Energy MBA Programs
A little off topic today for this blog, but I’ve been getting a lot of requests recently to talk about energy-focused MBA programs and thought I would share some of the research I’ve done. The following is by no means 100% comprehensive, and I would welcome other opinions on this data or approach, but I think it’s a good start for anyone interested in how a graduate business degree can be of use in the energy world.
Projects or Products?
When I talk to prospective and new MBA students about their career plans, I try to deemphasize the breach between renewables and traditional energy sources. While that may come as a surprise to many readers of this blog, from a functional job standpoint the difference between the two industries is not that relevant. Energy is a commodity business, and the business is generating electrons or BTU’s that provide revenue for the generator. Period. You might argue that energy efficiency companies create savings with value or that lots of MBAs go on to work in policy or for utilities where the difference between renewables and traditional energy is substantive. Or maybe you’re highly mission driven and want to get into energy because you want to be part of a clean energy movement. Those are all valid points, but if you’re thinking about a graduate education and a future career, the renewables/hydrocarbon debate is less salient on the front-end.
Instead, I encourage students to think about the following as a jumping off point: Are you more turned on by projects or products? Maybe that distinction doesn’t seem clear, but here’s some questions to help:
- Do you enjoy managing multidisciplinary teams and potentially being the only MBA in the room?
- Do you have a science background and enjoy the technical development process?
- Do you have a finance/strategy background and enjoy working with markets?
- Would you prefer project cycles in the 6-12 month range or over multiple years?
- Are you interested in working internationally?
Depending on your answers to those questions, you may start to feel like your settling more on product development, which tends to involve more technical interaction, long development cycles and marketing (not Market) skills. That type of role is often found in start-ups, venture capital or energy tech companies like Siemens, where the focus is on getting a product to market. On the other hand, if you have a finance background, enjoy working on multiple projects or shorter timelines and are interested in international opportunities, you might find that the project world is a better fit. Focusing on this division first allows students to consider what functional expertise (eg. finance, marketing, strategy, business development, general management) would be most beneficial as part of an MBA curriculum.
The Schools
Full disclosure: I’m an MBA at Berkeley Haas, but I’ve also interacted with numerous other energy-focussed MBAs and have tried to present a balanced analysis below.
While business schools like UT Austin and Rice have developed a reputation over many years for placing a high percentage of graduates in traditional energy companies, the new wave of energy technologies and young professionals interested in renewables has spurred on increasing interest in MBA energy careers. The following table shows some of the key metrics across schools (data taken from school reports). In addition to the usual compensation figures shown on MBA websites (as always, skewed by geography and the percentage of graduates receiving equity instead of cash), some of the important metrics to consider are the employers recruiting at the school and how big the energy student community is. In my experience, schools with larger pools of students interested in a subject are better positioned to maintain employer relationships.
Another important factor to consider is curriculum. UT Austin, for example, is well known for having both an energy finance curriculum and a Venture Fellows group that creates programming and connects students to investors. Similarly, MIT Sloan is very strong in energy innovation and has a large annual conference and a course called Energy Ventures. Several other schools, including University of Michigan, Yale and Dartmouth have also been admitting more students interested in energy technology in recent cycles.
Lastly, Berkeley-Haas has made some heavy strides toward claiming energy as one of its primary specializations. While there is no official certificate in energy, Haas students have access to dedicated business curriculum like Cleantech-to-Market and Energy and Environmental Markets. Moreover, Berkeley can claim unique company among schools like MIT, Stanford and Michigan that have world-class technical research and top 20 business schools. The interaction among science, engineering, law and business schools should be a critical question for any prospective MBA student interested in energy. At Berkeley-Haas, most of that cross-departmental interaction occurs through the Berkeley Energy and Resources Collaborative (BERC), the largest student energy club in the country.
(EPE)
Brazil’s Empresa de Pesquisas Energeticas released a report this week on expected power and transmission investments through 2020. All in all, the country is expected to expand power generation from around 112 GW today to a projected 171 GW in 2020. The report (download here) may not contain too many surprises for those that have seen previous versions (it’s revised annually), but we are pulling out some of the key findings . If nothing else, the presentation exposes some of the assumptions being made within the energy policy community (for example sustained annual 5% GDP growth through 2020).
A few key takeaways:
- Renewable generation outside of large-scale hydro is projected to rise from 8% to 16% of total generation by 2020
- Ethanol supply is predicted to almost triple to 73 billion litres and flex fuel vehicles will represent 75% of the vehicle fleet (compared to 49% today)
- Almost 43 thousand km of electricity transmission lines will be built under this scenario, representing about half of the installed grid today
Major transmission map (EPE)
Regional: Investing trends
In expectation of a new report to be released this week by UNEP and Bloomberg New Energy Finance, here are a few interesting charts from NEF tracking regional clean energy investments in 2010. Stay tuned for a more in depth analysis with the release of the UNEP report.
