Europe caps its biofuels future

Policymakers in Brussels and Washington last week got to grips with some of the items on their post-summer break clean energy agendas – and avoided others.

There was a significant development on biofuels in Brussels, as the European Parliament voted to limit the use of crop-based biofuels in transport. The EU has a binding target of 10 per cent renewable energy in transport energy consumption by 2020. The assembly decided that first generation biofuels can be used to achieve only 6 per cent at most, in order to ease competition with food production and avoid adding emissions through indirect land use changes. It also agreed that second generation biofuels from non-food sources like farm and industry waste must make up at least 2.5 per cent by 2020.

Those shares are higher than what was initially proposed last July, Bloomberg New Energy Finance biofuels analyst Roberto Rodriguez Labastida said. “This means there will still be a market for existing first generation capacity but not much room for growth,” he added. The parliament’s decision needs to be seconded by member states in the EU Council to pass.

Also in Brussels last week, the new Lithuanian Presidency tried to get ministers to give the council a mandate to start negotiations with the parliament and commission over backloading. This follows the parliament voting through the commission proposal in July to support the struggling EU carbon price by delaying the auction of some carbon permits until later this decade. Ministers unsurprisingly failed to agree on the mandate, as Germany is unwilling to commit before its election on Sunday. But Bloomberg New Energy Finance analysts said it suggested a level of urgency on the part of the Lithuanian Presidency and that a second attempt could follow swiftly.

Elsewhere in Europe, the Czech Republic last week passed a law ending subsidies for new clean energy projects from next year. That was expected: prime minister Jiri Rusnok said at the publication of a draft in July that the cost of renewable energy subsidies threatened the country’s industrial competitiveness.

Meanwhile, there was some confusion over a new French carbon levy on fuels last week, as environment minister Philippe Martin said there would be a new “carbon component” in consumer taxes, without giving further details. President Francois Hollande clarified that it will include diesel but not in 2014. Further details are expected in budget plans later this month. Meanwhile, Martin said a new energy bill, following the country’s national debate on energy transition, will be introduced next spring. The government originally planned for it to reach parliament in the second half of 2013.

Across the pond, Washington DC was abuzz last week with rumours that the Environmental Protection Agency is set to publish emissions limits for new coal plants. The agency proposed limits of 1000 pounds of carbon dioxide per megawatt hour last year – about the same as the UK’s 450g per kilowatt hour limit – but agreed to revise the rules to treat coal distinctly from natural gas. The new limit for coal is said to be higher but not enough to allow new plants to operate without carbon capture technology.

While the stakes are somewhat limited because there’s little demand for new coal generation in the US, coal interests see the initiative as a test case for the Obama administration’s overall strategy for emissions from existing plants. “Both sides are girding for a legal battle over the standards,” said Stephen Munro, a US policy analyst at Bloomberg New Energy Finance. “The coal industry’s objective would be a legal precedent that can be applied to dismiss or delay the existing-plant regulatory scheme scheduled to be unveiled in 2014.”

Meanwhile, a new bipartisan energy efficiency bill stalled in the Senate last week as Republican Senator David Vitter was accused of hijacking the debate to grandstand on healthcare amendments. The Shaheen-Portman bill includes measures to improve building codes, efficiency in the manufacturing sector and energy conservation in federal buildings.

There was more progress in New York state, where Governor Andrew Cuomo is starting a $US1 billion green bank to leverage private investment in clean energy projects. The bank, to be run by the New York State Energy Research and Development Authority, will provide loan guarantees and package loans for resale into the secondary market, with the aim of attracting institutional investors.

The news came as Bloomberg New Energy Finance revealed that global development bank financing for clean energy increased 19 per cent last year to $US109 billion, thereby breaking through the $US100 billion-a-year barrier for the first time. The 26 institutions covered by the analysis have financed a total of $US425 billion in clean energy investment since 2007.

Clean energy stocks again performed well in the public markets last week. The WilderHill New Energy Global Innovation Index, or NEX, which tracks 98 clean energy companies, rose 2.4 per cent, again beating broader market indices such as the S&P 500 Index and Nasdaq Composite Index. All sectors were up, with US microconverter producer Enphase Energy leading the pack with a 16.1 per cent gain, followed by SolarCity. The US rooftop installer added 15.6 per cent as it announced a fund with Centrica’s Direct Energy unit to finance up to $US124 million of projects.

EU carbon

European Union carbon permits advanced for a fourth straight week as German power prices continued to rise. European Union Allowances for December 2013 gained 1.5 per cent to end at €5.41/t on Friday, compared with €5.33/t at the close of the previous week. German power for delivery in 2014 gained for a fifth week, its longest winning streak for three years, ending the week 1 per cent up at €39.40/MWh.

Higher power prices can incentivise utilities to sell forward and hedge by buying fuel and carbon allowances. EUAs dropped earlier in the week after an EU auction of spot permits received the second lowest volume of bids since the first week of July, pushing carbon permit prices down to €4.96/t on Wednesday morning. The first attempt to get member states to support backloading at the council of the EU unsurprisingly failed last week, due to the lack of firm German support before elections there. However, the Lithuanian Presidency’s urgency bodes well for a second attempt to follow soon after the German elections. UN Certified Emission Reduction credits for December 2013 gained €0.07/t last week to close at €0.67/t.

This article was originally published by Bloomberg New Energy Finance. Republished with permission.