17 June 2010
Electricity industry experts have raised concerns that Europe’s distribution grid is not up to the task of handling the growing capacity from renewable sources, threatening the profitability of plants and the EU’s renewable energy targets.
Spain and Germany, the two European countries with the most installed wind and solar generating capacity, are seeing zero or negative spot prices for power when the wind is blowing strongly, said delegates at the Eurelectric conference in Dublin this week.
Spain has had 300 hours of zero prices in its power pool so far this year, said Stephen Woodhouse, director of Poyry Energy Counsulting, which means wind farms earn only a feed-in tariff for selling power at these times. “These plants are earning significantly lower than thermal plants,” he said. “Already we are seeing curtailment of wind power installation in certain areas.”
At times when the wind is not blowing, combined cycle gas turbine (CCGT) power stations are seen as the ‘swing’ supplier, stepping in to cope with demand. On the back of Europe’s targets to source 20% of energy from renewable sources by 2020, forecasts from the International Energy Agency (IEA) suggest 299 TWh of additional wind energy will be supplied over 2008-20, equating to 140GW of extra capacity. Alongside this, 97 TWh will come from gas-fired plants.
But as wind capacity grows, the intermittent nature of the resource will also affect earnings for gas plants, which will only be powered up on demand. “CCGT investors will face greater price and volume risk. They will really have to trust their traders,” said Woodhouse. “There will be a premium in the future for reliable capacity and flexibility. Maybe we need some market-based prices for these” attributes, as well as quantity, he questioned.
In an instant poll of some 200 delegates in the room, 31% said the best solution to managing the impact of large-scale wind generation is cross-border balancing in intra-day markets – effectively broadening the available market for the power.
“Even with 10-20GW of wind capacity in Spain and Germany, these markets are islanded,” said Ian Cronshaw, head of energy diversification at the International Energy Agency. “Transmission investments are still low and lagging.”
However, there are disagreements over who should pay for better grid connections – the generating country that lacks a market, or the consuming country that could benefit from cheaper power. Woodhouse said it will largely fall to governments to collaborate and create a unified grid with regulated assets that would in turn attract investment. “We don’t see rates of return will be sufficient for merchant connection,” he said.
European energy regulators are beginning to work together to develop a pan-European market, and the European Commission will also address the issue in its energy infrastructure package to be announced later this year.
The poll revealed that 20% thought electricity storage is the best solution. However, experts on a panel session suggested grid-scale electricity storage technology is currently inadequate and expensive.
Meanwhile, they highlighted the need for better demand management and said more should be done to make customers aware of energy price peaks and troughs. “We can’t absorb renewables properly without demand-side management,” said Jerry O’Sullivan, executive director of Ireland’s ESB Networks.
Ian Marchant, chief executive of Scottish and Southern Energy, said electricity suppliers should take a lesson from airlines, asking more for electricity during peak demand periods instead of charging a flat price at all times, and whatever the cost to utilities.
Christopher Cundy
Monday, 28 June 2010
Solar’s time in the sun is nigh, say financiers
24 June 2010
The focus of growth in renewables is likely to flip from wind to solar, as the falling price of the technology and equipment make it more competitive with other renewables, experts said.
In the next five years, the renewable energy sector will be defined by tremendous growth in photovoltaic and thermal solar projects, financing experts told attendees of Argyle Executive Forum’s 2010 Deal Making in the Energy Sector conference in New York last week.
“Solar is going to be huge in the future,” said Geoff Broglio, vice president of Hudson Clean Energy Partners in Teaneck, New Jersey. “It’s growing tremendously now.”
Global wind installations have increased about 27% every year for the last decade, said Olav Junttila, partner with Greentech Capital Advisors based in New York. “That’s a pretty astonishing number,” he said. “I think we’re really going to see something very similar on the solar side.”
But there will be ups and downs in the solar sector, with feed-in tariffs being readjusted, in Europe especially, and investment tax credits in the US constantly in danger of expiration, he said. “But there is an underlying trend toward more cost competitiveness,” Junttila said. “There is so much supply at this point around the world that it’s going to keep those costs down.”