MICHAEL LIEBREICH, NEF 2011
MICHAEL LIEBREICH, NEF 2011
Chile’s Energy Ministry appears to be responding to criticism of the country’s RPS by producing sleek videos and marketing materials. At RELA, we try not to be overcome by digital bells and whistles, but we have to say we were mighty impressed! The Ministry’s promotion of diversification is well received, and we hope the net effect will be to disarm some of the hostility among Chilean regulators and utilities towards renewables adoption.
We can only hope the country’s data collection and publication receives the same amount of attention as this marketing campaign. What Chile really needs–an open debate of the country’s energy future–can only come from transparent, informed opinions, which require the best possible energy intelligence available. As any energy professionals that have worked in Chile can attest, obtaining credible statistics from agencies like the CNE or INE can be maddening at times.
Take a look at a few of the videos here, or see more after the jump.
Brazil’s MPX Energia, part of billionaire Eike Batista’s Grupo EBX, announced last week that it plans to develop a 200 MW solar facility in Chile as part of its growing renewables portfolio. The project, estimated to cost some US$ 400 million, will be MPX’s first solar development outside of Brazil. In June 2011 MPX is scheduled to bring online its first solar array in Tauá, Brazil.
MPX, which claims 11 GW of capacity among its entire South American portfolio, is also developing several traditional power projects in Northern Chile, including the US$ 5 billion Hacienda Castilla coal-fired power plant. Chilean newspaper Estrategia estimates that 27 energy projects are currently underway in Chile, totaling more than US$ 18 million in investments. However, the absence of regulations governing the integration of solar generation onto the grid continues to be a barrier to higher levels of investment, and MPX’s Chile project is not slated for construction until 2016.
In a presentation last March, MPX listed several drivers for expanding the company’s solar position:
- Ability of Brazillian industry to participate in the full solar value chain (including silicon production)
- Application of solar generation to new World Cup stadiums
- Incentive fund from the State of Ceará
The Tauá project was conceived largely as a pilot project for MPX to enhance its development and operational experience with solar facilities. Power from the facility will off-take to the grid controled by COELCE. The project received the go ahead from Brazil’s environmental regulator in April (for up to 5 MW), and is scheduled to begin operation in June 2011.
MPX has also announced plans to install a thermal solar facility attached to its existing PECEM II plant. With 60 rows of concentrated solar trenches, the poject would have a final installed cpacity of 24 MW and could reduce coal throughputs at PECEM II by 2.8 tons/hour.
Authored by Gustavo Ribeiro
The Brazilian biofuel sector is in the process of rapid consolidation and Petrobras seems to be ready to make its move. Adriano Pires, director of Centro Brasileiro de Infra Estrutura (CBIE), claims that the Brazilian ethanol sector is still fragmented, with many small players, but that it is currently going through a process of deeper consolidation. The main reason for this is the increase in demand for ethanol.
There is a greater need for professional management in the marketplace. Not so long ago, the national ethanol marketplace was populated with family-owned producers. Sugar and ethanol distilleries were usually located alongside sugar cane plantations and managed by members of the family that owned each farm. Currently, the same distilleries must abide to strict capital market demands in order to attract the large investments needed to expand production.
Multinational energy and commodity companies were quicker in anticipating this market trend and have recently made large investments in the Brazilian alcohol industry, acquiring major national players. For example, the following three large-scale sugar and ethanol distilleries: Grupo Moema, Santa Elisa and Açúcar Guarani were bought respectively by Bunge, Louis Dreyfus and Tereos. BP has also made its move by creating Tropical Bioenergia in partnership with two national groups: Maeda and Santelisa Vale.
For many analysts, though, the most important move was made in 2010: Shell and Cosan, the largest ethanol producer in the world, signed a US$ 12 billion JV agreement in order to combine distribution and a retail network for commercializing ethanol. The combined enterprise will also explore business opportunities to produce and sell ethanol and sugar globally. “This is an important milestone in our effort to create one of the world’s most competitive sustainable biofuels companies,” explained Mark Williams, Shell Downstream Director. With annual production capacity of over 2 billion litres, the proposed joint venture – still to be formally approved by local authorities – will be one of the world’s largest ethanol producers. The inclusion of Shell’s interests in Iogen Energy and Codexis would enable the joint venture to deploy next generation biofuels technologies in the future.
Putting the breaks on foreign participation
Petrobras created a biofuel business unit in 2008 and bought distilleries in 2009 for R$ 150 million. However, by early 2010 it still had not commenced its own ethanol production.
