Week in review: Raising a hand for Indian solar

Solar

India has called for bids to build 750 MW of solar plants in its first national auction since 2011 and is offering about INR 18.75 billion ($US303 million) in direct grants.

Bids are due by November 29, state-run Solar Energy said on its website. The program seeks to reduce solar power costs to levels in line with other forms of grid-supplied electricity by 2017. The country, which suffers from peak-hour power shortages of as much as 25 per cent in some states, is seeking to boost generation and drive down the cost of electricity by building 100GW of ultra-mega coal-fired plants. To diversify its power mix and reduce a current-account deficit exacerbated by fuel imports, India plans to sell power at a record-low rate from a 4GW solar photovoltaic farm that will more than double the nation’s sun-powered capacity. India expects to complete the farm by 2020, with the first GW to be built by the end of 2016.

Moving west, Canadian Solar, North America’s biggest solar manufacturer, is offering a financing program for US homeowners to build rooftop power plants with its panels, an alternative to leasing companies like SolarCity. Customers may borrow as much as $US40,000 for residential projects, the Ontario-based company said in a statement.

The financing lets homeowners qualify for US tax credits and incentives offered to system owners, according to chief executive Shawn Qu. This comes close on the heels of SunPower closing a $US100 million agreement with Digital Federal Credit Union just last week. But even with such programs becoming more common, Bloomberg New Energy Finance expects the bulk of residential systems in the US to be financed under leases or power purchase agreements, as homeowners may be unwilling to take on tens of thousands of dollars of additional debt; may prefer a third party to be responsible for monitoring and O&M; and are not eligible to take advantage of accelerated depreciation, which can significantly improve system economics.

Wind

In wind, the two biggest wind turbine suppliers by sales, Vestas and Suzlon, are losing market share in Brazil because they don’t use enough parts made in South America’s fastest growing market, it emerged last week. Neither company has landed a new deal in Brazil in more than 18 months as the country’s development bank BNDES shut off their access to state-backed debt that’s helped drive an installation boom, said Bloomberg New Energy Finance analyst Helena Chung.

Recent announcements from Denmark’s Dong Energy on lay-offs and liquidity problems had the offshore wind industry concerned. So the announcement that New York-based Goldman Sachs Group will buy a DKK 8 billion ($US1.46 billion) stake in Denmark’s Dong Energy will come as a relief. The purchase of the world’s largest operator of offshore wind turbine parks – which also explores for oil and natural gas in the North Sea – will give Goldman a 19 per cent stake in the government-controlled utility, which is shoring up its balance sheet after losing money on failed natural gas bets. Danish pension funds ATP and PFA will pay DKK 2.2 billion and DKK 800 million to buy stakes of about 5 per cent and 2 per cent, respectively. The entrance of these funds will help raise awareness on the suitability of this type of asset for institutional investors.

However, it was not all bad for wind. International Finance Corp, the World Bank’s investment arm, expects to complete financing for a $US300 million wind plant in Jordan in the coming weeks, allowing construction to start before the end of the year. IFC will contribute about $US70 million to the 115 MW project, Adil Marghub, the lender’s head of infrastructure and energy for Middle East and North Africa, said last week. IFC plans to invest as much as $US300 million in renewables in the Middle East and North Africa this year and at least $US200 million in the next, he added.

And in Australia, Eaglestone NV, an investor in renewable energy, struck its first private-equity deal by backing a portfolio of local wind-power projects alongside Denham Capital Management. The planned wind farms include the 100 MW Glen Innes project in New South Wales, the 250 MW Lincoln Gap venture and the 240 MW Cattle Hill site in Tasmania. All are due to have their financing in place this year and next. Despite Eaglestone's backing of this portfolio, the key hurdle for the construction of projects Down Under remains the procurement of a long-term power purchase agreement. A policy review of Australia's Renewable Energy Target next year, the market power of major retailers and an oversupply of electricity and renewable certificates has made securing offtake contracts difficult.

The Week in Carbon

European Union Allowances for December 2013 declined 5.2 per cent last week as traders anticipated higher auction volumes the next week.

EUAs for delivery in December ended last Friday’s session at €5.11/t on ICE Futures Europe exchange in London, compared with €5.39/t at the close of the previous week. Only 14.6Mt of allowances were auctioned last week as the EU did not hold one of its three weekly sales on Thursday due to a German holiday. Carbon traders were bullish midweek as front-year EUAs rose to €5.34/t on Wednesday afternoon. This may have been slightly influenced by cheaper coal prices as the 2014 ARA coal contract recorded four-straight days of losses by Wednesday.

UN Certified Emission Reduction credits for December 2013 lost €0.04/t last week to close at €0.60/t.

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Originally published by Bloomberg New Energy Finance. Republished with permission.