Meanwhile, one of the main drivers of costly solar projects is the “healthy” margins for manufacturers, he said. “You’ve got First Solar, the king of the industry, earning 40% margins on the manufacturing business,” Broglio said. “It’s been going on for a while, but that’s not really sustainable. That makes a technology look a lot more expensive, but the true cost is much lower.”
“The technology is better, the price is coming down and frankly it is something that can be more easily sited behind fences, closer to the load,” said David Bickham, a partner at law firm K&L Gates in Austin, Texas. “You’re not constrained by where the wind resources are.”
Wind will continue to be a big component of the renewable energy sector, but until transmission issues are resolved, wind projects will remain confined to selected areas where the transmission is already available or can be made available within a single state pretty quickly, he said.
But on a long-term basis, offshore wind will present a major opportunity once the supply chain is built, said Michael Donnelly, managing director at GE Equity in New York.
Gloria Gonzalez
The focus of growth in renewables is likely to flip from wind to solar, as the falling price of the technology and equipment make it more competitive with other renewables, experts said.
In the next five years, the renewable energy sector will be defined by tremendous growth in photovoltaic and thermal solar projects, financing experts told attendees of Argyle Executive Forum’s 2010 Deal Making in the Energy Sector conference in New York last week.
“Solar is going to be huge in the future,” said Geoff Broglio, vice president of Hudson Clean Energy Partners in Teaneck, New Jersey. “It’s growing tremendously now.”
Global wind installations have increased about 27% every year for the last decade, said Olav Junttila, partner with Greentech Capital Advisors based in New York. “That’s a pretty astonishing number,” he said. “I think we’re really going to see something very similar on the solar side.”
But there will be ups and downs in the solar sector, with feed-in tariffs being readjusted, in Europe especially, and investment tax credits in the US constantly in danger of expiration, he said. “But there is an underlying trend toward more cost competitiveness,” Junttila said. “There is so much supply at this point around the world that it’s going to keep those costs down.”
Meanwhile, one of the main drivers of costly solar projects is the “healthy” margins for manufacturers, he said. “You’ve got First Solar, the king of the industry, earning 40% margins on the manufacturing business,” Broglio said. “It’s been going on for a while, but that’s not really sustainable. That makes a technology look a lot more expensive, but the true cost is much lower.”
“The technology is better, the price is coming down and frankly it is something that can be more easily sited behind fences, closer to the load,” said David Bickham, a partner at law firm K&L Gates in Austin, Texas. “You’re not constrained by where the wind resources are.”
Wind will continue to be a big component of the renewable energy sector, but until transmission issues are resolved, wind projects will remain confined to selected areas where the transmission is already available or can be made available within a single state pretty quickly, he said.
But on a long-term basis, offshore wind will present a major opportunity once the supply chain is built, said Michael Donnelly, managing director at GE Equity in New York.
Gloria Gonzalez
Utility-only’ cap and trade no silver bullet
23 June, 2010
Advocates of pricing carbon in the US economy are shifting their efforts to a ‘utility-only’ cap and trade system – but some experts warn that the proposal causes as many problems as it solves, and even its advocates concede its chances are slim.
On Sunday, Senator Joe Lieberman (I-Conn) – co-author alongside John Kerry (D-Mass) of the American Power Act, which would introduce an economy-wide carbon cap-and-trade programme – told CNN that he was open to a scaled back system, beginning with utilities.
His comments follow an address by President Barack Obama last week where he called for comprehensive energy and climate legislation, but neglected to call for carbon caps. However, Obama has become more engaged with the issue, and his chief of staff and Congressional fixer, Rahm Emanuel, told ABC News on Sunday that the president wanted to see legislation that deals with “environmental degradation caused by carbon pollution”.
Obama was due to meet with key Senators from both sides of the aisle today to discuss energy and climate legislation, which Senate Majority Leader Harry Reid (D-Nevada) has said he hopes to bring to the floor this summer. That meeting was cancelled, with the president instead holding a crisis meeting with his Afghanistan commander, Stanley McChrystal.
At this point, it is unclear which approach Obama and the Democratic leadership in the Senate are likely to pursue. However, Eileen Claussen, president of the Pew Center on Global Climate Change, described utility-only cap-and-trade as “the best chance we have got” to put a federal cap on US carbon emissions.