The red light really flashed for both Petrobras and the Brazilian Government in early 2010 when the Shell-Cosan joint venture was first announced. Both Shell and BP marked the entry of multinational oil companies in the ethanol sector, a traditional national industry. For the Brazilian Government and many energy sector analysts, a large national ethanol group is essential to the sector. The idea is that a strong national group would have better conditions and disposition to fight for turning ethanol into a global commodity.
In recent months, Petrobras has indicated that it will push to slow the role of international companies in the domestic ethanol industry in the near term and intends to make further acquisitions itself in the sector. Most recently, the company acquired 45.7% of Açúcar Guarani for R$ 1.6 billion, the fourth largest sugar cane processor in Brazil.
In early December, Petrobras showed interest in acquiring 40% of ETH, the ethanol business of Odebrecht, an operation that is valued at some R$ 3 billion. With an eventual acquisition by Petrobras, ETH could be turned into the largest global ethanol producer in the next few years following a massive capital injection. EHT has announced plans to invest R$ 3.5 billion through 2012, when 9 new distilleries will be fully operational. In that year, the company will have production capacity of 3 billion litters of ethanol. It will also generate 2,700 GW/h per year from biomass. In early December 2010, both ETH and Petrobras said they wouldn’t comment on the supposed negotiations. Later Petrobras denied any talk on this matter with Group EHT. But the fact is that this operation is certainly on the radar of both companies, specially because Odebrecht and Petrobras have a history of mutually beneficial joint operations, the latest one being the acquisition of Quattor by Petrobras and Braskem (controlled by Odebrecht) forming a petrochemical giant.
Click to amplify (courtesy www.bajacalifornia.gob.mx)
The US-Mexico border is becoming a hot spot for solar and wind interests, particularly along Baja to the south of California, all the more now that the US state has begun imposing aggressive emissions and climate control policies. Project costs in California are much higher than other parts of the US, making developments across the border economically attractive for accessing some of the most highly priced power markets in the country. On the other hand, developers in Mexico miss out on US federal and state subsidies for renewable generation.
Is renewable energy the next maquila industry?
San Diego renewable developer Cannon Power Group is putting together the Aubanel Wind Project project, with up to 1,000 MW of installed capacity, 15 miles to the south of the border on the Baja Peninsula. Cannon recently contracted Spanish Gamesa as the exclusive supplier under a 10-year contract. The total project will be phased in over several years–the first installation includes only 70 to 100 MW by 2011–which could easily be modified if line capacity or tariff negotiations aren’t resolved in the short-term. Cannon claims that it will off-take power to Mexican consumers initially, although it is looking at marketing to the US market, as well.
Note: Yellow and lighter green represent higher intensity (images courtesy 3tier)
A second ambitious project is being put together further to the south: Asociado Panamericanos(APA) is developing a wind park in northern Baja with 1 to 1.5 GW and plans to deliver power to the California market. According to Greentechmedia:
APA Wind has secured internal funding to maintain options on the windy land in and around the indigenous Pai Pai Community of Mission Santa Catarina, and has come to terms on a joint venture with the Mexican firms CISAe/INTAVAN, according to Michael Folloni, Energy and Business Manager at APA. Ideally, the plant will be built in phases from 2013 to 2016.
Our friends over at Greentch put together a nice table showing the current wind pipeline in Baja:
Image courtesy Greentechmedia.com
Transmission Constraints
As is often the case with renewable generation, transmission capacity and placement remains another challenge for cross-border developments. Some projects are considering constructing dedicated transmission lines to the US to avoid the expensive and highly bureaucratic relations with Mexico’s Comisión Federal de Electricidad (CFE), which handles all domestic transmission.
The transmission issues do not stop at the border, however, and the California ISO has warned that bottlenecks can occur because the major California electricity markets and load centers are not configured for higher transmission levels from the south.
Local Projects
Domestically focused wind energy projects are also gaining traction in Mexico, although the economics and logistics are obviously quite distinct from the US border developments. The CFE has publicly moved to include more renewable generation as part of its portfolio, although Mexico does not currently have a renewable electricity standard in place. Several recent domestically-focused projects include:
- Iberdrola was granted a tender last week by Gesa Eólica México to build the 228 MW Piedra Larga wind park in southern Mexico. The project will be built in two phases, with the first 90 MW coming online in March 2011 and the remaining capacity streaming by March 2012. The Spanish firm has already built two wind farms in Mexico (La Venta II and La Ventosa) and is currently developing a third (La Venta III).
- Acciona also signed an agreement with the CFE in April to construct 3 wind parks in southern Mexico totaling 306 MW. The parks–Oaxaca II, Oaxaca III y Oaxaca IV–located in the Istmo de Tehuantepec region, will cost an approximate US$ 600 M. Acciona completed the 250 MW Eurus project in Oaxaca last November.
