Utilities trying to spinoff their Renewable Energy Subsidiaries have faced a very tough 2011 with many of the plans being scrapped.The Utilities which have managed to list have done so at much reduced valuations and have seen their stock prices erode after listing.Enel Green Power which was the biggest Green Utility to IPO in 2010 managed to to so after massive delays and lowering its stock price 2 times.Orient Green Power in Indian and First Wind Holdings of USA which were pureplay Green Utilities also saw very tough times with First Wind being forced to scrap its capital raising plans.China’s Datang and Huaneng Group which were planning to list their Green Subsidiaries in Hong Kong for a long time faced a big question as well.Both these large state owned utilities have huge wind power assets which are forecast to grow at a tremendous rate over the next decade.The prospects are good for both these green utilities as wind turbine prices have been falling as a result of sharp competition amongst WTG companies in China such as Ming Yang Power.
Carbon Emissions Trading has always had profiteering built into it as private companies try to game a government regulated system for reducing GHG emissions.Carbon Trading which came into being after the birth of the Kyoto Protocol has got a lot of consultants and investment banks involved.While many of the schemes to earn carbon credits seem unethical they are not illegal.However a number of frauds have been unearthed in Europe which is the ground zero for Emissions Trading.The number of frauds have only increased since then with Italy suspending trading and 1.6 million carbon credits stolen from a Romanian carbon registry.The complexity and information asymmetry has always put the insiders in an advantageous position.The red tape and bureaucracy associated with the Carbon Trading Scheme ensures that common people and small business cannot take advantage of the carbon reduction scheme.
Japan has been desperately looking for Rare Earth Resources after China used its monopolistic position to embargo the supply of REE to Japan.Sojitz has signed a supply deal with new Australian REE developer Lynas while Toshiba is looking to set up a plant in India to mine Rare Metals from the monazite sands of the defunct REE extraction plant in Orissa.Sumitomo the Japanese trading giant too is rumored to be picking up a stake in US REE company Molycorp which expects to soon start its California mine which was shuttered a decade ago after China’s low prices bankrupted the REE producers all over the world
The biggest problem is that the winners of the Solar PV Projects are mostly unknown small firms who have bid so low that make the returns negative for investors according to the renewable energy ministry officials (MNRE).Bidding has gone as low as 23c/Kwh which is crazily low considering the debt costs in India are as high as 13% annually.Compare that to China where debt is priced as low as 3-4% and the winners are huge utilities.With even India’s Tata Power saying that the projects are not bankable as their is confusion how the electricity tariffs will go to developers,its difficult how these unknown firms could manage the financing .While the companies will lose their bid deposits if they don’t finish the projects,Indian Solar Energy will be the biggest loser as the failure of the Phase 1 of JNNSM of 1000 MW by 2013 will lead to even further delays.Already JNNSM has been criticized by a parliamentary panel for the tardy progress.Note some states have taken the lead in pushing solar energy on their own,namely Gujarat which aims to put up more than 500 MW in the next year or two.
NextEra Energy Resources which was previously known as FPL Energy has bought a number of Solar Energy Generating Assets in the past few months.NextEra is the largest Renewable Energy utility in the USA with around 18 GW of Capacity out of which around 6.5 GW is Gas and 7.5 GW of Wind Powered Capacity plus 2.5 GW of Nuclear Energy.NextEra Energy with its long experience in Green Energy Generation has now decided to expand its Solar Asset Portfolio buying equity stakes in Solar Thermal as well as Solar PV Farms in USA and Canada.NextEra Energy is already the biggest Wind Energy Producer in the United States and on the way to become the biggest Solar Energy Producer as well.While Wind Energy is facing uncertain times in the USA,Solar Energy is growing at a rapid clip driven by the sharp fall in Solar Panel Costs which have more than halved in the last 2 years.
France has halted its solar feed in tariff bubble putting a moratorium on new applications for installing solar panels above for 3 kw installations.This has been done after applications for solar panels exceeded the 500 MW per year target set up by the French ministry.The Prime Minister called the solar feed in tariff subsidies reaching a “veritable speculative bubble”.France has already changed its solar feed in tariffs 2-3 times in 2010 as it tries to fine tune the subsidies so that renewable energy investors earn a decent return.However the fast decrease in solar panel prices has caught the bureaucrats off-guard which is not surprising.Feed in Tariffs in general have been badly designed by most public authorities around the world leading to huge bubbles.Czech has suffered from the biggest solar subsidy bubble on which it recently cracked down through taxes,50% cut in tariffs and other measures as electricity rates increased sharply as subsidies ballooned.Spain and Italy have found their Feed in Tariffs leading to runaway subsidies while Germany which has the most successful FIT program too had to cut FIT by a single ad hoc measure in order to prevent a bubble.