European Power Utilities look to Private Capital to Increase Renewable Energy generation

15 Jul, 2010 by
Europe,Germany,Green IPO,Italy,Renewable Energy

European Power Utilities are increasingly looking towards private capital in order to fund their renewable energy projects.The European Union has a target of generating 20% of its energy from renewable energy sources by 2020.With most of the European countries facing budgetary and fiscal problems,Electricity utilities in Europe need to look for other sources of fund in order to meet the EU targets.Renewable Energy Generation based on Solar and Wind Energy typically requires large upfront capital costs with low operations and maintenance costs.This is unlike fossil fuel and hydro based power plants which require less capital upfront but more fuel and operations cost in the latter years.The ambitious offshore wind projects off the United Kingdom and the Desertec project in North Africa will require massive amounts of funding.

Italy utility Enel is proposing to IPO its renewable unit this year in order to lower its massive Euro 51 billion debt burden and raise capital for further renewable energy projects.Note Italy has one of the highest electricity rates in the world due to a lack of oil and mineral resources and imports most of its power.German utility E.ON is looking to partner with Abu Dhabi renewable energy arm Masdar to build more renewable energy projects.Note Masdar already has a solar thin film plant in Germany though it is facing problems.E.ON is going to invest a massive $10 billion in Green Energy projects over the next 5 years.

E.ON Says Utilities Need Financial Partners for Wind, Solar – Bloomberg

E.ON AG, Germany’s largest power company, and European competitors need financial support from investors and partners to reach their renewable energy targets, said Frank Mastiaux, who heads the company’s renewable division.E.ON may expand cooperation with Masdar, the $22 billion clean technology venture set up by Abu Dhabi, Mastiaux said yesterday in an interview in Duesseldorf, Germany. E.ON aims to increase the power it generates from renewable sources to 36 percent in 2030 from 13 percent in 2008.The German utility is investing 8 billion euros ($10 billion) in the five years through 2012 on wind parks and to a lesser degree on solar energy and biogas projects. Expanding at a faster pace is “technically feasible” and E.ON is assessing the price of carbon and other factors to determine how much it spends on renewable energy in the coming years, Mastiaux said.

Enel May Beat 2010 Earnings Target, Picks October for Green IPO – Businessweek

Enel also plans a 4 billion-euro initial public offering of its Green Power division, which manages wind, solar, biomass, hydro and geothermal power producers in 17 countries, to help repay debt.

The Italian government’s plans to cut subsidies for renewable-energy producers won’t affect Enel’s Green Power unit, two-thirds of which operates without state support, and won’t sway the IPO, Conti told reporters in Moscow today. The unit already has “solid cash flows” and can float “successfully even in the turbulent times that we are in now,” he said.

US Exim Bank criticized for providing credit finance to Mega Coal Power Plants in India and Africa

14 Jul, 2010 by
Climate Change,Coal,Energy,Renewable Energy,USA

US Export Import Bank (Exim) is a government owned financial institution which helps support US trade through credit financing of exports/imports of US companies.The Bank is also an instrument of US government policy which supports renewable energy and acts against climate change.However its recent policy actions have been criticized heavily by environmental groups for supporting dirty energy in developing countries of Asia and Africa.Note Exim Bank already support Energy Projects 95% of which are based on Fossil Fuels.The Exim bank has come under fire for succumbing to US business lobbies for providing credit financing to the tune of $560 million for coal mingin equipment to be supplied by Bucyrus International  to India’s Reliance Power’s massive Sasan Coal Plant.This financing which was rejected 3 weeks ago has been “reconsidered” ostensibly due to Reliance Power’s 250 Renewable Energy Plant.

Note the order 3 weeks ago had found huge opposition from political and business groups.The usual reasons  were touted for opposing this order such as loss of  jobs,loss of orders etc etc.There was no consideration for the fact that Coal is the dirtiest form of energy and needs no explicit and implicit subsidies.It is estimated that Fossil Fuels get $550 Billion in Subsidies globally and this is one the major reasons behind the slow uptake of Green Energy forms like Solar,Wind,Geothermal etc.Such retrograde decisions under pressure from vested interests will help neither US nor India ,only the profiting business and political groups.Environmental groups are lobbying to force multilateral lending institutions like the Exim Bank,World Bank and IFC to consider GHG emissions in their lending decisions.Even US officials are talking about it.However action speak louder than words.

