What Makes for a "Good" Energy Trading Partnership?
On September 17, 2020, NBR hosted a virtual discussion entitled “What Makes for a ‘Good’ Energy Trading Partnership.” This was the fourth and final event in the series “Reshaping Visions for Energy Security in the Indo-Pacific.” The series is part of NBR’s program on the United States’ Asia: Enhancing Development and Growth through Energy (Asia EDGE) initiative.
WELCOME AND INTRODUCTION
Alison Szalwinski, The National Bureau of Asian Research
Jeanne Choi, The National Bureau of Asian Research
Tom Cutler, Cutler International, LLC
Lauren Diekman, U.S.-India Business Council
Pravakar Sahoo, Institute of Economic Growth, University of Delhi
Alison Szalwinski opened the event by summarizing the Asia EDGE initiative and NBR’s related multiyear research program. Moderator Jeanne Choi then explained that the aim of the session was to address the question of what makes for a good energy trading partnership and examine the political and economic conditions that are considered necessary for collective gains.
Tom Cutler began the discussion by identifying various challenges that would make achieving multilateral energy trading relationships more difficult, including tariffs, export subsidies, local content requirements, poorly functioning financial markets, and nontransparent legal systems. He elaborated on key elements of a “model framework,” including policy certainty in sanctity of contracts, open and fair competition on a level playing field, market-based pricing undistorted by subsidies, independent rate regulation, and effective interministerial coordination that is transparent, rules-based, and predictable.
Lauren Diekman pointed to the importance of government and industry cooperation, as it creates opportunities for industry to provide feedback to policymakers in establishing and promoting best practices in standards and regulations. She discussed examples of collaboration such as the U.S.-India Strategic Energy Partnership and the new Mekong-U.S. Partnership. She ended her presentation by arguing that cooperation is essential, particularly in a post-pandemic world, if we hope to see companies engaging with governments to address trade policy issues that are preventing investment in countries that need capital.
Pravakar Sahoo concluded the panel discussion by outlining India’s expected growth in energy demand and how trade agreements can play a role in meeting part of this demand. Clean coal technology, oil, gas, and other new technologies from the United States were identified as examples of sectors with the potential to expand trade opportunities. Dr. Sahoo also pointed to the need for investment in infrastructure to encourage further energy trade, due to the lack of integral infrastructure to bring energy to different markets and consumers.
Additional takeaways from the discussion include the following:
- Political will is necessary to create new trading relations, and this requires trust between partners. Developing trust is one of the more difficult conditions, as it touches on issues of regional security and often calls for countries to overcome historical animosities.
- While industry explores the possibility of a regional electricity grid in South Asia, there are issues of financial solvency regarding several utilities. Thus, finding opportunities to bring in revenue to build this new infrastructure will be integral to the development of a grid that can facilitate electricity trade.
- In order to make renewables a greater part of the portfolio of power generation sources, a technological breakthrough in energy storage will be necessary. Even though the costs of solar panels and wind farms have been decreasing, solar and wind must compete with the storage capacity and reliability of fossil fuels for baseload power generation. Doing so will require new, collaborative approaches to research and development.