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A week of thinking big: wind, carbon, storage

A week of thinking big: wind, carbon, storage


It has been a week for thinking big. Wind developers in the US were told they must do so by Dong Energy. The UK government did so in its own way, saying it is preparing to auction the Green Investment Bank, the world’s first privatisation of a specialist development bank. In Canada, Prime Minister Justin Trudeau said the federal government and the provinces had agreed to put a price on carbon emissions, while in India the government decided to double the tax on coal.

In the US, offshore wind developers need to install 500MW annually for the next 15 years for the technology to make economic sense, according to Dong Energy, the world’s biggest developer of sea-based turbines. Large-scale projects will be the key to reducing installation costs and making electricity from offshore wind farms affordable, said Thomas Brostrom, the Fredericia, Denmark-based company’s general manager for North America.Offshore wind has thrived for more than a decade in Europe, helped by subsidies in the UK, Germany and elsewhere. The expense of building massive turbines at sea has prevented the industry from taking hold in the US. Dong is seeking to change that, and sent Brostrom to run its first US office in July.

Dong has acquired leases for two US sites, in the waters of New Jersey and Massachusetts, and is scouting the East Coast for other locations, Brostrom said. The company pioneered the world’s first offshore wind farm in 1991, and has projects with more than 2,000MW of capacity in operation and another 1,000MW under construction. On the subject of big thinking in the wind sector, BNEF ranks the world’s top turbine manufacturers in this Insight Note.Back in Europe, UK business secretary Sajid Javid said the government is starting an auction to sell the Green Investment Bank in a deal that may value the institution at as much as GBP 4.2bn ($5.9bn). The government would start a bidding process to sell 75% to 100% of the institution, Shaun Kingsbury, chief executive officer of the Green Investment Bank, said in an interview. The deal is due to be complete by the end of the year.

“The Green Investment Bank is a world first, and it is a sign of its success that the idea is being copied globally,” Javid said on 2 March. “Having proven the business model works, we now want it to make an even greater impact.”Privatisation would let the bank, which has channeled money into clean energy projects, invest more overseas and in technologies currently restricted by European Union state aid rules. Potential new projects include electric vehicles and power-grid upgrades, Kingsbury said.Kingsbury said he’s seeking new owners to invest as much as GBP 800m a year for the next three years, and that the bank currently manages assets valued at about GBP 1.8bn. This would take the value of investment required in the bank to about GBP 4.2bn.

Meanwhile, India doubled the clean-energy tax on coal to fight environmental pollution, risking higher electricity-generation costs at a time when it is also seeking to revive ailing power distributors.The tax on the fuel, which fires more than 60% of the nation’s generation capacity, will be raised to INR 400 a tonne from INR 200, finance minister Arun Jaitley said in his budget speech for the year beginning 1 April. The government plans to allocate INR 30bn ($438m) annually to come up with a comprehensive plan, spanning 15-20 years, to augment nuclear power generation.Taxing coal and promoting nuclear energy shows the government’s commitment to the environment, said Debasish Mishra, a partner with Deloitte Touche Tohmatsu India in Mumbai. Still, the tax increase could have waited, especially since the government is working with the states to reduce the debt burden on state-owned power distributors.

In another approach to carbon, Canada is following the example of some provinces in pricing carbon emissions. The federal government and its provinces have agreed in principle to put a price on carbon emissions, Trudeau announced on 3 March.In announcing the Vancouver Declaration on clean growth and climate change with provincial and territorial leaders, the Prime Minister gave no details on how and when a carbon price—or regional carbon prices—would be determined. But he said the federal government and the leaders of 10 provinces and three territories meeting to discuss climate changed reached agreement on “a suite of issues that will include carbon pricing.”The plan builds on experiences such as those in Quebec and California, the progress of which is tracked by BNEF in this Insight Dataset.

Separately, Ontario unveiled details of its cap-and-trade system, which starts next year. Companies with more than 25,000 tonnes of greenhouse gas emissions annually will be required to take part in the program, the government announced. It also said it plans to set the initial carbon price at about CAD 18 ($13) per metric ton of carbon emissions.In the UK, the case for energy storage made news again this week, when a report funded by three utilities said storage technologies may save the country’s consumers as much as GBP 2.4bn ($3.35bn) a year by 2030.

