16 December 2010
Chinese power firm Datang International has floated its renewable power arm on the Hong Kong Stock Exchange, raising around US$643 million.
Meanwhile, another Chinese wind developer which spun off from a state-owned utility, Huaneng New Energy Industrial, cancelled plans for an initial public offering (IPO) on the same exchange.
China Datang Corporation Renewable Power sold 2.14 billion shares, each for HK$2.33($0.30), raising approximately $643 million. The IPO was priced at the bottom of the range, which had a maximum offer price of HK$3.18 per share. The IPO was arranged by UBS, China Everbright Securities, JPMorgan Chase and Macquarie.
But this week also saw Huaneng ditch plans for an IPO, according to local media reports, which it hoped would raise around HK$7.8 billion. The cancellation was put down to unexpected market volatility.
Datang Renewables had 2.7GW of installed capacity at the end of June 2010, according to the prospectus for the listing, with a further 22 wind farms under construction that would add an additional 1.5GW to the firm’s portfolio. The firm plans to have 5.5GW installed by the end of 2011. It also has solar and biomass energy projects in its pipeline.
Profits for the first half of 2010 were RMB290 million ($43 million), the firm reports in the prospectus, up on a RMB219 million profit in the same period in 2009. Its full-year profit was RMB367 million in 2009, RMB219 million in 2008 and RMB90 million in 2007.
About 60% of Datang’s installed capacity is located in Inner Mongolia, which the firm said has the most abundant wind resources in China.
The firm reported revenues from electricity sales to local utilities of RMB1,043 million in the first six months of 2010, up from RMB1,384 million for the whole of 2009. Income from the sale of UN-certified carbon credits was RMB101.6 million in the first six months of this year.
Datang spun off from its parent in July this year, and the state-owned utility remains its controlling shareholder.
Jess McCabe
Thursday, 16 December 2010
UK overhauls electricity markets, clean energy subsidies
16 December 2010
The UK government today announced plans to overhaul the country’s electricity market, introducing feed-in tariffs for clean energy generation and supporting carbon prices.
Details for the reforms are set out in two consultation documents, one on electricity market reform by the Department of Energy and Climate Change and one on the carbon price floor, by the Treasury.
“More than £110 billion [$171 billion] of investment is needed in new power stations and grid upgrades over the next decade, that’s double the rate of the last ten years. Put simply, the current market is not fit to deliver this,” said Energy and Climate Change Secretary Chris Huhne.
The proposed shake up includes:
•A carbon prices support mechanism, using the Climate Change Levy and fuel duties to tax fossil fuels used to generate electricity at rates based on their carbon content.
•Establishing a long-term ‘contract for difference’ for low carbon power generation. This feed-in tariff would see generators receive top-up payments if wholesale power prices are low, but money would be ‘clawed back’ once the cost of low-carbon electricity generation drops below wholesale prices. However, the consultation also sets out an alternative ‘premium’ feed-in tariff.
•Incentives for demand-reduction measures and to construct back-up power plants.
•An emissions performance standard which would ensure no coal plants can be built without carbon capture and storage.
Jess McCabe
The UK government today announced plans to overhaul the country’s electricity market, introducing feed-in tariffs for clean energy generation and supporting carbon prices.
Details for the reforms are set out in two consultation documents, one on electricity market reform by the Department of Energy and Climate Change and one on the carbon price floor, by the Treasury.
“More than £110 billion [$171 billion] of investment is needed in new power stations and grid upgrades over the next decade, that’s double the rate of the last ten years. Put simply, the current market is not fit to deliver this,” said Energy and Climate Change Secretary Chris Huhne.
The proposed shake up includes:
•A carbon prices support mechanism, using the Climate Change Levy and fuel duties to tax fossil fuels used to generate electricity at rates based on their carbon content.
