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Diplomacy in Action

International Energy Security: An Overview

FPC Briefing
David Goldwyn
International Energy Security: An Overview
Foreign Press Center
Washington, DC
November 5, 2009


Date: 11/05/2009 Location: Washington D.C. Description: David Goldwyn, State Department Coordinator for International Energy Affairs gives an overview of "International Energy Security" at the Washington Foreign Press Center, November 5, 2009. © State Dept Image

Video

11:30 A.M. EST

MODERATOR: Good morning, and welcome to the Washington Foreign Press Center. We’re very pleased to be able to welcome David Goldwyn, the State Department Coordinator for International Energy Affairs, here today. He’s going to provide an overview on international energy security. He’ll also discuss his recent trip to Pakistan and an upcoming trip to Africa. He will start out with an opening statement, and after that he’ll be glad to take your questions.

MR. GOLDWYN: Thank you, nice to be here. Shout out to our friends from Canada in the back of the room.

My name is David Goldwyn. I’m Secretary Clinton’s Coordinator for International Energy Affairs. This is a new position at the State Department and it has the goal of mainstreaming energy security as a core function of U.S. foreign policy. And for the uninitiated, United States energy security has been primarily about oil security, avoiding a price shock. And the answers to that have been security of demand, about security of supply, diversity of supply, and having open markets that allow supply to meet demand.

But for the rest of the world, energy security is really about access to electricity, it’s about access to supply, and it’s really much more fundamental to their national security and much more fundamental to their survival. And so my work at the State Department is, in part, to pursue security of supply to make sure markets are protected. But increasingly, it’s to provide help to countries which are trying to normalize their electricity sectors. Because the chronic problems for countries around the world is that if you don’t charge a rate for electricity which covers the cost of electricity for those who can afford to pay it, then no one invests in the system and you don’t have enough generation, you don’t have enough transmission, you have rolling blackouts, and you don’t have enough electricity for fundamental economic activity.

And it’s a hard problem because you want to provide electricity for everyone and you want to be able to help the poor, but you don’t want to subsidize everyone. And this is sort of a segue to the work that we’re doing in Pakistan. October 23rd, 24th, I was in Islamabad for a U.S.-Pakistan energy policy dialogue, and we talked about a lot of things. But we talked mostly about electricity.

And Pakistan was a country that in 1994 had the ability to export electricity, and they were looking at export routes because they had a surplus of generation. But over the ensuing years, the cost of fuel rose, demand for electricity rose, but the price of electricity didn’t. And so what happened was there wasn’t enough generation, there wasn’t enough transmission, existing facilities fell into disrepair because there wasn’t enough money in the system to improve it and to expand it. And so last summer, they saw rolling blackouts and riots and huge disruption to the economic activity of the people in the country, textile manufacturers and others, who were just trying to do their business. And imagine trying to do your business when the lights are out eight, ten hours a day.

And so we talked to Pakistan about their entire energy strategy, but first off was electricity. And we were really encouraged, I mean, first at the very deep and concrete understanding of the full range of Pakistani officials about the problem. This is the finance minister, the power minister, the people who are in charge of natural gas, the people who are in charge of the utilities. And second, we are convinced that they have a very solid plan to address their needs. Part of it is by restoring financial stability to the system, clearing off debt, and then creating entities which can survive on their own. Another is by providing additional generation. The plans are for 2,500 megawatts by December and nearly 4,600 megawatts of additional generation capacity by next June.

And if they implement the plan, which they have devised, then they should be able to avoid the rolling blackouts of last summer. The key element with that will be for them to continue on the program which they have adopted with the IMF, which is to raise the tariffs, the cost of electricity, to a market rate by next summer. So they have taken two very courageous steps so far in raising the tariffs, I think, by almost 24 percent – 6 percent the last time. There’s a 12 percent hike due in January and then there’s another one in – a 6 percent hike in April. But we heard an incredibly strong commitment from the Pakistani Government to implement the agreement which it has negotiated with the IMF. And if they do that and make those hard choices, then they will restore stability into the system.

