round table comparative analysis of industrial policy worldwide moscow, april 27, 2004
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Designing effective national incentive and subsidy schemes in industrial policy (energy and water) Jerson Kelman Brazil. Round Table Comparative Analysis of Industrial Policy Worldwide Moscow, April 27, 2004. Key Considerations of Russia’s New Industrial Policy. - PowerPoint PPT PresentationTRANSCRIPT
Designing effective national incentive and subsidy schemes in industrial policy
(energy and water)
Jerson KelmanBrazil
Round Table Comparative Analysis of Industrial Policy Worldwide
Moscow, April 27, 2004
Brazil
Population(millions)
180
Territory(millions km2)
8.5
Per capita income(US$/year)
2,700
(?)
Key Considerations of Russia’s New
Industrial Policy
27. The strategy of minimal state interference in industrial policy has exhausted itself…
Key Considerations of Russia’s New
Industrial Policy
9. …An industrial policy cannot be tantamount to giving away of state budget resources.
12. The first priority would be supporting of exports … The mechanism for doing this entails state guarantees of up to 25 percent of from investments for creating such production project…
Key Considerations of Russia’s New
Industrial Policy
State guarantees
Case 1: Brazilian Electric Power Industry
Country Wide Integrated Electric
System
Installed Capacity = 73,000 MW
96 Hydropower plants > 30 MW
57 Regulating reservoirs
Country is interconnected by
70,000 km of high-voltage lines
Reservoirs and power plants in cascade
TRÊS MARIASV = 19 billion m³396 MW SOBRADINHO
V = 34 billion m³1,050 MW
ITAPARICAV = 10 billion m³1,500 MW
PAULO AFONSO IV2460 MW
XINGO3000 MW
MOXOTÓ440 MW
PAULO AFONSOI - 180 MWII - 480 MWIII - 864 MW
95% Hydro
Centralized
dispatch
The Liberal Power Sector Reform of 1996 (which failed…)
Rationale:
– To promote economical efficiency
Guidelines:
– Private investment and competition in energy generation and retailing
– Transmission and distribution to remain regulated, with provisions for open access
SOUTH-SE SystemEnergy Wholesale Market Prices (US$ / MWh)
THE ENERGY CRISIS OF 2001(load curtailment of 20%)
There was a market failure
• Government restored centralized expansion planning for new plants and transmission lines
• Owner of a new hydroelectric plant now gets, before construction, a long term contract with a pool of distribution companies (equivalent to an annual “rent”)
• All power plants operate according to rules set by central dispatch
Key Considerations of Russia’s New
Industrial Policy
15. Support of industrial infrastructure development needed by business.
16. The purchase area for industrial
development needs the following:…..- tougher control should be exercised over
investment activities of the “natural” monopolies…
Key Considerations of Russia’s New
Industrial Policy State control should be exercised on processes or on results?
Case 2: Subsidizing sewage treatment plants for cities
SEWERAGEResidential Service Coverage
56 % Urban areas
3 % Rural areas
47 % Brazil
River Pollution Water Rationing
TIETÊ RIVER IN SÃO PAULO
CANTAREIRASYSTEM
CANTAREIRA SYSTEM
Is responsible for the water supply to approximately 10 million inhabitants of the Greater São Paulo Area.
Guaraú Water Treatment Plant
Nominal Treatment Capacity: 33 m3/s
Water inflow at the entrance of Guaraú Plant – Cantareira System
Basic Assumptions and Objectives:
Government does not pay for civil works or equipment. It pays for results.
Government does not pay service provider before the plant is in full operation.
Terms of the contract between Government and service provider Government subsidy is 50% of the total
estimatedestimated capital cost of the plant, according to a Reference Value Table
Payments are made quarterly on fixed amounts for a period varying from 5 to 7 years, provided sewage is treated according to quality standard set in contract
Government makes a bank deposit in favor of the service provider equivalent to present value of the cash flow
Case 3: Integrated management of natural resources taking into account interests of multiple sectors of economy
Water allocation among sectors
Navigation
HydroelectricityUrban supply
Industrial supply
Tourism Fishing
Flood Control
Irrigation
Reservoirs and power plants in the São Francisco River
TRÊS MARIASV = 19 billion m³396 MW SOBRADINHO
V = 34 billion m³1,050 MW
ITAPARICAV = 10 billion m³1,500 MW
PAULO AFONSO IV2460 MW
XINGO3000 MW
MOXOTÓ440 MW
PAULO AFONSOI - 180 MWII - 480 MWIII - 864 MW
Loss of firm energy for each m3/s used for irrigation
2,79 MWmed
2,54 MWmed
2,08 MWmed
1,06 MWmed
0 MWmed
3,22 MWmed
SOLUTION..... River Basin Committee
Water Rights Enforcement Polluter pays
Water Resources Management