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Trump Cuts Funds While Offshore Wind, Pumped Hydro Make News

Trump Cuts Funds While Offshore Wind, Pumped Hydro Make News


President Donald Trump’s policies on renewable energy are slowly becoming more defined. Renewable energy technology research and funding are at risk of being cut under the White House’s proposed fiscal year 2018 budget blueprint released March 16. The Advanced Projects Research Agency-Energy and a loans guarantee program benefiting renewable technologies are among the Energy Department’s research and funding arms for innovative technologies that are candidates for cutting. The budget blueprint‘s proposed cuts are in line with efforts by the Trump administration to cut federal funding dedicated to renewable energy and combating climate change across federal agencies. Trump’s administration is requesting $28 billion for the Energy Department, a $1.6 billion cut from the fiscal year 2016 enacted level of $29.6 billion. The hardest hit office would be the DOE’s Office of Science, the largest federal sponsor of basic research in the physical sciences, which would face a $900 million cut from its fiscal year 2017 annualized continuing resolution level.

Trump’s budget request justified the cuts by saying the private industry is “better positioned to finance disruptive energy research and development and to commercialize innovative technologies.” The proposal would completely cut the ARPA-E program, which funds research into transformational energy technology projects, such as using renewable energy to create liquid fuels. The program was created under the America Competes Act, signed into law by President George W. Bush in 2007. Meanwhile, Trump’s proposed cuts to energy-efficiency programs came under fire from groups who say they undermine his jobs agenda and could lead to higher utility bills.

An initiative that promotes efficient appliances and building supplies and another that helps low-income households pay their bills are among those facing the ax under Trump’s budget blueprint released March 16. Along with other measures that shrink energy use, they help support more than 2 million jobs, according to the Alliance to Save Energy. In projects and technology developments, pumped hydro storage has made headlines in Europe. A coal-mine that powered German industry for almost half a century will get a new lease of life when it’s turned into a giant battery that stores excess solar and wind energy. The state of North-Rhine Westphalia is set to turn its Prosper-Haniel hard coal mine into a 200 megawatt pumped-storage hydroelectric reservoir, which acts like a battery and will have enough capacity to power more than 400,000 homes, said state governor Hannelore Kraft. The town of Bottrop, where people worked the 600 meter (1,969 foot) deep mine since 1974, will keep playing a role in providing uninterrupted power for the country, she said.

Germany’s decision to turn a coal mine into a pumped-hydro-storage station may solve two of the most intractable challenges created by its shift to clean power. On a local level, it provides new economic activity in a region where generations of workers have relied on fossil fuel for their livelihoods. On a regional level, it catalyzes the expansion of renewable energy by helping to maintain electric capacity even when the wind doesn’t blow or the sun doesn’t shine.The crucible of Germany’s industrial revolution, North-Rhine Westphalia, generates a third of the nation’s power—much of using aging coal plants. But as Europe’s biggest economy continues its so-called Energiewende, German for energy transition, the need for bigger and better storage has become more glaring. (Read more on the outlook for energy storage here).

Separately, floating offshore wind turbines have been given a boost in several countries as renewable energy developers seek new areas to harvest wind power. Scotland has granted planning permission for as much as 92 megawatts of floating offshore wind capacity, including two separate projects in the past two weeks. In Ireland, the developer Gaelectric Holdings Plc and Ideol SAS, a French floating wind company, agreed March 17 to develop floating wind projects in Irish waters, starting with a 30-megawatt array. The deals bring to about 237 megawatts the capacity of floating offshore wind projects that will be installed worldwide by 2020, according to Bloomberg New Energy Finance. That’s just a fraction of the 38,000 megawatts of turbine due to be fixed to the seabed by the end of this decade.

Adding to the good news, data from China provided evidence of changing trends in economic growth there. The country’s carbon dioxide pollution level slipped last year even as the economy grew 6.7 percent, suggesting the world’s biggest emitter is using energy more efficiently. Output of the greenhouse gas from the energy industry fell 1 percent in China in 2016, helping emissions flatline for a third year in a row, according to data from the International Energy Agency published on Friday. China is strengthening its commitment to tackling climate change and air pollution, pledging to invest 2.5 trillion yuan ($360 billion) in renewable energy through 2020 to reduce greenhouse gases that are blamed for global warming. Meanwhile, Brazil opened a new window for developers and investors, saying it would hold its first auction specifically to sell future renewable power for part of the vast Amazon rainforest region, and offered an unprecedented 1 percent interest rate to help finance winning projects.

