Crossing the Chasm
In the discussion of specific actions to mitigate Climate Change, there is an absence of discussion as to why there are not more energy infrastructure projects in the pipeline. The science, technology, and engineering knowledge are certainly available. What is impeding the formation, agreement, execution of energy infrastructure project deployments? There are many barriers to deployment which are unrelated to technology. Crossing the Chasm of these barriers is the challenge to significantly escalating the volume and project types to truly mitigate Climate Change.
Executing Infrastructure Energy Projects in the developing countries requires innovation and creativity beyond science. Crossing the Chasm to build these projects requires: Maintaining existing social communities; Bridging international financial standards; “Financeable” project structure; Meeting standards of development banks for financing, environment & anti-corruption.
Maintaining existing social communities
A successful project execution requires keeping in mind the consumers the project intends to support. To deploy an electricity project which is not mindful of the consumer’s needs, the economic equation they live with daily, is merely to deploy a project. In many developing countries, large centralized projects are planned. The result is many communities wait literally years for the network to connect to them. Creating smaller projects, with regional and local micro grids, moves electricity to more of the population, in parallel. A multi smaller project approach mitigates a worsening of the “haves and have nots”. Energy deployments which worsen inequality only create more civil instability.
Bridging international financial standards and “Financeable” project structure
Energy Projects of course require financing. Today, much of the developing world, without financial guarantees from a regional Development Bank, UNOPS, or the World Bank, does not have access to the commercial markets. For commercial financing to be available, the project needs to be backed by a Power Purchase Agreement (PPA). The country government, with the regional development bank, must guarantee the revenue stream. Existing utilities in country often do not have the IT or network support to meter, bill or collect revenues.
In addition, the financing requirements of “International Finance Standards” of spreadsheets of the financials can appear daunting to those unfamiliar with the process. Efforts have developed a template of a full P&L, with revenue, expense and assumptions worksheets, concluding with a full balance sheet and cash flow statements. This may seem incredibly basic. Without these financial statements a project will not get to the table of financing discussion.
The Power Purchase Agreement is also necessary. Those in the energy industry know these well, and there are many fairly standard sections of such agreements. Creating a template, which may be customized to the project and the country, is required to commence financing discussions.
Standards of development banks for financing, environment & anti-corruption
All regional development banks, the World Bank and UNOPS have established standards regarding the terms of financing (to address forbidden usury rates and predatory financial terms); an environmental statement with specifics regarding the project; and specific actions, behaviors and terms to stand firm on corruption. These standards are balanced regulation and enforcement without inhibiting projects. The financing and environmental standards most certainly can be met. Addressing corruption is a very serious challenge and barrier. This chapter will now review two energy projects: Waste to Energy and Jatropha Agriculture to BioFuel. In addition, the chapter reviews the barriers to deployment, and the challenges of corruption.
Waste to Energy
Electricity generation and Petrol for transportation in most Developing Countries (DC) is heavily fossil fuel based & expensive -/+$.30/kWh. (US: $.08-.15/kWh); Petrol diesel: $5-6.25/US Gall. (US: $2.50-3.50/gall). (As of 1/1/2016, US gasoline prices have dropped to $2.00 -$3.00/gall.) The importation of Petrol often results in +10% of GDP to be exported in currency annually. These cannot build an economy.
Without question, solar and wind are parts of the solutions for these economies. All electricity networks do require a baseload source. One of the feedstocks these countries have plenty of is actually a problem, waste, and trash. Waste & trash are everywhere. Landfills are overwhelmed. The landfills are not lined or designed for environmental safety. The landfills are literally mounds of trash, dumped in a clear space. Waste & landfills are public health hazards. Included in the waste stream are tires. Tires are of a particular problem as they do not decompose in the near term, and are a hosting ground for mosquitoes and disease. We can turn a problem into a Solution–Waste to Energy-$.12-14/kWh! We can decrease export of valuable currency. We can create economic development literally from trash. Kia close the spaces using m-dashes
Transforming waste to energy includes the following. Waste to Energy facilities use municipal solid waste (MSW) as fuel to generate electricity; they can produce and sell both steam and electricity. With regard to feedstock, the first source is the local weekly waste stream. Just as coal is mined, the feedstock of waste from the existing local landfills is mined. This secures a known, dependable volume of feedstock. Facilities can be deployed from 3MW to 100MW, with regional grids designed to later connect into national grids. Deployments of 3MW, 5 MW or 10 MW facilities meet the needs of a local region, and therefore communities are not waiting years for a national grid to be built out. Local regional deployments use the regions waste, and avoid hauling trash feedstock around the country to meet the needs of a mega facility. There can be utilizing of temperatures exceeding 2000°F, and state of the art emissions control, and the facilities meet stringent international environment standards. The smaller MW regional approach results in electricity deployment in parallel across the country vs. only centralized, long time connection by a national grid. This approach avoids creating “haves & have-nots.”
