Solar sans subsidies

With renewables now cost competitive with fossil-fuelled energy in some regions, First Solar is looking to surge into the Indian market without the assistance of subsidies. Meanwhile, other solar firms continue to scramble for profit, while tidal energy is on the verge of an upswing.

First Solar, the world's biggest maker of thin-film panels, plans to build solar farms in India rather than just supply panels, the company's new head for the South Asian market said last week. The interesting aspect of this piece of news is that many of these plants would be for industrial and commercial consumers without any subsidies involved. “Our focus really is to create a new stream of demand in the market," said Sujoy Ghosh, in an interview.

Bloomberg New Energy Finance analysis suggests that there are markets and regions where renewable energy is now price-competitive with conventional energy without subsidy support. This is especially the case in energy-deficit regions where diesel or fuel oil is used as feedstock for power plants. According to the Ministry of New and Renewable Energy, India is estimated to have a 30GW back-up power market created by factories and businesses that switch to diesel generators when grid power becomes unavailable.

India had an average power deficit of about 9 per cent last month and a peak deficit of over 13 per cent in some regions, according to the latest data from the Central Electricity Authority. This gap was partly responsible for the country's massive grid collapse and the world's largest black-out, affecting 600 million people in July.

Ghosh said that the self-generation demand in the market "would create a natural need for investing in a manufacturing facility to serve the needs of the market locally."

First Solar, for its part, has shifted strategy towards project development – and successfully so – as evidenced by an 81 per cent jump in second quarter earnings announced earlier this month. It is almost the only profitable panel-maker among the 10 biggest in the world.

Other large solar manufacturers continue to be under strain. GCL-Poly Energy Holdings, the biggest maker of polysilicon and wafers, reported its first loss since the second half of 2009 last week. In the six months ended 30 June, it turned in a loss of HKD 330 million ($A40 million), compared with a profit of HKD 3.55bn ($A430 million) in the same period a year earlier. "Due to factors such as cyclical oversupply in the industry, the European debt crisis and European subsidy policy changes, the company’s performance was affected," it said in a statement.

MEMC Electronic Materials and Trina Solar are among the other large manufacturers that have reported losses this month. The latter also reduced its forecast 2012 shipments to 1.75-1.8GW compared with a May forecast of 2-2.1GW.

A sector that could be on the verge of an upswing is tidal energy. London-based Hafren Power said that it is seeking investments from sovereign wealth funds for its GBP 25 billion ($A37 billion) plan to generate power from tides in the Severn Estuary. An earlier blueprint for the 6.5GW project was rejected by the UK government because of the cost to the public finances. According to Richard Bazley, the company's director, there is considerable interest from around the world and the funding would therefore have "a very international element."

The UK government is backing marine energy, which it claims could meet 20 per cent of the nation's current electricity demand. The 1,064-turbines project, which would generate electricity on both “ebb and flood” tides as the sea rises and falls, has the potential to meet 5 per cent of the UK's electricity demand.

On the biofuels front, the European Union ordered its customs officials to register imports of US bioethanol – a step that would allow the EU to impose duties retroactively if it finds that bioethanol producers in the US received trade-distorting government aid.

Nine months ago, the EU opened a probe into whether US bioethanol manufacturers receive government subsidies that harm European competitors. The bloc also began a separate investigation into whether American producers dump bioethanol in the EU.

EU governments must decide by December 25 whether to impose anti-subsidy duties on bioethanol from the US for five years, and by February 25, 2013 whether to apply anti-dumping levies. The EU already imposes anti-subsidy and anti-dumping duties on imports of biodiesel from the US.

EU carbon

European carbon allowances, or EUAs, advanced last week, as the profit for selling electricity from coal-fired power plants hit a two-month high. EUAs for December 2012 delivery gained 6 per cent to close the week at €8.17/tonne, compared with €7.71/t at the end of the previous week. EUAs may have been boosted by a widening in the German clean-dark spread – the measure of a coal-fired power plant’s profitability.

The profit for burning coal in Germany in 2013 closed last Thursday at €10.14/MWh – the highest since 19 June. December 2012 EUA trading volumes increased 26 per cent on that day to 14.7Mt. Power generators that want to burn coal need about twice the number of carbon permits required for natural-gas generation. United Nations Certified Emission Reductions, or CERs, for December 2012 climbed 3.8 per cent last week to €3.01/t.

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