Land of sinking sun power?
Some so-far unrealised solar projects looked as if they may face cancellation in one of the world’s biggest photovoltaic markets last week, as a major developer on another continent looked to bring in institutional money to help fund projects for new sunshine power capacity.
Japan is deliberating cancelling approvals for delayed solar-power projects following reports that some developers are putting off construction while they wait for equipment costs to come down. The Ministry of Economy, Trade and Industry plans hearings as early as March with developers of 672 solar ventures approved in fiscal 2012, it said last week. Permits for the plants, totalling about 3GW in capacity, will be revoked if developers have not secured sites and equipment by the time of the hearings
Japan was only second only to China for having the most capacity of newly installed photovoltaic projects last year, according to Bloomberg New Energy Finance. The country introduced a clean-power incentive program in July 2012 to diversify its energy mix following the Fukushima nuclear disaster. Since then, some solar developers have struggled to secure land or financing, while others may have deliberately delayed projects in the hope that construction costs will fall, the Institute for Sustainable Energy Policies said last month.
There have been doubts about whether some of the solar projects approved under Japan's feed-in tariff program will ever get built. As a result, the METI is tightening the rules to ensure approved applications result in real projects. Earlier in January, METI lowered the project size limit – from 500kW to 400kW – over which applicants need to provide clear documentation on project land rights. Further tightening of the rules will also mean developers with project approvals no longer can simply wait for land prices, solar module and other costs to come down before finalising procurement and construction.
Meanwhile, Mainstream Renewable Power, an Irish clean-energy developer, highlighted other opportunities for solar capacity expansion last week. Mainstream Renewable Power said it is looking to convince pension funds and insurance companies in Chile to help fund $US2 billion of planned investments in the biggest copper-producing country. As the Chilean government looks to renewable sources to provide at least 20 per cent of electricity by 2025, Mainstream and partner Actis have secured $US300 million for the construction of 592MW of wind and solar projects that require $US1.2 billion in investments.
Recently, high spot power prices in Chile have opened doors for ventures that would have seemed implausible in the recent past, according to Bloomberg New Energy Finance. These include unsubsidised merchant (non-contracted) solar projects, which are not particularly compatible with the investment profiles of pension funds and insurance companies, which generally prefer safer bets. Yet, projects that do have bankable power purchase agreements would fit their risk appetite. Bloomberg New Energy Finance has found that institutional investors in Europe and North America are now seeing renewable projects as sound places to park their money, and it may only be a matter before their Chilean peeps catch on.
In other news, RWE sold a 49 per cent stake in a 67MW wind farm under development in western Germany as the utility divests holdings to bolster its balance sheet. The city of Bedburg bought into the 21-turbine Koenigshovener Hoehe plant, according to a joint e-mailed statement.
RWE has downsized and divested operations in both the onshore and offshore business units, and the sale of the Koenigshovener Hoehe plant comes just one month after a decision to reduce the size of its UK offshore project Triton Knoll by 50 per cent. Germany is the largest target market for wind assets in Europe, and if the project can be commissioned before 1 August, it will lock in the soon-to-expire EEG 2012 tariff regime, which Bloomberg New Energy Finance expects will be more generous than any new support mechanism.
New financing details were revealed on another large European wind project last week. The company backing the biggest wind farm to be built in the Netherlands got a €350 million ($US480 million) loan led by the European and German development banks. Germany’s KfW Group, Dutch lender Rabobank Group and the European Investment Bank provided the funds for NOP Agrowind to expand a facility that is already under construction.
Agrowind will install 26 of Enercon’s 7.5 MW turbines, bringing the Noordooostpolder wind farm to 86 machines, KfW IPEX-Bank said last week in an e-mailed statement. The first turbine is expected to start generating in September, with completion of the project scheduled for 2016, it said.
The Netherlands is far behind the track required to meet its 2020 targets due to regional capacity allocation issues and an unfavourable tariff allocation process, according to Bloomberg New Energy Finance, and this project will boost the installed capacity of wind in the country.
EU carbon
European carbon prices advanced for a fifth straight week after the European Commission said a temporary curb on carbon permit supply will probably start in the middle of March.
European Union allowances (EUAs) for December 2014 finished the week 2.5 per cent up. EUAs for delivery in December ended last Friday’s session at €6.68/t on ICE Futures Europe exchange in London, compared with €6.52/t at the close of the previous week. The European Commission said on its website February 11 that it’s already started preparatory work with member states and carbon-permit auction platforms on a plan to curb supply in the market. The market fix envisages delaying, or backloading, the sale of 900 milliont carbon permits to help boost prices. Despite this positive news, permits fell back on February 12 as the European Commission said it approved the allocation of free permits to factories in six nations including Germany, boosting supply from as early as February 13. They bounced back to a high of €6.72/t on Friday.
UN Certified Emission Reduction credits for December 2014 lost €0.04/t last week to finish at €0.37/t.
Originally published by Bloomberg New Energy Finance. Reproduced with permission.