Exploring 10 Years of ERRA: My account of the organization’s success

Every piece of writing has its own story. The Energy Regulators Regional Association is celebrating  their 10 year anniversary in 2011. I was asked to write a publication chronicling their history and describing their success. This was an honor. The final product is a small book containing a compilation of interviews, historical research and contributions by leading regulatory thinkers.

10 Year birthdays are great!

The story behind this publication centers around working with a network of dedicated people that believe in the role and importance of independent and professional regulatory institutions.  That easily summarizes ERRA’s mission. Every person we approached for an interview was extremely kind in giving us some thoughtful and original ideas on the history and role of ERRA. As you read the publication, you can understand the difference that ERRA does make, and the support structure that it provides to national energy regulators. This widespread dedication enabled the 10 Year Anniversary publication to be that much more exciting to write. The passion that everyone expressed about ERRA’s purpose and mission, inspired me to match that passion.

This report is also special, because as so often happens when I finish writing an article or report, which can takes months or years to complete, I’m never really sure who – or whether anyone – reads it. Thus, I was pleased to hear that people were engaged with the publication at ERRA’s 10 Year Anniversary celebration. Their annual ERRA Energy Investment and Regulation conference in St. Petersburg, Russia served as the celebratory platform. It was also the location of the launch of this publication. A review of the schedule of speakers demonstrates the importance of ERRA. Just a few of these were:

  • Mr. Tony Clark, President, NARUC, USA
  • Mr. Sergey Novikov, Chairman, Federal Tariff Service of the Russian Federation
  • Mr. Robert Archer, Senior Energy Advisor, USAID, USA
  • Mr. Walter Boltz, Vice President, CEER (Council of European Energy Regulators)
  • Mr. Baohua Liu, Director-General, Power Market Regulation Department, State Electricity Regulatory Commission (SERC) of China
  • Lord John Mogg, CEER President and ACER Board of Regulators Chairman
  • Mr. Hans ten Berge, Secretary General, Eurelectric
  • Mr. Vladimir Knyaginin, Director, North-West Strategic Research Centre, Russian Federation
The geographic reach of ERRA

I conducted 35 interviews for the book. And there are two forewords, one by Tony Clark, the president of the National Association of Regulatory Utility Commissioners (NARUC), and another by Alberto Pototschnig of the Agency for the Cooperation of Energy Regulators (ACER). Some of the people interviewed include the speakers from the St. Petersburg conference, but also notable European energy experts, such as,

  • Jean-Michel Glachant -Director, Florence School of Regulation
  • Turkey representative, President Hasan Köktas: Energy Market Regulatory Authority (EMRA)
  • Konstantin Petrov, Director Markets Regulation of KEMA
  • Director, Romanian Energy Regulatory Authority (ANRE)
  • Ron Eachus -Chair of the Oregon Public Utility Commission/Former Chairman of the NARUC Committee on International Relations
  • Gabor Szorenyi, Director, Hungarian Energy Office
  • Peter Kaderjak, Director of the Regional Center for Energy Policy Research (REKK), at Corvinus University of Budapest

Inside the book, there is a wealth of information about the history and purpose of ERRA along with a description of all its activities. The rapid expansion of the organization in just 10 years, also indicates the growth in the need for regulatory knowledge in developing economies. This is where ERRA’s niche lies. It is successful in transferring the knowledge necessary to encourage professional regulatory decision making to occur.

There is an English version and a Russian version. I also have to thank everyone at ERRA and those connected with it, for working with me closely in revising and improving the drafts. The publication is based on their vision and their ideas for what makes ERRA so unique – and why it has grown so rapidly.

I’ll end this post with a word from ACER Director, Alberto Pototschnig:

The evolution of energy regulation compels regulators to work together even more. The Second Legislative Package, in 2003, required all EU Member States to establish a National Regulatory Authority for the energy sector; the Third Package is now granting these authorities greater powers and stronger independence. These are necessary factors for good regulation, but the enhancing of practices and the sharing of the best ones require much more: on the one hand, training and the dissemination of the regulatory culture and techniques; on the other hand, close cooperation among regulators at the regional level and beyond. This is where ERRA has made a key contribution over its 10 years of operation: it has an established track record of fostering cooperation between regulators and facilitating the process of market liberalisation and integration.

