The land of the rising solar

Japan is quickly becoming a solar powerhouse, ready to surpass the US for the number two spot and chase China at the top. Elsewhere, retroactive moves hurt confidence in some European countries and carbon prices lift.

The brightest places on Earth for renewable energy often have less to do with the weather and more to do with policy support. Some countries soaked up the rays last week, as others looked like risking their place in the sun.

The light shone on Japan last Thursday as a Bloomberg New Energy Finance report identified the island nation as a growing giant in the solar market. This is due, in large part, to its generous feed-in tariff for energy from renewable sources.

The research company increased its Japanese PV installation expectations for 2013 from the 3.2-4.0GW range, to 6.0-9.4GW. This would see Japan overtake the US as the second largest PV market in 2013, and it may move even ahead of China.

“This upward revision reflects the rapid increase in shipments seen last quarter as well as the fact that the pipeline of projects is even stronger than previously expected,” Bloomberg New Energy Finance said in the report.

It expects renewable energy growth in Japan will continue to be strong this year even though the government cut the feed-in tariff rate about 10 per cent, from 42 yen/kWh ($A0.41/kWh) to 37.8 yen/kWh ($A0.36/kWh), effective April 1, 2013. This was much less than the 20-30 per cent cut some players in the market were expecting and these are still generous rates, according to BNEF.

China does not appear ready to cede its place in the global renewable energy market any time soon. The Finance Ministry said last Wednesday that China has allocated 14.8 billion yuan ($A2.2bn) for renewable energy subsidies, as the country pursues a target to cut carbon emissions by 17 per cent per unit of gross domestic product by 2015.

The government will provide 9.3 billion yuan for wind power, 3.1 billion yuan for biomass projects and 2.4 billion yuan for PV plants, with the rest subsidising other technologies, the ministry said in a statement on its website. The country plans to have 100GW of wind, 21GW of solar and 13GW of biomass power installed by 2015.

Meanwhile, last week also heard news that solar developers were finding rays of opportunities in the tropics. Borrego Solar Systems announced it is developing its first utility-scale solar-power plants in Puerto Rico as the island extends subsidies for renewable energy.

Borrego plans to complete two projects, of 2.3MW and 1.2MW, within a year and to start building a 20MW plant in 2014, Alex Sarly, senior project developer at the San Diego-based company, told Bloomberg News. It has funding for all its photovoltaic ventures on the island with a group of US banks, he said.

Borrego is set to benefit from an extension of the Puerto Rico’s net metering policy, which credits generators for any power produced that is not used.

A recent Research Note from Bloomberg New Energy Finance on Caribbean markets found that three of the larger islands – Puerto Rico, Jamaica and the Dominican Republic – had significant potential for solar investment, largely because so much of their current generation is based on expensive, imported oil.

Over in Europe, subsidy cuts are continuing to make renewable energy investors skittish. The Romanian government said last Thursday that it will reduce subsidies for new wind and solar projects from 2014.

Romania’s plan to curb support for renewables follows similar moves in France, Italy and the UK, where governments have sought to ease power-price increases for households and businesses. Romania said Thursday it will grant 1.5 green certificates per megawatt-hour of wind power generated, down from two now, and three for photovoltaic plants, down from six.

However what is most controversial is that the country also announced April 2 that it plans to curtail support for existing projects. Romanian onshore wind projects benefitted from the highest levelised tariff in the European Union last year through the country’s green certificate scheme. With this news, it looks like their support level will be halved from July, albeit via a temporary freeze. That would place Romania in the “retroactive camp” of countries such as Spain, Czech Republic and Bulgaria that have made cuts in support, or increased taxes, on projects already operating.

The changes still need to be approved by the government – but damage has likely already been done to confidence. CEZ, central Europe’s biggest power utility, said last week it will now concentrate on expanding in Poland following the news that Romania will cut subsidies for clean energy.

Another worrying announcement for renewable energy came last week from BP. The energy giant said it will shed wind assets to refocus on its main oil and gas business. BP will sell interests in 16 operating wind farms in nine US states, with a total capacity of about 2,600MW. The company will also sell projects in various stages of development including 2,000MW poised to start construction.

BP’s stake in the 16 operating projects is roughly 1.5GW, some 285MW of which is uncontracted capacity in Texas, according to Bloomberg New Energy Finance. Assuming a lower valuation for the merchant projects, the valuation should likely be in the $US2.2-3.0bn range for the commissioned assets. The value of the 2,000MW of development assets will depend on geography and how far the individual assets are from being “shovel-ready,” but it could range from $50m to $200 million.

BP already withdrew from solar power in December 2011 and scrapped investment in a carbon capture project in Scotland. However it remains active in biofuels.

The WilderHill New Energy Global Innovation Index, or NEX, registered a 3.3 per cent decline in the trading week ended April 5, as markets retreated in the face of uncertainty about US economic recovery and war threats on the Korean peninsula.

There were some NEX gainers, notably Tesla Motors, which rose 9.2 per cent. The electric-car maker headed by billionaire Elon Musk climbed to a record last week after saying it turned its first quarterly profit on higher-than-forecast sales of its Model S sedan.

EU carbon

Carbon prices advanced last week as traders reported that industrial buyers were in the market. European Union allowances (EUAs) for December 2013 gained 7.9 per cent over the week to close at €5.19/tonne, compared with €4.81/t previously. EUAs were trading as low as €4.52/t on Tuesday morning after the European Commission released verified emissions data.

Prices bounced back on Wednesday – trading mostly above €5.00/t as market activity increased. About 17.3Mt of EUAs for December 2013 traded on Wednesday, compared with 12.1Mt on Tuesday. On Friday morning, the front-year contract surged to a high of €5.23/t. Traders that spoke with Bloomberg New Energy Finance analysts said carbon has been supported by demand from industrial buyers.

UN Certified Emission Reduction credits (CERs) for December 2013 ended the week at €0.40/t, up from €0.33/t. 

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

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles