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Key country developments

This is our summary of the latest country-specific, transaction and investment highlights – featuring United States, India, United Kingdom, Australia, South Africa, China/Thailand/South Korea, Ethiopia, Netherlands, Colombia and Turkey.

EY - United States

Green New Deal invigorates US policy debate

Democratic US presidential candidates are lining up to endorse the goals of the Green New Deal, promising to put renewable energy at the heart of next year’s election. Unveiled in February, the package aims, among other things, to make the US power sector zero carbon within 10 years.

While it does not offer policy specifics – and is strongly opposed by much of the Republican party – it has been credited with raising climate change’s profile, and prompting some Republican politicians to acknowledge the issue’s growing importance to voters.

It comes as renewables in the US are becoming a more mainstream part of the generating mix, even in the absence of strong support at federal level.

US solar photovoltaic capacity is forecast to rise 14% in 2019, with more than 12GW of additions expected by the Solar Energy Industries Association after 10.6GW of new capacity in 2018 – 2% less than in 2017, in part because of the introduction of tariffs on imported solar cells and modules.

Utilities are increasingly taking advantage of record low power costs from renewables. At the end of last year, Texas-based New Braunfels Utilities bought part of the output from a 255MW solar plant for less than US$0.025/kWh in a 15-year contract. Around one-third of the state’s energy mix is now low carbon.

However, the bankruptcy of California’s PG&E, the country’s largest utility, has cast a shadow over the financing of renewable energy projects. The San Francisco-based company has more than 250 contracts for renewable energy, representing investments of US$51.7b, and generators who entered into long-term contracts with it are concerned they could be renegotiated or cancelled. The bankruptcy has also raised questions about the credit risk large utility offtakers pose, which is likely to make it harder for new projects to raise financing on the back of such contracts.

EY - India

India unveils massive renewables tender plan, but delivery doubts persist

The Indian Government is to auction 40GW of solar and wind capacity each year to 2028, with the aim of generating 40% of its power from around 500GW of renewables by then. The new target, announced in January, extends the existing goal of installing 100GW of solar and 75GW of wind by 2022.

Despite a flurry of recent tenders, however, doubts are growing about whether the near-term targets can be met.

Solar Energy Corporation of India (SECI), the government agency charged with implementing the country’s renewable energy build-out, has conducted six rounds of wind auctions since 2017, attracting rock-bottom bids for 8.4GW of capacity. Of the 1GW auctioned in the first round in 2017, however, less than half was commissioned before the mid-2018 deadline.

Meanwhile, solar tenders have been scaled back or cancelled as developers bid higher prices than anticipated, in response to cost increases from tax changes and import tariffs on solar cells and modules. Developers have also struggled to secure land for some projects, while grid-connection issues have slowed others.

Of 58GW of renewable energy capacity tendered in 2018, only 20GW was awarded, according to Bridge to India, a consultancy. Renewable energy developers say more consistent policy and regulatory support for the sector is needed if the Government is to meet its ambitious targets.

Meanwhile, all three major parties have expressed broad support for clean energy in their manifestos for the ongoing parliamentary elections, results of which are due on 23 May. The BJP and the Indian National Congress party have both reiterated support for the National Solar Mission, while the minority Aam Aadmi Party has promised to promote decentralised renewables infrastructure.

UK seeks third of power from offshore as it unveils sector strategy

The UK has unveiled plans for offshore wind to supply 30% of its electricity by 2030, up from just 6.2% in 2017. The Offshore Wind Sector Deal, unveiled in March, also aims to treble the number of people employed in the sector to 27,000 by 2030, and targets 30GW of offshore wind, compared with 8.2GW by the end of last year. The deal involves industry participants investing £250m (US$330m) over the next 11 years, in exchange for the £557m (US$730m) in subsidies for renewables already announced.

However, the announcement follows the withdrawal of support for onshore renewables in 2016 that has slowed growth in the sector in the UK. Last year, just 598MW of onshore wind was installed, according to trade body RenewableU – down from 2.7GW in 2017. The Government also disappointed with a refusal to support the Swansea Tidal Lagoon, while changes to network charges – which have been favouring decentralised renewables, energy storage and demand-side response – will further hit the sector.

EY - Australia

Climate and energy looms over Australian election

Climate change and clean energy are likely to feature prominently in Australia’s May national elections with the opposition Labor Party accusing the National-Liberal coalition Government of lacking a coherent policy. Labor, ahead in the polls, has pledged AU$10b (US$7.1) for large-scale renewables and energy storage as part of a plan for a 45% cut in carbon emissions by 2030.