The electronic auction will be held May 11, the Brazilian Development Bank (BNDES) announced on March 14. In the auction, wind, solar, biomass-fueled thermopower and small hydropower developers that offer the lowest prices below a government-set ceiling will sign 15-year electricity supply contracts with that federal government distributor, Eletrobras Amazonas Energia. The contracts give them one year to install their projects in Amazonas state, in Brazil’s western Amazon. The development bank is offering 200 million reais ($64 million) in total financing, at a 1 percent interest rate, to winning developers to bankroll up to 15 percent of their projects’ investment costs. Developers eligible for BNDES financing can be local or foreign firms that operate in Brazil that win auction bids.

Typical BNDES lending rates are 7.5 percent annually, half the cost of commercial bank lending rates.

Q&A of the week

Innogy Can’t Close Its Eyes to Potential of Utility Solar
Innogy is setting its sights on mega-sized solar PV plants in sunny regions such as North Africa, and hopes to commission its first PV project in the next 12 to 18 months, Hans Bünting, chief operating officer renewables at the European electricity company, said. “We can’t close our eyes” to the fact that the biggest expansion of power technology on a global scale will be solar PV, and that it is already “the most cost-efficient technology based on the full cost of producing energy,” Bünting told Bloomberg New Energy Finance. “If we want to grow in this business then we should also be investing in this technology, and not just in onshore and offshore wind,” he said.

Since being spun off from RWE last October in Germany’s largest IPO since the millennium, Innogy has acquired Belectric Holding, a German solar and storage company, to give it a “kick start” in the “design, construction and procurement of utility-scale PV plants, said Bünting. “To earn money in PV you have to be active in the whole value chain,” he added. The $19.2 billion-euro ($21 billion) valued company, which supplies power to around 23 million customers across 11 European countries via 570,000 kilometers of grid networks, is looking to enter new markets where significant additional power capacity is required, such as North Africa and the Middle East. Renewables are very attractive in places where there is insufficient power to begin with, especially where the lifetime cost of conventional power is higher, Bünting said.

The developed markets of Europe and the U.S. also offer Innogy opportunities for expansion. “PV really has the chance to be competitive without subsidies” in the sunny regions of the Iberian Peninsula and Italy, where power prices are slightly stronger than in Northwestern Europe, according to Bünting. Innogy is willing to mitigate merchant risk by finding offtakers for the power or creating a diversified portfolio to spread the risk.

Bünting declined to comment on reports that France’s Engie is considering making an offer to acquire Innogy. Engie is seeking to offload oil and gas assets to focus more on energy services, renewables and gas, where revenue is regulated.

Bünting also discussed changing U.S. energy policy in the following Q&A.

Q: Why is Innogy pursuing expansion into utility-scale solar?

A: On a global scale, the technology that will expand the most will be photovoltaics. PV is the most cost-efficient technology that can currently be deployed based on the full cost of producing energy, especially in sunny areas like southern Europe, Africa or the U.S. So undoubtedly PV will play a dominating role in the future growth of renewables, and we can’t close our eyes to that. If we want to grow in this business then we should also be investing in this technology, and not just in onshore and offshore wind.

Wind will of course have a future role, especially in windy areas like Northwestern Europe and the U.S., but if we look at new markets like North Africa, then that will be mainly PV.

In the past few years PV has grown to become a larger, utility-scale technology. In the Gulf region, power plants of up to 1,000 megawatts (MW) in size are being built, which to a utility generator is very interesting. This is the business we want to go into.

[Bunting was referring to the 1,177-MW solar PV plant being developed in Abu Dhabi near the town of Sweihan, and the recent winning bid by Masdar Abu Dhabi Future Energy Co. to build an 800-MW solar PV project in Dubai by 2020.]

Q: What strategy would innogy take in entering new markets?

A: To earn money in PV you have to be active in the whole value chain. That’s why we acquired Belectric Solar & Battery Holding — a company active on a global scale in utility-scale PV and battery storage solutions. So we acquired the necessary skillset in the design, construction, and procurement of utility-scale PV plants, which we didn’t have in-house, to get a kick start.

Over the past years of managing hydro and wind plants, we have built strong asset management skills and can easily transfer that to PV project management.

In the next 12 to 18 months we will start to build and commission the first projects.

As a Bloomberg New Energy Finance subscriber, read more of this interview on our website here.

Anand Gupta Editor - EQ Int'l Media Network


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