Nuclear Power in Europe – Debate results

The push for or against nuclear power has taken on a new dimension since the Fukushima nuclear accident in Japan earlier this year. The German government decision to go it alone, without nuclear power, is influencing the debate in Europe. These were some parameters of the debate last night at the Common Sense Society event that was held at the Ybl Palota in Budapest.

The organizers were kind enough to invite me to debate the merits of nuclear power in Europe. The discussion was moderated by András Deák (Center for EU Enlargement Studies), while Ada Ámon (Energiaklub) took the opposing side of why nuclear power is not needed in Europe. I argued for nuclear power and why it is central for reducing carbon emissions. However, it needs to be stated that I’m not an expert on nuclear power. But I feel strongly enough and informed enough, as I told the organizers, that I can explain why we need nuclear power to keep climate change in check. I believe I made a coherent case for it last night – or at least within the 7 minutes alloted and in the follow up questions. I thought I would share my bare bone notes here.

I'm clean and green.

My argument was based on the following:

Introduction:

1. Nuclear power is needed because of the failure of society and politicians to advance a more green agenda, with clean technology, earlier and fast enough.

2. Europe and the world need nuclear power for two reasons, because it admits zero greenhouse gases and it is a proven technology

My argument is based on T and T: Time and Technology.

  • We are almost out of Time
  • Green Technology needs to be widely deployed

However, there are strong time and technological limits that must be dealt with. The most pressing limit, is the rise in global temperatures due to CO2 emissions. This is particularly scary, when we consider the following study. There is now a greater than 50% chance that global temperatures will exceed 3°C increase by 2100. This is based on a study that says, pledges by countries are not sufficient to keep global temperature rises below the 2°C agreed in the Copenhagen Accord. Therefore TIME is of the essence.

Since time is of the essence we need to consider the evolutionary timeline of energy systems laid out by the United States Energy Secretary, Steven Chu. “Look how long it took to make the transition from wood to coal, coal to oil and gas: 50-60 years. We cannot make this transition in another 50 or 60 years. It will be too late for the climate” (Thompson 2010). Therefore, there is an urgency to transition to a new energy system. Only through a concerted effort, like in Germany, where there is a strong political and social agreement, that the high short-term price will be paid to transition to an energy system without nuclear power.

This transition in Germany is particularly important. (this point comes out of the discussion after the debate, but is very important). Germany is now ready to finance the shut-down of viable nuclear power plants. The ratepayers and the taxpayers of Germany will have to pay an extra amount to the owners of these facilities NOT to use them. This is a substantial development, as it indicates the importance of the transition. This is what occurred in the United States when they moved from a monopolistic to a ‘competitive’ electricity market. The sunk costs that had accrued under the monopolistic system, were taken over by states, in order to foster a more competitive electricity market, under the belief that electricity prices would be lowered. This is an important political and financial decision that does represent a systemic transformation in the dominant energy regime.

Time and Technology:

Homer can save the earth with his nuclear power

We need to consider the GLOBAL SCALE of climate change:

  • Downsides: Nuclear waste remains with us for 100,000 years. Finland is building a storage facility to last for 100,000 years.
  • Climate change caused by human activity, releasing CO2, remains with us for 100,000 years. If we don’t act within the next few years we will not be able to keep global temperatures low and even worse cataclysmic events will occur. How many people does severe weather kill each year – as a result of climate change? What will be the result of drought on global food supplies? (for a great discussion on this 100,000 year timeline listen to this podcast, with Curt Stager).

We also need to consider the LOCAL SCALE impact of nuclear power:

  • Fucushima has demonstrated the worst case scenarios of total meltdown of three reactors. The result has been a minimal environmental impact. No doubt very bad for the locals but on a global scale, much much less compared to the impact of global warming and the carbon and toxic emissions from coal power plants.
  • Third generation nuclear power is safer, less wasteful and is more efficient
  • Passive safety features. European regulators will require core catchers. A containment vessel around the main containment vessel.
  • Nuclear power is the outcome of the pursuit for a more sustainable and independent energy system from the 1960s and 1970s.