We talked to them about a range of other issues, too. Pakistan is fortunate in the sense that it has a large number of natural resources. And if it creates a fiscal regime where it can develop those, it can provide a significant amount of its own throughput or feedstock for power generation. They have natural gas. They have oil. And they are creating a system where they can introduce renewable energy into the system, particularly wind, but also basic efficiency measures which would reduce demand. And so while they’re trying to increase generation and increase supply, they can reduce demand, and that will provide not only more affordable electricity for the country, but also more stability in terms of adequate electricity.

And so after we had our meetings with Pakistan where we, after two days, really got into a granular level with almost every aspect of the – of their energy sector, Secretary Clinton, as part of her visit, announced the first phase of a signature energy program which is aimed at reducing the problems in the electricity sector. Part of it was improving efficiency, and this was focused on tube wells which were used to pump water in agriculture. Another was in funding for rehabilitation of some of the existing generation facilities, which could provide more power over the next 12 to 18 months. And part of it is capacity building or management assistance to four of the six distribution companies, essentially, to help them, once they become independent, manage their business, improve their management, train people on how to run a distribution company for the long term. That was Secretary Clinton’s contribution which was well-received by the Pakistani Government and informed by our conversations with them.

And it’s part of a greater picture. The Asian Development Bank has under consideration a $3 billion commitment, half of which goes to generation and distribution, and the other goes to energy efficiency, and so they are an important donor. And the United States is a major shareholder in the Asian Development Bank, but through them, through the World Bank, through the Friends of Democratic Pakistan, you have a lot of players who are working with the Government of Pakistan to try and transform the sector.

I think it’s – anyone who knows Pakistan well – most of all the Pakistanis – will tell you that there’s no quick fix to the sector. It’s been 25 years and a generation of this crisis, so there’s no easy cure. But they have very sound plans, which have been endorsed by the international financial institutions to get this right. And the United States is committed to helping them as a partner through this process to get management right, to get generation increased, and to help them develop their resources. And as they develop their own national energy strategy – if they implement it – they can succeed.

As I said at the outset, it wasn’t that long ago that Pakistan was an exporter of electricity, so they have the capability; they have the management expertise; they have the natural resources to succeed. And what they need is the political commitment to make these hard decisions. And so we have seen this political commitment made and we have seen it fulfilled, but it will be a continuing effort. And my hope is we will be there to help them and support them. But by next summer, they will have this new generation up, they will avoid these blackouts, and that will give them the political strength and the support to take further steps.

Let me pause there.

MODERATOR: Okay. We will open it up for questions. Just a quick reminder – we have microphones on each side of the aisle, please wait for the microphone, and will you please state your name and your news organization. We’ll start here in the front.

QUESTION: Thank you. Mr. Goldwyn, you refer to an ADB potential plan for about $3 billion investment in energy sector. Would you like to expand on that? And what is the U.S. commitment to that?

MR. GOLDWYN: The ADB is negotiating these loans, and they are also the primary coordinator of donor assistance, so the United States is a shareholder, a leading member of that. But their plan is – excuse me – to spend about $1.6 billion on improving the country’s transmission and distribution sectors, and the remaining balance is at developing – focused on developing renewal energy and improving energy efficiency, so this assistance goes to things like dam extensions, new transmission lines. Pakistan’s electricity sector is segregated between north and south, so integration of those lines and improvement of the voltage, which those lines can carry, will enable these – you know, you build a new dam, you build a new plant, you’re generating more electricity. You have to make sure the transmission line can hold that electricity and distribute it. You also want to be able to distribute electricity on a more wider basis to other towns.

Another part of the ADB assistance in terms of energy efficiency is going to be things from replacing lighting in its major cities, which can have a huge impact to help in the agricultural sector, creating essentially new things like these new tube wells, but also helping cities figure out how they can improve efficiency. They’ll also look at things like building codes and appliance standards for Pakistan, and really for any country in the world, the real challenge is, if you make a capital investment in upgrading your infrastructure and upgrading the technology, you can achieve huge savings, but there’s a large upfront capital cost to doing that. And if you can make a loan to do that, and you have the commitment to change the infrastructure, then you can change the slope of the demand curve.

MODERATOR: Let’s go to the back here.

QUESTION: Alex Grigoriev, Voice of America Russia. Sir, do you have any such projects with Russia or in other post-Soviet countries?

