The Energy Source

About Us

2011-11-02T12:50:00.001-07:00

Goldfeder McCormick Ltd. is a management advisory and commercial research consultancy specializing in building secure and fruitful relationships between partners and stakeholders.

Our network of seasoned researchers collect and provide you with the intelligence you need to make mission-critical decisions. Our coverage spans Central and Eastern Europe, the Middle East, Central Asia, Brazil and China. We specialize in commercial due diligence, partner and candidate screenings, and market feasibility studies.

Jacob Doyle, Director and Managing Partner has worked formerly as the energy columnist of the Budapest Business Journal and Professor of Communications at McDaniel College Budapest, both in Budapest, Hungary. Jacob currently manages our team of researchers and functions as chief editor of all reports.

Jacob Doyle, Managing Partner
Goldfeder McCormick Limited
Registration No. 2460272
Level 1, Change House
150 Featherston St., Wellington, NZ
jacob.doyle@goldfedermccormick.com
Tel. +905312221885 (Turkey)

Selected Research Reports Sample Research Report Contact Us

Solar Car Racing Team Pushes The Envelope In Turkey

2011-07-09T06:20:00.000-07:00

By Jacob Doyle.

When it comes to pushing the envelope of solar-powered transportation technology, Turkey is probably not the first country that comes to mind. But that has been the goal of a team at Dokuz Eylul University (DEU) in the Aegean coast city Izmir since it first entered the national solar car competition six years ago. The event culminates in a race between cars built by teams of students from universities across the country. More significant than the race, however, is the process of learning and advancing solar energy and vehicle technology that leads up to it.

Aytac Goren, first launched the Dokuz Eylul team in 2004 as a doctoral student. Now a PhD in mechanical engineering and a faculty member at DEU, Goren now refers to the team as the “Solaris Project.” The roster of the team has changed each year, as students come and go. Between 6 and 20 students compose the team, which is supervised by professors. The professors are vital to the project. Goren has worked with the team throughout its existence. In 2005, the team placed 7^th, then in 2007 it placed 3^rd.

“Even though the aim of the Solaris Project seems to be participating in challenges and being successful,” said Goren, “it is also an R&D project contributed by voluntary students and supported by academic advisors. The real purpose of the project is to raise people who are enterprising and who have team spirit by giving them the opportunity of using their theoretical knowledge.”

Evrim Verdioglu, a physicist based in Izmir, Turkey, came into contact with the DEU “Solaris” team in late 2004, while studying for his master’s. Intrigued by alternative energy since 2000, he decided quickly to get involved. The team was then planning to enter the new solar car race, in 2005 at the Istanbul Park Formula 1 race circuit. The team designed its entire car, both mechanical and electric systems, Verdioglu explained. He was personally involved in the design and construction of the mechanical aspects of the vehicles.

“We built three solar-powered cars for that race,” said Verdioglu. “On the third car, I supplied some electrical components. For the second car, I supplied the motor.”

Race Against Time

In preparing for each race, Evrim explained, the biggest challenge is time. The workers are students, who also have lectures to attend and class assignments to complete. They have summer assignments and often find themselves conflicted between their devotion to the team and their regular studies. One enterprising student, however, arranged for his design work on a solar car’s suspension system to be counted as his graduation project.

Similar innovation has been applied to the technology used by the Solaris team. Verdioglu explained that the motor of their first car – and all subsequent cars - was built inside the rim of the “power wheel” of the three-wheeled vehicle. A brushless motor, it requires more sophisticated controlling circuits than conventional brush motors, but the advantage is greater efficiency. Unlike brush motors, there’s no contact between rotor and stator, thereby reducing material drag. The first motor was ordered from Japan, the second from China. USD 10,000 was the cost of the Japanese motor, while Chinese motors cost less than half that, according to Verdioglu. Both motors were made specifically for Solar-powered cars.

The DEU car carries the university’s name, but the money for parts comes from industrial sponsors. The hardware for each car cost between 20 and 60 thousand USD, in total.

Pushing the Envelope

Pushing the envelope of technological possibility is the goal of the annual event, rather than the development of a prototype solar car for mass production.

“We built these cars to demonstrate that a vehicle can be driven entirely by sunlight,” said Verdioglu. “Because of this, power limits were fixed for the race, and maximum efficiency is a must. As a result working within these tight parameters, a lot is learned which can eventually applied to conventional automobiles. Electric traction or electric drive, for example, is finding its way into everyday vehicles, such as ZEVs and hybrids.”

In international solar-car competition, the American and Japanese teams have been the top performers. Verdioglu attributes this to deeper pockets.

“They are able to buy the best motors and batteries with very high energy density and very light, thin solar panels. We have so far attended only domestic races. Those teams have higher budgets and can buy the best.”

The event has been attracting greater and greater interest. More thab 30 universities competed in the most recent race. The crowd of thousands, which included representatives of the national media, brought out experts as well as curiosity-seekers.

“Some people asked when these cars will be ready to make their way on to the roads,” said Verdioglu. “We explained to them that they are entirely experimental. Others said these machines are useless. They are very useful, however, for students and for advancing research, but not really for transportation. Many of the sponsors do not give sponsorship for the sake of promotion or exposure, but rather to support education and technological advancement. Of course, they expect their names to be on the cars.”

Hydrogen Power Enters the Fray

A more recent hydrogen car race pits hydrogen-powered cars against each other in a race held alongside the solar race. These cars use fuel cells and electric motors. They are smaller than their solar counterparts, as they don’t need a surface for the solar panels. Moreover, the hydrogen cars are made as small as possible for aerodynamic reasons. It’s difficult to compare these cars to the solar cars, said Verdioglu, but they are a bit faster, being smaller and lighter. The amount of energy produced and consumed by the two types of cars, however, is very close. Each hydrogen car must carry a tank of hydrogen, supplied by a company. These cars have hydrogen tubes, fuel cell units, control circuits, and an electric motor.

“I worked on the car’s electrical system and was responsible for it,” said Evrim. “I chose the motor and controller. I worked with them for one year.”

If you were to have an ample supply of hydrogen, such cars would be viable for transportation. The disadvantages include a lack of hydrogen infrastructure and the limited lifespan of fuel cell units. It’s currently more efficient to use a battery than to generate hydrogen on demand. The solution for the next 10 to 20 years is to use hybrids, as battery technology improves. In the meantime, we need to improve energy production, make it cleaner and more efficient.

Powerful Learning Experience

“The competition is a great application of classroom learning,” said Verdioglu. “I’m not a mechanical engineer, but a physicist. Applied physics is very interested in both solar cells and fuel cells. With my involvement, I have learned about many things: electric drive, composite materials, the application of solar power, vehicular dynamics, suspension systems, and vehicular aerodynamics.”

Many of the students who have worked on the cars have gone on to work as engineers in industry; others have chosen to continue their studies.

“I started my own company,” said Verdioglu, “selling products for electric drives and related products such as inverters, batteries and motors. I also work as a consultant to electric vehicle projects.”

The Case for Large-scale Solar Hydrogen

2010-05-04T02:20:00.000-07:00

By Jacob Doyle.

An American Yoga teacher recently made a visit to the city of Puna, India, to learn from the great Yoga master, BKS Iyengar. The American teacher was stunned to find Puna a very different place from the tranquil city he had visited three decades before. A technology center, the city was now a bustling metropolis. The bustle alone had its drawbacks, but the air was so thick with pollution - produced mostly by motor vehicle emissions - it rendered his stay there nearly intolerable. This situation is well known to residents or visitors to the world’s major cities, particularly those in the developing world, where emissions standards are more relaxed. In Mexico City it is common to see birds falling from the sky, dead from asphyxiation. In Sao Paulo, Brazil, where half or more of the vehicles on the road run on ethanol, the situation is a bit better. Ethanol emissions contain fewer particulates. But ethanol pollutes nonetheless and contributes to climate change. The air in Sao Paulo still stinks, only the stink has a different flavor. But imagine a major city with a million or more vehicles where the air is clean.

Today only remote hamlets such as Zermat, Switzerland restrict motor vehicle traffic to those producing zero emissions. A major city, on the other hand, which manages to do away with vehicular pollution, or drastically reduce it, will be eminently more livable than those that have not. Its attraction to tourists, businesses, and educated, health and environment conscious residents would be substantial. Such an initiative would spur inner-city revival, investment and property development, particularly of the “green” variety.

Already zero-emission vehicles have hit the mainstream in the form of plug-in hybrids and EVs. But the winning concept of the future involves hydrogen. Both hydrogen powered internal combustion vehicles and hydrogen-powered fuel-cell driven vehicles produce no emissions other that water vapor and offer performance comparable to or even exceeding those offered by vehicles that burn fossil fuel. The well-documented challenges posed by both its storage and transportation are slowly being overcome as compressed gas has become the hydrogen medium of choice, and progress is underway to optimize its storage, using lightweight carbon fiber tanks that are able to store hydrogen at up to 680 atmospheres .

Hydrogen fuel makes a comeback

2009 was a banner year for the development of fuel cell vehicle technology. Toyota proved the single trip endurance of fuel cell car in June by taking a fuel cell powered concept car on a 533 km journey in the US on actual road conditions through traffic without stopping to refill. Agreements signed in Germany in September between carmakers and government as part of the H2 mobility plan promised to have both serial production of fuel cell powered cars in Germany by 2015 with sufficient hydrogen available at 1000 filling stations across the country by 2020. Several new fuel cell models are expected to be on the road by the end of 2010. Germany has proven itself to be a world leader in the development and promotion of renewable energy. Its commitment to hydrogen is indeed noteworthy.

Questions concerning efficient production have long dogged hydrogen fuel. Deriving it from natural gas suffers from the same scarcity problem associated with burning fossil fuels. Moreover, this process releases greenhouse gases. Germany is currently experimenting with wind power as means to release hydrogen from water to power buses. On a large scale, however, the technique with the most promise is solar hydrogen. Various efforts are underway to develop systems to generate solar hydrogen in private homes or even on-demand in the car itself. But these efforts aren’t likely to bring results anytime soon and could be limited in their application. Moreover, such techniques contradict the advantages offered by fossil fuels to investors and governments; specifically producing hydrogen at home or in one’s car would diminish its value as a tradable and taxable commodity. Technology exists today, however, to produce solar hydrogen in large quantities so that it could be traded, taxed and transported to points of use.

A new look at solar hydrogen

Solar hydrogen production could be achieved efficiently and effectively in regions that receive lots of sunlight and have access to large quantities of water. The Middle East, Southern Asia, parts of Africa, Central and South America all meet this requirement. By employing such devices as parabolic solar troughs and Stirling solar dishes to generate electricity in a considerably more cost effective manner than with conventional photovoltaic panels, hydrogen could be extracted from the nearby water and transported to points of consumption. This way, hydrogen would be produced as a commodity, similarly to oil. Infrastructure could be put in place in those areas where the necessary resources are available, namely sunlight and water, and hydrogen could be compressed and loaded on to tankers for shipment to market.

At first observation, the efficiency of this process may appear to be poor when compared to more conventional sources of energy. At best, a Stirling solar dish converts just over 30% of the sun energy it receives into electricity and the subsequent electrolysis, the process whereby electricity is used to release hydrogen from water, releases enough hydrogen to generate just 50% to 70% of the power used to produce it, under favorable conditions. But when one considers the availability of sunlight and seawater, the production cost of solar hydrogen is reduced to the cost of infrastructure, land and other capital, the average cost of which will reduce as production increases. Already peak efficiency of the Stirling dish competes favorably with conventional electricity production at USD .06 to USD .1 per kw/h . This proposed process, unlike drilling for oil, produces readily useable fuel, which does not need further refinement. Compression and shipping would however add cost to the final product. But the position taken here is that once scaled up, solar hydrogen production would not be prohibitively expensive. The cost of solar hydrogen relative to oil could be reduced further when oil’s negative externalities and scarcity are factored in. So long as sunlight and seawater exist, hydrogen could be produced in this manner. When used in fuel cell powered vehicles, the only emission is water vapor.

It is helpful to understand that this process would not actually expend water. All the energy used would come from the sun, and the hydrogen gas would be produced as the carrier of that energy. The water, which is consumed in the release of hydrogen, would be returned when the hydrogen is recombined with oxygen in the fuel cell that would power the vehicle at the end of the process.

Supply drives demand

Demand for hydrogen fuel is small but growing. Germany has demonstrated a commitment to it in recognition of its environmental benefits. Its automakers are producing hydrogen fuel cell cars and its filling stations will make hydrogen fuel available at stations across the country. A similar initiative has been taken in California. Large, affordable supplies of solar hydrogen would drive demand for this most environmentally friendly of fuels. Because producing hydrogen in this manner use much the same infrastructure as oil-based fuel - such as transport and delivery – and would produce a taxable and tradable energy commodity, it would make a suitable replacement for oil. That it requires large amounts of water and sunlight; it could replace oil production directly in those countries that are currently oil rich, as they tend to be likewise rich in sunshine and seawater. Moreover, it is oil rich countries that could afford the investment required. The prospect of transitioning themselves from oil producers to hydrogen producers could help win their support of hydrogen fuel, rather than viewing it as a threat to their livelihoods.

The cost of large-scale solar hydrogen production will be high, especially in the beginning. Spain’s Andasol 1, a 50 mw solar electricity plant that employs parabolic solar troughs cost approx EUR 300m. If a similarly sized plant could serve as a pilot, additional costs would have to be incurred to build large scale electrolysis and compression machinery. In addition, a pipeline might have to be constructed to deliver the compressed hydrogen to port. In the long run, however, if governments follow Germany’s example and support the move to hydrogen away from oil, the return on investment could be fresh air for the world’s cities for the first time in decades.

The preceding is a web-exclusive article and does not appear in print.

Russia's Agressive Energy Policy Encroaches on Hungary

2009-04-14T13:27:00.000-07:00

By Jacob Doyle.

Close inspection of the factors surrounding Russian oil company Surgutneftegaz’ purchase of some 21% of Hungarian energy giant MOL from Austria’s OMV indicate an expansionist Russian energy policy that seeks to exploit growing European gas consumption with the option of “bypassing Ukraine” in delivering Russian gas to Europe.

Russian Prime Minister Vladimir Putin let Hungarians know as far back as his February 2006 visit here what job he had in mind for them, explaining that Hungary could easily become a “gas distribution hub” for all of Europe. His job would be to make sure it was Russian gas that Hungary distributed. If Russian involvement in Hungary’s energy sector since then were any indication, he would appear to be succeeding.