It is important to remember that energy systems are local. Local opinions and the governance systems matter – they choose the path for technology that will be producing zero carbon emissions by 2050. WE MUST DEVELOP MORE NON-CARBON BASED ENERGY SOURCES NOW. NUCLEAR GETS US TO WHERE WE NEED TO BE WITHIN THE TIMEFRAME. Not just because it is clean, but because it works.

The EU’s Second Strategic Energy Review, calls for decarbonizing Europe’s electricity system by 2050. How can we get there? Nuclear power is a product of past efforts to create a more sustainable and clean energy system. It was a concerted goal that had political, social and agreement with industry. We don’t have time to reinvent the wheel. Therefore, nuclear power is needed.

Conclusion:

The present energy system is based on a concerted government, economic and social regime. Focused over years, decades, to build a particular system. It is these factors that will shape whether we need to use nuclear power to meet our future energy demands. It would be great not to use nuclear power, but is that realistic? At least for the next 100 years? If gas is the present bridge fuel for another 20 or 30 years, then nuclear – and third generation nuclear is the bridge fuel for the next 60 to 100 years. The focus is on carbon reduction, AND QUICKLY. If we don’t do that then the planet for the next 100,000 years will be broadly impacted. Fukushima and Chernobyl show us the devastating localized impact of nuclear power accidents. We need to consider not just the developed economies of Europe, but the planet as a whole and the impact that our demand for energy has on the planet. If society, politicians and the economic sacrifices can build a zero carbon energy system without nuclear power – great, but so far outside of Germany there is not this widespread support. Six European countries overwhelming rely on nuclear power as their main source for power. Forcing them to develop a new energy system, along with other countries that use nuclear power too, will require a very long lead time. 50 or 60 years, we do not have that long. Nuclear power, because it is the product of a previous energy regime, can be used as a key power source to transition the planet to the next clean energy system.

 

 

 

    1. Time and Technology

  1. GLOBAL SCALE

  2. Downsides: Nuclear waste remains with us for 100,000 years. Finland building a storage facility to last for 100,000 years

  3. Climate change caused by human activity, releasing CO2, remains with us for 100,000 years. …………….If we don’t act within the next few years.. … How many people does severe weather kill each year – as a result of climate change?

LOCAL SCALE

  1. Fucushima has demonstrated the worst case scenarios of total meltdown of three reactors. The result has been a mininumal environmental impact. No doubt very bad for the locals but on a global scale, much much less compared to the impact of global warming and the carbon and toxic emissions from coal power plants.

    1. Third generation nuclear power is safer,less waste and is more efficient

    2. Passive safety features. European regulators core catcher

    3. Nuclear power is the outcome of the pursuit for a more sustainable and independent energy system.

    4. Why is nuclear power positioned so well for this transition?

  2. Energy systems are local. Local opinions and the governance systems matter – they choose the path for technology that will be producing zero carbon emissions by 2050. MUST DEVELOP NON-CARBON BASED ENERGY SOURCES NOW. NUCLEAR GETS US TO WHERE WE NEED TO BE WITHIN THE TIMEFRAME. Not just because it is clean, but because it works.

  3. EU’s Second Strategic Energy Review, calls for decarbonizing Europe’s electricity system by 2050. How can we get there? Nuclear power is a product of past efforts to create a more sustainable and clean energy system. It was a concerted goal that had political, social and agreement with industry. We don’t have time to reinvent the wheel.

Energy will liberate Hungary from Neoliberal and Western Shackles

The energy sector in Eastern Europe benefited from the central planning efforts of the communist era. The oil, gas and electricity networks built during this time were robust and based on a high level of security of supply. While the oil and gas transit networks may have resulted in dependence on Russian sources, they were nonetheless robust and served to drive national economic activity. In 2004 when many countries in the region joined the EU their interconnected electricity network were more robust than most systems in Western Europe.

The days of central planning, when state owned energy companies were strong

The privatization efforts that begin in the mid-1990s and carried through the mid-2000s (see my Energy Policy article) were marked by selling electricity and gas distribution companies. This corresponded to the establishment of energy regulatory authorities to oversee the activities of these private companies, ensure the public good is fulfilled and keep prices in check while increasing reliability. This regulatory system, when allowed to function, can serve the interests of consumers and ensure private companies make investments while receiving a fair rate of return for their efforts.