The Waste to Energy Process involves a variety of inter-related steps. First, there are incoming truck deliveries to an enclosed area; MSW waste is unloaded into concrete storage pits. Overhead cranes transfer trash into a feed hopper to the boiler. Inside each boiler, an inclined, reciprocating, metal grate slowly moves the trash through the thermal process, where temperatures exceed 2000°F. Second, the large utility type boilers are designed to recover thermal energy in the form of high pressure steam that is converted into electrical energy in the turbine generator. Third, Waste to Energy plants utilize advanced environmental control systems that clean emissions to meet stringent environmental standards while producing clean energy. Fourth, generator power exits to the transformers and to the network. In sum, with a signed PPA, accepted financials, commercial financing can be completed. From shovel ready go, a facility will be commercially available in 9-12 months.
Tires as waste are their own unique problem. They are a perfect environment for mosquitos and malaria. Tires from daily collection are moved to tire landfills & mined landfills. The tires can be shredded and separated using this in different ways: use steel belts for recycling; use the oil in waste for an energy facility; use rubber Crump as a 14% mix for asphalt. Rubber crump in asphalt lowers imports and creates a more durable road, particularly in hot climates. The integration of the tire recycling facility with a Waste to Energy facility provides one place in the community to address feedstock sourcing and to maximize recycling. The tire recycling facility may be built in parallel to the Waste to Energy facility and may be commercially available for operations within 6-9 months.
Jatropha Biofuel Project
The cost and pricing metrics of the fossil fuel world have turned upside since a year ago (12/2014 to 12/2015). Oil prices have declined from $100/barrel to $60/ barrel and at 12/2015 to $36/barrel. Over time, this should lead to some relief of the economic energy pressures on developing economies. As long as countries are importing fossil fuels, they are exporting valuable currency and economic growth. For countries which do not have natural fossil fuel resources, or prefer to be the captains of their ship of destiny, developing an alternative fuel based economy is crucial. The opportunity exists for this agriculture and biofuel industry development today. For example, it can be created with Jatropha Curcas, which grows naturally in many countries. We can create new BioFuel industry based on Jatropha utilizing state of the art technology. The yield from the Jatropha crops is projected to generate BioFuel production of 12,000–15,000 barrels per day for domestic use. BioFuel production is capable of expanding to create export markets. A new Industry of Fuel Pellets/Briquettes can be derived from the BioFuel byproducts, being used as a replacement for wood & charcoal for residential & commercial activities. This can reverse the deforestation and degradation of land and improve the watershed/irrigation issues for agriculture. Moreover, edible agriculture can be inter-cropped with the Jatropha orchards.
Can Jatropha Agriculture to BioFuel compete in a world of $36/barrel of oil? The answer is yes. At an estimate of +/- $3.00/Gall wholesale for biodiesel, 50% of the cost includes funds for building water infrastructure. To the degree an integrated, coordinated plan with the government and the development banks, Foreign Aid, etc., is developed for water infrastructure (planned and managed for reservoirs, wells, and solar irrigation), the faster the price may drop. The two highest costs of the production are the water infrastructure and the associated financing costs. Therefore, proper planning and coordination will definitely lower and impact the cost. By maintaining this economic activity in the country, the country may realize velocity of the economy. The farmers gain income from several sources: the purchase of the Jatropha Crop; the return of seed cake to the farm for fertilizer; the sale of fuel briquettes produced from the hull and seed; and the additional crops which may be intercropped with the Jatropha Trees. There is also the economic velocity of the economy by producing and consuming domestically produced BioFuel. The economy is created with a reliable, predictable fuel source, with a sustainable price, creating a barrier to the swings in the world price of oil.
In the developing countries most of the cars, trucks, and generators are diesel based. A very important economic aspect of the Jatropha BioFuel project is compatible with existing equipment. Biodiesel is a one for one replacement for fossil fuel diesel. A White Paper from US Department of Energy on Biodiesel Basics was published in February 2011.[1] No replacement of existing equipment is required, an important economic consideration for developing countries.
In this Biofuel Project the following advantages accrue. Small farmers via collectives and cooperatives maintain ownership of the land with accompanying creation of wealth for their families. Also, the developer provides the necessary capital and resources to bring the land to Jatropha-ready condition. This results in the following: water irrigation arises from the necessary earthwork, wells and water collection points, drainage, and irrigations systems; there is a creation of both thousands of jobs and increased income opportunities for workers and land owners, and nurseries purchase the Jatropha seeds; and the need for agricultural equipment. For the process of planting, cultivating, harvesting and processing Jatropha to Biodiesel it is important to note that trees begin to produce in year 1, increase to full maturity in 4-5 years, and a tree has a life span of 35-40 years.
Barriers to Economic Development
The combined projects of Waste to Energy and Jatropha BioFuel integrate well in meeting the needs of lower cost and sustainable pricing of electricity and petrol. Both projects provide significant mitigation to existing fossil fuels and provide an energy growth production portfolio which can both spur and sustain long term economic growth.
Why isn’t the market exploding with these projects? Embedded monopolies block new entrants and competition. The existing monopolies have been able to maintain very high prices. There is a significant vested interest in blocking economic growth and maintaining poverty. To provide perspective of the chasm of the price difference, electricity in developing countries is often +$.30/kwh US (US comparative: $.08-$.14/kwh), and Diesel Petrol-$4-6.25/gall US (US comparative are $2.50 – $3.50 as of 4 Qtr. 2015).
In developing countries there is often a tapping into the electrical lines. This is done by groups in country. The consumer pays them, and the groups pay nothing to the utility. With a 100% profit business, the vested interests can be very protective of their domain. Public Utilities often collect 30-50% of electricity revenues. Without firm and stable revenue collection, countries often cannot obtain “Financeable” Power Purchase agreement. To do so, the countries federal budget must take on as a line item in the budget the payments to support the producers of electricity. The vested interests work with the governments to erect barriers to permits, to land titles and to available studies. Regulations are used as a barrier to entry vs. a protector of the common good. Developing financing for projects in-country is barred for all intents and purposes, with interest rates of +17% annually. Therefore, the local focus is often very small solar installations by NGOs and other groups.
Cancer of Corruption
The cancer of corruption can be described in this manner: “follow the money and you’ll find out why and how the corruption has become public enemy number one for those who are promoting global development—as crony capitalists in the private sector connive with corrupt officials in the public sector to short-circuit sound business practices, reward self-interested insiders, subvert the broad public interest, and undermine the ideals of good governance.” [2]
To understand the breadth and depth of the Cancer of Corruption, the following reviews 5 cases in which the fraud and corruption was unveiled publicly. Corruption doesn’t just occur in the developing world; some of the world’s largest and trusted corporations have engaged in money laundering and fraud at levels of billions of dollars US. Why does this matter so much?
Corruption creates barriers to commercial or development Bank Financing, including: taking any kind of risk; creating political instability; causing lack of revenue collection thereby preventing revenue collateralizing projects; and creating concerns of competition to the business elite in-country. The following 5 cases illustrate this type of corruption.
In Senegal, Minister Karim Wade, Minister of Energy & Infrastructure (2009-2012) was the son of President Abdoulaye Wade (2000–2012): he was convicted of amassing an estimated $178 Euros; he was convicted & sentenced 6 years prison; he was fined $230m; the court found over 100 irregularities and violations. Karim was given vast responsibilities that far exceeded those assigned to ordinary ministers, and some argued that his portfolio covered 46% of the state’s budget.
In Nigeria, former President Sani Abacha had to forfeit in August 2014 $458 million stashed in foreign accounts; this was only a portion of the $3 billion believed looted. The funds were used for the benefit of the Nigerian people. It is important to note that he was closely associated with the Nigerian National Petroleum Company that was accused of failing to account for $20 billion in oil revenues. The company was charged by Central Bank governor Lamido Sanusi, including the allegation that more the $1 billion was disappearing every month over 19 months. An illustration of this corruption was that regarding the government subsidy of kerosene, the lower price was not passed on to Nigerians, instead it was collected by a consortium amounting to $100 million per month.