In February, the Government announced AU$2b in funding over 10 years to underwrite small and medium-sized emission-reduction projects, noting that Australia is on course to meet its Paris Agreement commitment to reduce emissions by 26%–28% by 2030. However, its energy policy has focused on reducing customer bills and improving reliability – including, potentially, by subsidising new coal-fired generation.

This approach has come under attack from the governing party, with New South Wales Energy Minister Don Harwin calling on the Government to do more to tackle climate change and address the policy uncertainty that has contributed to higher wholesale prices and delayed clean energy investment.

Despite uncertainty at a federal level though, state policies are helping bring renewables projects forward.

In Victoria, the 425MW Coopers Gap Wind Farm, under development by AGL, is set to become Australia’s largest wind farm on completion in early 2020, and the Victoria Government approved the larger 800MW-plus Golden Plains Wind Farm earlier this year, to be developed by WestWind Energy.

In New South Wales, approval was granted in January for the country’s largest solar farm, the AU$1b, 900MW Yarrabee project, due for completion next year, developed by Reach Solar Energy, which recently completed the 375MW Bungala solar plant, in Port Augusta, South Australia.

EY - South Africa

Uncertainty clouds South Africa’s power markets

South Africa’s continuing electricity crisis and mixed signals from the Government are weighing on existing and prospective clean energy investments.

An announcement in mid-February that contracts under the Renewable Energy Independent Power Producer Programme (REIPPP) could be renegotiated spooked investors, but was speedily reversed by the Government. Meanwhile, development banks and investors are continuing to back renewables in the country, while its coal-fired sector is struggling to find funding.

South Africa is currently suffering from blackouts and load shedding as the state-owned generator, Eskom, struggles under US$30b of debt and an antiquated generating fleet. Some argue that tariffs negotiated under early rounds of the REIPPP are part of the problem; others point out that renewables capacity is proving vital in meeting power demand.

The Government certainly sees a greater role for renewables.

Its draft Integrated Resource Plan, published last year, foresees an additional 8.1GW of wind and 5.67GW of solar by 2030, making up 25% of total capacity. However, it has given mixed signals on whether and when it will be commissioned.

Investors are voting with their wallets. New coal-fired projects are struggling to find investment, whereas renewables are benefiting from backing from – among others – the Development Bank of Southern Africa which has announced US$200m to help fund 330MW of embedded renewable energy generating capacity and US$209m for the 100MW Redstone concentrated solar power project, with 12 hours of thermal storage to generate baseload energy.

EY - China EY - Thailand EY - South Korea

Solar farms take to the water

As of September 2018, 1.1GW of floating solar farms had been installed globally, according to a new World Bank report, which calculates that the technology could deliver at least 400GW of capacity.

Floating solar is growing exponentially, with just 10MW installed as of 2014, the World Bank says. It is proving attractive because it avoids land acquisition and site-preparation challenges, and can often be sited close to where electricity demand is high. The report also notes that, while upfront costs are slightly higher than for conventional solar, over time they are equivalent, as water’s cooling effect boosts floating solar panels’ energy yield.

In March, Chinese state-owned developer CECEP completed the world’s largest floating solar project, at 70MW, built in collaboration with French floating solar specialist Ciel & Terre in Anhui province, China. Last year, Kyocera Corporation switched on Japan’s largest plant, with 13.7MW of capacity.

Thailand, meanwhile, plans to commission 2.7GW of floating solar capacity across nine hydroelectric dams. State-run utility Electricity Generating Authority of Thailand is to open a tender in May for a pilot 45MW floating solar farm at the Sirindhorn Dam, in the north-east of the country.

Some countries are also eyeing offshore installations. At the end of last year, South Korean President Moon Jae-in announced plans for 3GW of offshore floating solar, alongside 1GW of floating wind, in the Yellow Sea off Korea’s west coast.

EY - Ethiopia

Ethiopia launches 800MW solar tender

The Ethiopian Government is seeking bids for six solar farms, with a combined capacity of 798MW. At an expected total cost of US$750m, the projects are to be partially funded by the Government under its public-private partnership framework.

The tender is being run through the World Bank’s Scaling Solar Programme, which combines a number of World Bank services with the goal of creating viable markets for solar power within a particular client country. This latest tender is Ethiopia’s third within the programme; Enel won the first, in October 2017, to build a 100MW solar plant, and local utility EPP won the second, to build 250MW of solar.

