When reading the GTZ energy News No. 6 August 2007 on how Pakistani's textile industries wasted energy, I was in a dismay since such case could and is happening in major textile producers in developing countries.
It is of course a daunting task to urge textile industry to start complying with energy efficiency. Most of them use outdated equipments. New investments on manufacturing technologies creating better energy efficiency are out of the discussion.
Yet, the approach of creating awareness might be the first suitable step. One of the ideas is to introduce textile industries with an energy audit. With this instrument, the amount of wasted energy converted into monetary values on operation and manufacturing processes is disclosed.
For a company with restricted budget on new investments, energy auditor could argue on the operational cost that could be saved through allocation of fund on energy efficiency measures, for instance by changing the lighting with more energy efficiency light. Other approach would be the increase of illumination intensity in rooms through the use of innovative painting which is capable to increase up to 20% illumination of the light reflection.
Next step with companies allocating a significant budget for energy efficiency, apart from the two approaches above, the company could start implementing better insulation. This way, the power use for air conditioning could be reduced since better insulation gives less energy demand to cool the room. One however should consider that such approach may also require the changing of air conditioning pipes as well as significant redesigning of the ventilation system which could significantly increase the cost.
Further step definitely is an investment on new textile producing technology with superior energy efficiency. This may require the large portion of the total budget allocated for the energy efficiency program. Even at the extreme case, the company may need to reinvest in new plant with energy efficiency and environmental friendly approaches. In the return, the company could save a significant portion of operational cost and maintain its business competitiveness.
Thursday, August 26, 2010
Tuesday, August 17, 2010
Opening energy market: buyer and seller perspectives
It is interesting when I read a report on ASEAN energy market spelling out the essence of opening access of gas pipeline or electricity transmission facilities. The access was said as a requirement for competitive market and efficient trade.
When we speak about competition, then it is always assumed that at least two players in economic activities exist to either buy or sell good(s). In buying a particular good, a buyer must convince the seller that it offers attractive profit to the seller while at the same time it ensures that the goods offered have better economic value compared with other similar alternatives.
In terms of energy, the buyer can have different options, but through rational economic calculation, the buyer chooses a seller matches with the offered good it needs, as well as the transaction cost it takes. Furthermore, the whole economic cost, direct and indirect, should meet the buyer expectation.
From a buyer perspective, the access to gas pipeline or electricity transmission will benefit the buyer since the buyer has more options to select, therefore meeting the allocation efficiency.
Speaking about seller, the seller could tap new opportunities to sell the goods they offer. With better technology and efficient transaction cost, the seller could offer a better choice to the buyer(s), therefore could tap more profit. In terms of gas or electricity trade, the seller could also offer better contractual terms and facilitate better deliveries.
Therefore, with the opening access to gas pipeline and electricity transmission facilities, it seems that this would create benefits for both buyers and sellers.
To achieve such condition, both buyers and sellers should be bound on free economic activities, with the most efficient providers gaining the maximum result of the trade. This requires deregulations and to some extends deliberalization of economic trading.
Yet, when speaking about energy needs, it should also be pointed out that the needs from domestic demand may constrain the buyer and seller trade activities. From the seller perspective, the social demand to provide gas or electricity to the local may restrict the amount of volume to be sold. By the same token, the restriction could also limit the supply of energy to the buyer.
Social demand could also increase by the progress in economy. Country selling gas or transmitting electricity could be constraint with the local demand in some years to come. The volume of unit used to be allocated for export could be no longer offered since some shares must be leaved for domestic demand, even with the price that would not be attractive enough for the seller perspective.
Another possibility comes from new competitors. With new LNG plant and terminal somewhere else closed to the buyer proximity, the transaction cost could be reduced. This would reduce the bargaining position of the existing seller, while gives benefit to the buyer. Consequently, a lower price is proposed from the buyer for the new contract which might be impossible for the seller to fulfill.
Summarizing the short article, the energy needs will eventually increase with the increase of the economy. The trade of energy through export which used to benefit the seller, may no longer appear with the demand to meet local needs. Energy sellers must look for new ways to survive with better technology, efficient delivery and tap new demand either from somewhere else or through domestic needs. On the other hand, buyer must look for new sellers with the most efficient way to trade so that it could also meet the supply for fulfilling their energy needs.
When we speak about competition, then it is always assumed that at least two players in economic activities exist to either buy or sell good(s). In buying a particular good, a buyer must convince the seller that it offers attractive profit to the seller while at the same time it ensures that the goods offered have better economic value compared with other similar alternatives.