The first Russian attempt to take over MOL came in 2007 in a move by Gazprom, which MOL managed to thwart with an assist from the Hungarian government. This was quickly followed by another failed takeover attempt, one by Austria’s OMV, a move made possible thanks to financial backing from former Gazprom executive Megdet Rahimkulov. The botched acquisition left OMV with a nearly 20% share in MOL, subsequently increased to 21% and sold to cash-rich Surgutneftegaz (Surgut) at the end of March this year. Surgut’s boss and Vladimir Putin’s reported ally, Vladimir Bogdanov, emphasized that the purchase is not the first step in a takeover. If approved, however, it would make Surgut MOL’s single largest shareholder and give the Russian company a powerful role in MOL’s decision making.

A study by KPMG’s Peter Kiss helps to explain persistent Russian attraction to MOL. Kiss expects the EU’s reliance on natural gas imports to grow from 57% to 84% by 2030. He identifies Russia as “the most important natural gas source for the European region,” adding that Russia’s central Asian neighbors currently “lack alternative supply routes other than those through Russia.”

Ready access to the vast gas storage capacities owned by MOL’s subsidiary FGSZ would enhance Russia’s ability to distribute gas to Europe and capitalize on rising European demand, particularly when coupled with the planned South Stream gas pipeline from Russia. Moreover, this coupling would enable Russia to “bypass Ukraine,” an idea mentioned widely in Russian media upon the formation of the Russian/Hungarian joint venture to build the Hungarian leg of South Stream. The pipeline has also been described as a Russian counter play to the planned Nabucco pipeline, itself designed to bring Central Asian gas to Europe without crossing into Russian territory.

Vladimir Socor, who covers Russia for the Jamestown Foundation, contends that Nabucco may have itself been a consideration in the Surgut purchase.

“MOL is a partner in the EU-backed Nabucco natural gas transport project,” said Sucor. “By seizing a big stake in MOL, the Kremlin evidently would like to peer into information and decision-making processes of significance to European energy security.”

However, this latest move toward continued Russian dominance of Europe’s gas sector might yet be undone. PSZAF, HUNGARY’s financial sector watchdog has launched an investigation – at the request of MOL- to examine whether or not the Surgut purchase was in violation of Hungary's capital market law.
A slightly edited version of this article appears in the 17 April edition of the Budapest Business Journal.

A Second Look at Nuclear, and a Second Turning Away

2009-03-11T23:55:00.000-07:00

By Jacob Doyle.

Hungarian political leaders have joined a chorus across Europe calling for the expansion of nuclear energy in response to questionable gas supplies. Energy Minister Csaba Molnar, speaking at the Green New Deal Summit on 27 February in Budapest, affirmed Prime Minister Ferenc Gyurcsany’s recent remarks to Parliament that Hungary should double its current nuclear output of 2000 megawatts. Molnar described an increase in nuclear capacity as necessary to tackling global energy challenges of the coming decades. Opinion among experts, however, remains divided, with such issues as cost, sustainability and environmental hazard at the center of the debate.

“Hungary is a natural gas trap and alternative technologies should be found to partly substitute natural gas,” said Dr. Attila Aszodi, Director of the Institute of Nuclear Techniques at the Budapest University of Technology and Economics. “Use of nuclear energy is necessary on the long term. Extending the lifetime extension of the Paks nuclear power plant is an important task; the construction of new nuclear units has to be considered.”

Andras Perger, who follows the nuclear industry for Energia Klub, a Hungarian environmental NGO, took a contrary view when speaking with the BBJ.

“The nuclear lobby has become more powerful since the January gas crisis,” he said. “They propose doubling nuclear capacity across Europe within 10 years. I cannot imagine where the money will come from. Nuclear power plants have always been the most expensive to build. The expense and risk make them unviable as private sector projects, especially in the current economic climate.

Juergen Grossmann, head of German energy company RWE, which owns Hungary’s ELMÜ Rt. and ÉMÁSZ Rt., has himself praised European nuclear expansion plans for months and recently began an assault on government support for renewables. He told WirtschaftsWoche magazine that subsidies for renewables are a "support program for Russian gas," and called wind power “an unstable provider requiring gas-fired power plants that would have to supply base-load capacities.”

Perger dismissed the idea that wind power is incompatible with existing power grids, stating that solutions become available once a commitment to renewables is made. He gave the example of Germany, whose province of Schleswig-Holstein gets 40% of its electricity from wind. A nuclear expansion, however, brings a laundry list of complications, he said. Each proposed new reactor at Paks would likely produce 1000 mw/h, in turn requiring a similarly large reserve capacity from a non-nuclear source, most likely gas, which would add dramatically to the price tag and ultimately to electricity rates. A history of cost and schedule overruns, a coming world shortage of uranium, the cost of nuclear waste storage and disposal, unseen external costs and a basic incompatibility on the energy grid with such renewables as wind were other disadvantages Perger perceived.

“In the US, the nuclear industry has been lobbying the government to provide 120% loan guarantees toward the construction of new plants,” he said, which indicates that the industry is well aware of the risks posed by its own plans. “Renewables offer a more predictable model for banks and investors. I wouldn’t be surprised to see smaller, higher interest loans made available for the likes of wind parks selling power to the grid at subsidized prices, than multi-billion dollar loans for five-year nuclear plants. At this stage, neither the government, nor MVM (Hungarian national electric company) have the money to finance a Paks expansion.”

Advocates of nuclear energy frequently refer to France for evidence of nuclear efficacy. Some 80% of France’s electricity is generated by 59 nuclear reactors across the country, delivered at rates below the European average, prompting Italy ‘s Prime Minister Silvio Berlusconi to call to bring French nuclear know-how to Italy. Uranium, nuclear fuel, is not however a renewable resource, a message spoken loudly by anti-nuclear voices. Current supplies come from existing mines and from decommissioned warheads, both of which will begin to deplete within ten years at current demand level, Perger said. Doubling nuclear output, predictably, would deplete supplies much faster and raise the cost of nuclear energy, even in France.

Perger contended that nuclear expansion of any kind is unfeasible without state support, hence applying upward pressure on taxes, to say nothing of the costs of nuclear waste removal and storage. His position finds support in recent independent studies of the nuclear industry in the US, such as one by the Congressional Budget Office reported in May 2008 that the actual costs of building 75 of the existing nuclear power plants in the U.S. exceeded industry quoted estimated by more than 300 percent.

A slightly edited version of this article appears in the 20 March Budapest Business Journal.

Despite Politicians Targets, Hungary's Renewables Potential Mired In Paralysis

2009-02-19T10:37:00.000-08:00

By Jacob Doyle.

In Brussels, as in Budapest, hope springs eternal. The EU Parliament set new targets on 21 January that called for an improvement in energy efficiency by 35%, a reduction in European greenhouse gases by 80%, and the goal to produce 60% of the EU’s electricity from renewable sources — all by 2050. Nine days later, Hungarian Foreign Minister Kinga Gönz told a conference on the EU presidency in Budapest that Hungary will promote the diversification of resources, linking Europe's energy networks and using of alternative sources of energy during its presidency from mid-2011. The EU chimed back with a report issued 2 February, which described saving energy as the most effective and cost-efficient way of improving energy security. It called on the European Commission and member states immediately to adopt a legally binding energy efficiency improvement target of at least 20 percent by 2020.

Not to be outdone, Budapest Mayor Gabor Demszky traveled to Brussels on 11 February to co-chair the launching ceremony of the “Covenant of Mayors,” a document signed by mayors of more than 350 cities across Europe committing their cities to “go beyond” the EU's new energy objective of reducing 20% CO2 emissions by 2020.

The optimism shared by the politicians of Brussels and Budapest is hardly universal. The use of such renewable energy sources as wind, biofuels, solar and geothermal is widely reckoned to help reduce greenhouse gas emissions and to be a crucial part in the efforts planned for achieving the new energy and environment targets. But the actual implementation of renewable energy projects, particularly in Hungary, may be easier said than done.

“What we’re hearing is that both the EU and the Hungarian government want to make it easier to gain access to EU energy funds,” said Ada Amon, director of Energia Klub (EK), a regional civic organization focused on energy-related environmental issues, which recently issued a status report on Hungary’s renewable energy sector. “However, in our experience, the actual use of these funds has been limited.”

Amon explained that in order for Hungary to reach its official target of 23% renewable energy by 2020, some HUF 400bn in investment support and subsidies is required. But money, she contended, is still not enough.

“What is needed more than investment support is a reliable, predictable legal framework to administer and govern this support,” Amon said. “It goes back to the problem of not doing enough modeling prior to forging energy legislation. As a result, lawmakers are blind to the impact of their legislation.”

Amon gave the example of the subsidized pricing offered to the owners of wind power facilities earlier this decade. The subsidized price, she explained, made wind projects so attractive that the ensuing rush to build them allowed neither time to adjust the electrical grid to the impending surge of new power, nor the government’s energy budget that was required to pay the subsidy.

“The bottleneck the government installed was to require all license applications to go through the Hungarian Energy Office where a sort of triage was performed,” she explained. “This meant that a number of projects were scaled back, which prompted lawsuits and went a long way toward spoiling Hungary’s image as fertile ground for renewables investment.”

Amon’s contention appears to find confirmation in the 2005 experience of Irish wind power investor SWS, which saw its permission for a 108mw project in Hungary reduced to 25mw by the Energy Office.

Since 2007, however, the Energy Office has proffered its Environment and Energy Operative Programme to promote energy efficiency and renewable energy via tenders issued by the National Development Office.

But the projects Amon has seen, tend to be neither efficient, nor environmentally friendly.

“They tend to be enormous old coal fire plants converted to burn forest timber rather than agricultural waste. What is needed instead are new and efficient smaller facilities that burn genuine domestic biomass.”
A slightly edited version of this article appears in the 20 February 2009 edition of the Budapest Business Journal.

Nabucco Summit Comes to Budapest

2009-01-20T04:38:00.000-08:00

By Jacob Doyle.

The Nabucco Summit slated for 27 January in Budapest could define Hungary as a leader in challenging Russia’s dominance among suppliers of gas to the market of CE Europe. It could also prompt a sea change in EU and US foreign policy toward Iran. In due deference to numerous world crises and a newly inaugurated American president, the summit and its outcome deserve some close attention.

The long discussed - and frequently ridiculed – Nabucco pipeline proposes to carry gas from the Caspian basin, the Middle East, and Egypt to Europe by routes stretching through Turkey, Bulgaria, Romania, and Hungary to its terminus in Austria. Prime Minister Ferenc Gyurcsany has invited the members of the Nabucco consortium – Austria, Bulgaria, Germany, Romania and Turkey - along with potential suppliers Azerbaijan, Egypt, Iraq, and Turkmenistan, as well as transit country Georgia in hopes of finessing the proposed pipeline into a viable supply alternative to that offered by Russia through Ukraine.

A US delegation is also expected to attend.

"The gas crisis highlights the significance of energy security, and not just in terms of the route, it also strongly emphasizes the need for the diversification of sources of supply," Hungary's special Nabucco ambassador Mihaly Bayer told MTI. "The purpose of the summit is to strengthen commitment to the Nabucco project."

Who will supply the pipeline and what benefits will be issued to transit nations are likely lead issues to be tackled at the summit. The only committed supplier so far is Azerbaijan, although diplomatic efforts this fall by Hungary, Turkey and others promise to bring others on board in time for the Summits’ close. These could include Kazakstan, which traded official visits with Hungary this past November and December; and Turkmenistan, whose president met with his Turkish and Azeri counterparts in late November, as well as Iraq. The jewel among potential suppliers, however, is Iran with its 15% share of global gas reserves.

MOL’s president and CEO Zsolt Hernadi turned heads last September when he announced in Vienna, “Nabucco will become reality if we can get Iranian gas,” adding, “perhaps we need another shock, like that of January 2006 [Russia-Ukraine gas crisis], to tackle the risks involved.” If Iran turns up at the Summit ready to sign on to Nabucco, then Mr. Hernadi could add prophet to his list of titles. For Iran to become a key gas supplier to EU countries, however, could raise eyebrows among the US delegation. While EU exports to Iran – in part due to sanctions in response to Iran’s nuclear program - have steadily declined over the past two years, the EU remains Iran’s leading foreign trading partner, with 90% of its EU-bound exports comprised of energy-related products.

Support from European nations not attending the summit, meanwhile, appears strong. Italy’s prime minister Silvio Berlusconi and Poland’s president, Lech Kaczynski, have both aired their unabashed support of Nabucco in light of the recent shutoff of Russian gas.

As for the projected EUR 7.9bn price tag of the pipeline in a time of global financial crisis, Reinhard Mitschek, Nabucco Gas Pipeline GmbH Managing Director, expressed little concern in a 9 January BBC interview. To the contrary, he spoke enthusiastically about lower steel prices and Nabucco’s market driven business model: “the actual situation of the markets is more or less a benefit for projects like Nabucco."
A slightly edited version of this article appears in the 23 January 2009 edition of the Budapest Business Journal.

African Ethanol Offers Hope for Europe, Hungary

2008-12-08T07:44:00.000-08:00

By Jacob Doyle.

When business leaders and government officials gathered on Friday 5 December at Budapest’s Kempinski Hotel for Africa Business Day, the Energy Source was on hand to sniff out potential energy deals between Hungary and the nations of Africa. One promising lead came from keynote speaker Dr. Kandeh K. Yumkella, Dlrector-General of the UN Industrial Development Organisation (UNIDO) and former minister of industry for Sierra Leone, when he mentioned recent interest on the part of Brazil in development projects in Africa that has involved three visits to Africa by Brazilian President Lula da Silva. Awareness of Brazil’s prowess in sugarcane-based ethanol begged the question: is Brazil investing in African ethanol production and could there be a place for currently disgruntled Hungarian ethanol producers?

Energy Source readers will recall a column on 14 September that reported the crisis facing corn-based ethanol. Disappearing subsidies and removal of EU-mandated market guarantees- prompted by claims that corn-based ethanol pushed up food prices - had jeopardized the corn ethanol business model, hence stopping progress on a number of ethanol production initiatives in Hungary. This climate had Hungarian Bioethanol Association (MBS) president László Zsemberi shifting his gaze south, to Africa where he had worked years earlier as a civil engineer. “I do see potential for growing sugarcane and other crops including corn in Africa,” Zsemberi then told the BBJ, “and processing it into ethanol and exporting it to Europe.”

Zsemberi could have been heartened to hear his words echoed by Dr. Yumkella.

“We can help the EU meet its bioenergy targets,” said Dr. Yumkella. “In Africa we can produce biofuels in a sustainable, cost effective way that will enable a win-win situation for both continents.” On this he based a call for the nations of the EU provide subsidies to European firms that develop ethanol production in Africa for export back to Europe.