Some would mark this last period as neoliberalism with the introduction of private capital and withdrawal of the state from the direct provisioning of public services in energy. A more accurate term would be the rise of ‘sectoral governance’ (Bulmer et al 2005), that is occurring globally. (But that is for another post and the basis of my next journal article). ‘Some’ (bad term to use, but I’ll do it here), consider private ownership in the energy sector, which is the driver of economic activity and has a direct impact on household budget and inflation as an essential state function. State ownership, it could be argued, is important to provide stability, long-term planning and investment to serve the national economy.

In Hungary, ‘the state’ is now in a process of reclaiming ownership rights lost during the ‘neoliberal era’. The need to reclaim ownership in the energy sector is about building up a strong industrial base for the country nation, as pointed out by Peter Szijjarto, the Hungarian Prime Minister’s Spokesman.

“We do not have a serious national industry so in order to reanimate the national industry we need to take such tough steps as for example reclaiming MOL…. In order to make Hungary strong again, we need to eliminate energy dependence, and we need to restore the national character of our strategic companies in parallel with their international operation,” Szijjarto said (Reuters, and my take on it).

Hungary enters a new era with reclaiming ownership in energy companies. The sweeping election of Fidesz, according to Prime Minister Orban allows them to finally end the communist era in the country, thus the need for a new constitution and to reshape the country according to their ‘post-communist vision. The introduction of high taxes on sectors of the economy that are privately held, like banking, energy and retail that were done to save Hungary from economic ruin, as it was explained at the time, now begin to appear as part of a broader reworking of the economic order in Hungary. Orban is leading the Fidesz-KDNP coalition in the process of not just transforming the country from a communist-socialist-private capital haven, which is represented in its own local form, but slaying the broader global order of neoliberalism. Hungary is now, according to Orban, leading the world into a post-neoliberal order.

“While we have put an end to the basic principles of a neoliberal era, we have yet to build up the non-liberal economic policy of the 21st century, in terms of planning, coordination and practices,” he said, adding that because there had been no planning in the real economy, financial planning was askew.

“The old world order is on the verge of collapsing; we have no reason to wait for the advice and opinions of opinion-shapers stuck under the rubble,” Orban said.“We say, however, calmly, politely and unflinchingly: this is none of your business; this is the business of Hungarians,” the prime minister said (MTI, my take on it).

The end of Neoliberalism and American post-war capitalism

It is this new “non-liberal economic policy”  that Hungary will be leading the region and the world in. While Romania and Poland pursue privatization of part of their energy sector, under the old way of thinking that private capital can modernize the sectors and lift some of the economic burden from the state, Hungary views the energy sector not as a burden, but as the fundamental building block of a state owned industrial complex (haven’t we seen this before?).

But what is the post-neoliberal era that Orban describes he is putting in place? Well, this is a huge question that only quoting Gramsci, Polanyi and the like can answer fully – or only partly. But essentially, don’t expect the worker or the tax payer to be better off. The 2 billion euro price tag of MOL demonstrates that it is the taxpayer/worker/citizen that will be paying for this new order, through higher taxes and services (i.e. feed through of ‘crisis’ taxes in inflation) while also having their working rights eliminated, as demonstrated by the total elimination of worker rights in Hungary over the past year. In fact, the post-neoliberal era looks like it is described in this excellent article by Elmar Altavar as presented at a conference in Venezuala in 2008.

The crisis of neo-liberal ideology does not necessarily result in a post-neoliberal order which aims at social forms beyond capitalism. In the contrary, post-neoliberalism in finance can result in new forms of capitalist hegemony which again include a stronger role of the state. Contrary to ‘old Keynesian’ state interventionism, the new interventionism – including austerity with regard to the social wage – will not be designed in favour of workers’ interest and the environment, but in an undisguised political support of financial interests.