In terms of energy, the buyer can have different options, but through rational economic calculation, the buyer chooses a seller matches with the offered good it needs, as well as the transaction cost it takes. Furthermore, the whole economic cost, direct and indirect, should meet the buyer expectation.
From a buyer perspective, the access to gas pipeline or electricity transmission will benefit the buyer since the buyer has more options to select, therefore meeting the allocation efficiency.
Speaking about seller, the seller could tap new opportunities to sell the goods they offer. With better technology and efficient transaction cost, the seller could offer a better choice to the buyer(s), therefore could tap more profit. In terms of gas or electricity trade, the seller could also offer better contractual terms and facilitate better deliveries.
Therefore, with the opening access to gas pipeline and electricity transmission facilities, it seems that this would create benefits for both buyers and sellers.
To achieve such condition, both buyers and sellers should be bound on free economic activities, with the most efficient providers gaining the maximum result of the trade. This requires deregulations and to some extends deliberalization of economic trading.
Yet, when speaking about energy needs, it should also be pointed out that the needs from domestic demand may constrain the buyer and seller trade activities. From the seller perspective, the social demand to provide gas or electricity to the local may restrict the amount of volume to be sold. By the same token, the restriction could also limit the supply of energy to the buyer.
Social demand could also increase by the progress in economy. Country selling gas or transmitting electricity could be constraint with the local demand in some years to come. The volume of unit used to be allocated for export could be no longer offered since some shares must be leaved for domestic demand, even with the price that would not be attractive enough for the seller perspective.
Another possibility comes from new competitors. With new LNG plant and terminal somewhere else closed to the buyer proximity, the transaction cost could be reduced. This would reduce the bargaining position of the existing seller, while gives benefit to the buyer. Consequently, a lower price is proposed from the buyer for the new contract which might be impossible for the seller to fulfill.
Summarizing the short article, the energy needs will eventually increase with the increase of the economy. The trade of energy through export which used to benefit the seller, may no longer appear with the demand to meet local needs. Energy sellers must look for new ways to survive with better technology, efficient delivery and tap new demand either from somewhere else or through domestic needs. On the other hand, buyer must look for new sellers with the most efficient way to trade so that it could also meet the supply for fulfilling their energy needs.
Monday, August 9, 2010
Free Trade Agreement: A discontent truth
When reading on the small sentence describing the ASEAN Free Trade Agreement (AFTA) from a report outlining energy integration market, I was a little bit dismay. Not because the description itself, but on the insight I tried to explore when reading the material.
The free trade agreement, by its logic consequence, means that a country has the right to trade / export its manufactured / processed goods to another targeted country. The export country has some degree of freedom to export the goods. The import country becomes consumer of the imported goods. This is fair enough unless when we consider that the import country has limited resource to produce and/or manufacture goods to be exported.
Logical implications of the Free Trade Agreement revolve around these arguments:
- Given the constrain on the economic condition, the import country will not become a potential consumer country
- Given the argument number 1, Free Trade Agreement between countries having significant economic disparities will not work unless it is precluded by Foreign Direct Investment (FDI) activities to the less developed countries
- The impact on FDI activities for the overall economy of the less developed countries joining FTA will take some time. Consequently, the benefit of FTA from the export country to the import country and vice versa will not appear in short time.
With such arguments, it would be essential from the export country to target specific goods to the import country having less developed situation. In such case the FTA will benefit both countries.
The free trade agreement, by its logic consequence, means that a country has the right to trade / export its manufactured / processed goods to another targeted country. The export country has some degree of freedom to export the goods. The import country becomes consumer of the imported goods. This is fair enough unless when we consider that the import country has limited resource to produce and/or manufacture goods to be exported.
Logical implications of the Free Trade Agreement revolve around these arguments:
- Given the constrain on the economic condition, the import country will not become a potential consumer country
- Given the argument number 1, Free Trade Agreement between countries having significant economic disparities will not work unless it is precluded by Foreign Direct Investment (FDI) activities to the less developed countries
- The impact on FDI activities for the overall economy of the less developed countries joining FTA will take some time. Consequently, the benefit of FTA from the export country to the import country and vice versa will not appear in short time.
With such arguments, it would be essential from the export country to target specific goods to the import country having less developed situation. In such case the FTA will benefit both countries.
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