into Canadian perspective, using actual project examples and case studies.
Click on the image for an executive summary of the INECC analysis.
To access full 43 page slide deck “Combined Cycle, Solar, Wind, Hydro, and Geothermal Power” featuring 25 graphs and tables, 9 descriptive figures and diagrams, and full text analysis, click on the link below.
Boston Strategies International’s President Mr. David Jacoby Shared BSI’s Analysis of the Solar PV Market at the SNEC Conference in Shanghai, China on April 17-21, 2017.
The SNEC Scientific Conference provided an excellent platform for the world’s PV experts and scientists to showcase and share the latest developments in solar energy technologies.
The conference programme encompassed a wide scope of PV technologies, ranging from silicon feedstock, PV materials, cells, modules, systems and quality assurance to smart grid technologies. The world’s top PV scientists along with CTOs from leading PV companies have been invited to join the International Scientific Committee as well as presenting on the cutting-edge technologies of solar energy at the conference.
Boston Strategies International’s President Mr. David Jacoby’s presentation on “Market Outlook for Solar PV” provided detailed insights about the long-term demand growth outlook for Solar PV and the world’s solar markets.
In his presentation Mr. Jacoby emphasized that cumulative global market for solar PV expected to triple by 2020 to almost 700 gigawatts, with annual demand eclipsing 100 gigawatts in 2019. According to the analysis, the bulk of the growth will occur in a small number of markets. While 8 countries might each add over 10 GW, 4 markets – China, US, Indian and Japan – are supposed to add over 20 GW, and China could exceed the 100 GW level in the High Scenario.
David also emphasised that Solar power as the lowest-cost renewable energy can provide enough clean power generation in time to meet the ambitious Paris Climate Summit targets. Utility-scale systems and rooftop systems will each have roughly half of the global market.
Rooftop systems are currently more expensive but the value of electricity delivered on consumption sites or nearby is greater.
However, as PV expansion is driven more and more by self consumption – the use of PV electricity directly at the same site where it is generated – grids may carry smaller amounts of traded electricity, raising concerns over how to recover the fixed costs of grids.
Mr. Jacoby explained how the global market for solar PV will no longer be Europe-centric and large solar markets in Asia are booming. China and Japan are leading the growth curve for the solar PV market and energy storage solutions will unleash latent growth in Latin America, Middle East and India.
He also discussed about the increasing rates of penetration for rooftop solar. According to BSI’s research, since the demand growth is coming mainly from emerging markets where utility-scale PV is currently the preferred application, this solar segment will continue its lead over the next 5 years.
He summed up by forecasting that energy storage solutions and emerging market potential promise long-term profitability for the industry.
To access David’s full SNEC 2017 presentation “Market Outlook for Solar PV” with detailed charts and analysis kindly buy it using this link.
Decisiveness is usually a good thing in matters of economic policy. Markets depend on stability, and growth depends on markets, ergo growth depends on stability. Central bankers send signals long in advance of changes in interest rates to give markets and businesses time to prepare and adjust. In some countries businesses practically come to a standstill before important elections, rather than risk making suboptimal decisions. The worst thing is mixed signals.
However, some waffling may be excused, and even encouraged, when an irreversibly wrong decision is about to be made. The consequences of Brexit will be felt for generations to come, both inside and outside the U.K.
As Britain begins its exit negotiations from the EU, many tactical decisions will need to be made, such as slow versus fast, soft versus hard, and consultative versus imperial (executive-led).
However, British citizens should take every opportunity to review, reconsider, and even recant their decision to the extent that is politically possible. In the case of a Big Wrong Decision, a slow, soft, and consultative approach can minimize the damage and leave some room for potential reconciliation.
Important negotiating points should be voted on, and as the negotiated cost and benefits become clear, the actual costs and benefits should be compared to the assumed costs and benefits that were the basis of the vote to exit the Union. If there is a significant difference between the reality and the picture they had in their minds at that time, procedural mechanisms should be manipulated to minimize losses and possibly even to squirm out of the Brexit cage entirely.
The Trump administration’s trade policy is anything but Republican. From a conventional economic perspective it would seem isolationist and protectionist. Its coherence could lie in its support of superordinate political goals, such taming or reversing immigration from Mexico, engaging China against North Korea, and bolstering Saudi Arabia’s hegemony in the Middle East.
What is the current US trade policy? For decades, even centuries, the US has had a trade doctrine. While the doctrine changed from time to time, the policy was predicated on economic principles and it was usually designed with engagement, multilateralism, global economic strength, and free markets in mind.
Perhaps the Trump administration has yet to reveal the intellectual blueprint underlying its diverse and varied trade stances. Maybe, the intent is to start from scratch in a new and better way. For analogues we could examine the coherence and roll-out approach of this administration’s foreign policy, communications strategy, and technology & innovation roadmap.
Keep an eye out for my upcoming book, which will peer under the covers of Trump’s trade policies, evaluate whether they will be effective or not, and map a trade policy path for today’s flat world.
Drought, electricity rationing, and increasing reliance on dirty thermal power are adding to the woes of the Colombian power sector.
