The week in clean energy

India and UK upgrade grids for renewables, SolarCity acquisition to target one million solar customers, EUAa trading in band of €4.3-€4.5.

RENEWABLE-FED GRIDS TO GET BIGGER IN INDIA, SMARTER IN THE UK 

The faithful old servants of the power system – the grids that deliver electricity from producers to consumers – are facing new challenges the world over as a result of the addition of renewable generation. Last week there were a number of developments as countries moved to adapt their grids to the new energy realities.

The first problem is, straightforwardly, over grid capacity. India last week announced plans to spend €6 billion ($US7.9 billion) on doubling transmission capacity over the next five or six years to connect up wind and solar projects. Minister of new and renewable energy Ratan Watal said Germany’s development bank KfW will provide €250 million “soon”, and a total of €1 billion. The World Bank, Asian Development Bank, India’s National Electricity Fund and state governments will also finance the project, he said.

Also in India, the cabinet approved a proposal to reinstate a subsidy for onshore wind generation of INR 500 ($US8.20) per megawatt hour and raise a cap on the total amount that can be received by 61 per cent. The so-called Generation Based Incentive expired at the end of March 2012 but wind installations fell 46.8 per cent in the following 12 months compared to the year before.

Many European countries are building smarter, as well as bigger, grids. The UK’s roll-out of 53 million smart meters by 2020 took a step forward last week, as the government announced preferred bidders for £2.4 billion ($US3.7 billion) of contracts. Spanish company Telefonica’s UK unit took the lion’s share, earning a £1.5 billion deal to run the networks in south and central regions, while Arqiva was awarded £625 million for the final, northern region. Capita, CGI IT and Gemserv are also in line for contracts. Major bidders including Silver Spring Networks, Vodafone and Hewlett Packard were left out.

In Germany, ratings agency Moody’s warned in a new report that it sees “particular challenges” for grid operators like Amprion and TenneT from the burden of connecting and paying for renewable generation. This includes liquidity issues over pre-funding feed-in tariff payments or potential delays to offshore wind farm connections. Meanwhile, German development bank KfW agreed to provide a long-term loan of as much as $US79.5 million for Akuo Energy’s 42MW Minas wind farm in Uruguay.

Another wind developer to win financing last week was Gama Enerji, a venture between Ankara-based contractor Gama Holding and General Electric, for a 35MW wind project in Turkey, its third in the country. No financial details were given of the deal with local bank Turkiye Sinai Kalkinma Bankasi. The project is one of the lucky ones: there are around 4GW of projects in Turkey that have obtained licences but are still looking for providers of debt finance. Turkey is aiming for 20GW of wind power by 2023, up from about 2.5GW currently.

In the US, SolarCity agreed to buy solar direct-marketer Paramount for about $US120 million to reach more customers. Chief executive Lyndon Rive told Bloomberg News the acquisition will help SolarCity to expand to a goal of 1m customers, or 6GW of rooftop solar systems installed, by 4 July 2018. Meanwhile, work is underway at the White House to install US-made solar panels and make energy efficiency improvements, fulfilling a three-year-old promise by President Barack Obama to “go solar”.

Also in the US, wind project developer Pattern Energy filed for an initial public offering of up to $US345m. The company owns interests in eight wind farm in the US, Canada and Chile comprising 1,041MW. BMO Capital Markets, RBC Capital Markets, Morgan Stanley were listed as underwriters.

The WilderHill New Energy Global Innovation Index, or NEX, lost 0.7 per cent last week amid a broader market sell-off. The NEX is up 33.6 per cent year-to-date but still down two thirds from its peak in late 2007.

AMEX Oil, Nasdaq and S&P 500 rebased
 30 Dec 2002 = 100

Graph for The week in clean energy

Source: Bloomberg New Energy Finance

EUROPEAN CARBON TUMBLED AS UK NATURAL GAS PRICES SLIPPED

European Union carbon edged down last week, as UK natural gas prices declined and coal prices rose. European Union allowances (EUAs) for December 2013 lost 2.0 per cent to end the week at €4.37/t, compared with €4.46/t at the close of the previous week. EUAs tracked falling UK natural gas prices on Monday and extended losses into the next day. Utilities need half the number of emission permits when burning gas rather than more-polluting coal for power. UK natural gas for winter 2013-14 ended the week 1.3 per cent down, while coal for delivery to Amsterdam, Rotterdam, Antwerp for 2014 increased 0.6 per cent. EUAs recovered on Wednesday – closing at €4.37/t – as market activity waned, with trading volumes totalling only 4.9Mt for the whole day. Prices shot up to €4.45/t on Thursday morning before easing off to trade in a range of €4.35/t to €4.40/t for the rest of the week. UN Certified Emission Reduction credits (CERs) for December 2013 dipped 1.6 per cent last week to close at €0.61/t.

EUA and CER Prices - As of 21 Dec 2012, benchmark prices are for Dec-2013 contracts

Graph for The week in clean energy

Source: Bloomberg New Energy Finance

The Energy: Week in Review was originally published by Bloomberg New Energy Finance. Republished with permission.