Yumkella explained that Sudan has the most fertile soil in Africa and is the continent’s largest producer of sugar, the implication being that where there is sugar there can also be ethanol, as the two products share the same feedstock of sugarcane. Water management, he added, was the biggest challenge facing an up tick in production, but that competition with food for arable land need not be a problem. He emphasized however that close attention to should be paid to such large developments as involve ethanol production in Africa because the rush for profits could plough over efforts at sustainability. A failed project, too hastily organized and too quickly abandoned could leave vast swaths of once arable land parched and robbed of their nutrients.

When the conference broke for coffee, the Energy Source was approached by H.E. Sayed Galal E. Elamin, Ambassador of Sudan to the UN in Vienna. Brazil has already formed a joint venture with Sudan to produce large quantities of ethanol there, he informed. Elamin’s statement corresponds to a recent report from UK energy watch group New Energy Matters of forthcoming production of ethanol in Sudan “using equipment provided by Brazilian firm Dedini.”

Falling oil prices and the prospect of imported fuel could appear to make imports of African ethanol less attractive to Europe. The advantages of ethanol over oil, however, are well known. Far less particulate pollution and a renewable feedstock that could offset the supply and price volatility of oil are powerful selling points. The prospect of clean, sustainable production in a continent in need of development is another. That Hungary could play a role in all of this may not be such a far-fetched idea. The Energy source informed Yumkella that Hungary had its share of ethanol experts, some of whom may be looking for work.

“If Hungary has experts in the field of biofuels,” said Yumkella, “they are most welcome in Africa.”
A slightly edited version of this article appears in the 12 December 2008 Budapest Business Journal

Business Summit in Turkish port of Trabzon

2008-11-17T02:14:00.000-08:00

By Jacob Doyle.

As foreboding talk of global financial crisis echoed through the world’s boardrooms, statehouses and cafés, a contrasting optimism was on display at the first “Silk Road Businessmen’s Summit” held late last month in the Black Sea port of Trabzon, Turkey.

Hundreds of businesspeople and government trade officials from the countries lining the historic Silk Road, stretching from Mongolia to the outskirts of Europe, gathered to discuss the revitalization of trade and cooperation along its course. Participants included Chinese, Kazaks, Hungarians, Iranians, Turks, Romanians, Ukrainians, and 15 other nations representing the “Silk Road” region.

The four-day summit was marked by a dual emphasis on the upswing in trade among these nations and their role in the transit of goods from East to West, and the importance of fostering this trend with the aid of new initiatives, agreements and such meetings as the summit itself.

“A new axis of trade is forming that includes Turkey and the countries along the historic Silk Road as the West shifts toward the East," said Kürşad Tüzmen, Turkish Minister of State Responsible for Foreign Trade, “therefore we need to boost infrastructure and logistics.”

New infrastructure could include a high speed rail connection to complement improved transportation along the old Silk Road from China to Turkish Mediterranean port city of Mersin via Kazakhstan, Tüzmen reported, stating that the proposed railway had been part of his discussions with the Chinese delegation just prior to the Summit. He indicated that a direct link to China’s vast and growing trade volume would “speed up our growth.”

When asked by the BBJ if he thought that improved transportation along the Silk Road could increase energy options for Europe, particularly for Hungary, Tüzmen responded that the increase in both quantity and variety of goods that he foresees could well include energy feedstocks, but he refrained from specifics.

Tüzmen admitted that he recognizes an historical “culture of trial and error” among the Silk Road nations, one that must yield to more deliberate planning and action as the region progresses. “Kites fly because they resist the wind,” he added. “We must resist the prevailing winds and this is how we will fly.”

That better transportation and infrastructure helps facilitate trade and that trade improves quality of life were ideas voiced in talks by representatives from both Kosovo and Macedonia and affirmed Tüzmen and other Turkish participants.

Hungary’s participation in the four-day summit was anchored by Hungarian MP Andras Kelemen who serves as chairman of the Turkish-Hungarian Inter-parliamentary Friendship Group. Keleman used a Hungarian folktale involving a hot bowl of soup to illustrate the need for nations to cooperate in the face of economic difficulty.

“Those who share find themselves happy and fed,” said Kelemen referring to the characters in the story. “Those who are selfish will burn themselves and go hungry.”

Cooperation among nations remained a constant theme throughout the event, but it was also evident that the Summit’s concept was in many ways a reflection of Turkey’s own desire to assert its identity as an emerging economic power, but one that serves as a bridge between East and West. Tüzmen made much talk of Turkey’s USD 115bn in exports, but also of Turkey’s desire to “share its prosperity.”

Summit organizer Rifat Hisarcıklıoğlu, president of the Foreign Economic Relations Board of Turkey (DEİK) explained that today’s Turkey combined a “powerful economy” with “quality democracy.”

“I want neither money nor privilege,” Hisarcıklıoğlu said. “I want Turkish businessmen to play on the same field as other businessmen of the world.”

This field, it appears, includes Hungary.
A slightly edited version of this article appears in the 14 November 2008 edition of the Budapest Business Journal.

Introducing the Biogas Bounty

2008-10-15T01:23:00.000-07:00

By Jacob Doyle

Hungary is a slave to Russian gas and has nearly no gas of its own. So the thinking goes in a country that meets the bulk of both electricity and heating needs by relying on gas imports from Russia. In reality, Hungary has barely begun to tap the potential of its own gas. Not the fossil-variety gas that comes from the ground, but biogas, which can be derived from animal, human and agricultural waste, as well as from special “energy crops.” By 2010, some 40 MW of electricity could be generated directly from biogas, enough to power the equivalent of 40,000 households.

The total near-term energy potential for Hungarian biogas is reckoned to be some 300 MW, according to ITD Hungary. Today’s capacity is composed of around 12 MW from sewage treatment and 6 MW from agricultural feedstocks, Attila Kovacs of the Hungarian Biogas Association (HBA) told the Energy Source. A biogas electricity plant at Nyírbátor, near Nyíregyháza, produces 40% of Hungary’s agricultural biogas. Its 2.5 mw output makes it one of Europe’s largest capacity individual plants. Just four other smaller agricultural plants currently generate electricity from biogas, Kovacs added. This underutilization has spawned a wave of projects and captured the attention of foreign biogas companies.

“The coming two to three years will see several biogas projects coming to fruition,” said Kovacs. “So far 39 animal farms have received subsidies to build biogas production facilities to co-generate both electricity and heat.”

Kovacs explained that EU funding has been drawn to help pay for these new facilities, which will cost some EUR 60m to build.

Hungary’s farm ministry announced this Spring that a pair of biogas plants in southwest Hungary would receive state subsidies of nearly EUR 8m, roughly half of the total investment required.

Biogas produced from just 50% of Hungary’s animal waste alone, Kovacs estimated, could generate 40 MW of electricity by 2010. Add sewage, waste from foodstuff production and slaughterhouses and the capacity grows. Throw in non-animal farm waste and custom “energy crops” and the capacity climbs much further still. Kovacs agrees with German biogas technology provider Consentis that Hungary’s agriculture holds the greatest feedstock potential for biogas, followed by sewers and landfills.

Consentis, which entered the Hungarian market this year, has high hopes and big plans for biogas in Hungary. It estimates that less than 10% of domestic potential has been realized, adding that in Hungary 15 million cubic meters of liquid manure from livestock as well as 300,000 tons of slaughter waste accumulate annually, which can be utilized in biogas plants.

HBA’s Attila Kovacs sees opportunities for investors amidst the underutilization. Biogas produced from waste costs no more than natural gas to produce, he said, and unlike natural gas, it benefits from subsidies. A 10 MW plant could be built in Hungary to produce electricity and heat for an investment of EUR 25m to 30m, he estimated. This would put it in the expensive bracket of 10 MW power plants, but with subsidies pitched in to cover as much as half the costs, it begins to look more attractive. Larger investments could cover the cost of a chain of facilities, Kovacs added, and could push the technology further, bringing in capacity to produce bio-methane or the utilization of energy crops. HBA could facilitate the investment and research the possibilities, he explained, adding that HBA is a non-profit organization whose mission is to promote biogas in Hungary.
A slightly edited version of this article appears in the 17 October 2008 Budapest Business Journal.

Wall Street Meltdown Could Fuel Hungary's Energy Sector

2008-10-05T00:19:00.000-07:00

A slightly edited version of this article appears in the 3 October 2008 edition of the Budapest Business Journal

By Jacob Doyle

Issues surrounding the US financial meltdown appear to be having an effect on Hungary’s energy sector. These include the volatility of energy prices brought on by deregulation in US-based commodities trading and the sudden illiquidity of international capital markets. Energy ventures with capital and financing needs could suffer, but ventures that provide alternative energy feedstocks to fossil fuels could find themselves benefiting.

“Right now banks are making significant changes in their lending policies,” said Bálint Szecsécsényi, who monitors the energy sector for Equilor Investment, to the Energy Source. “Margins have been increased and a number of conditions have been added to loan approvals, hence making it more difficult to borrow.”

The volatility in prices for oil and other commodities, Szecsécsényi explained, has been artificially created by the commodities markets, rather than by supply and demand for the physical products. Regulations are being introduced and re-introduced, to curb such activities as short selling, but markets still appear out of touch with reality.

“More assets are traded than actually exist,” Szecsécsényi said, “thanks largely to derivatives trading.”

By enabling traders to buy and sell the possibility to buy and sell, energy derivatives not only add to oil price volatility, but also pose a destabilizing effect on the broader economy: as the cost of oil rises, so too goes the price of doing business. Fortunately, while changes in oil price do affect prices at the pump, the change is rarely so dramatic. Because the retail market couldn’t stomach such volatility, MOL and other petrol wholesalers insulate themselves by maintaining product reserves and by hedging their oil purchases.

On the surface, the cost of electricity and heating would appear to be on the rise in Hungary due to high oil prices, as – globally speaking - gas price increases tend to follow those of oil by a lag of nine months, according to Cambridge Energy Research Associates (Cera), a US-based consultancy, and gas-fired electricity plants account for 50% to 60% of the country’s electricity. Yet the price may rise further still, according to Szecsécsényi, due to Hungary’s dependence on Russia for 80% of its gas and a move by leading Russian gas provider Gazprom to separate its gas pricing from that of oil. Gazprom would do this, he said, in order to raise the gas price as high as commercially possible to take advantage of its near monopoly position.

High fossil fuel prices could herald a boon to the renewables sector, if the rising cost of capital and financing doesn’t stall it first.

“Capital and borrowing have both definitely become more expensive,” said Dénes Gyimothy, CEO of Pannergy, which currently plans to build a network of geothermal power plants across Hungary for heat and electricity generation. Pannergy has insulated itself by limiting its capital needs, he added, and by borrowing from such institutional banks as the European Investment Bank, which have not suffered from the liquidity problems plaguing commercial banks. The price of institutional bank financing, he added, could eventually become more expensive, too.

Rising gas prices, Gyimothy reckons, are only sweetening Pannergy’s prospects, as its geothermal power promises both stable pricing and self-sustainability.

Similarly insulated could be the 300mw of wind-powered electricity targeted for Hungary within the next two years. Wind power investments should not be affected by the crisis, said Szecsécsényi, as they are more straightforward investments that come with the market guarantee of subsidized pricing for the electricity they produce and are therefore considered low risk, if not hugely profitable. A steep rise in gas prices, however, could substantially raise their profitability.

European Corn Ethanol Facing Problems

2008-09-14T09:27:00.000-07:00

By Jacob Doyle

Are the days of Europe’s corn-based ethanol numbered?

Critics have long denounced its “negative energy balance,” that more energy is used to produce corn ethanol than it ultimately generates. Hence, they argue, it is only viable with government-provided market stimulants: crop subsidies and a requirement for a growing percentage of ethanol in the European fuel diet. The promise of energy independence, however, and new revenue for Europe’s farmers were enticements enough to push both stimulants through, hence making corn-based ethanol projects popular investments from 2004 until 2007.

Demand for ethanol was cited by the EU agriculture commission as a cause of higher corn and other grain prices in 2007; thereby helping to raise food prices. This, along with such factors as oversubscription, prompted the EUR 45 per hectare EU subsidy for “energy crops” to be scaled back, as reported by Euractiv on 18 October 2007. The next hit came when the European Parliament’s Industry Committee on the Renewable Energy Directive, voted on 11 September 2008 to effectively lower the target percentage for biofuels in the EU vehicle fuel mix from 5.75% to 4%; this despite recent dramatic falls in the price of corn.

“I am trying to stay hopeful,” said Hungarian Bioethanol Association (MBS) president László Zsemberi to The Energy Source on Friday 12 September, regarding prospects for Hungary’s ethanol sector, “but this will certainly be a setback for the industry here in Hungary. Fears that the percentage would be lowered explains the lack of any new ethanol projects in Hungary or elsewhere in Europe. That two million hectares of energy plantations would greatly affect food prices makes no economic sense. The European commission, in tandem with the appropriate experts, needs to find a more fitting solution by the end of the year.”

Sugarcane, meanwhile, appears to be moving from strength to strength as an ethanol feedstock, albeit in climates closer to the equator than Hungary’s. Yet even with such energy density to give it a “positive” energy balance, sugarcane required subsidies and a great deal of government support long before ethanol could claim the nearly 50% of all vehicle fuel consumed in Brazil, which it does today.

“Sugarcane farming was being subsidized to protect plantation owners from fluctuations in the price of sugar,” said Mario Garnero, chairman of Brasilinvest, by phone to The Energy Source. “These subsidies were going to waste, I thought. Why not convert them to energy?”

The year was 1979 and oil prices had leapt thanks to revolution in Iran. Brazil had racked up foreign debts with the import of petrodollars throughout the 1970s and – like Europe today – was hankering for homegrown vehicle fuel. In addition to subsidies, Garnero orchestrated the cooperation of government, labor and industry to boost ethanol production, install it at the nationwide and produce ¼ million ethanol-burning vehicles all within the space of four months.

“The way I see ethanol in Europe: the transformation they need is to change their subsidies into energy,” said Garnero. “Europe will require more time. A blend of biofuel and conventional fuel makes sense for Europe and requiring a certain percentage of this blend to be biofuel makes sense, in the beginning. Setting a goal of 15% for world fuel consumption for biofuels would be huge. I have no question that this is an enormous investment opportunity.”

The opportunity Garnero perceives may be more for sugarcane-based ethanol than that of corn. He spoke of tariff reductions on sugarcane ethanol in France and Sweden and production opening in Africa and southern Asia. On the topic of sugarcane, László Zsemberi sounded a glimmer of optimism.

“I do see potential for growing sugarcane and other crops including corn in Africa,” said Zsemberi, “and processing it into ethanol and exporting it to Europe.”
A slightly edited version of this article appeared in the 18 September 2008 edition of the Budapest Business Journal.

Gas Market To Drive CEE Energy Sector For Years To Come

2008-06-12T00:59:00.000-07:00

By Jacob Doyle

If you want to know where the CEE energy sector is headed for the next decade or more, keep your eyes on gas. This is the message conveyed by a trio of reports that hit the desk at Energy Source the second week of June. Natural gas has become the fuel of choice both for heating and electricity generation, causing demand to continue its steady rise. Such substitutes as nuclear, “clean” coal and renewables require costly infrastructure to offset this demand. Moreover, the supply for gas is finite and, in most of CEE, dominated by a single national player, Russia.

“A more significant shift toward natural gas (electricity) generation is expected in the CEE region,” wrote KPMG’s Peter Kiss in World Power, a 2008 report issued by Isherwood Production Ltd. “Neither electricity, nor its primary fuel of natural gas has any real substitute in the short term.”

Despite the consequence of greater dependency on a single non-renewable energy feedstock, the move to gas-fired electricity plants in the 1990s was well founded, reads The 2008 CEE Electricity Outlook, published by KPMG. Combined-cycle gas turbine (CCGT) plants are more efficient and contribute much less to climate change than the conventional coal-fired plants they replaced and they offer greater generation flexibility and lower start-up costs than nuclear power stations.

Increased demand is a classic ingredient of price inflation, while diminishing supply is another. The looming 9.9% hike on 1 July in Hungarian gas prices testifies to both, with ample credence to government claims that it stems from rising transportation costs. A glance at projected demand offers little hope. The KPMG CEE Gas Outlook forecasts a 52.3% increase by 2020 in CEE demand alone. This does not include the rest of Europe or Central Asia, both of which also rely on the same gas supplies.

With demand for gas on the rise and overall energy prices going up along with it, it is easy to imagine opportunities in renewables and energy conservation. But the energy sector is a “big business” sector dominated by incumbents that have severe allergies to changing business models. From their perspective, rising demand and diminishing supply are good. Both mean higher prices. Why pollute the energy mix with potentially cheaper alternatives? Why indeed. Consumers do vote, after all. Inflation tends to promote political action. Consumer discontent over rising gas prices could find a bedfellow in environmentalism to promote government incentives for energy alternatives.

“The further development of renewable energy supplies promises improvements in the security of supply.” reads the Electricity Outlook. “Renewable generation in general is still not economically feasible and requires appropriate state support.”

All three reports discuss the need and opportunities presented by improving gas delivery infrastructure, particularly that which decreases a singular reliance on Russia. Particularly telling is an article in World Power authored by the European Federation of Energy Traders (EFET). It advocates a more competitive European gas market, but for reasons that may have little sympathy for the end user.

“Nobody has the magic wand to solve all Europe’s energy problems,” the article reads, “but EFET believes that improving the conditions that improve competition could be the key.”

A close look at the article reveals that the problems referred to by EFET are those that affect traders wishing to have greater access to the gas market. After all, with gas prices apparently on the rise for years to come, what sane trader wouldn’t want better access?
A slightly edited version of this article appears in the 13 June 2008 Budapest Business Journal.

Glow Green! Some Second thoughts on the Nuclear Renaissance

2008-05-26T13:54:00.000-07:00

Nuclear power plants under construction and planned

By Jacob Doyle

Does anyone remember “No Nukes!” or its German equivalent “Atomkraft, nein danke!”? These slogans took hold after major nuclear accidents at Three Mile Island in the US in 1979 and the much worse one at Chernobyl in the USSR seven years later; along with hundreds less publicized smaller incidents. The aftermath was a significant worldwide decline in construction of nuclear power plants; this following a nuke building boom throughout the 1970s, one that saw the conception of the Paks nuclear power plant, Hungary’s cheapest source of power and supplier of some 40% of its electricity. Today, with global energy prices at historic highs and greenhouse gas emissions a burgeoning issue, nuclear power is back. Hailed as a cheap, carbon-neutral alternative to fossil fuels, investment is pouring into nuclear projects across the planet including CEE in Bulgaria, Slovakia, Lithuania and in Hungary with the planned expansion of Paks. Advocates appear to be winning the day, but a still, small voice of opposition continues to make itself heard.

“We do not share the president’s view concerning the role that nuclear energy can play in the implementation of the “20-20-20 by 2020” EU-plan, aiming to reduce CO2 emissions,” reads a statement by Hungary’s Energy Club, issued 23 May 2008, one day following announcements by the EU Energy Commission in support of nuclear energy. “The same amount of money spent on energy efficiency and renewables could much more effectively result in lower GHG emissions.”

The toxicity and storage cost of nuclear waste and the enormous eventual cost of plant shutdown and cleanup disarm the claims that it is cheap and clean, argued Club project manager Andras Perger. Moreover, he added, non-nuclear renewables serve a greater portion of world energy needs than does nuclear, which Perger estimated at just six percent of total energy production.

More reactors will mean more nuclear fuel. Unmentioned by Perger is the possible use of such fuel in illicit nuclear weapons, a risk that potentially increases with the fuel’s proliferation.

The central attraction of nuclear power is not to environmentalists, but to investors, for whom they are a veritable dream. They require large capital outlays and promise stable, sustained returns. This means fat fees for a lot of dealmakers and lobbyists. A quick comparison of industry PR to EU Energy Commission communiqués reveals the influence of the growing army of energy lobbyists camped out in Brussels.

“Nuclear energy can of course make a major contribution to this battle against climate change,” said José Manuel Durão Barroso of the EU Energy Commission in his speech to the European Nuclear Energy Forum last Thursday, “as it generates two thirds of the EU's carbon-free electricity.”

Barosso glossed over the risks, calling them something “we all know,” without getting specific, but sure to mention that the “EU nuclear industry is leading the world in terms of its technological leadership.”

Barosso’s talk was starkly similar to that of RWE power division’s head Johannes Lambertz’ statement in support of new nuclear power plants the same week: “Germany's nuclear power plants help to save 150 million tonnes of carbon dioxide per year, which is equivalent to the amount caused by German automobile traffic.”

Critics charge that in their rush to embrace the initially lucrative and inevitably dirty solution of nuclear power, investors and policymakers will divert resources from conservation and cleaner energy alternatives. Under funded and unwanted in an age of SUVs and plasma screens, however, critics’ voices may fall on deaf ears.
A slightly edited version of this article appears in the Budapest Business Journal, 30 May 2008.

http://rockandecology.blogspot.com/2007/12/no-nukes-concerts-held-by-musicians.html

International Panel on Climate Change comes to Budapest

2008-04-17T12:07:00.001-07:00

By Jacob Doyle.

Climate change has been a hot topic in recent years, growing hotter with the 2007 Nobel Peace Prize going jointly to former US president Al Gore for his cautionary film, An Inconvenient Truth, and to the Intergovernmental Panel on Climate Change (IPCC), a child of the UN, for their efforts to publicize and investigate the foreboding subject. The Energy Source was in attendance at Budapest’s Central European University (CEU) this past Thursday and Friday as IPCC scientists along with local academics, corporate dons and government officials talked up the subject for the general public at an outreach event while the official 28th session of the IPCC met across the river at the Congress Center. The upshot of some 18 hours of presentations and panel discussions was expected: we have corrupted the very climate that governs life on Earth. Less expected was the scale of pessimism that emerged: the problem worsens by the day and despite experts’ efforts to prescribe urgently needed remedies, things are likely to get much worse before they have a chance of getting better. As the climate changes, so change ecosystems, meaning vast disturbance not simply to the creatures of the land and sea, but to agriculture and human economy.

“For the sake of our future generations,” said Professor Ralph Sims of the International Energy Agency, “we need to make more rapid progress in reducing green house gas (GHG) emissions than has been the case to date.”

A steady rise in GHG emissions in Hungary over the last three decades was the presentation topic of Dr. Laszlo Haszpra of the Hungarian Meteorological Service (HMS). Haszpra explained that so far approximately half of global GHG emissions have remained in the atmosphere while the oceans and surface soil and plant life have absorbed the other half. “But we are quickly reaching a limit,” he warned, “soil will become saturated and emit more CO2 than plants can absorb.” At which moment, he explained, the Earth’s soil will cease to be a carbon sink and become a carbon source, joining forces with the industries, motor vehicles and animals than line its surface. His HMS colleague Dr. Janos Mika correlated the rise in emissions to ominous changes in leading climate change indicators: average temperature, temperature variability, tropospheric warming, diminishing snow cover and glacial and sea ice melting. Mika gave 90% of the credit for a 50-year trend of global warming to rising GHG emissions.

Professor Istvan Lang of the Hungarian Academy of Sciences described how such climate change could soon reverse seasonal rainfall patterns, thereby forcing radical change to crop production. The price and availability of food would likewise be affected.

No one at the conference suggested such radical alterations to human habits as swapping personal motorcars for bicycles, or a sweeping switch to a vegetarian diet; both of which would directly reduce GHG emission. Rather, technology-based solutions were emphasized. Economics and Transport Minister Csaba Kakosy talked up the need for nuclear power and a HUF 400m increase to Hungary’s renewable energy fund. Carbon capture and storage (CCS) – or pumping COx gases underground - was advocated both by Professor Sims and economist Dr. Laszlo Varo of MOL, both of whom kept their optimism well guarded.

It was comments by Dr. Varo, however, that revealed the most about how the looming climate crisis came in to being and why it will be difficult to resolve.

“Until we get this into the income value at the bottom of the page,” said Varo in regard to proposed climate change solutions, “don’t expect corporations to do much.”
A slightly edited version of this article appears in the 17 April 2008 Budapest Business Journal.

From Plastics to Power from Below

2008-03-31T03:08:00.000-07:00

The Energy Source reported early last year that the heat beneath Hungary’s surface could become a source of power to offset dependence on increasingly expensive imports of gas and oil for both heating and electricity generation. A major new initiative now appears to be pushing this prospect a good deal closer to reality, in turn promising to fuel the emergence of a new player in the Hungarian energy market from the ashes of a past industrial giant.

“There is a great potential for geothermal power in Hungary,” said Dénes Gyimóthy, CEO and CFO of Pannergy Nyrt. (formerly Pannonplast), “the ratio of ground depth to temperature increase is nearly double the European average and it is largely unutilized. Our plan to build 20 geothermal energy plants across the country is the first of its kind.”

The proposed EUR 350m investment could bring heat to the equivalent of some 60,000 households, Gyimóthy explained, and generate 60mw of electricity. Moreover, unlike wind or solar, geothermal power is a “baseload” source that delivers a steady flow energy independent of weather and sunlight, he added. Pannergy explored several energy alternatives before settling on geothermal. Factors influencing their choice include the total lack of emissions, feedstock and waste.

Of the proposed EUR 350m investment required to bring Pannergy’s plan to fruition, the company itself states that it will invest EUR 70m of its own money, with the remainder coming from major development banks such as the European Bank for Reconstruction and Development, the European Investment Bank and the Council of Europe Development Bank. Residual needs may be taken up with local commercial banks.

Success with this project would mean the first large-scale business venture for Pannergy. Prior to the start of 2008, the company was known as Pannonplast and had been one Europe’s major plastics producers. After privatization in the 1990s, it was listed on the Budapest Stock Exchange and for was for several years one of Hungary’s most successful companies. A changing market, competition from Asia and rising material costs combined to nearly sink the company earlier this decade. But management restructuring, sales of assets and operations enabled the company to pay off its debts and reemerge as fiscally sound. Gyimóthy, a veteran of corporate finance and an employee of the company since 2004, was given the helm last year to steer it into the new waters of the alternative energy sector.

In each of Pannergy’s 20 proposed plants, geothermal heat will be carried to the surface by a “working fluid” – a mixture of water and ammonia. At some of the plants, plans call for the hot fluid to be circulated to provide district heating. If the fluid comes up hot enough, it could be used to generate steam and thereby electricity in a “binary” electric power plant wherein the hot working fluid would be used to boil a second fluid with a lower boiling point. The technology – known as the Kalina Cycle for its Russian inventor Alexandr Kalina – is to be provided by the Iceklandic energy enguineering firm VGK, a specialist in geothermal energy utilization.

Gyimóthy emphasized a number of advantages the Kalina cycle has over competing geothermal technologies, among that it functions as a “closed circuit,” so that the working fluid, comes to the surface at temperatures of 110 degrees or hotter, is sent back down into the earth after being circulated through heating systems and generators, to rise again after soaking up more heat in the depths of the earth.

“What we bring up,” said Gyimóthy. “We send back down.”

The thousands of wells drilled across Hungary by MOL over the decades mentioned in last year’s Energy Source on geothermal power are coming in handy for Pannergy for prospecting purposes, but not for actual energy utilization. The condition of the wells, their depth and locations are apparently less than optimal. As a result, new wells will need to be drilled.

Each heating plant will require approximately 1 year to build at a cost of EUR 5-7m, said Gyimóthy. Combined heat and electricity plants will cost much more, between EUR 20 and 25m. The number of plants generating both electricity and heat and the numbers of those that produce just one or the other will depend on the temperature of the particular well through which the working fluid will be pumped. Exploration is currently underway for the location of the first plant, scheduled to begin constructon in the second half of 2008 and completion in Q4 2009. These costs include both the construction of the plants, material costs and the cost of drilling.

The company forecasts one of its heating plants to show an after-tax profit of nearly EUR 1m after 5 years of operation and nearly EUR 1.5m after 10 years. Such a plant could supply heat to the equivalent of 3000 households. In warmer months, Gyimóthy said, the heating could be converted to cooling for industrial purposes, a process familiar to Energy Source readers that is used at Audi Hungaria in Györ. Even rosier forcasts have been drawn up for plants that generate electricity and those which could generate both heat and electricity.

As word has spread about Pannergy’s plans to build 20 plants across the country, more municipalities have approached the firm with the wish to be included.

“Each plant will be partly owned by the particular municipality which it serves,” said Gyimóthy. “This way, the municipality will share the revenue from energy sales.”

Pannergy hopes the electricity that it plans to generate should qualify for EU-stipulated subsidized pricing and would then likely be sold back to the national grid via Hungarian national energy company MVM. When asked if he feared the possibility of the scenario encountered three years ago by energy services company EETEK which found its subsidy qualification requirements suddenly changed for its cogeneration facilities after substantial investments had been made and its generators, Gyimóthy confidently dismissed the thought. “I don’t foresee any problems selling to the grid at the subsidized price. But if it doesn’t work, we’ll sell the electricity on the open market.”