El Niño has caused drought and high temperatures across northern and western Colombia since early 2015. Much more potent than usual, the current version is called ‘Super El Niño’ and is likely to last up to 5 years. In 2015, 9 of Colombia’s 32 departments (provinces) were in a state of emergency due to extreme drought in 2015. In recent months, El Niño dried up parts of the Magdalena River, the country’s main waterway. Electric power generation capacity, more than 70% of which comes from hydropower, has suffered. Power generating companies like ISAGEN, EMGESA, AES, and EPM have been squeezed, with little revenue to offset large fixed costs. Climate change scientists suggest that the intensity and frequency of this phenomenon will increase.
Unplanned outages of Colombian power generation plants like EPM-operated Guatape and Celsia-operated TermoFlores, sapped 10% of the country’s power supply in March alone. Additionally, about 15% of electricity is lost in transmission, leakages, and theft. Given the impact of El Niño and anticipating further reduction in hydropower generation, the government is likely to extend the electricity rationing that happened in March 2016.Colombia experiences 1.2 power outages in a typical month, and the value lost due to these power outages is estimated to be around 1.8% of sales, according to a World Bank survey. In an already constrained power system, electricity demand is growing at 13% annually, making the problem critical to the country’s future.
The government plans to add 7 GW to the national grid network by 2027. While there has been a focus on reducing reliance on hydropower since the 1990s when its contribution was over 80%, more than 20% of the upcoming capacity will come from thermal generation, which is carbon intensive.
Distributed power generation – decentralized small scale technology producing anywhere from a few kilowatts to up to 50 MW close to the end user– can help mitigate the looming power crisis. Multiple units can even cater to a “micro-grid” that is either independent of the grid or connected to it through smart net meters. Previously, distributed generators relied on synchronous generators, induction generators, and micro-turbines (which were used as power back-ups), but these are gradually being replaced by solar PV, wind, biogas, and geothermal systems. Distributed generation based on renewable technologies reduces the cost of generation, cuts transmission and distribution losses, and can make self-sufficient 5-10% of the population, which is not connected with the national grid system and receives only about 5-10 hours of power daily.
The potential for distributed power generation is considerable. Small hydropower in Colombia can potentially produce up to 150,000 GWh of power per year from multiple generation sites which are less than 20 MW each. The country has significant solar power resources, with daily average radiation of up to 6kWh/m2. According to a study by the World Bank’s Energy Sector Management Assistance Program (ESMAP), approximately 190 million m3/yr of biogas generated from coffee plantations can produce 995,000 MWh of power. And, geothermal potential has been estimated at 2,210 MW (vs. current installed capacity of only 14.4 MW).
Colombia needs to finalize and articulate its electric market legislation for the country to realize the potential of distributed generation. It was among the last of the Latin American countries to have a renewable energy law. The law passed in 2014 after two years of deliberations. Limited policy development has failed to pass a provision to allow power purchase agreements with utilities, especially the largest ones such as EPM, ISAGEN, and EMGESA. Hence there is a relatively small number of small private sector players and investors.
However, there is reason to believe that even small scale development of renewable energy is on government’s radar, given that the government woke up to clean energy development to begin with. According to the plan published by the energy and mining planning agency (Unidad de Planeación Minero Energética, or UPME), 54 MW and 50 MW of solar and geo-thermal power capacity will be installed by 2020. Tax incentives give reasons to small and medium sized enterprises to invest in small scale distributed power generation: no value added tax (16%) on capital equipment, import duty exemptions for renewable energy projects, accelerated depreciation on capital equipment (50% in the first five years).
Even though the government woke up late in addressing the regulatory omissions, it needs to take it from here in an accelerated fashion. The future of distributed power generation lies mainly with small and medium players while the large players will be struggling with optimizing the performance of grid-connected hydro and thermal projects and their transmission. Future policies must focus of power purchase agreements and feed-in-tariffs so that the distributed generation sector attracts progressively more investment capital from the private sector for faster growth.
Boston Strategies International’s President, David Jacoby delivered the results of BSI’s recent study “Impact of Energy Prices on Logistics & Global Supply Chains” at the New England Supply Chain Conference and Exhibition (NESCON) in Boston. NESCON is produced by APICS (The Association for Operations Management), the Council of Supply Chain Management Professionals (CSCMP)’s New England Roundtable, and The Northeast Supply Management Group of the Institute for Supply Management. The 2016 conference consisted exclusively of the top-rated All-Star speakers from the conference’s 12-year history.
For global shippers, recent dramatic changes in energy costs necessitate a review and reconfiguration of the number, type and location of distribution centers and fleet assets, since the trade-off between transportation costs and inventory holding costs has changed substantially.
BSI’s study evaluated the results of 400 scenarios using a network modeling tool to quantify the impact of recent gasoline, diesel, electricity prices, load factors and network design on total supply chain costs. The study mapped the relative impact of key cost drivers according to their impact on total supply chain cost, scaling the variables from one tenth to 10 times their current value.
While current low fuel prices have dampened the pressure to move towards green energy, progressive carriers like UPS, shippers like AT&T, and OEMs like Mercedes-Benz continue their work on alternative fuel vehicle fleets, mostly based on ethanol blends and Compressed Natural Gas (CNG).
Mr. Jacoby engaged a lively discussion on the impact of disruptive technology such as Uber, Drones, and Connected Vehicles on commercial logistics, and presented a framework for logistics planning.
To request a complete presentation on “Impact of Energy Prices on Logistics & Global Supply Chains” please contact us or drop us an email .