RECAI: Latest developments

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Country-specific highlights

Brazil backs solar. Brazil will hold its first national solar-only auction in late 2014, after above-average solar prices in a 2013 multi-technology reverse auction prevented any capacity awards, despite more than 2GW of applications. This follows the success of the first state-level solar auction in December. The unveiling of a US$5.1b aid package to help utilities respond to record-high power prices as droughts reduce hydroelectric output are also likely to boost efforts to diversify Brazil’s energy mix. Wind needs little encouragement, though, with over 12GW of capacity shortlisted for a June auction.

Kenya strikes big. The 300MW Lake Turkana wind project, expected to generate almost 20% of Kenya’s power, has secured US$870m from 12 investors based in at least eight countries, making it Africa’s largest wind asset financing deal and biggest clean energy project. It has faced significant delays and challenges, but represents a milestone for large-scale projects in the region. The Government’s denial that it has suspended the issuing of licenses for new wind and solar projects until 2017 is also welcome, following late 2013 reports of a moratorium.

South Africa keeps going. Competitive pricing has prompted the South African Government to award additional capacity under Round 3 of its national renewable energy procurement program after allocating 1.5GW to 17 projects in late 2013, though specific details are yet to be released. The Government has also closed bidding for 200MW of CSP capacity available under Round 3.5 of the program. March saw state utility Eskom begin emergency rolling blackouts as heavy rains disrupted coal supplies, increasing the imperative for alternative energy supplies.

Ireland stalls. The apparent collapse of a trade agreement to export wind power to the UK has prompted developers to cancel or postpone around 10GW of Irish wind projects. While the mutually beneficial deal — exploiting some of Europe’s best and cheapest wind power — could become more likely after 2020, this deals a major blow in the short term. The absence of specific 2030 and 2050 carbon emissions reduction targets in recently published highlights of Ireland’s climate action bill also caused disappointment. Find out more

Poland pushes coal. While April’s release of draft legislation proposing to award renewable energy projects with fixed-price tariffs for 15 years via auction provides some clarity, the Polish Prime Minister’s call on Europe for to tap into Poland’s coalfields in order to lower energy costs and reduce reliance on Russian gas imports makes it unlikely Poland will diversify its energy mix soon. Vocal in its pursuit of shale gas and nuclear power, Poland has been one of the staunchest critics of the EU’s proposed 2030 carbon and energy targets.

UK solar woes. Another government consultation on financial support for UK solar projects has left the sector again facing uncertainty, at a time when solar is fast becoming one of the UK’s cheapest, cleanest and most popular forms of energy. The proposals would make projects larger than 5MW ineligible for renewable obligation certificates (ROCs) from April 2015, two years earlier than planned. Confirmation that solar will compete directly with other technologies for contract for difference (CfD) FITs when applications open in October 2014 adds further pressure.

Deal, investment and policy highlights

A deal of three halves.

The battle for Alstom has already become one of the year’s most exciting deals. The French Government’s opposition to GE’s US$17b offer for the French manufacturer’s energy assets has opened the door for a rival bid from Siemens, based on a potential asset swap that would create two major European energy and rail businesses. A counter offer is expected from Siemens once it has examined Alstom’s financial records, but an Alstom-Siemens deal could encounter European competition barriers.

The French Government, which has the power to block deals involving strategic national assets, is favoring a Siemens deal as a way of preserving jobs through the proposed asset exchange, and some believe a strong sense of nationalism is also behind its unwillingness to sign Alstom over to an American company. However, while the Government has opposed GE’s bid “as it stands”, it seems willing to negotiate, but it has said it would push for state-controlled Areva to buy Alstom’s offshore operations if GE is successful.

EU lockdown.

The implication of the events in Ukraine on Europe’s energy security has prompted EU leaders to push back the deadline for reaching a consensus on 2030 climate and energy targets until October. The EC has been given until late June to find ways to reduce dependency on Russia, which supplies almost a third of Europe’s gas, around half of which comes through Ukraine’s pipelines. A renewed focus on Europe’s energy security should benefit renewables, but comes at a time when EU laws on state aid calling for a shift to more market-based mechanisms could make funding alternative energy more difficult in the short term.

Flat packing sweet success.

Major corporations are continuing to moveinto the renewables sector. Ikea has acquired the 98MW Hoopeston wind project under development in Illinois, US, its largest renewable energy investment to date, and part of a US$2b effort to become a net-zero energy consumer. Mars has signed a power purchase agreement for the electricity generated by a 200MW wind farm in Texas that will power its entire US operations, equivalent to around 24% of its global carbon footprint.

Desertec drama.

E.ON is to leave the Desertec Industrial Initiative (DII) at the end of this year, saying it needs to concentrate on its own renewables projects and cost-cutting program. It’s another blow for DII, after losing Siemens and Bosch in 2012 and the Desertec Foundation itself last year. However, securing the State Grid Corporation of China’s support in late 2013, and a renewed focus on the Middle East and Africa (MEA) region deploying renewable energy for its own use rather than exporting to Europe, could give DII a much-needed boost. According to a recent NPD SolarBuzz report, the MEA region’s annual solar PV demand will reach 4.4GW by 2018, with an upside potential of 10GW.

Q1 2014: New worldwide clean energy investment

New investment in clean energy increased 10% on Q1 2013 to US$47.7b, largely due to a 42% increase in small-scale solar investment (totaling US$21.2b) and the opening up of new markets. While the Q1 2014 figure represented a drop on Q4 2013’s total investment of US$58.1b, a rush to meet year-end incentive deadlines can often distort final quarter figures. Europe and the Americas (excluding the US and Brazil) saw a fall in investment on the same quarter last year while all other regions saw an increase.