Taking the good with the bad

As Russia and its allies block climate talks there's hope that America might finally do something. Elsewhere, Warren Buffett continues to back renewables, it's the end of a solar era in Italy, Japan shows signs of slowing down and the EU carbon price lifts again.

There was mixed news on global efforts to cut greenhouse gas emissions last week. Russia and its allies blocked progress at United Nations negotiations in Bonn, but there were reports that President Barack Obama is readying a US climate change plan.

The headlines from 12 days of climate talks in Bonn were grabbed by Russia, Belarus and Ukraine. Their call for discussions on legal and procedural aspects of the negotiations resulted in the suspension of talks in the Subsidiary Body for Implementation, one of the three negotiating forums under the UN Framework Convention on Climate Change. The call was linked to their frustration over the way that an extension to the Kyoto Protocol was pushed through at last year’s Doha conference.

“Practically speaking we have lost six months.” That was the verdict on the suspension from the lead negotiator for the “least developed countries”, Bangladesh’s Quamrul Chowdhury. The issues are likely to spill over into the next annual Conference of the Parties in Warsaw in November, unless a work-around can be found.

Despite that, the head of the talks, Christiana Figueres, said she was encouraged by the ambition shown for the next few years and towards an agreement in 2015. “Governments are increasingly realising that there are many co-benefits to the energy transformation,” she said.

Meanwhile, there were reports last week that Obama is planning to unveil a package of US climate change actions in July. That has been the response to pleas from donors at closed-door fundraisers to reject the proposed $US5.3 billion Keystone XL pipeline project.

While no specifics have been detailed, the plans will largely focus on actions the president can take with his existing executive authority, as Congress is unlikely to take up a climate bill. This may include final rules from the Environmental Protection Agency to limit greenhouse gas emissions from new power plants, and potentially standards for existing plants.

Before then, the most famous of US investors may again show the way, as Warren Buffett’s MidAmerican Energy Holdings could be about to make another large solar bond offering. A $US700 million bond offering to finance the $US2.7 billion Antelope Valley solar farm in Southern California may reportedly be held this month.

The deal would bring clean energy issuance this year to more than $US2 billion, “putting 2013 on track to be the biggest year on record for renewables bond offerings,” Bloomberg New Energy Finance analyst Joe Salvatore said.

It was the end of an era in Europe last week, as Italy hit the €6.7 billion solar subsidy trigger point that will end feed-in tariffs for new PV projects. Italy was the world’s second largest market for solar investment in 2011 after the US, and has vied with Germany for top spot in the EU for each of the last three years. The residential market will now have to rely on a net metering scheme.

In central and eastern Europe, policy changes are also reshaping markets. Czech private equity company EnerCap is planning a new €350 million fund to invest in gas and biomass combined heat and power plants, rather than of wind and solar projects. Shane Woodroffe, a partner at the Prague-based company, blamed “current uncertainties” about government support for renewables in countries such as Romania and Poland.

Meanwhile, EnerCap ordered 42MW of wind turbines from Vestas for the Obrovac wind farm in Croatia, and Vestas also took a 94MW order for a €160m project in South Africa from Aurora Wind Power, a venture led by GDF Suez. Terms were not disclosed but the contract includes a 15-year service agreement.

Nordex, a German turbine maker, won a 134MW order for another South African project being developed by Cennergi, a venture of Tata Power and Exxaro Resources. That contract includes a 10-year service agreement. Exxaro and Tata last week reached financial close on $US700 million for two wind farms with Standard Bank, Nedbank and the International Finance Corporation.

The solar explosion in Japan showed signs of faltering last week, as utility officials on Hokkaido told project developers they did not have grid capacity for any more solar projects greater than 2MW. By the end of March, 1,568MW of those plants had applied for grid connections, according to an April 17 statement from Hokkaido Electric Power, which said it had capacity for only 400MW.

Goldman Sachs, planning as much as 300 billion yen ($A3.3bn) in renewable energy investments in Japan, is eyeing offshore wind power there after building up holdings in solar projects. Goldman set up Japan Renewable Energy in August last year after Japan began offering generous feed-in tariffs. Shigeru Yasu, a representative director at Japan Renewable Energy, told Bloomberg News in an interview last week that the company sees offshore wind as promising, while geothermal and biomass power also hold potential.

The WilderHill New Energy Global Innovation Index, or NEX, followed broader market indexes down last week, losing 1.6 per cent. The 96-member index of clean energy and energy efficiency stocks is ahead 25.9 per cent in the year to date. In the same period of 2012, it declined 13.4 per cent.

EU carbon

European carbon advanced for a fifth straight week after lawmakers proposed a compromise on a plan to fix the region’s oversupplied market. European Union allowances (EUAs) for December 2013 gained 15.8 per cent over the week to close at €4.77/tonne on Friday, compared with €4.12/t at the end of the previous week. EUAs surged on Wednesday to a €4.50/t close after negotiators from political groups in the Parliament’s environment committee were said to have reached a tentative compromise on a carbon market rescue plan known as backloading.

The deal, which needs backing by political groups before a vote on the measure scheduled for June 19, will restrict the European Commission’s proposal to delay auctions of some carbon permits. Prices fell back on Thursday to close at €4.41/t after the Green group in the European Parliament said it was against the tentative carbon compromise. But market participants did not appear to lose confidence that European parliamentarians will support backloading, as EUAs rebounded on Friday.

UN Certified Emission Reduction credits (CERs) for December 2013 gained €0.04/t last week to close at €0.46/t.

This article was originally published by Bloomberg New Energy Finance.

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