U.S. Export-Import Bank Reconsiders India Coal Financing Deal – Bloomberg

The U.S. Export-Import Bank will reconsider its rejection of a loan guarantee for Bucyrus International Inc. so it can sell coal-mining equipment for a power project being developed by India’s Reliance Power Ltd.The bank acted after Democratic lawmakers in Wisconsin, where Bucyrus is based, appealed the rejection last week of $560 million in financing on environmental grounds. Reliance told the bank it may buy U.S. equipment for a renewable energy project, bank Chairman Fred Hochberg said in a letter.

The bank “will take into account Reliance’s expressed commitment to invest in the renewable energy sector” in its review, Hochberg wrote to Reliance chairman Anil Ambani today.Bucyrus would lose an order worth as much as $560 million for electric drag lines and rope shovels to mine coal without getting the Export-Import bank’s guarantee, Bucyrus Chief Executive Officer Timothy Sullivan said in an interview June 28. The financing request was turned down last week as part of the lender’s review of the project because of its potential carbon emissions.

Exim bank applauded for decision on Sasan – Business Standard

A San Francisco-based non-profit organisation, Pacific Environment’s Responsible Finance Program holds public banks such as the US Export-Import Bank accountable to taxpayers, project-impacted communities and the environment.The group issued statement after the businesses and local politicians in Wisconsin asked President Barack Obama and Ex-Im Bank to reverse its decision, with regard to not approve the financing the project as it would result in hitting as many as 1,000 jobs in the US.

The 3,960 megawatt (MW) Sasan coal power and mine is one of the 9 earmarked ‘ultra-mega’ coal-fired power stations proposed by the Indian government as an effort to reach specific energy capacity goals by 2017.The project would release vast amounts of pollution into the local environment and the global atmosphere. The annual greenhouse gas emissions from this project alone would nearly triple the total annual emissions of all fossil fuel projects approved by Ex-Im Bank in 2009, the statement said.

“We have been long concerned that Ex-Im Bank’s fossil fuel financing has been skyrocketing, and support for Sasan would have sent those emissions off the charts,” said Norlen, adding we hope the decision on Sasan marks a pivotal point for Ex-Im Bank as they avert future involvement with harmful fossil fuel projects.

Ex-Im Bank’s decision to decline support for Sasan brings the federal government export credit agency more in line with the rest of the Obama Administration’s efforts to reduce fossil fuel subsidies and expand support for renewable energy and energy efficiency, the NGO said.

U.S. eyes geothermal for Exim Bank’s $1 bln Indonesia credit – Reuters

Part of a $1 billion credit facility backed by the Export-Import Bank of the United States (Exim Bank) for Indonesia should be used to help develop clean energy projects such as geothermal power, a senior U.S. official said on Monday.The U.S. Exim Bank announced in late June it had pre-approved 11 Indonesian banks to receive funds under the scheme, which aims to make credit available to public and private sector businesses under low or fixed-interest rates.

U.S. companies currently have $18 billion worth of investment in Indonesia, which boasts the potential to produce an estimated 27,000 megawatts of electricity from geothermal sources.U.S. energy major Chevron Corp is among firms that have bid for a geothermal power project in Indonesia, as the country seeks to boost erratic power supply and cut its greenhouse gas emissions.

However, geothermal energy production is expensive and struggles to compete in Indonesia, where fossil fuels are heavily subsidized.

Is the Green Investing Opportunity in Pumped Hydro Storage being overlooked

7 Jun, 2010 by
Solar Energy,Wind Energy

Pumped Hydro Storage Introduction

Pumped Hydro Storage along with Compressed Air Energy Storage (CAES) are the less glamorous cousins of Energy Storage Approaches like Lithium Batteries,Flywheels and Capacitors .The Green Investing Limelight has been firmly taken over by startups like A123 Systems which have failed to perform to their initial hype.Pumped Hydro Storage on the other hand is already extensively used by Power Companies to store low cost electricity during off peak hours and then used during peak times to supply the high demand.There is 90 GW of Global Pumped Hydro Storage already existing in the world and with increasing Solar and Wind Energy  this Capacity is only going to grow.The main use of Pumped Hydro Storage is for Grid Energy Storage rather than Energy Storage for Automobiles and Electronic Products.The Electric Utilities are the main customers of this Technology using Pumped Hydro Storage for

  1. Load Balancing – Storing Power during Low Usage Periods and Generating Power at High Usage Periods
  2. Accommodation of Intermittent Sources of  Energy – Solar Energy and Wind Energy are  growing at a scorchingly fast rate of 50% and 30% CAGR over the last several years.Larger share of these forms of renewable energyin the Electricity Mix is driving the growth Grid Storage.
  3. Reducing Capital Investments as Peak Power plants like Natural Gas Combined Cycle Plants are much more expensive to run than normal Thermal and Nuclear Energy Plants

Advantages and Disadvantages of Pumped Hydro Storage

This form of Energy Storage also leads to losses of between 15 – 30% due to inefficiency.There are also minor problems of environmental impact of large hydro plants and availability of  favorable sites. However Hydro power storage is quite inexpensive with  with estimates ranging from $500-$1500/kW power and $50-$150/kWh energy storage capacity; which is about 1/10th the cost of energy storage like Lithium Batteries.The main advantages are that it uses existing infrastructure of Hydro Power which has a large global installed base.In the 1930s technology was developed for building Turbines which could generate Electricity and also serve as Motors allowing Storage of Hydro Power.Also Pumped Hydro Storage has High Reliability of >99% and  relatively Long Cycle times which means that the stored electricity can be used in a few hours to a few days.

Why Invest in Pumped Hydro Storage

The trend towards Pumped Hydro Storage  is increasing with countries like China,Scotland,USA and Australia proposing massive new capacities.While USA has 21 GW and Europe 38 MW ,China has around 14.55 GW of Pumped Hydro Storage Capacity.China intends to increase this to 41 GW by 2020, which at $300,000/MW would mean an investment of ~7.5  BillionDollar by China alone over the next 10 years.

How to Invest in Pumped Hydro Storage

There are not a lot of glamorous startups in this form of Energy Storage unlike other segment of Green Industry like A123 Systems,Solyndra and Tesla.Most of the companies that can used to invest in this space are large global industrial companies like Toshiba and Emerson Control Systems.While a pure play is difficult to find,Investing in these Conglomerates is also a Less Risky Green Investment.

China State Grid to up pumped storage hydropower capacity – Reuters

The State Grid Corp of China, China’s dominant grid operator, plans to raise its pumped storage hydropower generating capacity to 21 gigawatts (GW) by 2015 and 41 GW by 2020, complementing the fast development of irregular renewable energy sources such as wind and solar power.On Sunday, the State Grid started building a 1.2 GW pumped storage hydropower plant in southern Jiangxi province, the first phase of a planned 2.4 GW capacity expansion that will have a total cost of about 5 billion yuan ($732.3 million).China had only 14.55 GW of pumped storage hydropower capacity at the end of 2009, according to the State Grid.China’s total power generating capacity was 874 GW at the end of 2009

Ambani Detente – Reliance breaks the shackles,Plans to enter Indian Power,Telecom and Financial Services

7 Jun, 2010 by
Energy,Finance,Nuclear Energy,Solar Energy,Telecommunications

The detente between the Ambani brothers which lead to the rescinding of the non-compete agreement has resulted in Reliance Industries  Ltd (RIL) being the biggest Winner in the win-win arrangement.While on one hand Anil Ambani’s Reliance Communication which was facing a liquidity problem has benefited by being free to sell a stake in the company,Mukesh Ambani’s RIL has gained even more. RIL has been a huge cash cow generating billions of dollars in free cash flow from its Energy businesses each year.However RIL was finding it itself hamstrung by the non-compete agreement which prevented the company from entering the areas in which ADAG ( Anil Dhirubhai Group ) operated in. RIL tried its hand at overseas acquisitions but was not finding much success.However with the Ambani Brothers burying the hatchet,Reliance find its hands free to enter the virgin territories of Telecom,Power and Financial Services which will be high growth areas in India’s booming economy

Reliance has firmed up its intentions in all Three Areas through acquisitions,JVs and greenfield expansion.

