The hunt for a level playing field

The country that is the world's largest investor in clean energy was dragged into yet another investigation into the subsidies it provides last week. The European Commission initiated an anti-subsidy probe into imports of solar glass from China, based on a complaint by lobby group EU ProSun Glass.

"Under trade defence rules, the EU could impose provisional anti-subsidy duties within nine months if it considers these necessary," the Brussels-based Commission said in a statement. Imports of solar panels are already under investigation by the European Commission, and US duties on panel imports from China came into force in 2012. State support to industry in various forms – including local content preference – is increasingly coming under the scanner as companies clamour for the establishment of the vaunted ‘level playing field’ in the clean energy sector.

China was in the news for other reasons too. Solar-panel maker Yingli Green Energy secured loans of $US165 million from China Development Bank to support its operations. The state-owned bank committed to provide a $US110 million, one-year loan and a $US55 million, three-year loan to supplement the company's working capital and back the procurement of raw materials.

CDB has committed almost $US70 billion worth of credit lines to solar, wind and other clean energy companies since 2010, according to Bloomberg New Energy Finance. In March, the China Banking Regulatory Commission warned Chinese banks to avoid high risks in nine oversupplied industries, including solar and wind. In recent weeks, CDB has provided long-term loans to JinkoSolar Holding and ReneSola.

Solar companies are also tapping alternative sources of finance. LDK Solar, the loss-making Chinese solar-panel maker with $US3 billion in debt, agreed to sell a second 15 per cent stake to Fulai Investments last week for $US25.8 million, following the first share sale deal in January. The company will issue 25 million new shares at $US1.03 each to Fulai, some 28 per cent lower than the weighted average of $US1.44 each that Fulai paid for the 17 million shares in January.

In China's wind power sector, Xinjiang Goldwind posted a more-than-fivefold increase in first-quarter profit as cost cuts countered a decline in sales. Net income of the country's biggest maker of wind turbines jumped to 32.5 million yuan ($A5 million) from 6.2 million yuan a year earlier.

Its smaller rival Sinovel however reported a bigger than expected loss for 2012 and forecast a loss for the first half of the current year, as investments in the sector slowed. The net loss in the first quarter of 2013 was 248.5 million yuan against a net income of 28.6 million yuan a year earlier. Chinese wind project developers fared much better, with Longyuan reporting a 13 per cent gain in first quarter earnings and China Datang posting a 79 per cent surge.

The news emanating from US, the country that was the second largest clean energy investor in 2012, was of a different flavour. The abundant supply of competitively-priced gas has pushed 16 of the 29 states to review renewable portfolio standards, which would reduce the need for solar and wind power, thereby clipping investments.

What is required is enhancing investments in renewable power and energy efficiency to avert environmental calamities, UN Secretary General Ban Ki-moon said at the Bloomberg New Energy Finance Summit in New York last week. "Climate change is a threat to economies large and small and to the stability of the global financial system. We have only one planet Earth. We have no plan B," he said.

There was encouraging news on efficiency financing from KfW, Germany's state development bank. It committed a record €16.5 billion (to energy efficiency measures last year, which is more than half its total €29.2 billion financing for climate and energy protection.

In India, Ramky Enviro decided to delay its $US200 million IPO plan, citing tepid market conditions. The company planned to use about half of the funds mobilised for a 48MW waste-to-energy plant.

EU carbon

European carbon permits struggled to stay above €3.00/tonne last week as the market failed to recover from the European Parliament’s rejection of a plan to fix oversupply. European Union allowances (EUAs) for December 2013 lost 1.6 per cent last week to close at €3.11/t, compared with €3.16/t at the end of the previous week. EUAs were trading as low as €2.71/t on Tuesday morning, extending the previous week’s losses.

The European Parliament voted on April 16 against a proposal to delay sales of some emission allowances. Later on Tuesday, EUAs surged to a high of EUR 3.20/t, as EU environment ministers met in Dublin to discuss ways to fix the EU Emissions Trading System. On Thursday, lawmaker Matthias Groote confirmed that the environment committee which he chairs will seek to present a new backloading proposal for a vote in the Parliament.

UN Certified Emission Reduction credits (CERs) for December 2013 added one cent to finish the week at €0.26/t.

This article was originally published by Bloomberg New Energy Finance.