•Establishing a long-term ‘contract for difference’ for low carbon power generation. This feed-in tariff would see generators receive top-up payments if wholesale power prices are low, but money would be ‘clawed back’ once the cost of low-carbon electricity generation drops below wholesale prices. However, the consultation also sets out an alternative ‘premium’ feed-in tariff.
•Incentives for demand-reduction measures and to construct back-up power plants.
•An emissions performance standard which would ensure no coal plants can be built without carbon capture and storage.
Jess McCabe
Chris Huhne admits green bank may be scaled back
Environmental bank could start as a fund owing to fears of adding to deficit, says climate secretary Chris Huhne
Allegra Stratton and Tim Webb The Guardian, Wednesday 15 December 2010
The government's environmental bank looks likely to be scaled back and may begin life as a fund, jeopardising billions of pounds of badly needed loans to green technology. The green investment bank (GIB) was devised by George Osborne, the chancellor, when he was in opposition. He believed that it was crucial to the development of green energy projects such as clean coal plants and offshore windfarms in Britain.
Now the cabinet minister who is in charge of seeing it come to fruition and is a devoted ambassador for the idea of a fully functioning bank has floated the possibility of staggering its introduction. This would see it initially set up as a more limited fund unable to raise finance by issuing "green bonds" to back projects.
Chris Huhne, the energy and climate change secretary, appears to concede that the Treasury's concern that the liabilities taken on by a GIB would be added to the government's budget book. He suggests instead that the new institution could morph into a bank able to raise finance over time as Britain's deficit is reduced.
In an interview with the Guardian, he insisted that the government remained committed to setting up a bank and that setting up a fund initially was only one option. But the prospect of a delay on fully implementing this key green policy will anger environmentalists.
Huge task
"Obviously, if we were to turn around and have the GIB borrowing vast amounts of money tomorrow I can understand that managers of the national debt would be a little alarmed," he said. "I am absolutely at one with the Treasury on the need to make sure our fiscal credibility is completely re-established. The key issue is whether or not having established our fiscal credibility, what then happens?
"There are phasing issues, there are transition issues. What is the point at which maybe it begins as a fund and later is a bank, whatever. Let there be no doubt that the first overwhelming priority of the government has to be to get the deficit down."
Auditor Ernst & Young has said that, without a bank, only about a fifth of the £450bn investment needed for Britain to meet its carbon emissions targets over the next 15 years would be made.
Tomorrow Huhne will announce other measures which, he says, will amount to the biggest change to the electricity market since privatisation in the 1980s. Despite its apparent rethink on the GIB, the government hopes the measures will channel private sector investment into renewables in other ways. Huhne's plan will also break a key Conservative pre-election pledge on cleaning up coal plants.
In a key note speech to environmentalists in October last year, David Cameron repeated his party's pledge to introduce rules requiring new power stations to be as clean as a modern gas plant. This would have required energy companies to fit experimental equipment, which captures and stores carbon emissions (CCS), to about two-thirds of their new coal plants. But the policies to be unveiled are expected to recommend that CCS be fitted to only one-third of coal plants.
Huhne declined to comment on the specifics, but was much more effusive about Tesco, particularly when it comes to the environment. Tomorrow, Huhne will, by his own admission (albeit with tongue firmly in cheek), ape Britain's biggest supermarket when he promises that his plan will make Britain "greener for less". Huhne will promise that electricity bills will be lower and power plants twice as green as would be the case under the existing energy policies inherited from the previous government. "[It will be] greener for less, more for less," he said. Told that it sounded a bit like a Tesco promotion, he said: "I am very happy to be the Tesco of the energy industry." With the coalition government committed to both slashing the deficit and being the "greenest ever", it's a fitting slogan.
The power sector accounts for about a third of Britain's carbon emissions, so cleaning it up is crucial for the country to meet its climate change targets. The task is huge – and it won't come cheap, whether it is done with Tesco-style efficiency or not. Old coal and nuclear plants are being closed and must be replaced. The UK's electricity grids will have to be massively upgraded to cope with more intermittent supplies of electricity from wind farms. New flexible gas plants are needed in reserve to come online when the wind does not blow enough. Overall electricity demand is set to increase too, as electric vehicles become more common.