As to whether such a proposal would garner the 60 votes needed to pass the Senate, she told Carbon Finance that “it’s still very challenging, but the chances are better than with economy-wide cap and trade.”
She added that while, “today, I can’t get to 60”, she said it is impossible to accurately gauge support for a hypothetical bill.
Kyle Danish, a Washington, DC-based partner at law firm Van Ness Feldman, said that a utility-only approach “has some obvious appeal, because it’s simpler and because the power sector has dealt with cap and trade for over a decade”, to control sulphur dioxide and nitrogen oxide pollution.
Also, most analyses show the power sector delivering the lion’s share of early emissions reductions, even under wider trading programmes.
“But simpler by no means equals simple,” he added.
Such a proposal would undermine the complex deals and compromises that underpin the Kerry-Lieberman proposal, many of which rely on the generous distribution of carbon allowances. “If it’s a utility-only programme, there are far fewer allowances to distribute,” he said.
Claussen – who has written an op-ed piece with Jim Rogers, the CEO of power utility Duke Energy advocating a utilities-first approach – acknowledged some of these drawbacks.
“It does mean that there will be a lot less money available for a lot of the other things that people care about,” she said, such as international climate financing, adaptation finance for US states and technology assistance.
Dan Reidinger, a spokesman for the Edison Electric Institute, which represents investor-owned utilities, said that the organisation “has been focusing on economy-wide, comprehensive climate legislation, [so] we have not fully discussed a utility-only approach at this point.
“However, we believe that any utility-only legislation would have to incorporate major consumer protections to attract 60 votes in the Senate,” he added.
Advocates of pricing carbon in the US economy are shifting their efforts to a ‘utility-only’ cap and trade system – but some experts warn that the proposal causes as many problems as it solves, and even its advocates concede its chances are slim.
On Sunday, Senator Joe Lieberman (I-Conn) – co-author alongside John Kerry (D-Mass) of the American Power Act, which would introduce an economy-wide carbon cap-and-trade programme – told CNN that he was open to a scaled back system, beginning with utilities.
His comments follow an address by President Barack Obama last week where he called for comprehensive energy and climate legislation, but neglected to call for carbon caps. However, Obama has become more engaged with the issue, and his chief of staff and Congressional fixer, Rahm Emanuel, told ABC News on Sunday that the president wanted to see legislation that deals with “environmental degradation caused by carbon pollution”.
Obama was due to meet with key Senators from both sides of the aisle today to discuss energy and climate legislation, which Senate Majority Leader Harry Reid (D-Nevada) has said he hopes to bring to the floor this summer. That meeting was cancelled, with the president instead holding a crisis meeting with his Afghanistan commander, Stanley McChrystal.
At this point, it is unclear which approach Obama and the Democratic leadership in the Senate are likely to pursue. However, Eileen Claussen, president of the Pew Center on Global Climate Change, described utility-only cap-and-trade as “the best chance we have got” to put a federal cap on US carbon emissions.
As to whether such a proposal would garner the 60 votes needed to pass the Senate, she told Carbon Finance that “it’s still very challenging, but the chances are better than with economy-wide cap and trade.”
She added that while, “today, I can’t get to 60”, she said it is impossible to accurately gauge support for a hypothetical bill.
Kyle Danish, a Washington, DC-based partner at law firm Van Ness Feldman, said that a utility-only approach “has some obvious appeal, because it’s simpler and because the power sector has dealt with cap and trade for over a decade”, to control sulphur dioxide and nitrogen oxide pollution.
Also, most analyses show the power sector delivering the lion’s share of early emissions reductions, even under wider trading programmes.
“But simpler by no means equals simple,” he added.
Such a proposal would undermine the complex deals and compromises that underpin the Kerry-Lieberman proposal, many of which rely on the generous distribution of carbon allowances. “If it’s a utility-only programme, there are far fewer allowances to distribute,” he said.
Claussen – who has written an op-ed piece with Jim Rogers, the CEO of power utility Duke Energy advocating a utilities-first approach – acknowledged some of these drawbacks.
“It does mean that there will be a lot less money available for a lot of the other things that people care about,” she said, such as international climate financing, adaptation finance for US states and technology assistance.
