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Round Table Comparative Analysis of Industrial Policy Worldwide Moscow, April 27, 2004

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.

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Round Table Comparative Analysis of Industrial Policy Worldwide Moscow, April 27, 2004

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  1. 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

  2. Key Considerations of Russia’s New Industrial Policy 27. The strategy of minimal state interference in industrial policy has exhausted itself…

  3. 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…

  4. Key Considerations of Russia’s New Industrial Policy State guarantees Case 1: Brazilian Electric Power Industry

  5. 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

  6. Reservoirs and power plants in cascade TRÊS MARIAS V = 19 billion m³ 396 MW SOBRADINHO V = 34 billion m³ 1,050 MW MOXOTÓ 440 MW PAULO AFONSO I - 180 MW II - 480 MW III - 864 MW 95% Hydro  Centralized dispatch ITAPARICA V = 10 billion m³ 1,500 MW XINGO 3000 MW PAULO AFONSO IV 2460 MW

  7. 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

  8. SOUTH-SE System Energy Wholesale Market Prices (US$ / MWh)

  9. 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

  10. 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…

  11. 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

  12. SEWERAGE Residential Service Coverage 56 % Urban areas 3 % Rural areas 47 % Brazil

  13. River Pollution  Water Rationing TIETÊ RIVER IN SÃO PAULO

  14. CANTAREIRA SYSTEM

  15. 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

  16. 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.

  17. Terms of the contract between Government and service provider Government subsidy is 50% of the total estimated 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

  18. Case 3: Integrated management of natural resources taking into account interests of multiple sectors of economy

  19. Water allocation among sectors Hydroelectricity Urban supply Navigation Industrial supply Flood Control Irrigation Tourism Fishing

  20. Reservoirs and power plants in the São Francisco River TRÊS MARIAS V = 19 billion m³ 396 MW SOBRADINHO V = 34 billion m³ 1,050 MW MOXOTÓ 440 MW PAULO AFONSO I - 180 MW II - 480 MW III - 864 MW ITAPARICA V = 10 billion m³ 1,500 MW XINGO 3000 MW PAULO AFONSO IV 2460 MW

  21. Loss of firm energy for each m3/s used for irrigation 3,22 MWmed 2,79 MWmed 2,54 MWmed 2,08 MWmed 1,06 MWmed 0 MWmed

  22. Water Resources Management SOLUTION.....River Basin CommitteeWater Rights Enforcement Polluter pays

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