Financial Services

Reliance has made its move in this sector by signalling its intention through acquisition of a small private player JM Financial Services.With the private financial companies trading at decent valuations compared to the sky high valuations during the 2007-2008 this might be a great time to make acquistions.

Mukesh Ambani may buy MF firm – LiveMint

Mukesh Ambani, who controls India’s most valuable company Reliance Industries Ltd (RIL), is in talks to buy a majority stake in JM Financial Asset Management Pvt. Ltd, his first attempt to enter Anil Ambani’s territory since the estranged brothers scrapped a “non-compete” agreement between them a week ago.

Negotiations are under way for a deal that values JM Financial Asset Management, the money manager controlled by investment banker Nimesh Kampani, at around 8% of its assets under management, which equals Rs685 crore, said two officials close to the development who didn’t want to be named.

Power

Reliance is making forays into Power starved Indian Market by planning to set up Thermal ,Solar and Nuclear Energy Plants.With its superb project executions skills and rock solid Balance Sheet , Reliance is ideally situated to become a dominant player in this space

Reliance may foray into nuclear energy – report – Reuters

Petrochemicals-to-gas conglomerate Reliance Industries Ltd is looking to enter nuclear energy, the Economic Times reported on Monday, citing unnamed sources with knowledge of the matter.The energy major is believed to be in talks with Bechtel, the largest U.S. engineering firm, for a possible collaboration, the newspaper said.”RIL has indicated to the government that it is keen on generation and distribution of nuclear power,” it quoted an unnamed senior government official as saying, adding the plans are at a preliminary stage.

RIL may enter thermal power sector – Energy Business

For RIL power sector is not new as it is already supplying power to Jamngar refinery, Hazira petrochemical complex and Jamngar city through 800 Mw captive power plant, and said sources close to the family.
The company might enter in to the bidding process during next round of UMPPs are offered by the government. However it is unlikely that, RIL will enter in to telecom or financial service sector as RIL are a B2B company and not B2C company

Telecommunications

Reliance Industries had brought a revolution in the Indian Telecom space by introducing the “Monsoon Hungama” scheme which allowed poor Indians to go mobile at a  startlingly low cost of $11 ( Rs 500)  . This arm was hived off as Reliance Communications under the separation agreement between the two Ambani brothers.Now Reliance sees an opportunity to return to Telecom through the new wave of investments in 3G.

RIL to offer 3G, WiMAX devices – Financial Express

Five years after its exit from the country’s booming telecom sector, Mukesh Ambani’s Reliance Industries Ltd (RIL) is plotting the road map for a return trip. However, this time around, it won’t be plain vanilla telecom services that RIL will be interested in, but rather the emerging segments of 3G and WiMAX. According to executives familiar with the development, the initial strategy is not to enter as a telecom operator, though this cannot be ruled out in the long run.

India’s Ambani led Reliance Group free to enter Power,Telecom and Financial Sectors

24 May, 2010 by
Energy,Finance,Telecommunications

Indian mega industrial groups led by Ambani brothers decided to rescind their non-compete agreement which allows oil and petrochemical giant Reliance  to enter the financial,telecom and power sectors.This deal is much more beneficial to Mukesh Ambani led Reliance Group then Anil Ambani’s led ADAG Group.This deal came about after ADAG lost a gas supply dispute with Reliance in India’s Supreme Court recently.

Power companies in India may face a formidable competitor

Reliance is a massive free cash flow machine as its oil and petrochemicals businesses are one of the most profitable around the world.Its  project execution abilities are also well known.I don’t think that Reliance would like to enter the Hyper Competitive Telecom market but it would make sense to enter the Power Sector where India faces a huge shortfall.It already has a some presence in power installing Solar panels for India’s Commonwealth Games and it would be logical to enter this field as power sector requires large capital outlays and project execution capabilities.Reliance also may want to enter the Financial Services field which  is growing rapidly.It could enter through acquisitions of india Infoline,Edelweiss or any of the myriad  private players to jumpstart their entry.