The Alluring Energy Bubble

2008-03-02T12:06:00.000-08:00

by Jacob Doyle.

Rising energy prices are the stuff of economic intrigue. On the one hand, they’re bad for the greater economy, generating inflationary pressure and stifling growth by increasing average production cost. Yet so long as units of energy remain relatively price inelastic – i.e. the percentage of each price increase is greater than the corresponding percentage of decreased demand – then rising energy prices are a dream for people in the energy business: traders, investors, technology providers, scientists, administrators and so on. Moreover, when oil companies turn record profits for two years running, as has been the case for ExxonMobile and several of its competitors, this creates an attractive pool of economic activity that draws in players who may have lost in other sectors – a few sub-prime mortgage peddlers come to mind. And when rising energy prices tie in with both rising energy demand and dwindling supply of traditional energy resources such as oil and gas, then newer sectors such as renewable fuel and energy conservation become hot, drawing investors and professionals and generating capital along the way. Following this formula, an energy bubble starts to look better than either the Internet or property bubbles.

With the Internet, investors bet too heavily on the dream of a “new economy” that failed to materialize fast enough to make them all winners. Hence many lost. Housing bubble investors, on the other hand, gambled on rising property prices until they contradicted economic reality so blatantly that disbelief could no longer be suspended. Then housing prices fell, mortgages went unpaid and hundreds of billions of Euros and dollars of investment went unreturned.

But the “energy bubble”, to give it a name, looks so much more secure. In Hungary alone average electricity demand has been rising by a million megawatts per year for a decade, according to the Central Statistics Office. Global demand for oil (and/or its substitutes) is projected to rise to 118m barrels per day in 2030, up from 83m in 2004. Annual demand for cars in China is expected to reach 12m units by 2008, nearly equaling that of the US, with India close behind. This means outrageous demand for fuel: fossil, renewable or otherwise.

Mark Jacobstein, a Harvard-educated entrepreneur who hit the jackpot during the Internet boom with such companies as Small World Software, which he founded and later sold off in phases, recently went to work at the West Coast office of Charles River Ventures, venture capital group with active interest in energy projects, particularly renewables. In a recent conversation, he told me that the valley is “abuzz” about energy and that projects related to energy are the leading pulls for investment. Since “Energy Source” began life as a news column a year and a half ago, it has reported on tens of millions of Euros pouring into Hungarian energy projects of a range that includes biofuels, wind and geothermal electric with discussion of others such as underground coal gasification. And the new national energy policy concept issued by the Hungarian government calls for more nuclear power, hence more investment, construction, infrastructure; more economic activity of the big money variety.

But if energy is the new investment bubble, will it eventually burst? The tempting answer is no, that the forces of demand and scarcity would cause it to swell ever larger, ad infinitum. The more sober analysis, however, is different. There are currently many energy options, not all of which will remain viable and whose demise will bring economic losses. Recent criticisms of biofuels, for example, question their efficiency and cleanness. So despite current growth in demand, they could fall out of favor, replaced by something better, perhaps hydrogen. Hydrogen, of course, is not free from faults – many say – its high production cost and volatility being among them. This leaves of course fossil fuels, which remain the perfect investments, no? Both demand and scarcity, after all, are on the rise. Yet, the same could have been said for lamp oil just before Edison unveiled the light bulb. If the touts of such nifty sounding “free energy” concepts as electromagnetic resonance and zero point field energy are on to something, then even fossil fuel could find itself something less than indispensable in the years to come.
An edited version of this story appeared previously in the Budapest Business Journal

The Pros and Cons of Biofuels

2008-03-02T11:51:00.001-08:00

An edited version of this article appeared in the Budapest Business Journal

By Jacob Doyle

The subject of renewable fuels raises hopes as well as confusion. The viability of these fuels both on the supply and consumption sides is yet to be decided. A recent conversation with Dr. Akos Berecky, a scientist and engineer with The Combustion Institute at the Budapest University of Technology and Economics helped to shed light on how well these fuels work compared to conventional fuels, and what effects they have on economies and the environment.

The first topic raised with Dr. Bereczky concerned the advantages and disadvantages of biofuels, assuming tax incentives, subsidies and other fiscal measures are applied to bring the price of biofuels to the same level as conventional petrol and diesel.

When blended with conventional fuels, there is little impact on either the environment, or on the performance of the vehicle burning the fuel, he explained. When the feedstock for the bio component of the fuel is grown in Hungary, however, using blends does lessen reliance on foreign energy imports and boosts the country’s agriculture sector.

The picture changes when pure (or close to pure) biofuels are employed. If two otherwise identical cars embarked on a journey from Budapest to Dubrovnik and one had E100 in its tank and the other conventional petrol, the E100-burning car would consume 30% more fuel by volume, said Berecky, adding that it would also need to be specially rigged to burn E100 without suffering damage. If a pure biodiesel (B100)-driven car made the same journey, it would consume 6-10% more fuel than its conventional diesel-driven counterpart.

“Ethanol can cause problems for a conventional car’s engine and fuel system,” he added. “The plastics used in the fittings of the car’s system are not resistant to alcohol. Upon sustained contact, the plastic will expand, resulting in jams and breakdowns. Ethanol also absorbs and carries dirt inside the fuel lines and fuel tank, thus contaminating the car engine system”

Similarly, biodiesel - when used in its pure, unblended form - can cause engine problems for conventionally outfitted diesel vehicles, specifically with rubber seals the fuel comes into sustained contact with. Both biodiesel and ethanol have trouble with cold starts, a problem sometimes remedied with a heated fuel tank.

Dr. Berecky explained that Bioethanol also requires a different “stochiometric ratio”, meaning that a different mixture of air and fuel is needed to achieve a chemically balanced combustion. Moreover, it needs a higher pre-injection angle. As a result, motorists wishing to fill up with E100 (or even E85) will need to buy a flexi-fuel vehicle or replace their fuel injectors as well as their ignition. Ethanol is, however, a higher octane fuel than conventional petrol - of benefit to those with distaste for engine knock.

Most of the major carmakers are currently offering flexi-fuel models, with Saab now offering a flexi-fuel version of every model in its range of cars. But motorists will have to wait until later this year to fill up with bioethanol in Hungary, the BBJ reported on 19 February, adding that less than fifty such vehicles currently call Hungary home.

Owners of conventional cars seeking to run them on bioethanol have the option of buying a conversion kit, which sells online for USD 500 to 800 depending on the number of engine cylinders. Berecky noted that the major concern most car owners have about conversion is the loss of manufacture’s warranty that comes with it. He added that most carmakers are now offering the option of conversion for many of their models, but that he had “no information” about any shops yet performing them in Hungary.

Among the environmental benefits to bioethanol over petrol is a reduction in the emission of greenhouse gases by 4.6% for users of E10 and 44.5% for E85, according to a study by a pair of scholars at Leval University in Quebec, Canada. According to Berecky, the emission of poisonous carbon monoxide gas along with polluting “particulates,” CxHy and NOx are also considerably lower for ethanol versus petrol.

Biodiesel combustion also produces fewer particulates burning standard diesel.

The potential benefits to Hungarian agricultural of producing ethanol have been widely discussed, including the utilization of surplus corn supplies and the development of the rural economy, as well as the creation of jobs at new ethanol distillation plants. The same could be said for the cultivation of canola (rapeseed), the leading feedstock for biodiesel, although the climates of other European countries such as Germany are reportedly more suitable than Hungary’s.

It is less known that Hungarian corn is at a big disadvantage as an ethanol feedstock when compared to sugarcane, its Brazillian competitor, in terms of the amount of fuel produced per hectare of cultivated land. Each hectare of sugarcane yields 4000-5000 liters of ethanol, as opposed to some 2000 liters per hectare of corn, Berecky revealed. Brazil has been actively promoting ethanol as a vehicle fuel since the oil crisis of the early 1970s to promote energy independence. Today some 30% of the vehicle fuel burned in vehicles there is ethanol. Brazil is also the world’s largest ethanol producer and exporter, responsible for 40% of the world’s total. At the time of this writing, US President Bush was preparing to visit Brazil to sign a trade agreement purportedly to reduce import taxes on Brazilian ethanol, much to the ire of American ethanol producers who, like their Hungarian counterparts, use mainly corn as a feedstock, according to Money and Markets, an investment newsletter. Brazil meanwhile is boosting exports to markets in India and Japan and supplying African countries with the know-how to cultivate sugarcane and produce ethanol. George Soros and Bill Gates have already invested in Brazilian ethanol production, the newsletter adds, with Google’s Larry Page and Sergei Brin making moves to do so.

Europe’s answer to sugarcane may come in the form of the sugar beet, according to data supplied by the University of Glasgow. Sugar beet ethanol yield per hectare is comparable to that of sugarcane, with the disadvantage that it must be rotated with non-root crops, meaning that a crop field can only yield sugar beets one harvest in every four. Increased demand for ethanol-bearing sugar beets could be better news for the Czech Republic - whose climate and landscape are considered ideal for growing such sweet tubers – than for Hungary whose ethanol feedstock of choice remains corn, thanks to strong compatibility with local climate and soil.

Demand for ethanol as a fuel is rising fast, climbing up from 4.3bn barrels in 2005 to well over 5bn barrels in 2006, according to the Renewable Fuels Association. EU energy policy has upped the requirements for biofuel content and cleared the way for tax-free sales of E85. Sweden’s Scania, meanwhile, is pushing its ethanol-burning buses across the continent, having equipped the fleets of Stockholm and other Swedish cities. Sugarcane may be the world’s choice feedstock today and fiscal supports and market protection may give food crops such as corn, wheat and sugar beets some life as feedstocks, but reports flow in of progress to harness agricultural and wood waste as well as creeper vines for ethanol production with the aid of termite enzymes. Once surpluses are exhausted, the viability of growing corn in Hungary for ethanol production will be put to the test.

Hydrogen, meanwhile, is finally starting to emerge as a renewable source of vehicle fuel. Just a handful of hydrogen-powered car models exist such as the Honda FCX and the Chevrolet Equinox. While the cost of hydrogen fuel competes favorably with conventional fuel, there are scarcely any filling stations, notably a few in California and Norway. The cars themselves are still priced in excess of USD 1 million, a shocking figure to most, but one that doesn’t surprise Dr. Berecky.

“A motor car is an expensive piece of technology,” said Berecky. “Decades of mass production and economies of scale keep the price of conventional cars down to an affordable level.”

The promise of a car that performs as well or better than its conventional predecessors and emits an exhaust of just water and steam has many - including Berecky - still calling hydrogen the possible fuel of the future. Hydrogen is the simplest of all the elements, and in its free state it serves as a carrier of energy that can either be set alight to explode or just produce heat, or it can be combined with oxygen in a fuel cell to produce electricity (and water.) But to bring it to its free state requires energy, typically electricity, which is pumped into water to release it.

Hydrogen can also be produced biologically, which is the subject of study of another Hungarian scientist, Dr. Kornel Kovacs, a professor at the University of Szeged who has been developing a means to release hydrogen from biomass with the aid of bacteria. Hyvolution – the name of Kovacs’ EU-funded project – involves a team of academics and industry specialists from around Europe.

“The Integrated Project aims to develop a blueprint for a cost effective production facility for hydrogen from biomass,” reads a recent Hyvolution press release. “By using biomass instead of fossil resources, CO2 emission and the dependence on fossil resources will be reduced.”

Unlike more conventional means of producing hydrogen, Hyvolution’s technology aims at “minimal energy demand and maximal product output through system integration.”

Hyvolution aims to configure a prototype facility for the conversion of agricultural and other biological waste into hydrogen for use in energy production. Kovacs and his colleagues plan to meet their objectives by 2010.

Ferenc Darvas, a well-known Hungarian industrialist and innovator whose nanotechnology firm Thalesnano was named last year by Hungarian business weekly HVG among “the 50 most promising Hungarian companies”, has himself become active in the field of hydrogen technology with the development of the Microfluidic Water Electrolysis Cell (MicroWEC). Originally developed as part of another device used in drug development, Darvas now has plans for the MicroWEC to serve as a portable hydrogen generator to refuel smaller hydrogen vehicles such as golf carts and boats. He is currently seeking uses for the product as a means to deliver it to market.

Renewable fuels may come and go. Brainpower, it seems, is one energy resource Hungary has in perennial strong supply.

Hungary's Godfather of Coal

2007-11-07T22:59:00.000-08:00

Interview conducted by Jacob Doyle

Local energy player László Kapolyi has a major hand in traditional electricity imports – and a keen eye on greener power for the future.

Regularly listed as one of Hungary’s wealthiest individuals, László Kapolyi is the founder and owner of System Consulting Zrt, a major player in the Hungarian energy sector.
System Consulting began importing electricity to Hungary from Ukraine in the early 1990s. This served the dual purpose of overcoming a shortfall during peak usage hours and indirectly enabling Russia to pay back old Soviet-era debts to Hungary by way of coal exports to Ukraine.
Maintaining the infrastructure behind this power import business is the most significant activity of System Consulting, and its largest revenue stream. More recently, the company has also launched ventures that include the announced construction of small hydroelectric power plants in Ukraine and a combined-cycle gas-powered electricity generation plant near Vásárosnamény, northeast Hungary.
In addition to supplying electricity to the national grid, plans call for the latter plant to power the production of bioethanol, which Kapolyi hopes will soon power environment-friendly buses in Hungary’s cities.
Kapolyi’s plans for greener energy generation contrast with System Consulting’s traditional model of importing electricity produced from the burning of coal.
Before launching his business in 1989, Kapolyi was a state secretary responsible for energy, and minister of industry from 1983 to 1987. In 2002, despite holding chairmanship of the non-parliamentary Hungarian Social Democratic Party (MSzDP), he was elected to Parliament as an MP of the now governing Socialist Party (MSzP).
Kapolyi has held a number of academic positions, including honorary doctor of heavy industry at both the University of Miskolc and Moscow State Mining University, and visiting professor at the Fletcher School of Law and Diplomacy, at Tufts University, Boston, MA. He is also a professor of the Academy of Mining and Metallurgy in Cracow, and an honorary member of the Russian Academy of Sciences.
Kapolyi is regarded as a philanthropist, having personally funded a number of scholarships and grants to support universities, professors and young experts in Spain, Ukraine, Hungary, and the U.S. He spoke with contributor Jacob Doyle on Sept. 11 at his office in Budapest’s District 12.