MR. GOLDWYN: We have actually for quite a long time. Different countries are at different stages. Our work with Russia – and I’m going back 15 years ago – was on things like district heating and introducing efficiency measures, really, initially, it was things like thermostats into cities and localities to help reduce their energy bills. We helped foster ESCOs, or Energy Savings Companies, which were essentially private companies which can earn money by putting up the capital cost of an efficiency improvement, and then if they save a dollar on your electricity bill, they get paid 10 cents. So it was developing these and combined heat and power, which was very important in Russia also because you have a lot of heat generated and so the excess can be used for power. So it was the kind of things that we did with Russia.

I’m not spending a lot of time on Russia myself these days because we have Ambassador Morningstar to pay attention to that. But that’s the simpler answer.

MODERATOR: We’ll go here and then here.

QUESTION: Hi, thank you. Sonia Schott, Radio Valeria Venezuela. I was wondering why you didn’t mention Latin America. It’s a great source of energy, not only to the United States, but to the others parts in the world. So I would like to know if there is any plan or any project regarding energy, considering there is prices – oil prices are rising. There is a lack of investment. And you talk about energy efficiency; what about biofuels? Could you please elaborate a little bit on that? Thank you.

MR. GOLDWYN: Sure. No, my pleasure. And I didn’t intend to disparage the Middle East, Africa, or anybody else either. I came mostly to talk about Pakistan today. But in terms of security of supply, I mean, it’s – Latin America is the region which provides the greatest share of U.S. energy security, and we have large imports from Mexico and Venezuela, also Colombia and, increasingly, Brazil now that it’s an exporter. So it’s a critically important region.

And so we have a really very broad relationship with all those countries bilaterally. We also have the Energy and Climate Partnership of the Americas. Secretary Chu has announced a ministerial this April. And so we really work across the gamut. And in terms of supply, we encourage open frameworks to encourage investment in the upstream sector. In terms of efficiency, we have partnerships with a number of countries to help them, primarily in the electricity sector, improve electricity.

In Central America, that’s pooling – having smaller countries pool their electricity system so that they can achieve economies of scale. In Mexico in particular, we’ve got very significant partnerships from everything from using electric buses to introducing efficiency measures into the consumption sector, to cooperation on appliances and building codes.

On biofuels, we have a partnership with Brazil on biofuels, which is really looking at the standardization of the biofuels industry worldwide to make it viable, and also, I think in the next generation, to help other countries, particularly in Latin America, achieve second-generation biofuels, to use jatropha and other things as a way of producing it.

So we have a very robust relationship with them and Latin America is important. And I could go on in Asia, Africa, and the Middle East and other places too, but it’s a package in all of the regions, which is security of supply, efficiency and demand, and reducing climate emissions. And it works well as a piece because every country has an interest not only in reducing emissions, but in saving money.

And essentially, efficiency and electricity, efficiency in how you produce oil and gas, efficiency in how cities provide electricity saves governments money and saves citizens money, and particularly in this economy, that’s very appealing to everyone. So our role, from the U.S., is to be a technology sharer to talk about the policies that have worked for us, and to learn from other countries for their practices.

MODERATOR: Do you have a follow-up?

QUESTION: If I could make a --

MODERATOR: Quickly, okay.

QUESTION: If I can make a follow-up, you mentioned electricity technologies change. We are having some problems in Venezuela regarding electricity. I was wondering if you have any project in mind to try to exchange any kind of technology to improve these problems we’re having there? You are aware of that? Thank you.

MR. GOLDWYN: I’m aware of the problem. And in – I think in Venezuela as well as in a number of other countries, the real challenge in the electricity sector is getting prices right. And ultimately, you have to charge a rate for electricity, a cost recovery rate, which encourages people to invest in generation and find a way to subsidize the poor. If you subsidize electricity and you do it at a significant rate, eventually, the government runs out of money to pour into the electricity sector, and you don’t have enough electricity and then you have problems.

So getting prices right is something I know that Venezuela understands, and that’s – it’s more of an internal matter to change that. As you know, the depth and extent of contact between the U.S. and Venezuela on the energy sector is – has decreased significantly from what it was 10 years ago. And I think that’s unfortunate. But in terms of what Venezuela needs to do to improve electricity, I know the people and their energy sector well, and I know that they know what needs to be done. But like with many countries, sometimes it’s hard just to muster the will to do it.