In Malaysia, Prime Minister Razak was faced with allegations of corruption and money laundering. The U.S. Justice Department initiated a Federal Grand Jury investigation of shell company owners by family and friends of New York City real estate valued at $150 million using a Malaysia sovereign wealth fund. The investigations was run by the Justice Department’s Kleptocracy Initiative, tracking payments of $681 million routed through Wells Fargo. Also, Swiss authorities have frozen several related individuals’ bank accounts in Hong Kong, Singapore, and Malaysia.[3]
Another case was that of HSBC, being investigated for money laundering and drug trafficking. In December 2012, HSBC agreed to pay $1.92 billion to settle U.S. criminal and civil investigations with a 5-year deferred prosecution agreement. Lax money laundering controls at HSBC allowed drug cartels in Mexico and Columbia to move $881 million in drug proceeds. Prosecutors found HSBC was the “Preferred Financial Institution” for drug traffickers and money laundering. Charges occurred in U.K., French, and Spanish tax authorities regarding HSBC Swiss clients. In total, the 3 countries have recovered more than $825 million from taxpayers who did not declare assets in Geneva.[4]
Another case dealt with Volkswagen for global fraudulent deployment of “clean” diesel autos. In September 2015, The car company admitted rigging the proprietary software on 11 million diesel cars worldwide. Proprietary software turned on pollution-control equipment during inspections. On the road, their cars spewed up to 35 times the legal limit of nitrogen oxide. The situation was discovered by West VA University road-testing Volkswagen vehicles, and Volkswagen denied it for a year. The U.S. Justice Department has opened a fraud investigation for deliberate attempt to evade rules on emissions, and the EPA fine could be $18 billion.
Global Action against Corruption
On September 25, 2015, Pope Francis made this remark before the United Nations: “A selfish and boundless thirst for power and material prosperity leads both to the misuse of available natural resources and to the exclusion of the weak and disadvantaged.” This comment is an inspiration for global action against corruption.[5] There is significant action underway to fight against this sort of corruption that can undermine energy infrastructure projects and mitigate climate change.
There are many law enforcement, intelligence agency and International groups working to gain evidence, prosecute and recover assets. Listed in the literature for this chapter are links to reports, prosecutions and current activities. For example: in March 2015 the FBI established International Corruption Squads to target foreign bribery and Kleptocracy Crimes; there is the Department of Justice Kleptocracy Assets Recovery Initiative; there is the International Foreign Bribery Task Force, the World Bank International Corruption Hunter Alliance, and the International Consortium of Investigative Journalists to pursue these matters.[6]
Just as cracking the code of the science and technology was a challenge so too is the Cancer of Corruption. Understanding the dimensions of the problem is the first step towards the solution. This Cancer of Corruption is crucial for the discussion on Climate Change.
Notes
[1] U.S. Department of Energy, Energy Efficiency & Renewable Energy, Vehicle Technologies Program. See, http://www.cleancities.energy.gov, and http://www.eere.energy.gov/informationcenter, DOE/GO-102011-3011, February 2011.
[2] Christopher Colford, The World Bank, Follow the Money: Corruption and Graft Punish the Poor, Undermine Development, and Corrode Honest Governance, at,
[3] The NY Times – Malaysia Leader – http://www.nytimes.com/2015/09/22/world/asia/malaysias-leader-najib-razak-faces-us-corruption-inquiry.html.
[4] U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History Majority and minority staff report – permanent subcommittee on investigations United States Senate. 07/12/2015.
[5] See, http://www.popefrancisvisit.com/schedule/address-to-united-nations-general-assembly.
[6] The International Consortium of Investigative Journalists is a global network of more than 190 investigative journalists in more than 65 countries who collaborate on in-depth investigative stories.
Literature
World Bank, International Corruption Hunter Alliance http://web.worldbank.org
The International Consortium of Investigative Journalists (ICIJ), http://www.icij.org
Global Financial Integrity – http://www.gfintegrity.org/
The FCPA Blog – http://www.fcpablog.com/
The World Bank – http://www.worldbank.org
Website Resources:
http://thievesofstate.com/index.html
http://carnegieendowment.org/2014/09/09/corruption-priority-intelligence-requirements/ho96
http://www.theglobalist.com/the-hard-facts-of-global-corruption/
http://www.worldbank.org/en/news/speech/2013/12/19/world-bank-gr
Manich Strategic, Inc 