System Consulting is a successful independent player in the Hungarian energy sector, and has made you one of the country’s wealthiest men. How did this all come about?
A: System Consulting was founded in September 1989, and the early emphases were on information technology and energy. As the years passed, we focused more on energy. Today, our core business is built around our long-term contract to import more than 1 million megawatts of electricity from Ukraine to Hungary. This first involves the import of energetic coal from Russia to Ukraine, where it is used at the Burstin power plant to generate electricity. We also had to install a power line to bring the electricity to Hungary. Our total revenue today is approximately $100 million per year.
Q: There have been a number of reports that you were able to use your connections in the former Soviet Union – not simply to enable energy imports, but also to claim payments on old debts owed to Hungary from Soviet times. How was this done?
A: Yes, we have managed to reclaim debts owed to Hungary by the former Soviet Union – somewhere between $131 million and $151 million. This has been made possible via in-kind payments of Russian coal to the Burstin power plant in Ukraine, which results in electricity being sold first to [wholesale distributor] Hungarian Electricity Works Zrt (MVM) and then to consumers. A portion of the profits from the sale of the electricity is then paid in to the Hungarian national treasury.
Q: Hungarian weekly Élet és Irodalom reported that the electricity you import from Ukraine does not conform to EU environmental standards because of its source at the coal-burning Burstin plant. Is this why System Consulting is pursuing hydroelectric power in Ukraine and a new combined-cycle, gas-powered electricity generation plant in Hungary?
A: Ukraine is, of course, not an EU member country, so EU electricity generation standards do not apply there. We’ve been working with parties in Ukraine to develop a series of small hydroelectric facilities for the purpose of flood control and generating electricity for both countries. We’re also building a combined-cycle, gas-powered electricity generation plant here in Hungary in the vicinity of Vásárosnamény, with 234-megawatt capacity.
Hungary’s energy needs are large enough to justify both additional supply and continued imports from Ukraine. The combined-cycle plant will be a co-generation facility, the surplus heat from which will be used to produce bioethanol for use in motor vehicles and other machines.
Q: The BBJ recently reported that national oil and gas company Mol Nyrt is blending biofuels with conventional fuels for use in motor vehicles. Is this your goal as well?
A: It is my opinion that blending biofuels with conventional fuels should not be as high a priority as introducing pure biofuels on the Hungarian market where it is possible to do so.
One example is city buses that are powered entirely by bioethanol. Sweden’s Scania makes buses like these, and one such bus was recently on exhibit in Budapest. I support a move to bring these buses to Hungary and to use them in our cities – both as a means to protect the environment and to promote energy independence.
Hungary’s climate is well suited to growing corn, and corn is an ideal source material for bioethanol. But for the time being, I’m waiting to see the result of the forthcoming municipal elections as their outcome will impact any decision-making as far as city buses are concerned.
Q: You were quoted in the ’90s as saying: “We have to do business in the West while leaning with our back against the East.” What exactly did you mean by this, and do you still think this way?
A: Hungary is well positioned to act as a bridge between East and West. I’ve felt this way for a long time, and our business practices at System Consulting reflect this mindset.
Certainly, over the years, I’ve made a number of contacts and built relationships in the countries of the former Soviet Union. But times are changing, and a new generation of leaders is emerging in these countries. It will be important for Hungary to build ties with these new leaders and to stay abreast of their needs, to assess how their resources can serve us and our neighbors to the west. In this way, by building relationships and doing our homework – staying informed of each other’s interests and strengths – we can build a strong bridge.
Q: Millennium Cell, an American maker of hydrogen-powered batteries, lists System Consulting as a partner. What is your relationship with that company?
A: We have an ongoing relationship with Millennium Cell in the U.S. to develop sodium borohydrate from natural gas here in Hungary for use in new-generation batteries. That started in 2001, and we’re continuing our efforts, but progress has perhaps not been as rapid as we initially hoped.
Q: Former government colleagues of yours – from the days prior to the political changes of 1989 – have been successful in their own right. Two in particular are Peter Reiniger of the European Bank for Reconstruction and Development (EBRD) and developer László Somogyi. Do you maintain relations with them?
A: Peter Reiniger worked with me while I was minister of industry back in the 1980s. He later moved on to the EBRD, where he works today in a senior position in London. We are in regular contact and see each other often.
László Somogyi was minister of construction while I was minister of industry. We had a lot of contact in those days; he was working to organize a world expo in Budapest in the ’90s – which, as we know, did not come to pass. We no longer work together, though we remain friends.
Q: Some elected officials run into trouble for abusing public office for personal gain. Was conflict of interest ever an issue for you?
A: I have always separated my business activities from my activities as a government official. In my view, the two roles come with different sets of responsibilities. Yes, I’ve had my share of success in business, although there are others who have had more. I have never been involved in privatization, for example. Success with privatization requires certain skills and acumen that have never really been among my strengths.
Q: In 2002, you were elected to Parliament as a Socialist, despite being chairman of the Social Democratic Party. What does it mean for you today to be a social democrat?
A: I am still chairman of the Hungarian Social Democratic Party, although I am a member of the Socialist faction in Parliament. As a social democrat, I believe that a social safety net is good for business. When a nation’s elected government is able to protect the interests of its working population, then business interests are likewise protected. But things are more complicated today.
The old social paradigm that took for granted a large percentage of manual workers has given way to a high-technology model, so the acquisition of knowledge has become the way to protect one’s livelihood. This is different from the days when workers’ rights could be clearly defined and defended by unions and government.
We have reached a shift that could be compared to that experienced in 1952, when Germany’s Social Democratic leader Willy Brandt called for a “new paradigm” for social democracy.

The text of this interview originally appeared in the Budapest Business Journal on 25 September 2006

US Trade Delegation Seeks Energy Partnerships

2007-09-14T00:10:00.000-07:00

By Jacob Doyle

(a slightly edited version of this article appears in the 17 September 2007 issue of the Budapest Business Journal)

A greener, more energy-efficient world was the promise offered by a US trade delegation to Hungary this past Wednesday in the conference rooms of Budapest’s Bank Center on Freedom Square and later at a reception at the US Ambassador’s residence nestled high in the leafy hills of district 12 in Buda. The delegation’s stars included Israel Hernandez, Assistant US Secretary of the Commerce Department and Director General of the US and Foreign Commercial Service and Mark Ginsberg, a board-level director at the US Department of Energy.

The combination of Hungary’s adherence to EU energy policies, its suitable climate for the crop production of biofuel feedstocks and a host of Hungarian companies involved in renewable and efficient use of energy drew the delegation here. The Hungarian firms included such energy engineering heavyweights as ERBE Kft., today a subsidiary of national electricity provider MVM Zrt., Mott MacDonald Kft., the Hungarian arm of the large British civil engineering firm of the same name and Montsanto Kereskedelmi Kft., the Hungarian branch of the American agriculture and biotech giant.

“We’re delighted with the response,” said US Ambassador April H. Foley to open the evening reception. Her enthusiasm was shared by Secretary Hernadez.

“We need to diversify on energy,” he said. “The company representatives we have with us this evening can provide solutions.”

Genetic Engineering meets Biofuel

One such solution being promoted was genetically modified (GMO) corn, praised by John C. Walker, a vice president with the Wisconsin-based Innovative Bio-Technologies LLC as a potential feedstock for bio-ethanol production in Hungary.

Fields of GMO corn should be planted within 25 miles (40 km) of bioethanol distilleries, Walker said, to optimize ethanol production. The implication was that his firm was eager to help build bioethanol plants in Hungary, but only for use with GMO corn. Monsanto’s MON 810 GMO corn was specifically banned from being grown in Hungary by the Agriculture Ministry in 2005, “until tests are completed.” While Mr. Walker did not mention the ban, it does help to explain why he had been pressing the issue so. A fellow participant in the day’s activities remarked that Walker had loudly addressed the subject three times earlier in the day. Walker’s meetings included one with Monsanto Hungary’s registration manager, Dr. Mihály Czepó, who eagerly extolled the benefits of GMO corn.

“There are multiple advantages,” Czepó explained, “GMO corn requires far fewer chemical pesticides, as it is genetically altered to defend against rootworm. It’s also resistant to drought and produces higher yields. It makes an ideal feedstock for bioethanol and is widely used as such in the US.”

Czepó then ran down a list of US companies currently using GMO corn as ethanol feedstock including Calusa in California, Ace Ethanol in Wisconsin and Arga Ethanol in Alabama. When asked if ethanol made from GMO corn produces more energy than it’s production consumes, he responded, “as far as I know the balance is energy positive.” He added that such production can benefit from the energy utilization of its own byproducts, namely by burning the corn’s husks, silks and stalks to fuel the distillation process.

As far as health and environmental risks from genetic modification of crops, Czepó was adamant. 100m hectares of GMO crops are harvested each year, he said, “without a single scientifically-proven health or environmental adversity.”

Potential Health Risks of GMO

At least one scientific study, however, appears to contradict Czepó’s claim. The study, commissioned by Monsanto, received media attention in June 2005 after analysis by Dr. Arpád Pusztai and Prof Eric-Gilles Seralini on behalf of the German and French governments. The two toxicologists claimed the study demonstrated certain risks of MON 863, a variety of GMO corn intended for human consumption. They claimed the study showed kidney abnormalities and unusually high levels of white blood cells in rats that had been fed the corn. Pusztai had also carried out an earlier study – unrelated to Monsanto – which demonstrated that rats that had consumed GMO potatoes developed immune system defects and stunted growth after a time period corresponding to 10 years of human life. Such long-term effects, wrote Pusztai, are rarely considered in food safety testing. Pusztai’s potato findings were unpopular with his then employer, the publicly funded Rowett Institute for food safety in Scotland. He soon afterward found himself unemployed.

The GMO corn advocated by Mr. Walker and Dr. Czepó is intended neither for human nor rat consumption, but rather by cars, buses, tractors and trucks upon conversion to bioethanol. Czepó dismissed concerns that cross-pollination might cause “genetic migration” from cornfields of GMO ethanol feedstock to fields of non-GMO corn intended for livestock and humans. “Cross-pollination is not a problem if the percentage of GMO corn being grown is beneath a certain threshold,” he said. Whether he meant it would not be problem of regulatory violation for Monsanto or a problem for the environment and the lives of animals, plants and people was unclear. After speaking somewhat derisively about the tactics of “green NGOs” that oppose GMO architecture, he offered a small concession.

“No one will say there is no risk,” he said, referring to GMO corn, “but the microtoxins left by the rootworms can cause problems, too.”

Zero Energy Buildings

Mark Ginsberg of the US Energy Department appeared more comfortable speaking about “zero-energy buildings” than about GMO feedstocks or biofuels. He did speak buoyantly about his meeting with Hungarian architect László Szekér who described the primary goal of his firm, Intervallum Architects, “to design and build sustainable, climate-conscious, energy efficient buildings.” Ginsberg explained that Szekér, a devotee of fabled American architect Frank Lloyd Wright, has been working on a new Hungarian government building that will incorporate a number of energy-saving and energy generating features and, moreover, that he will soon be hosting on conference on zero-energy buildings.

Zero-energy buildings, said Ginsberg, are built so that they actually produce as much energy as they consume. This is done with a mixture of better insulation, windows, lighting and controls that avoid energy loss and improve efficiency and energy generating technologies such as photovoltaic panels to generate electricity and solar thermal systems to provide heating and hot water. He referred to initiatives taken in the US by Google, Toyota and Interface carpet, each of whom have installed solar panels at their facilities, but who have also improved their overall energy efficiency, both as a savings measure and as a gesture of “corporate social responsibility.”

“I don’t think incrementalism is the way to go,” Ginsberg said. “A mix of known, mainstream technologies such as solar, wind, biofuel, biomass and better efficiency is what we need. The transition to zero energy buildings is within our lifetimes.”

He added that the US government has been offering incentives in the form of tax credits to stimulate the transition to cleaner, renewable energy sources and greater efficiency. In Europe, he said, EU directives concerning biofuel consumption reflect an aggressive push to biofuel blends and flexi-fuel vehicles, which helped explain the number of biofuel technology providers included in the delegation which had started in Munich and continues on to other countries in the region after Hungary.

Investors Awaken to Potential of Heat below Hungary's Surface

2007-08-25T09:47:00.000-07:00

(a slightly edited version of this article appeared in the Budapest Business Journal on 6 January 2007)

By Jacob Doyle

Hungary is a well-known hotbed of geothermal energy. The layers of rock and sand in the depths of the Earth beneath its landscape are baked at a constant temperature nearly double that of the rest of Europe. Coupled with a wealth of deep-water springs, this underground heat has throughout history provided Spa owners with a practically free source of income. For much of the first half of the twentieth century, members of Hungary’s parliament warmed their feet from the circulation of thermal waters in the floors of their chamber. But today, the heat beneath Hungary’s soil remains a largely underutilized resource. The chill of rising energy import prices, matched with an opportunity to add value to real estate development projects, may, however, draw this bounty of heat and steam to the surface.

The earth in Hungary is not simply hot, it is also full of holes – possibly thousands - drilled over the course of the previous half century to heat spa waters and for use as wells in prospecting hydrocarbon deposits. Of the latter, one hundred or so are both currently out-of-use and owned by MOL. Two such wells, located near Iklódbördőce in Zala county, will be key to the success or failure of Hungary’s first geothermal electricity plant, as announced by MOL’s partner in the project, Enex HV, an Iceland-based geothermal technology provider which has been testing the wells, as reported in the BBJ last March. Enex CEO Lárus Elíasson has since confirmed that the plant hopes to produce a modest 2 to 5 mw of electricity, with the surplus heat redirected to nearby agricultural and district heating. But the plant’s significance to nation’s energy mix may likely be more profound.

Until now, electricity has never been produced from a geothermal source for commercial purposes in Hungary. In fact, less than 10,000 mw of electricity is produced from geothermal sources worldwide, with roughly a quarter of that in Iceland. Most plants use one of two technologies: steam or binary. Steam plants rely on steam emissions such as geysers to spin turbines and require steam temperatures of 200 degrees Celsius or more. Binary also relies on steam to spin turbines, but does so using cooler water - as low as 50 to 60 degrees C – which then generates steam from a liquid with a lower boiling point such as hydrocarbons isobutene or isopentene. The technology being discussed for Iklódbördőce involves forcing water deep into the earth where it becomes heated and returns to the surface hot enough to produce steam, most likely in a binary process.

The EUR 18.3m Iklódbördőce project is clearly a pilot for something larger. The World Bank-funded Geothermal Energy Development Fund has chosen to underwrite it, approving USD 3.7m USD in “Geological Risk Insurance.” Moreover, a third stakeholder in the project, Greenrock Energy of Australia, found the endeavor so alluring that it acquired Vulcan Geothermal Pty Ltd to gain a 32% share, Vulkan being one of the three original partners along with Enex and MOL. Greenrock is much more of a financial investor to the energy sector than it is a technology provider like Enex. Its short history is replete with acquisitions in the sector, first in Australia and now in Hungary. In its final activity report for 2006, Greenrock projects a positive cashflow from its activities in Hungary by 2008.