Ethiopia has a target of universal power access by 2025, up from around 30% currently, with renewables accounting for the majority of new supply. It aims to increase generating capacity to 17.3GW by then, from 4.3GW. The largest generating project is the 6.5GW Grand Ethiopian Renaissance Dam hydropower scheme, while two geothermal projects are also under development.

The Government’s National Electrification Program, launched in 2017, expects to connect around two-thirds of the population to the grid with the rest getting power through mini-grids or distributed solar technologies.

EY - Netherlands

Netherlands risks missing 2030 climate goals

Despite recent progress developing clean energy, the Netherlands is unlikely to meet its 2030 climate goals. In March, the Netherlands Environmental Assessment Agency PBL analysed government proposals and found they would reduce emissions by between 31 and 53 million tonnes of carbon dioxide equivalent by 2030.

However, the Dutch target of reducing emissions by 49% below 1990 levels by then implies reductions of almost 49 million tonnes, the agency said, so the target will probably be missed.
Hitting the top end of the Government’s range would need €75b (US$85b) of investment, mostly in electricity production and transport. Proposals, including a carbon levy on businesses, were due to in April.

This is despite considerable recent progress in bringing clean energy forward. Last year, the Netherlands joined the ‘solar gigawatt club’ of countries installing more than 1GW of solar in a single year, according to SolarPower Europe. It installed 1.4GW of solar photovoltaics, almost twice 2017’s 0.77GW.

Over the coming months, the Dutch Government will also tender the next round of subsidy-free offshore wind farms, the 700MW Hollandse Kust Zuid 3 & 4 projects. In addition to 4.5GW set out in its current offshore road map, the Netherlands plans to add a further 7GW of offshore capacity by 2030.

EY - Colombia

Colombian renewables tender fails

Colombia’s Government has declined any bids for the country’s first long-term renewables tender, citing competition concerns. UPME, its mining and energy planning agency, sought bids for 12-year power purchase agreements for a total of 500MW, with projects to come online in 2021.

While 27 local and international companies expressed interest, only eight projects were bid by seven companies, including Italy’s Enel Green Power, Canadian Solar, Solarpack of Spain and China’s Trina Solar.

The low number of bidders meant the auction did not meet rules set by Colombia’s energy market regulator to ensure it complied with competition and anti-trust laws.

A new auction will take place before the end of June.

The tender was the first in a series designed to commission 1.5GW of renewables by 2022, by which point the Government aims to increase the share of renewables in Colombia’s generation mix to almost 10%, up from around 2%. Currently, Colombia sources around 70% of its power from hydro.

Turkey cancels solar tender, but bioenergy booms

The Turkish Government has cancelled a tender for 1GW of solar capacity due to be auctioned at the end of January. It gave no explanation, but industry speculation suggested it may not have generated sufficient bids – which were capped at US$65/MWh – to go ahead.

The move follows a 1.2GW offshore tender, with a ceiling of US$80/MWh, announced in June 2018, with an October bid deadline, which has passed without official acknowledgement.

Turkey carried out successful onshore wind and solar tenders in 2017, both for 1GW of capacity, but its economic outlook since then has deteriorated sharply, making financing new projects challenging.

While large-scale solar and wind are struggling, the number of bioenergy projects is growing rapidly.

Turkey’s energy regulator, EDPK, lists 101 biogas and biomass plants, totalling 526MW of capacity, while the grid operator lists a further 94 unlicensed plants, making up 264MW of capacity, according to Renewable Energy Monthly. EDPK lists another 21 biogas plants and 64 biomass plants, totalling 480MW, under development.

These projects benefit from feed-in tariffs worth US$0.133/kWh, considerable locally available feedstock, and top-up tariffs for those using locally produced equipment, and the liberalisation of the country’s energy sector.

Contact the RECAI team

EY - Ben Warren

Ben Warren

RECAI Chief Editor
Global Power & Utilities Corporate Finance Leader
UK&I Energy & Infrastructure Corporate Finance Leader
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EY - Phil Dominy

Phil Dominy

RECAI Chief Advisor
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EY - Sami Zubair

Sami Zubair

RECAI Model Lead
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EY - Lavaanya Rekhi

Lavaanya Rekhi

RECAI Research Lead
Analyst, Energy & Infrastructure Corporate Finance
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EY - Benoit Laclau

Benoit Laclau

RECAI Leadership Sponsor
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EY - Aparna Sankaran

Aparna Sankaran

Global Media Relations and Social Media, Energy
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EY - Joni Craigie

Joni Craigie

RECAI Marketing Lead
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