MODERATOR: We’ll go here and then in the back.

QUESTION: Yeah, thank you very much. My name is Williams Ekanem. I report for Business World newspaper in Nigeria. Concerning your upcoming trip to Africa and in Nigeria, in particular, what would you say as regards to the recent amnesty deal that has been struck in Nigeria? Will you say it will, in any way, lead to an end in the crisis of the Niger Delta? Then also, the – in that country, there’s the petroleum industry deal that is going on right now – I don’t know if you are aware – and what are your comments?

And then lastly, what (inaudible) have put forward the strategic industrious task force initiative. So many years after, or some years after, how will you rate the progress of that initiative? Thank you.

MR. GOLDWYN: Okay. Well, thank you for the questions. I’m looking forward to my trip to Angola and Nigeria, and I’ve spent a lot of time thinking and writing and working on Nigeria issues in my life, so I’m very excited to be going back.

My purpose in going to the continent is to follow up on Secretary Clinton’s trips to both Nigeria and Africa – Nigeria and Angola. We promised in both places to have very senior policy dialogues focused on energy and other issues. My responsibility is primarily in the energy sector. So we will be preparing those senior dialogues in both places. In Angola, we’ll be talking about – a lot about electricity and the future of energy production and the introduction of renewable energy, which is an area that’s very ripe in Angola.

In Nigeria, we’ll focus on a few things. The first concern, I think, is to understand from Nigerian officials what their plans are in terms of the restructuring of the sector, the fundamental goal of restructuring the electricity sector to have an independent regulator, to have an independent national oil company, to have the joint ventures stand on their own is wise, long recommended by dozens of studies and long overdue. The fine details of how that program gets implemented and what it means in terms of continued investment in Nigeria is a more complicated question, so my goal really there is to talk to officials, understand their goals and how they see the challenges, and to learn what the path forward is. And to the extent they want our help, we’d be happy to provide that.

I also want to look into how the Extractive Industry Transparency Initiative is going in Nigeria – the NEITI, the Nigeria Extractive Industries Transparency Initiative, when it was launched, was probably the most robust, the most expansive effort which was done, or to date has been done, under EITI. It was a look at the physical and financial and process systems of Nigeria. It exposed significant weaknesses in governance and provided a very significant program of reform.

There was a pause after the election when EITI was reconstituted under the NEITI law and it didn’t have a stakeholder group and it hadn’t been funded. And that has changed. The group has been funded and they are seeking validation for the aficionados under the EITI, which is basically an independent assessment of whether you’ve met the rules for compliance with EITI. There’s significant assistance from the United States and from the British Government and from the World Bank in educating civil society on how to progress. But my hope is that they will achieve validation, and what I want to learn is what the reform agenda is and what the role of EITI will be in the sector reform. And my understanding from my reading is that they are involved, but I will meet with the EITI leadership and stakeholders while I’m there and hear that directly.

With respect to the Niger Delta, it’s not my primary area because the Africa Bureau has the lead on that. But obviously, with respect to Nigeria’s energy security and Nigeria’s future income, resolution of the Niger Delta crisis is important. I have read about the amnesty and it seems to be going well. I’ve heard about the technical committee report – not recently – but I’d like to learn when I’m there what has become of that report, which was a look at every recommendation for Niger Delta development which had been made to date. And I’d like to learn more about what the plan is if the United States or others can be helpful in any way in formulating or implementing a Niger Delta development plan. We stand ready and willing to do it.

What I really hope to learn is what the strategy is with – from talking to officials in Nigeria and also from the EITI and civil society stakeholders, what their views are on the best path forward.

MODERATOR: We’ll go with you.

QUESTION: Hi. My name is Javed Soomro. I work for the BBC’s South Asian services. Going back to Pakistan issue, I was just wondering, nuclear energy is considered as one of the cheapest options for any country. And are there any plans for United States to provide nuclear energy assistance to Pakistan as they did with India?

MR. GOLDWYN: Nuclear energy isn’t always the most cost-effective. It’s certainly the lowest-carbon alternative, but it can be pretty expensive. We spent two days in very intensive talks with the Government of Pakistan on the whole range of energy issues, but they did not raise nuclear energy, so we did not discuss it.

