Clean energy friction

The European Union found itself at the centre of friction over clean energy policy last week. It was embroiled in a trial of strength with the US over airline emissions and a row with China over trade in PV modules, and seeing another of its member countries slapping a tax on clean energy developers.

The US Senate passed a bill to prohibit US airlines from participating in the EU Emissions Trading System. The EU started including international airlines in the ETS earlier this year, though the first test of compliance will not be until 2013.

Senator John Thune, a Republican sponsor of the bill, showed no sympathy for the EU's emission efforts, saying: “The Senate's action today will help ensure that US air carriers and passengers will not be paying down European debt through this illegal tax.”

House Republicans continued their pre-election snubbing of climate and clean energy policy in DC. The Republican-led House of Representatives passed the so-called ‘Stop the War on Coal Act' on Friday, which seeks to remove regulations on the coal industry. This followed the so-called ‘No More Solyndras Act' the week before, to block federal loan guarantees for clean energy projects.

Neither bill has a chance of passing the Democrat-led Senate or escaping a veto from the White House. But as the House now rises for November's presidential election, they set the Republicans' stall out to play to coal states and against Barack Obama's policies, as well as trying to maintain the President's embarrassment over the collapse of Solyndra last year. Obama said on a visit in 2010 that Solyndra, which won a $US535 million loan guarantee in 2009, showed clean energy was not “just an article of faith.”

The airline emissions bill will go back to the lower house after the election. It ramps up pressure for a negotiated solution at the UN International Civil Aviation Organization. “The Senate bill calls for the US to go for a global deal to address aviation emissions,” EU Climate Commissioner Connie Hedegaard said. “I agree. This is what the EU has always been fighting for. But it's not enough to say you want it, you have to work hard to get it done.”

Shipping emissions may be the next target in the EU's sights, as progress at the International Maritime Organization has been slow, a European Commission official said. Elina Bardram, head of the international carbon market unit at the European Commission, told a seminar in Brussels that the EU will make a proposal on emissions from shipping in the coming months, and including them in the ETS is “part of the options that are being considered”.

As if scrapping with one global superpower was not enough for the EU, China ramped up the rhetoric over the European Commission's anti-dumping investigation into Chinese solar manufacturers. Wen Jiabao, the outgoing Chinese premier, told a business conference in Brussels last week: “We must uphold trade liberalisation and facilitation, oppose trade protectionism.” He urged Europe to “exercise restraint in resorting to trade-remedy measures.” German Chancellor Angela Merkel said the European Commission backed her call for talks to solve the dispute.

A new phenomenon in Europe, as the region's debt crisis rides on and austerity bites, is the taxing of renewable energy plants, especially where subsidies may have been too high to begin with. Last week was the turn of Bulgaria, where the energy regulator approved temporary taxes on as much as 39 per cent of revenue for solar and smaller amounts for wind, hydro and biomass projects. This followed a proposed tax in Spain the week before and similarly unpleasant surprises in the Czech Republic and Italy in previous years.

In France, President Francois Hollande confirmed his campaign pledge with the Greens to cut the share of nuclear power from 75 per cent to 50 per cent by 2025. He also upheld a ban on fracking and called for EU emission reduction targets of 40 per cent in 2030 and 60 per cent in 2040. Meanwhile, the renewable unit of state-owned utility EDF expanded into Poland's wind market by acquiring developer Starke Wind – with a project portfolio of 650MW – and, separately, the 48MW Linowo project.

There was not such good news for Germany's wind industry, as turbine maker Fuhrlaender filed for bankruptcy, citing delays to both projects and payments. Indian turbine maker Suzlon, meanwhile, asked bondholders for a four-month extension on around $US221 million of notes due next month.

Wind was actually the best performing sector on the WilderHill New Energy Global Innovation Index, or NEX, which tracks 95 clean energy stocks around the world, adding 4.4 per cent last week. However, the NEX retreated 1 per cent overall. China's Suntech was the best performer, its stock rising 24 per cent. The company announced a significant reduction in its PV production capacity and said it had a plan to address a warning of possible delisting from the New York Stock Exchange due to its low share price. Another embattled Chinese manufacturer, LDK Solar, said it is in advanced talks with strategic investors.

Asian solar companies were shouting from Europe's rooftops last week. Zongyi bought and built Italy's largest roof-mounted PV project – a 13.5MW plant in Marche – for €55m ($A67 million). Hanwha, a South Korean industrial group, delivered 7.7MW of PV modules for France's biggest rooftop solar installation, comprising some 36,900 panels on buildings housing a ginseng plantation in Rion-des-Landes. In the week's biggest deal, private equity giant Blackstone agreed to buy Vivint – a Utah-based home security, energy management and solar leasing company – for about $US2 billion.

Brazil postponed two auctions to contract new power capacity, including wind, biomass and hydro, by two months due to lack of demand from distributors. Meanwhile, national development bank BNDES and research-financing agency Finep will provide BRL 2 billion ($A970 million) up to 2014 for research into processing sugar cane into fuels and specialty chemicals. This is double their initial plan.

EU carbon

European carbon allowances, or EUAs, for December 2012 delivery rose 0.1 per cent last week, closing at €7.46/tonne, compared with €7.45/t at the end of the previous week. EUAs fell at the start of last week, after the European Commission announced on Monday that it would open an upgraded single carbon-permit registry on October 2, potentially enabling early auctions of Phase III permits to begin. Prices bounced back on Wednesday, as options contracts to sell EUAs for September expired. On the same day, Denmark's Climate Minister, Martin Lidegaard, said on Bloomberg TV that EUA prices were too low, suggesting some allowances should be taken out of the market and a more ambitious emissions target set for 2030.

Meanwhile the Climate Change Committee, representing EU member states, met last week to discuss a plan to curb the oversupply of allowances in the market. The lack of outcome from the meeting may have encouraged some market participants to swap EUAs for cheaper United Nations Certified Emission Reductions, or CERs, in the short term. This may have helped CERs rally 11.9 per cent last week, recovering from a record low of €1.68/t the previous week to end at €1.88/t.