Dan Reidinger, a spokesman for the Edison Electric Institute, which represents investor-owned utilities, said that the organisation “has been focusing on economy-wide, comprehensive climate legislation, [so] we have not fully discussed a utility-only approach at this point.
“However, we believe that any utility-only legislation would have to incorporate major consumer protections to attract 60 votes in the Senate,” he added.
Employment, Environment at Odds
U.S. Agency Won't Back Sale of Coal Equipment; Company Says That Costs Jobs.
Text By JAMES R. HAGERTY And AMOL SHARMA
For the second time in recent weeks, the Obama administration's environmental policies have clashed with its efforts to boost American jobs.
The U.S. Export-Import Bank, a federal body charged with promoting U.S. exports with loan guarantees, decided against backing a sale of coal-mining equipment to an Indian company. The guarantees were denied amid the agency's concerns about the mine's environmental impact.
Bucyrus International Inc. said it was likely to lose orders totaling as much as $600 million for mining machinery from a subsidiary of Reliance Power Ltd. of India because of a decision by the Ex-Im Bank against providing loan guarantees to help finance the purchase. The orders were contingent on obtaining the guarantees, which would cut the cost of financing for Reliance, part of a conglomerate headed by Anil Ambani.
Ex-Im Bank Supports Chile Infrastructure. Access thousands of business sources not available on the free web. Learn More .A person familiar with the situation in India said Reliance has chosen not to purchase the mining equipment from Bucyrus because of the bank's decision.
The bank's chairman cited Obama administration policy against backing projects with heavy carbon emissions.
The decision means "throwing 1,000 jobs in the ditch," Tim Sullivan, chief executive officer of the South Milwaukee, Wis., maker of mining equipment, said in an interview. Bucyrus cited an estimate that the order would create or protect 984 jobs in 13 U.S. states.
Last month, the Obama administration angered many people in Louisiana by imposing a six-month ban on deep-water oil drilling in the wake of the BP PLC oil spill. That ban could cost thousands of highly paid Gulf energy jobs, Louisiana officials have said. A U.S. District Court last week overturned the ban, but the government is appealing. The administration argues that "green" energy technology will prove a big generator of jobs.
Political leaders in Wisconsin hope to use a planned visit by President Barack Obama to the state Wednesday to plead for a reversal of the Ex-Im Bank decision. Mr. Obama is due to speak at a town-hall meeting on the economy in Racine, Wis.
The board of the Ex-Im Bank voted 2-1 Thursday against supporting the project. The bank is required to consider the environmental effects of projects it backs, a bank official said. The mining equipment would be used for a coal mine that is to supply a power plant under construction at Sasan in the Indian state of Madhya Pradesh.
Miners at India's Gevra coal mine last year. Most new power plants use coal, which Indian officials say they need to rely on to support growth.
.Mr. Sullivan said Reliance could turn to rival suppliers in countries such as China and Belarus.
Thebank board split along party lines. Two Democratic members—Fred Hochberg, chairman, and Diane Farrell—voted against supporting the project, while Republican Bijan Kian, voted in favor.
Mr. Hochberg said: "President Obama has made clear this administration's commitment to transition away from high-carbon investments and toward a cleaner energy future." He said he voted against the guarantees, which would lower the cost of financing for Reliance, because of the "projected adverse environmental impact."
The decision drew protests from some local politicians. "We have to focus on creating jobs," Tom Barrett, the Democratic nominee for governor of Wisconsin, said in a statement. Mr. Barrett, currently mayor of Milwaukee, pledged to "explore avenues to reverse the outcome."
A Reliance Power spokesman said the Ex-Im Bank decision "will have no adverse impact" on the $4.5 billion power project.
Mr. Sullivan, the Bucyrus CEO, said the power plant's expected emissions of 830 grams of carbon dioxide per kilowatt hour were within the Ex-Im Bank's limit of 850 grams. An Ex-Im Bank official said the margin of error on such estimates meant the emissions easily could exceed that guideline. Mr. Sullivan said the Ex-Im Bank decision was likely to kill U.S. jobs without protecting the environment because the power plant would be built in any case.