QUESTION: Hi, I’m Sabine Muscat with the Financial Times Deutschland in Washington. I have a question I wanted to ask you. This week, there was a new forum set up between the European Union and the United States, an energy council. I mean, I understand you were traveling at the time, but --

MR. GOLDWYN: No, I was there.

QUESTION: You were there? Okay, good. And so I would just like to know how you are planning to take this forward. I mean, there were – there was an agreement to look into certain sectors of cooperation and research and development, which is energy efficiency and electrical cars and things like that. And what are the next steps for this so as to keep it alive and to produce something for next year? And also in terms of energy security, the other big issue, what are the issues that you would like to discuss with Europe mostly from your perspective in the next months, in the coming months ahead? What are the pressing issues from your point of view on energy security? Thank you.

MR. GOLDWYN: Okay. Thanks for the question. Indeed, the U.S.-EU Energy Council was inaugurated yesterday, and we had a terrific representation on the European Union side, and Secretary Chu and Deputy Secretary Steinberg led on the U.S. side. So we met both in plenary to inaugurate the Council to develop three working groups – one on energy security, another on technology, another on research and development.

The directive from our leadership, from the EU leadership, is we don’t need another talk shop. We need to have concrete projects. We need to have a robust agenda. And the way these – this Council functions is you have three working groups. The working group chairs met at lunch afterwards – I participated in that meeting – and mapped out the agenda for each of these. They’re looking for results in six months as well as a continuing relationship on these issues. And there are – I’m not positive whether the – we’ve publicized the work plans or not, but I can talk about them in general terms. But the idea is to come up with a very detailed plan in the next month or six weeks that we can implement.

On the technology side, there is tremendous interest in electric vehicles on our side and in having European scientists and U.S. scientists get together to talk about a variety of other technologies where we think that tremendous progress can be made, and quickly. So research and development, there is a robust agenda. On energy efficiency, we’re really looking at harmonization of the standards in the two places which will promote trade and energy efficiency. Technology, there’ll be a link to the business-to-business dialogue as well.

In terms of energy security, the core issues for the European Union – and you know – and for us are to provide energy security for Europe. Obviously, there are historical issues which come up with some regularity which will be a big focus. That’s the Russia-Ukraine challenge. So there’ll be a focus on that. East-West pipeline, Southern Corridor will be another focus. And my own contribution to the dialogue is that I hope with the European Union, we can engage in providing help in third countries. And so Africa is one obvious continent where the U.S. and European companies have tremendous investment, where we have a great interest in energy security, and where we should have an interest in stability and governance and transparency.

So we should talk about both how to be helpful to a lot of the existing producers, but my own hope is as we see emerging producers on the continent, that we look at trying to address governance issues in those countries before large revenues come, so that they’re able to manage them. So we’ve got a pretty robust agenda. I think it’ll become more detailed and more public in the days to come. But we had a lot of EU commissioners around the table. And both the Department of State, Department of Energy, Department of Commerce, and then we will loop in other agencies of the U.S. Government, too, as this progresses.

MODERATOR: Let’s come here and then here.

QUESTION: Thank you. Mina Al-Oraibi, Asharq Al-Awsat Newspaper, Arabic language paper. I want to ask you about the Middle East. President Obama during his election campaign afterwards spoke quite often about the dependence on foreign oil and usually alluded to oil from the Middle East. One, does that fall under your arena, before I go further into questioning? But, two, also, what sort of work has been done over the last few months since the Administration on this issue? Thank you.

MR. GOLDWYN: Security of supply, diversity of supply is sort of squarely in my responsibility and in relationships with the Middle East in the energy sector, as well. It is a profound commitment of the Obama Administration to reduce U.S. dependency on oil, period, foreign oil, domestic oil, any kind of oil. And you have seen really an unprecedented effort in billions of dollars in investment by the Department of Energy increase in fuel efficiency standards, looking at the Cap and Trade bill in Congress, tremendous investment through the American Recovery Act in efficiency improvements to try and do that. It’s primarily a transportation issue – dependence on oil is, because we don’t really use oil for electricity – but you’re seeing tremendous investments in the creation of electric vehicles and the internationalization of that research and development effort, as well as a rise in fuel efficiency standards. So we’re moving on the demand side is the main issue.