By curbing the need for grid upgrades and boosting use of wind turbine and solar panels, energy storage could deliver savings equal to about GBP 50 pounds a year for households, EON, SSE and Scottish Power said in a report on 2 March. The paper was written by the Carbon Trust, an organisation that helps companies reduce their greenhouse gas emissions.The Department of Energy and Climate Change will call for evidence in the first half of this year about how to reduce regulatory barriers, according to an e-mailed statement from the department.


Q&A of the week
India’s coal tax hike to fund clean energy: Minister
India’s move to hike the tax on coal in the next financial year was widely expected, but a doubling of the rate to 400 rupees [$6] per ton was not. “We have demonstrated to the world that probably India is the only country that has respected the concept of a carbon tax, that has respected the concept of ‘polluter pays’,” said Piyush Goyal, power, coal and renewable energy minister.

As much as $4bn is projected to be collected under what will now be called the ‘clean environment cess’ instead of the ‘clean energy cess’. About half of this will be earmarked to support clean energy projects while the other half will go to clean the Ganga river.

India has a target to commission 175GW of renewables by 2022, with solar accounting for 100GW of that. Speaking in an interview in his New Delhi office, a day after the government unveiled its budget proposals on 29 February, Goyal said he expects India’s solar power capacity to increase from about 5GW currently to 17GW over the next 12 months.

A host of banks, financial institutions and developers promised to back India’s planned expansion of renewables capacity at the RE-Invest conference in February last year, an event that had Prime Minister Narendra Modi in attendance. The actual progress in the first year has been limited, although renewable energy investment did rise 22% to $10.2bn in 2015.

Goyal said he was satisfied with what has been achieved so far: “We have an overall target to achieve. We are not in a hurry to achieve something in the first year. It takes time…”

He also spoke about the challenges of competitive bidding for wind, the worries about the record low solar tariffs in the last bid, and the apparent surplus of power in India, which he said was partly attributable to energy efficiency gains of heavy industry and lighting, and partly to the “indiscriminate” addition of thermal power.

Vandana Gombar, global policy editor at Bloomberg New Energy Finance, spoke with Piyush Goyal, India’s power, coal and renewable energy minister, about the implications of the country’s doubling of its coal tax to 400 rupees ($6) per ton.The following is an extract from the Q&A published in this week’s Clean Energy and Carbon Brief.

Q: Financial institutions, banks and project developers made promises to invest in renewables at the RE-Invest conference one year ago. But the actual progress seems to have been rather sluggish. Would you agree?
A: Things are moving at an outstanding pace. I don’t know where you got the sluggish pace story. The reality is that when you suddenly scale up a program five-fold, there are two ways of going about it: we can indiscriminately and quickly launch it, and fall flat, or we can do it systematically and achieve results. This year has seen big successes in getting 31 solar parks approved. Transmission and land acquisition has been taken up in mission mode for these 31 solar parks. The new framework of bidding has been very successful. We are hoping to complete this year [ending March 2016] with 18,000MW of bids. I don’t think the world has ever seen – in 12 months – 18,000MW of solar bidding. Prices have come down from over 7 rupees [per unit, $0.10] to 4.50 rupees [$0.07], plus or minus 25 paisa [0.25 rupees]. It has been an amazing journey which has also been a great satisfaction for the entire team, since it has demonstrated that India can do it once we get down to it.

Q: Are you on track to meet your target of 175GW of renewables by 2022? Most of the RE-Invest commitments were for five years to 2020…
A: I had a review meeting with all those who made those commitments, and I told them if you are not able to meet them, please withdraw. We have no problem. We would rather have credible commitments. Some of them, I think, withdrew; some reduced their targets; some increased their targets and some said they would be unable to do it. All these things are a part of business. For a programme of this magnitude, the planning has to be good. We cannot afford that power at 7 or 8 rupees [per unit]. We had to bring the prices down; we had to focus on domestic manufacturing, which we are going to give a boost to in the months and years to come. We have an overall target to achieve. We are not in a hurry to achieve something in the first year. It takes time to get land, to get transmission. I have to dovetail my bidding to match with transmission, otherwise I will have solar plants standing with no transmission. There is a whole ecosystem that has to be prepared

Anand Gupta Editor - EQ Int'l Media Network


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