Indian companies are racing to build power plants to power the country's growth. Most of the large new projects are coal-based. Although India has pledged to ramp up solar, wind and nuclear projects, officials say they need to continue to rely on coal to support growth.
Write to James R. Hagerty at bob.hagerty@wsj.com and Amol Sharma at amol.sharma@wsj.com
Text By JAMES R. HAGERTY And AMOL SHARMA
For the second time in recent weeks, the Obama administration's environmental policies have clashed with its efforts to boost American jobs.
The U.S. Export-Import Bank, a federal body charged with promoting U.S. exports with loan guarantees, decided against backing a sale of coal-mining equipment to an Indian company. The guarantees were denied amid the agency's concerns about the mine's environmental impact.
Bucyrus International Inc. said it was likely to lose orders totaling as much as $600 million for mining machinery from a subsidiary of Reliance Power Ltd. of India because of a decision by the Ex-Im Bank against providing loan guarantees to help finance the purchase. The orders were contingent on obtaining the guarantees, which would cut the cost of financing for Reliance, part of a conglomerate headed by Anil Ambani.
Ex-Im Bank Supports Chile Infrastructure. Access thousands of business sources not available on the free web. Learn More .A person familiar with the situation in India said Reliance has chosen not to purchase the mining equipment from Bucyrus because of the bank's decision.
The bank's chairman cited Obama administration policy against backing projects with heavy carbon emissions.
The decision means "throwing 1,000 jobs in the ditch," Tim Sullivan, chief executive officer of the South Milwaukee, Wis., maker of mining equipment, said in an interview. Bucyrus cited an estimate that the order would create or protect 984 jobs in 13 U.S. states.
Last month, the Obama administration angered many people in Louisiana by imposing a six-month ban on deep-water oil drilling in the wake of the BP PLC oil spill. That ban could cost thousands of highly paid Gulf energy jobs, Louisiana officials have said. A U.S. District Court last week overturned the ban, but the government is appealing. The administration argues that "green" energy technology will prove a big generator of jobs.
Political leaders in Wisconsin hope to use a planned visit by President Barack Obama to the state Wednesday to plead for a reversal of the Ex-Im Bank decision. Mr. Obama is due to speak at a town-hall meeting on the economy in Racine, Wis.
The board of the Ex-Im Bank voted 2-1 Thursday against supporting the project. The bank is required to consider the environmental effects of projects it backs, a bank official said. The mining equipment would be used for a coal mine that is to supply a power plant under construction at Sasan in the Indian state of Madhya Pradesh.
Miners at India's Gevra coal mine last year. Most new power plants use coal, which Indian officials say they need to rely on to support growth.
.Mr. Sullivan said Reliance could turn to rival suppliers in countries such as China and Belarus.
Thebank board split along party lines. Two Democratic members—Fred Hochberg, chairman, and Diane Farrell—voted against supporting the project, while Republican Bijan Kian, voted in favor.
Mr. Hochberg said: "President Obama has made clear this administration's commitment to transition away from high-carbon investments and toward a cleaner energy future." He said he voted against the guarantees, which would lower the cost of financing for Reliance, because of the "projected adverse environmental impact."
The decision drew protests from some local politicians. "We have to focus on creating jobs," Tom Barrett, the Democratic nominee for governor of Wisconsin, said in a statement. Mr. Barrett, currently mayor of Milwaukee, pledged to "explore avenues to reverse the outcome."
A Reliance Power spokesman said the Ex-Im Bank decision "will have no adverse impact" on the $4.5 billion power project.
Mr. Sullivan, the Bucyrus CEO, said the power plant's expected emissions of 830 grams of carbon dioxide per kilowatt hour were within the Ex-Im Bank's limit of 850 grams. An Ex-Im Bank official said the margin of error on such estimates meant the emissions easily could exceed that guideline. Mr. Sullivan said the Ex-Im Bank decision was likely to kill U.S. jobs without protecting the environment because the power plant would be built in any case.
Indian companies are racing to build power plants to power the country's growth. Most of the large new projects are coal-based. Although India has pledged to ramp up solar, wind and nuclear projects, officials say they need to continue to rely on coal to support growth.
Write to James R. Hagerty at bob.hagerty@wsj.com and Amol Sharma at amol.sharma@wsj.com
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