“Hungary has a strong and growing demand for clean, green, renewable energy, and has existing power infrastructure and electricity pricing incentives for renewable energy which make geothermal projects commercially attractive,” the report reads. “(this) Project should provide the Company with early geothermal energy production and near term cash flows in a country that financially supports the generation of electricity from renewable energy sources.”

MOL, meanwhile, has downplayed the undertaking, portraying it as more of an experiment in its ongoing lip-service to all things green and renewable. But the presence of Enex is telling. They have built geothermal electric plants for 70 years in Iceland and have now begun to export their technology, constructing a binary power plant in El Salvador, in addition to their activities in Hungary. Enex know the technology for extracting power from hot earth and they recognize the conditions that make this a fruitful pursuit. MOL may be cloaking its own prescience, having actively explored the geothermal potential of its many wells since the mid-90s, and cooperating with Enex since 2003.

With Hungary’s demand for electricity growing by 1m mw per year and gas import prices rising steadily along with an EU energy policy – unlike that of the United States’ – that keeps coal fired plants out of the picture, it is only a matter of time before means are found to tap the electricity potential of the nation’s renowned geothermal resource. The announcement in late September by Szentlorinc mayor Mayor Mark Gyorvari that his town will also see the launch of a geothermal electric plant in 2007 serves to reinforce the concept, the uncertainty of his claims notwithstanding.

Gyorvari told reporters of plans to drill as many as four wells down to 2500 meters at a cost of some HUF 12bn, the result being 10mw of electricity to supply both the needs of his town and to be sold to the national grid. Repayment of loans, he said, would take 10 to 15 years, roughly half the lifespan of the typical geothermal electricity plant.

Even if turbine-based generators aren’t the answer, where there is heat, there can also be electricity. A theoretically more seamless way to convert BTUs into volts is found in the nascent field of thermovoltaics. So far, thermovoltaic cells (TPVs) have only shown to be effective at much higher temperatures than those found in the Hungarian depths. Technology, however, sweetens with age. A thermovoltaic technique known as “electron jump” finds itself mentioned in the 2005 Integrated Feasibility Study on Geothermal Utilisation in Hungary, as a possible way to derive geothermal electricity in the future.

Electricity aside, and beyond its fabled use in Hungary’s hot baths, geothermal waters have for decades enabled local farmers to produce peppers and tomatoes in the dead of winter, piped through greenhouses to prevent crop freezes, thus accounting for 64% of all geothermal utilization and making Hungary a world leader in geothermic-assisted agriculture. Geothermal space heating for human purposes remains very limited, with only around 100 megawatts being currently utilized, according to a report from the World Geothermal Congress. This figure may soon begin to change, if the hopes of a geothermal-assisted property developer are realized.

Energy sector veteran Lajos Kisban, founder and majority owner of Hungaronafta, once Hungary’s largest independent petroleum wholesaler and exclusive supplier to Klubpetrol, a franchised chain of discount filling stations across Hungary, finds himself weary of a gasoline market dominated by MOL, and is leaving Hungaronafta to chair Green Synergy Rt., a company he co-founded in 2005 with Jozsef Szekely, a property developer and telecoms investor active in Spain.

At a board meeting held between Christmas and New Year’s, Kisban and Szekely thrashed out the opportunities presented by renewable resources in Hungary, taking up the cause of windpower and biofuels, but making it clear that geothermal is their spearhead.

“Hungary is a land rich in geothermal energy,” said Szekely, “at 3kms deep, you find a temperature of 200 degrees Celsius, while in other European countries the average is 80 degrees.”

While Green Synergy perceives opportunity in utilizing geothermal energy to produce electricity, more immediate plans call for its use in space and water heating, as well as in cooling for industrial, commercial, municipal and residential structures. Over the course of a decade, Szekely explained, a newly-built structure can reduce its overall monthly costs by 10% with the use of geothermal heating and cooling, as well as making it eligible for EU subsidies. Green Synergy’s current plans include a 70,000 m2 shopping center in Budapest’s 17th district, a Spa hotel in the village of Vajta in southern Fejer county as well as projects in Romania and Slovakia, each with a geothermal component to its energy mix.

“Geothermal heating and cooling could be attractive to an owner/occupier with a long-term interest in a particular property,” said a somewhat skeptical Hamish White, Investment Advisory Group Manager at Colliers International, a Budapest realtor. “But your typical developer is looking at a bottom line profit; the more money they spend on a building usually means the less they receive when they sell it.”

White added that for most office and retail developments, the millions of euro required for a geothermal energy system would be cost-prohibitive, allowing that large logistics or industrial projects might be more receptive.

“Without a doubt the concept will become more attractive over time,” White concluded. “With the cost of energy rising, an awareness will take hold that lower energy bills translate into higher profits.”

Can Coal Make a Clean Comeback in Hungary?

2007-08-25T09:42:00.000-07:00

By Jacob Doyle

Amidst today’s clamor for clean and renewable energy, it seems odd for anyone to speak of coal making a comeback. Historically the dirtiest of fossil fuels, coal has been systematically replaced in many developed nations as a fuel for electricity production, heating and locomotion by cleaner burning natural gas, petroleum and – more recently – by renewables such as biofuels, wind and solar. This has certainly been the case in Hungary where ten or more coal-fired electric plants have been phased out since the mid-1990s. But a comeback for coal is exactly what’s happening.

The vast coal reserves of leading industrial nations such as China, the US and the Russian federation, coupled with dwindling supplies of oil and natural gas, have helped fuel the construction of more than 550 coal-fired electricity plants around the world over the past 5 years. According to the US-based energy watchdog Natural Resources Defense Council (NRDC), some 150 coal-fired plants are currently proposed in the United States. As a result of this increased use of coal, emission of CO2 - a notorious greenhouse gas - is on the rise, by a count of 1.2bn tons per year.

There is, however, more than one way to burn coal. For decades, Hungarian coal was converted into “coal gas” and “coal oil” and used for lighting, heating and machine fuel. Old “gas factories” are still a common sight in Hungary, although no longer in use since the advent of widely available natural gas in the 1970s and 80s. Nonetheless, Hungary remains a nation relatively rich in coal, with nearly 5000m tons beneath its soil, according to the Hungarian Energy Office. As recently as 2004, it ranked 27th among the world’s coal-producing nations, mining 2m “oil equivalent” tons, used to power the country’s two remaining coal-fired electricity plants. But most of Hungary’s coal-fired plants have closed, along with the mines that supplied their feedstock. What’s more, the coal conversion technologies of the past are not viewed favorably today, owing to the large amount of CO2 as well as other nasty byproducts such as coal tar produced in the conversion process.

Turning black into green

A pair of newer processes, known as underground coal gasification (UCG) and carbon capture and disposal (CCD), may yet give coal a place in Hungary’s future energy mix - one that promotes the country’s energy independence without grievous cost to the environment. UCG is described as “the in-situ gasification of coal in the seam,” by UCG Engineering Ltd., a UK-based firm specializing in the field. “It is achieved by injecting oxidants, gasifying the coal and bringing the product gas to surface through boreholes drilled from the surface.” CCD, on the other hand, is a process whereby the CO2 emitted from the combustion of such coal-derived gas is liquefied and forced deep beneath the earth’s surface.

“In the long-term, Hungary may do well in sequestering CO2,” said Zoltan Lontay, a renewable fuels engineer at EGI Contracting Engineering Co. Ltd. “CO2 capturing is currently being researched and Hungary is believed to have good possibilities for it. There are many suitable holes across the landscape, both natural and man-made.”

In May 2006 there was communication between Professor Zoltan Puspoki, a widely-published geologist at the University of Debrecen and Dr. Michael Green of UCG Engineering about launching an initiative to develop underground gasification in Hungary. Dr. Green told the BBJ by phone from the UK that Professor Puspoki anticipated government support for the initiative, but that it’s been in a holding pattern for the past year.

“We’d be very interested in a Hungarian initiative,” said Dr. Green. “Based on what we know of Hungary’s coal gasification potential, we think there’s a tremendous opportunity.”

Green added that UCG Engineering would cooperate actively with the Hungarian government regulating bodies that govern the use of Hungary’s natural resources if such an initiative were launched. He described the coal gasification process used by his firm as one that produces a trio of gases: methane, hydrogen and carbon monoxide. Of these, the first two can be readily used as fuels, while the third could conceivably returned beneath the surface via carbon capture.

Opportunity trapped deep below

Lontay explained that most of Hungary’s coal lies deep beneath the surface, with some exceptions, such as the lower-quality, high sulfur content “lignite” that is currently mined from an open pit near Gyongyos at the base of the Matra mountains to fuel the nearby Matra power plant, owned by MVM Zrt. Deep coal makes for expensive mining, he added, which is one reason why coal has been largely phased out as a source or fuel in Hungary.

“The best example is Pecs, which was the last plant that had to make a fuel conversion from coal to gas,” said Elemer Illes, a director at EETEK Zrt., an energy services company in Budapest. “In its last phase, coal was imported from South Africa and Brazil. Pecs had the best quality coal but it was so expensive to extract, it no longer made sense.”

UCG, however, could potentially change this.

“UCG is a more cost-effective way of mining,” said Lontay. “It could serve as a means to recover energy from deep coal, which may not be competitive when mined using conventional technologies.”

Lontay explained that Hungary has a wealth of high quality “deep coal” in the Mecsek Basin near Pecs, in the Borsod region and in Transdanubia, where the use of UCG could potentially siphon energy reserves that could otherwise go untapped.

The concept of deriving methane gas from Hungary’s coalbeds was explored in 2002 in a joint US- and Hungarian Geological Surveys study, which revealed several trillion cubic feet (TCF) of gas potential in the Mecsek Basin in alone, with the conclusion that “the coalbed gas (methane) resource potential of Hungary should be further investigated in order to evaluate its potential impact on future energy budgets of the nation.”

At the Underground Coal Gasification Conference in London this past February, much talk was made about the potential for UCG in many parts of the world and a specific call was made for further studies to be performed in Hungary. There is an unconfirmed report that a mine in the Mecsek Basin has been purchased with UCG specifically in mind.

A cleaner burn with UCG and CCD

As for the environment, gasification alone could solve one of the major complaints associated with coal combustion in Hungary, notably the release of sulfur oxides (SOx). EETEK’s Illes explained that modern gasification techniques are in principle an acceleration of the natural release of component gases from coal, a process that leaves such unwanted elements as SOx behind in the remaining residue or slag. When combined with CCD, the technologies win praise not only from industry advocates, but also from the NDRC, in a statement issued in the second half of last year.

“Coal gasification with carbon capture and disposal (CCD) technologies are essential if continued use of coal is to be reconciled with preventing dangerous global warming,” the statement reads, “Long-term geologic disposal of CO2 (for thousands of years) is viable now and must be implemented quickly if we are to meet the challenge of sharply reducing global emissions this century.

NDRC concedes that power plants based on these technologies would be more expensive than conventional coal-fired plants, but contends that this is what it takes to retain coal as a viable fuel in a new era of climate change. While no plants using both coal gasification and CCD have yet been built, a coal-fired power plant in Eastern Germany last month began using CCD to enable the CO2 emission-free combustion of coal for electric power. Swedish energy utility Vattenfall has invested EUR 50m into the 50 MW facility in the town of Jänschwalde.

“Eventually it will be possible to generate electricity in lignite-fired plants without emitting carbon dioxide to the atmosphere – a major contribution to achieving a global solution to the climate problem,” said Lars G. Josefsson, CEO of Vattenfall at company’s 2007 annual meeting.

There are currently no active initiatives to use such technology in Hungary, reported Lontay. Instead, an additional 400 MW of capacity is to be added to the Matra plant, generated from the combustion of lignite coal. A debate is on regarding whether to use processes known as pulverized or fluidized combustion as a means to address the issue of SOx emissions. Then there is the approximately 1m MW of electricity imported each year from Ukraine, generated from coal combustion using older, heavily polluting technology. Unlike renewables such as wind and biofuels, there are no subsidies for clean-burning coal plants, although there is funding for research, he added. Will the prospect of tapping Hungary’s coal reserves in a clean, cost-effective manner eventually bring these technologies here?

“Mankind needs power and the EU needs electricity,” said Lontay, “and consumption is increasing.”

(a slightly edited version of this article appeared in the Budapest Business Journal on 28 May 2007)

Hungary Makes "Thin" Contribution to Solar Energy

2007-08-25T09:38:00.000-07:00

(a slightly edited version of this article appeared in the Budapest Business Journal on 12 February 2007)

By Jacob Doyle

Electricity was first derived from sunshine in the early 20th century when Spanish and German inventors tinkered with using the updraft in a “solar chimney” to spin electricity-generating turbines. For the past three decades, solar electricity has remained mostly the province of portable calculators, emergency roadside phones, space stations and satellites. As a source of larger scale electricity production, efforts so far have been relegated to “micro-distribution” solutions for small installations somehow cut off from a central electricity grid or as a backup or supplemental source for individual grid customers.

The history of solar energy in Hungary is more known for its gravestones than its success stories. Back in the 1990s, the Wallis group made a go at the solar business, only to abandon it as hopelessly unprofitable. And the much-heralded Dunasolar Photovoltaics, a major manufacturer of electricity-generating solar panels, ceased production in summer 2003.

Why, then, would one of Hungary’s greatest success stories in the Internet and telecommunications sectors make a switch to the energy sector, taking the helm of a company in the business of solar electricity based in Hungary?

“Timing is a huge consideration when entering a new field of business,” said Csaba Törő, CEO of Solar Thin Films inc. (STF), on his decision to go solar. “You start at the right time or you fail. For a variety of reasons, now is the right time.”

Törő was first drawn into the industry through his contact with Zoltan Kiss, a scientist with an extensive background in the development of photovoltaics (PV) - one of those technologies so advanced it is indistinguishable to most from magic - that transforms light into electricity. It was Kiss’ designs, said Törő, which laid the foundation for the erstwhile Dunasolar. Now it is Törő - with his own brand of magic that turns ideas into money - who is applying Kiss’ know-how to a profitable outcome at Solar Thin Films.

Banking on the business acumen he displayed with Euroweb International, the regional ISP he founded in 1997 that last year sold its Hungarian and Romanian units to Invitel for USD 30m, Törő conceived a business model and capital acquisition scheme for Solar Thin Films.