Understanding Capitalism takes Marxism

National solutions become the way out of the current neoliberal crisis of capitalism. According to Altavar the state comes back into the economy to provide support to the faltering capitalist system. But while Altavar describes a heavy burden being placed on the taxpayer to finance capitalism to save it from drowning, Orban uses the public monies, not to save the banks and the capitalists which traditionally drive growth, but uses the cash, along with the capitalist’s money, to finance state acquisition of companies for the purpose of reintroducing the state into the market based economy. This occurs in strategic sectors to benefit the Hungarian nation – and state. In this case, the energy sector.

Under Hungary’s new post-neoliberal energy order, energy companies will be used to extend the Hungarian nation-state into domestic and foreign economies. Under this nationalist guise, this may include active participation in former Hungarian lands (Romania and Croatia). The Hungarian territorial state is only a core vessel for the economic activities of the Hungarian nation. If growth and economic prosperity, under this line of thinking, is to occur then the whole Hungarian nation throughout the Carpathian Basin needs to benefit.

The re-industrialization  of the Hungarian nation will be led and financed by the Hungarian people and companies. The logic continues, that MOL, with the help of state owned electricity provider MVM, will lead this economic revival. Along the way, Hungary will boost its energy security through diversification of energy sources (although this remains dubious if  100% of oil is from Russia). The Hungarian nation will become strong by energy, industrial and financial diversification. Those leaders and financiers in America and Europe that Orban scorns, will hold little sway over how Hungary carries out its economic and social post-neoliberal revolution.

 

The rebirth of Hungary and the fall of Neoliberalism

I thought I would post a few interesting statements by Hungarian political leaders I came across this week, along with a brief personal reflection.

Reuters:

 

“We do not have a serious national industry so in order to reanimate the national industry we need to take such tough steps as for example reclaiming MOL,” Peter Szijjarto told private broadcaster HirTV in an interview.

“In order to make Hungary strong again, we need to eliminate energy dependence, and we need to restore the national character of our strategic companies in parallel with their international operation,” Szijjarto said.

He did not elaborate on the possible further steps or the areas of industry involved.
Source

MTI:

Neoliberalism is over

Prime Minister Viktor Orban told a conference assessing the first year of the centre-right government on Tuesday.

“While we have put an end to the basic principles of a neoliberal era, we have yet to build up the non-liberal economic policy of the 21st century, in terms of planning, coordination and practices,” he said, adding that because there had been no planning in the real economy, financial planning was askew.

Orban went on to reject the idea that Hungary should listen to foreign criticism.

“It is worth listening to ourselves and we should not wait for either approval or the contrary,” Orban said.

“In the past we have often abandoned important plans just because someone in America, Paris, Berlin, Brussels or London didn’t like it and let ourselves be discouraged, only to give up on the whole thing in the end,” he said.

“The old world order is on the verge of collapsing; we have no reason to wait for the advice and opinions of opinion-shapers stuck under the rubble,” Orban said.

He said Hungary was still likely to come under attack for various reasons, including the new constitution and economic policy.

“We say, however, calmly, politely and unflinchingly: this is none of your business; this is the business of Hungarians,” the prime minister said.

source

The Internet:

They fought for freedom to join the West

Towards the end of the Second World War, Hungary is occupied by the Soviet army and all streets, squares, institutions are renamed. People who continue to use the old names are arrested and beaten up by the communists.

Immediately after the occupation, an old man from a village, visit’s the country’s capital, Budapest.

He gets lost. Not knowing that the streets have been renamed, he ask people for various place names.

Old man: “Excuse me, sir, where is the “Heroes’ square”?

Pedestrian # 1: “No, old man, don’t use that name! It’s “Stalin Square” now!”

Later…

Old man: “Excuse me, sir, where is the “Chain Bridge”?

Pedestrian # 2: “Oh my God! Don’t use the old name of the bridge! It’s “Red Army Bridge” now! If you say that once more, you could get into jail, be careful!”

The old man gets terrified and takes a walk on the bank of river Danube.

He’s spotted by a soviet officer who shouts at him with anger.

Soviet officer: “‘Ay, old komrade! What ‘r’ ya lookin’ at?”

Old man: “Nothing! I’m just admiring the Volga!”

Source

Hungary after the fall of Neoliberalism