With respect to the supply side, the rules of the market are really the key source of our economic security and our energy security. And I think you saw it in the G-20 effort, an effort to provide stability to markets by providing better data, and it sounds kind of boring and dull. But basically, if you don’t know what demand is, you can’t provide enough supply. If you don’t know how much supply is actually out there, then you don’t really know whether it’s going to get met. And if the traders don’t know what the supply is and what the demand is, they speculate and they guess. And fears of disruption can drive prices up, not out of irrational behavior, but out of perfectly irrational behavior, of fearing whether or not there’ll be adequate supply to meet demand in the medium future.

So the G-20 effort was first to call in all the G-20 countries to increase the transparency of the stocks they hold, the amount they consume, and the amount they produce. And the U.S. does this on a weekly basis, but a lot of other countries don’t. And that is probably the most significant step we can take for reducing price volatility.

The second was to address energy subsidies. And it’s not only really expensive for countries that subsidize the price of oil or of gas or of electricity. But when you have a subsidized price and the price goes up, demand doesn’t go down in places where it’s subsidized. So you have lots of bad consequences. You have way higher demand than you need. You have way higher prices than you ought to have. You have way more missions than you need. You have a deterrent for increased efficiency in vehicles or in any other technology because you don’t save any money from investing in it, because you’re not actually paying the price. So the G-20, including Saudi Arabia agreed to reduce energy subsidies. And there will be a call to account in February of this year when finance ministers meet, and in June next year when leaders meet.

And I can tell you from personal experience and the phone calls I’m getting from the White House, this is a front-and-center issue, and we’re engaging with countries around the world to make sure these commitments are fulfilled, and that will have a big impact on energy security. So I think one of the areas, one of the regions where energy subsidies are the highest is the Middle East.

And just like in our country, we have had low energy prices. There have been subsidized and extremely low energy prices in the Middle East, but you have seen a tremendous evolution in the Middle East, including introduction of renewable energy, because countries that are oil-rich are gas-short. And when they are gas-short, they need to either import it, or they need to consume it, instead of exporting it, and that’s expensive. And so you’re starting to see reform in the Middle East, both reduction of subsidies and introduction of renewable energy because they, too, need to meet their electricity demand. And finance ministries all over the world get tired of using their money for subsidizing people who can afford to pay, rather than investing in things which the country needs to develop.

MODERATOR: Let’s go to – Sami, GEO TV.

QUESTION: Hi. My name is Sami Abraham and I work for GEO TV of Pakistan. You mentioned that by December, Pakistan will be able to generate 2,500 megawatt, and then, by June next year, another 2,600 megawatt. And then, you also said that this raise in power tariff will be helpful in doing all that. Now, my question is that will this power – this raise in the tariff will be enough to cover the charges, which will be used to that power generation, or the money you mentioned Pakistan is negotiating with the Asian Development Bank will also be used to get to that generation?

MR. GOLDWYN: The goal is to have the – Pakistan’s agreement with the IMF has the goal that, by next April, the tariffs will be at a cost-recovery rate. None of the money, as I understand, which will come from the ADB is meant to provide subsidy to the electricity tariff. So the goal is that the nominal tariff will be at a cost recovery rate, and that the debt will be cleared of – the so-called circular debt – will be cleared and the government will in a sense, assume and then issue bonds for it, and the distribution companies will be able to stand on their own.

The generation companies going forward will be able to charge a market rate for the electricity, and they will be able to pay their fuel bills. And if the price of fuel – of the fuel price adjustment in which Pakistan has committed to, so if the price of fuel rises, the tariff will rise as well. The price of fuel goes down, as it does, then that will be adjusted as well. And so the idea is to have that financial stability going forward.

The poor will be subsidized initially by a lifeline tariff, and essentially which is free electricity up to a certain point. And I think the – part of the conversations with the government will be to see if there are other creative ways to provide the poor with the means to buy electricity, which are supportive of increasing generation.

QUESTION: Thank you. My name is Dmitry Zlodorev. I am from Itar-Tass News Agency of Russia. Not so long ago, the U.S. and the Ukraine organized bilateral energy cooperation. And my question is how U.S. can help Ukraine to solve their energy problem and solve long-term gas dispute between Russia and Ukraine? Thank you.