A PIPE – private investment in a publicly-trade company – was used to draw funds into a publicly-listed, “shell company”, that had been acquired for just this purpose and quickly renamed “Solar Thin Films inc.” Then an RTO - “reverse takeover” – was orchestrated between SRF and Kraft Elektronikai Zrt., a privately-owned maker of PV manufacturing machinery in Hungary. The result was USD 6m in start-up capital and a public listing in New York, with Törő as its CEO.

Perceiving the risks and complications involved in both selling solar-generated energy to the end-user and producing the panels themselves, Törő has chosen instead to focus “lower down the supply chain” – as he puts it – by producing the industrial machinery that factories require in order to produce solar panels. And not just any solar panels, but thin film solar panels of the variety pioneered by Zoltan Kiss.

Today STF has a workforce of 60 engineers and staff at its factory in Budaörs. Many personnel worked for Kraft in the days of Dunasolar, but were subsequently laid off, only to have returned with the arrival of Törő and – more significantly – some lucrative new contracts.

The first contract was a USD 1m deal in late 2006 with Energy Photovoltaics, inc. (EPV), a New Jersey, USA-based provider of PV technology, located close to Princeton University where Kiss is a longtime professor. Princeton is also home to the fabled Institute of Advanced Study where another Hungarian inventor, Janos Neumann, built the first computer based on a digital processor and developed the mathematical models for the atomic bomb.

EPV placed a second USD 1m order as 2007 began, followed by a USD 6m contract with China Blue Star, a vast state-owned glass-making and chemical industries firm in China. The Blue Star deal involves equipping a factory in China with sufficient output to produce enough PV panels in one year to generate 5MW of electricity. Further factory upgrades with Blue Star are in the works, said Törő, adding that other promising deals are in the pipeline in both Europe and elsewhere.

While STF recent success may reflect a rising demand for solar panels driven by a host of planned PV-based power plants, there are some significant differences between Kiss’ thin film solar panels and the more traditional multi-crystal or bulk technology solar cells that make up the majority of PV cells currently in use.

While both technologies rely on silicon, the thin film variety of PV panel – as its name implies - is much thinner than bulk. And unlike bulk solar panels, which typically consist of a large assembly of many small individual units, thin film panels come in integral sheets of transparent material of variable size. Törő spoke buoyantly about windowpanes of skyscrapers covered with thin film panels, thereby transforming entire buildings into solar power stations. A report from the US department of energy tells of thin film panels adhered almost invisibly to roofing shingles, hence maximizing surface area for power generation as well as eliminating the need for an additional structure on top of one’s roof to house the panels as is the case with bulk cells.

The downside is that thin film panels are less energy efficient than bulk, currently converting just 5% of the sun’s power they receive into electricity, compared with 15% for their older cousins. Nonetheless, Törő explained, measured kilowatt for kilowatt, thin films offer a much cheaper energy solution. What’s more, his company is developing equipment to produce a new type of thin film panel called Copper Indium Gallium Diselenide (CIGS).

“CIGS-based panels are now in commercial form,” said Törő. “They are a breakthrough technology and are garnering serious interest in the US. They could manage as much as 12% efficiency and cost a mere 1/3 of the cost of the old silicon cells per MW.”

Törő admitted that he and Kiss are far from alone in the business of developing and investing in PV technology. Global technology giant Kyocera, whose products range from mobile phones to kitchen products, has been a leader in PV technology since 1975 and shows no signs of slowing down. For the time being, however, Kyocera stands by the older multi crystal cells, announcing early last year its own increase in efficiency, while touting its record of success installing solar panels on the tops of parking garages, shopping centers and private residences. British Petroleum’s solar energy division, BP Solar, meanwhile announced last spring a EUR 160 million investment to build 278 PV power plants in Spain in conjunction with Santander, a large Spanish financial group. And possibly the biggest news of all was Google’s announcement to cover the buildings of its campus in Mountain View, California with enough PV panels to generate 1.5 MW of electricity, perhaps the largest installation ever for a single client.

There is currently a pair of PV power plants in Germany generating between 5 and 10MW. Due to open soon is an 11mw plant in Portugal. In the various phases of planning and development are a 15mw plant in South Korea, a 100MW plant in Israel and another plant in Portugal promising to deliver 115mw.

All this demand for solar panels has been accompanied by reports of a global silicon shortage, bringing up the cost from USD 20/kilogram in 2001 to US 50/kilogram in 2006, according to research published last year by Paul Maycock and Travis Bradford, from PV Energy Systems and the Prometheus Institute for Sustainable Development, respectively. While the alleged shortage has prompted a spate of concerned commentary in the energy news, causing some to predict that investors might be lured away to other alternatives such as geothermal and wind, Törő showed no signs of worry. Thin film technology, after all, requires much less silicon than its leading PV rivals. Moreover, Maycock and Bradford predict a 50% drop in the manufacturing cost of PV components by 2015.

A curious shortage parallel is the recent rise in price for corn and canola cooking oils, prompted by escalating demand for biofuels. The silicon shortage is more likely due to bottlenecks in the silicon processing industry, rather than to a diminished supply of the mineral feedstock itself. Silicon, it is estimated, composes two-thirds of all sand found on the average beach. Already chemical and glass giant Dow Corning is gearing up to cash in on the shortage, announcing a lower-cost replacement for the polycrystalline silicon currently used in PV panels, known as PV 1101, made from a metallurgical grade silicon feedstock.

For now, Csaba Törő is keeping his focus on another shortage.

“Market studies indicate a shortage of solar panels,” he said. “They are selling fast in both the retail and wholesale markets. The retail market consists more of homeowners and small equipment makers. But the end-user isn’t so much of a concern for us. We are looking much more at the wholesale market: construction firms that would be replacing windows in big companies as well as power plant makers. As for the future, this industry is technology-driven, we really don’t know which way things may turn. In the longer term, we may well equip our own factories, sell our own panels, and even sell our own power.”

On Renewable Energy and the Inevitable Paradigm Shift

2007-08-25T09:27:00.000-07:00

(a slightly edited version of this article appeared in the Budapest Business Journal on 10 April 2007)

By Jacob Doyle

The advent of renewable energy is changing the world more than just to make it cleaner, more efficient and sustainable. It is also threatening to change the way business is done in the energy sector, even in Hungary. Transparency, accountability and cooperation are part of the credo for the emerging sector of renewable energy. Comparisons between the early days of the Internet are well deserved. Shorter cycles of business development, new business relationships that combine the talents of the for-profit, not-for-profit, academic and governmental spheres and a new understanding of business opportunity as it relates to corporate responsibility each stand as hallmarks of success in the new sector.

“Clusters” is the new buzzword for strategic cooperation between entities that are making business in the renewables sphere possible. The public sector provides structural support for the clusters by helping to decide viable opportunities by providing subsidies and incentives as well as providing a framework for cooperation that designates a role for each player, be they energy start-up companies, NGOs, universities or incumbent energy providers.

Hyvolution, the cooperative initiative of 17 universities, NGOs and businesses in 13 countries aimed at the biological production of Hydrogen - for use in such energy applications as fuel cells - that was mentioned in last month’s Energy Source is an example of such a cluster. The Hyvolution cluster is rooted in the EU’s sixth “framework program” or FP6. The framework program is the central mechanism of the EU for funding R&D projects. The funding period for FP6 closed at the end of last year, succeeded now by FP7, which runs for seven years with a budget of over EUR 70bn. An emphasis on the development of renewable energy, collaborative research that crosses the borders of nations and economic sectors and a significant industry-driven component helped make Hyvolution a successful FP candidate. Hungary’s role, through the participation of the University of Szeged, is an example of how local brainpower factors into the renewables mix.

“For foreign investors seeking a climate of high risks and high returns, now is a good time for renewable energy investors to come to Hungary,” said Tibor Hejj, managing partner at Proactive Management Consulting Kft (PMC), and an active player in cluster activity, in a BBJ interview.

“Clusters create feedback loops wherein the local player cooperates with the foreign investor and with partners in R&D,” he said. “This way new links in the value chain are identified and fed into R&D priorities. If research is just research, then it may go nowhere. But if you are in a community of trusted partners, then the time to market is shortened, which is better for the investor, the consumer and opens the door for new investment opportunities.”

Hejj compared the current renewables sector to the burgeoning Internet economy of a decade ago. Traditional telecommunications companies in those days were in the same position that incumbent power companies are in today, he explained. Internet companies, conversely, have their counterparts in today’s renewable energy firms.

Hejj, called “the Steve Jobs of Hungary” by Fortune magazine in the early 1990s as then boss of Muszer Teknika, a Hungarian PC manufacturer, went on to lead a host of energy projects with E.on, MVM and the Paks nuclear power plant. More recently, Hejj has parceled his efforts between innovative energy projects and not-for-profit ventures such as providing employment and leisure for the disabled. His writings include a published essay, “The Economy of Sharing.”

“With the Internet we went from nicety to necessity,” he said, indicating that the same will be the case with renewable energy and conservation. In the coming years, he added, economies will adjust to the utilization of biofuels, solar and geothermal power. Moreover, what is now considered waste will come to be seen as a feedstock for material and energy production, a concept affirmed by David Butler, regional manager for Ireland’s state development agency Enterprise Ireland. Butler delivered a fireside talk two weeks ago to the Irish Hungarian Business Circle (IHBC) where he brought up the commoditization of “end-of-life” components resulting from fuel-hungry incinerators.

Hejj – himself vice president of IHBC – emphasized later that Butler’s comment reveals an emerging “holistic view” of production and consumption: yesterday’s waste is viewed today as a different state of resource, in a manner similar to ice being understood as a different state of water.

The transformation currently underway amounts to what Hejj calls a “paradigm shift” in the way energy business is done. The dominant paradigm remains –by and large – to address consumer demand by exploiting conventional feedstocks such as fossil (or even fissile) fuels to produce both energy – to meet this demand - as well as such negative externalities as pollution, toxic waste and a depleted resource pool. The new holistic paradigm enables recognition of both social and private costs as well as benefits, along with new ways of thinking about resources, production and waste.

Social costs such as pollution, climate change and the economic vulnerabilities posed by overdependence on fossil fuels are no longer discarded as inevitabilities associated with human progress. In the old paradigm, it still makes little or no business sense to pursue renewables; they’re simply not cost effective for individual firms. In the new paradigm, however, social costs are factored in with private costs to what becomes a broader business model. This, according to Hejj, enables new roles for government, academia and NGOs. NGOs can work as watchdogs to spot and define social costs, academia can lead research projects to develop more effective and efficient use of renewables and conservation of conventional feedstocks, and governments can set usage requirements, institute frameworks, provide incentives and subsidies. This all opens up opportunities for companies ready to embrace open collaboration and new business models that redefine corporate social responsibility.

An example that comes to mind is Hungarian auto parts maker Raba Nyrt., which earlier this decade transferred its energy assets to Hungarian energy services company (ESCO) EETEK Zrt. The result was a refitting of Raba’s energy infrastructure that included cogeneration gas engines that generate electricity and heating in the same cycle, an improvement over the old systems that generated them separately at greater cost to the environment. Subsidized pricing for co-generated electricity, along with an ESCO alert to the opportunities of the new paradigm, made this refit a viable business undertaking.

Awareness of these opportunities is clearly on the rise, as evidenced by an estimated EUR 63m invested this past year in Hungary in wind projects alone, most of which remain in the planning and permitting phase. A similar story rings true for biofuels projects. Again, Hejj sees a comparison to the Internet.

“Competition has started before real economic activity gets underway,” he said, drawing a parallel to the investments made in online banking in Hungary in the late 1990s before demand for such a service had even materialized. “Today we take online banking for granted. We rely on it. The same will be true for biofuels and other renewables.”

Hejj explained that his firm PMC and its partner organization Central European Management Intelligence (CEMI) have been examining the development of the biofuels market on behalf of clients. The results show that biofuels investments are still in the “waiting game” – delayed by an array of issues involving regulations, subsidies, labor and demand. Nonetheless, there is “huge capital interest” despite a physical shortage of actual projects. A similar story rings true for wind projects. A period of consolidation is starting to loom.

“Projects involving renewables have different lifecycles than conventional energy projects,” he said. “The customary feasibility studies, pilots and eventual roll-out is too time-consuming.”

Despite wind power’s integral contribution to the energy economies of Western Europe, incumbent energy providers in Hungary demonstrated little more than token interest, leaving the field to a group of smaller players, which Hejj divides into three groups.

The first group, he said, consists of players eager to make a big noise over their involvement in wind power, but who were actually playing the waiting game themselves. E.on Energy, Hungary’s largest energy distributor, once fit into this group with its financial support of the nation’s first grid-connected wind turbine, a 600kw station in the Danube village of Kulcs, less than an hour south of Budapest. Since then, E.on has chosen the role of incumbent observer, waiting for wind power to take hold and the field to narrow.

The second group consists of more demonstrably active players who according to Hejj, “took risks and acquired lisences, but neglected other factors such as land rights and building permits.”

The third group – the one poised eventually to succeed – Hejj sees as falling somewhere between and beside the other two. Hungary’s EETEK and Irish energy investor SWS are likely members of it. Both parties have experienced their share of frustrations in developing wind parks in Hungary, but both are determined to push forward.

EETEK CEO Lansing Gatrell identifies three keys to success for wind power projects in Hungary: first, an operating license from the national energy office (HEO); second, adequate financing; and third, a grid connection to the national grid supplied by national electricity company MVM. The operating license, Gatrell explained, is what entitles the wind farmer to sell electricity at a subsidized price. Many players have a grid connection, but far fewer have both operating licenses and adequate financing, as both EETEK and SWS do.

The BBJ reported last December of SWS’s tale of woe over being denied the size of license it was initially promised - a decrease from 108mw to 25mw – that pushed its project below the threshold of viability. But adequate financing may yet save the day. While the current situation denies the transfer of licenses from location to another, Galvin told the BBJ he hopes to acquire them.

“They may be able to buy some licenses later if the rules change,” said Gatrell, “as I’m sure they eventually will.”

Lingering charges of corruption that operating licenses were handed out as political favors shortly before last year’s election may be evidence of the old paradigm’s staying power. But Hejj sticks to his position that a virtuous model will eventually prevail. He insists that where there is cooperation, transparency and collaboration there has been and will be success in the new energy economy.

“Projects like these bring fresh blood and fresh spirits to Hungary,” he said. “To have resources is not enough. You must also know how to leverage them. Even good brains are not enough, you must be able to turn good research into business. It has been said that Hungary produces some of the world’s finest software engineers, but success comes when Hungary is known for producing the world’s finest software. If Hungary is to become the Kuwait of renewable energy, then a coordinated and networked alliance of local brains and resources, foreign investment and experience, along with structural support on the part of governments – local, national and EU – will produce tangible, sustainable results.”