Good Reads:
Zonas Potencialmente Productoras de Energía Eléctrica Eólica, en Baja California.pdf
Argentina and China are embroiled in a heated round of trade brinkmanship that has brought biodiesel shipments to a halt in May. China advised the Argentine embassy in March that it was restricting imports of Argentine soybean oil due to elevated levels of hexane, a solvent used in the harvesting process. While the dispute has been couched in technical language about Chinese product standards, it is widely suspected that China is acting in retaliation against increasing restrictions on Chinese imports into Argentina (particularly textiles and leather goods).
According to an article in La Nacion, China canceled a 20 thousand ton soybean oil cargo in March and redirected a second shipment to India, although the country has not switched to importing significant volumes from Brazil, Argentina’s nearest soybean rival. Soybean oil imports from Argentina made up 76% of foreign supply to China in 2009 according to CIARA, Argentina’s leading vegetable oil industry association, and the Asian country in turn absorbed 45% of Argentine soybean oil exports in 2009 (up from 30% in 2008). However, China has significant inventories of soybean oil on hand and has demonstrated that it can source from other suppliers if necessary, leaving Argentina to wonder if it is more dependent on its Asian trade partner than the other way around.
Argentina, which only began exporting biodiesel in earnest in 2006, now accounts for a significant share of the global biodiesel trade (over half of all exports in 2008/09 according to the USDA) and the country is projected to become even more important for global supply in the coming decade (the USDA believes that Argentine exports will grow over 70% from current levels to reach 8 million tons by 2020).
The USDA goes on:
Argentina is the leading exporter of soybean oil, reflecting the country’s large crushing capacity, its small domestic market for soybean oil, and an export tax structure that favors exports of soybean products rather than soybeans. Gains in Argentine soybean production due to extensive double cropping, further adjustments in crop-pasture rotations, and the addition of marginal lands in the northwest part of the country, contribute to increased soybean crush and soybean oil exports.
Argentina also continues to import soybeans from other South American countries in order to more fully utilize its crushing capacity. Despite continued expansion in Argentina’s biodiesel production, soybean oil exports are expected to rise strongly.
After many delays and competing projects, Ecuador’s first onshore wind project has reached a milestone with the completion of a feasibility study in May. Ecuadorian firm Elecaustro is proposing the 30 MW Minas de Huascachaca project outside the southern city of Cuenca. According to press reports, wind speeds average 5.9 m/s in the area. The Huascachaca project has been in consideration for some time (Elecaustro completed site selection studies in 2003) and the total price tag is estimated at US$ 34 million.
Although the only other wind generation currently in operation in Ecuador is a small 2.4 MW facility on the Galapagos Islands that was built in 2007, several other projects have been proposed in recent years.
Another 15 MW wind park in the South in the province of Loja, known as Proyecto Eólico Villonaco, has been in consideration for some time but was recently paralyzed by legal and political battles after the tender was granted to a newly created private company with ties to local politicians. Construction was originally scheduled for start-up by end 2008, but work has yet to begin and it will take at least two years to bring the park online.
Yet a third project is being proposed for the Salinas Valley in the northern province of Imbabura by local company Electroviento with the support of the regional electricity utility Empresa Eléctrica Regional Norte. According to the company, the 10 MW project has an estimated cost of US$ 22 million. While Ecuador’s minister came out in support of the project in April, saying that financing was already in place, no concrete plans for the wind park have been publicly released to date.
Image courtesy Proviento.
In an interview with Chile’s Estrategia daily, Hipólito Suárez, director of Latin American operations for the Spanish renewables firm Enhol, discussed the company’s ongoing plans to construct wind and hydro projects in Chile. Suárez claims that half of Enhol’s projects currently in construction will be finished next year, while the other half are set for completion by the end of 2012.
Source: Talinay EIA report
Enhol entered the Chilean market in 2006 and it’s most ambitious project was the development of the 500 MW Talinay wind park in Ovalle, Chile. Talinay, which will reportedly be the largest wind project in South America when it is finished, was approved by the Chilean environmental regulator in June 2009. However, in February Enhol’s subsidiary, Eolica Navarra, divested it’s 60% share in the project to the minority partner Empresas Phoenix. The head of Phoenix told El Mercurio in February that his company’s lack of experience with energy projects would not slow development and he expected the installation of the first 125 MW phase to be completed in 2011:
“Este megaproyecto se desarrollará por etapas (son cinco) y hoy estamos en condiciones de implementar la primera, que son 125 MW”, afirma el líder del grupo. Esta fase requerirá unos US$ 250 millones de inversión y en los próximos meses realizarán el ‘road show’ internacional para sumar a la firma que provea los aerogeneradores.
Despite withdrawing from the Talinay project, Enhol claims to be investing some US$ 400 million on two other wind facilities in IV and IX regions of Chile, and the company has mentioned the following hydro and wind projects in recent months:
Other Sources:
Read the full Talinay environmental impact assessment here.