MR. GOLDWYN: Ukraine and Eurasia is primarily Ambassador Morningstar’s territory, so I won’t step too deeply into it. But our conversations, but also conversations, I believe, between the World Bank and the Ukraine deal with the basic fundamentals of – as you would in any other country. One is to ensure that the rate for electricity is a market rate. The other is to promote introduction of efficiency into the system, primarily in heating and power generation, and to deal with how you manage the transition to a more market rate.

As you do that and you manage both the political challenges and the economic challenges of that, then you get to a point where it’s – the ability to pay is less of a problem. So diplomatically, Ambassador Morningstar engages with Ukraine, and then we have more technical conversations with them as well. But there are other agencies that are – institutions, like the international financial institutions that are in the mix as well.

MODERATOR: Dawn, right here.

QUESTION: I’m Anwar Iqbal. I work for Pakistan’s Dawn newspaper. And I don’t know whether this question has already been asked. If it has, please ignore it. What do you think is Pakistan’s number one problem: lack of infrastructure, distribution, subsidy, corruption, nonpayment of bills? And what would be an alternative – cheap and affordable alternative to oil because Pakistan is one of those countries that cannot afford to buy oil for producing electricity and (inaudible) it does. And do you think Pakistan will be able to overcome its energy problem in the next ten years? If not, what do you see happening?

MR. GOLDWYN: I think Pakistan can overcome the problem of load-shedding or of these rolling blackouts by next summer. I think they could put themselves in the position with a tremendous amount of political courage and work within the next decade, if not sooner, of being more than self-sufficient in electricity.

I think the biggest problem in – the biggest challenge in the Pakistan electricity sector is getting prices right. Everything flows from whether or not you charge a cost-recoverable tariff for electricity. This is the conclusion that Pakistan’s finance minister has reached, that the government has in conversation with the IMF. Everything flows from getting prices right. If you get prices right for charging electricity, then you have people who want to generate electricity. If they can afford to generate electricity, they can afford to pay their fuel bills. If they can afford to pay their fuel bills, and you have adequate generation and you have distribution, you don’t need to import kerosene or residual fuel oil, which is expensive and inefficient and highly – has high level of emissions, so that everybody has to provide their own electricity.

If you can provide a cost-recoverable tariff, you can introduce renewables, because the difference between the cost of using gas as a throughput and the use of using wind is smaller, and you can – and you make renewables competitive in this sector where electricity is not subsidized. Where electricity is subsidized, the gap between wind and solar is so large from an artificial subsidized price that no private investor will invest in it. So that’s the core. You get the prices right and the rest of it is really technical work to provide stability to the sector.

So I think the plan is there and I think if Pakistan does that, you will see a tremendous revival in the sector. And you may not have been her in the beginning, but in 1994 Pakistan was an exporter of electricity. So it wasn’t that long ago. It can happen. And I believe there is really unanimous understanding and will among the Pakistani Government – the president, the prime minister, the finance minister, the utilities – everybody understands the problem, everybody knows what needs to be done, everybody is behind having the courage to do it. That’s what we heard from them, and that’s what we support.

In terms of the – what you would use to generate electricity in Pakistan, it’s going to be a suite of things. Hydropower is already large – will continue to be a very large element of generation supply in Pakistan. And there are plans of the ADB to expand or improve the efficiency of dams there. Natural gas is an obvious bridge before renewables. And Pakistan can do more to develop its own natural gas sector. The main thing, again, is the price – pay a commercial price for natural gas. People want to invest in producing natural gas. Subsidize the price, they go someplace else.

So natural gas will be a huge portion, both LNG (ph) imported natural gas, which I think is probably the quickest, most stable long-term way to bridge that gap, but also domestic development. I think renewables will be the next phase. Pakistan is a wind corridor. And so you can see the introduction of wind. I think you would see solar built into buildings and residences, but you also would have the potential for a large aggregate of solar, again, if the price has made it competitive for somebody to invest in the private sector to do that. And there are other sources as well. I would say those are the near-term ones.

MODERATOR: Any other questions? Well, we’ll have to end there then. Thank you, Mr. Goldwyn. Thank you all for coming.

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