Ofgem, the energy regulator, estimates that £200bn of investment is required in new energy technology over the next decade alone, about double the normal rate of investment. But the existing market regime will not do the job. Some of the technologies are relatively new and untested on a large scale, making them risky for investors. Electricity prices are also volatile, which means the return on huge upfront investments is uncertain.
Huhne's plan is aimed at incentivising investment in cleaner ways of generating electricity. For example a carbon floor price – effectively a tax on carbon emissions – will be introduced which should make coal and gas plants more expensive to operate and renewables more competitive. Large offshore wind farms will earn a guaranteed premium above the market rate for all or some of the electricity they sell. Standby gas plants will also receive fixed payments in return for being available.
Higher bills
The cost will ultimately be borne by consumers through higher energy bills. Huhne will claim that his reforms will make electricity bills slightly cheaper than they would be under the current system. He may be right, but energy bills are still expected to increase by about a quarter over the next decade, and that assumes homes have been properly insulated. Ofgem's worst prediction sees prices rocketing by 60% by 2015.
Gas and electricity prices are already close to record levels after a recent round of rises, which coincide with the coldest December for decades. Huhne argues that over the long-run, bills would be "substantially" higher if the UK relied on fossil fuels as their cost is rising.
"The name of the game is not adding to any British consumer's cost, but is actually making sure that British consumers over the long-term have an energy policy less vulnerable to the variability of what is going to be a pretty rough and tumble oil and gas market …And if we have a relatively high fossil fuel price they [consumers] are going to be quids in." Promising higher bills in the short-term to head off even higher bills 20 years from now is a tough sell at the best of times, let alone during an age of austerity. Huhne insists he can pull off the trick of both greening the UK – and keeping the costs down for Osborne and the British consumer.
"Fiscal credibility is key. But we also have to decarbonise the economy. Governments by definition do not have one objective. We are able to walk and chew gum at the same time. Therefore we are able to have low carbon investment and fiscal credibility. That is what we have to combine and that is what we're going to do."
Allegra Stratton and Tim Webb The Guardian, Wednesday 15 December 2010
The government's environmental bank looks likely to be scaled back and may begin life as a fund, jeopardising billions of pounds of badly needed loans to green technology. The green investment bank (GIB) was devised by George Osborne, the chancellor, when he was in opposition. He believed that it was crucial to the development of green energy projects such as clean coal plants and offshore windfarms in Britain.
Now the cabinet minister who is in charge of seeing it come to fruition and is a devoted ambassador for the idea of a fully functioning bank has floated the possibility of staggering its introduction. This would see it initially set up as a more limited fund unable to raise finance by issuing "green bonds" to back projects.
Chris Huhne, the energy and climate change secretary, appears to concede that the Treasury's concern that the liabilities taken on by a GIB would be added to the government's budget book. He suggests instead that the new institution could morph into a bank able to raise finance over time as Britain's deficit is reduced.
In an interview with the Guardian, he insisted that the government remained committed to setting up a bank and that setting up a fund initially was only one option. But the prospect of a delay on fully implementing this key green policy will anger environmentalists.
Huge task
"Obviously, if we were to turn around and have the GIB borrowing vast amounts of money tomorrow I can understand that managers of the national debt would be a little alarmed," he said. "I am absolutely at one with the Treasury on the need to make sure our fiscal credibility is completely re-established. The key issue is whether or not having established our fiscal credibility, what then happens?
"There are phasing issues, there are transition issues. What is the point at which maybe it begins as a fund and later is a bank, whatever. Let there be no doubt that the first overwhelming priority of the government has to be to get the deficit down."
Auditor Ernst & Young has said that, without a bank, only about a fifth of the £450bn investment needed for Britain to meet its carbon emissions targets over the next 15 years would be made.
Tomorrow Huhne will announce other measures which, he says, will amount to the biggest change to the electricity market since privatisation in the 1980s. Despite its apparent rethink on the GIB, the government hopes the measures will channel private sector investment into renewables in other ways. Huhne's plan will also break a key Conservative pre-election pledge on cleaning up coal plants.
In a key note speech to environmentalists in October last year, David Cameron repeated his party's pledge to introduce rules requiring new power stations to be as clean as a modern gas plant. This would have required energy companies to fit experimental equipment, which captures and stores carbon emissions (CCS), to about two-thirds of their new coal plants. But the policies to be unveiled are expected to recommend that CCS be fitted to only one-third of coal plants.
Huhne declined to comment on the specifics, but was much more effusive about Tesco, particularly when it comes to the environment. Tomorrow, Huhne will, by his own admission (albeit with tongue firmly in cheek), ape Britain's biggest supermarket when he promises that his plan will make Britain "greener for less". Huhne will promise that electricity bills will be lower and power plants twice as green as would be the case under the existing energy policies inherited from the previous government. "[It will be] greener for less, more for less," he said. Told that it sounded a bit like a Tesco promotion, he said: "I am very happy to be the Tesco of the energy industry." With the coalition government committed to both slashing the deficit and being the "greenest ever", it's a fitting slogan.
The power sector accounts for about a third of Britain's carbon emissions, so cleaning it up is crucial for the country to meet its climate change targets. The task is huge – and it won't come cheap, whether it is done with Tesco-style efficiency or not. Old coal and nuclear plants are being closed and must be replaced. The UK's electricity grids will have to be massively upgraded to cope with more intermittent supplies of electricity from wind farms. New flexible gas plants are needed in reserve to come online when the wind does not blow enough. Overall electricity demand is set to increase too, as electric vehicles become more common.
Ofgem, the energy regulator, estimates that £200bn of investment is required in new energy technology over the next decade alone, about double the normal rate of investment. But the existing market regime will not do the job. Some of the technologies are relatively new and untested on a large scale, making them risky for investors. Electricity prices are also volatile, which means the return on huge upfront investments is uncertain.
Huhne's plan is aimed at incentivising investment in cleaner ways of generating electricity. For example a carbon floor price – effectively a tax on carbon emissions – will be introduced which should make coal and gas plants more expensive to operate and renewables more competitive. Large offshore wind farms will earn a guaranteed premium above the market rate for all or some of the electricity they sell. Standby gas plants will also receive fixed payments in return for being available.
Higher bills
The cost will ultimately be borne by consumers through higher energy bills. Huhne will claim that his reforms will make electricity bills slightly cheaper than they would be under the current system. He may be right, but energy bills are still expected to increase by about a quarter over the next decade, and that assumes homes have been properly insulated. Ofgem's worst prediction sees prices rocketing by 60% by 2015.
Gas and electricity prices are already close to record levels after a recent round of rises, which coincide with the coldest December for decades. Huhne argues that over the long-run, bills would be "substantially" higher if the UK relied on fossil fuels as their cost is rising.
"The name of the game is not adding to any British consumer's cost, but is actually making sure that British consumers over the long-term have an energy policy less vulnerable to the variability of what is going to be a pretty rough and tumble oil and gas market …And if we have a relatively high fossil fuel price they [consumers] are going to be quids in." Promising higher bills in the short-term to head off even higher bills 20 years from now is a tough sell at the best of times, let alone during an age of austerity. Huhne insists he can pull off the trick of both greening the UK – and keeping the costs down for Osborne and the British consumer.
"Fiscal credibility is key. But we also have to decarbonise the economy. Governments by definition do not have one objective. We are able to walk and chew gum at the same time. Therefore we are able to have low carbon investment and fiscal credibility. That is what we have to combine and that is what we're going to do."
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