ADAG Group could be a Loser

ADAG has less to gain from this deal as entering the oil and gas sector might not be that profitable given the large amounts of capital and long gestation periods required .Note the ADAG Group is strapped for cash and facing headwinds in its telecom and power companies I think it has more to lose from competition in the power and financial sectors where it is quite dominant.However the full deal is not known and Anil Ambani might have received a big monetary settlement to free Reliance from the non-compete agreement

Mukesh-Anil Ambani scrap ‘non-compete’ agreement of 2006 – ANI

In a significant development, Reliance Industries Ltd. (RIL) and Reliance ADA Group companies on Sunday formally agreed to cancel all existing non-compete arrangements which the two groups entered in January 2006.The two groups have entered into a new simpler, non-compete agreement with respect to only gas based power generation.The new agreement has been approved by the board of directors of RIL and the respective Reliance ADA Group companies.

However, RIL has agreed not to enter into Gas Based Power Generation Business for the period upto March 31, 2022. An appropriate exception has been made in respect of RIL’s captive gas based power plants.It is believed that these developments will eliminate any room for further disputes between the two groups, on matters relating to the scope and interpretation of the non-compete obligations.

Reality Check for US Commerce Secretary – USA is already far behind China in Clean Energy

22 May, 2010 by
China,Goldwind,Sinovel,Solar Energy,USA,Wind Energy

The United States could fall behind China and other countries in clean energy technology unless Congress passes energy legislation, U.S. Commerce Secretary Gary Locke said on Saturday– Reuters

While the Commerce Secretary is “only thinking” that the US could fall far behind ,The Reality is that US is already far behind in the Solar and Wind and is at risk of falling behind in the other newer sectors of the Green Industry as well.

USA is far behind China in Solar

USA has fallen far behind China in solar manufacturing despite Silicon Valley being the hotbed for technology innovation in solar . If it was not for First Solar, no US company would figure in the top 10 rankings by 2011 as the Chinese and Taiwanese use their low cost and processing skills to tighten their grip on the world market. Numerous startups like Miasole,Nanosolar,eSolar are in the process of moving from pilot to commercial production but the support from the government does not measure up . Evergreen Solar has  given up on the US and shifted its manufacturing base to China  while other technology innovators like Energy Conversion Devices are on their “deathbed”.Sunpower and First Solar the other major companies are trying to compete by expanding their facilities in Asia, retaining only a  token presence  in the US (less than 10% of their future capacity will be located in the US). Technology giant Applied Materials has shifted its manufacturing and R&D base  to China as well. While all this is going on, US continues its petty politicking over the climate bill which ironically has support for “offshore drilling”

In Wind US is in a more pathetic condition

Except for GE , US does not have a single company in the top 10 turbine makers for wind. There does not exist a single large pure play wind turbine maker in the US. Despite US being the world’s largest wind market in 2009 , US hardly manufactures even 10% of the world’s wind turbines.In contrast Chinese wind makers like Sinovel,Goldwind ,APower are planning big foreign expansions making the dominant European companies like Vestas  go into the red.

Energy Efficiency,Storage and other forms of Renewable Energy a  Saving Grace

In the still nascent markets of Energy Efficiency ,Energy Storage and other forms of renewable energy like geothermal ,tidal ,biomass and nuclear energy the US still leads along with Europe, but the Chinese government has been proactively seeking investment in these areas as well. Its a matter of time that once these technologies cross the early adopter curve, companies in Asia will actively look to attain leadership here as well.Innovative companies like Ormat, Comverge,EnerNoc , Johnson Controls,A123 systems still give the leadership to the US in these areas.But unless they are given more government support and subsidies , you can see them moving off to Asia like the solar and semi companies like Evergreen,Applied Materials.

Summary

US is still the leader in technology innovation and R&D in the green technology area,however it is way behind in the manufacturing area.Its only a matter of time that the Asian countries develop the technology once they move further along the experience curve.Companies in the US like IBM,Applied and others have already shifted a large part of R&D to these countries.Unless US soon implements on  a coherent long term policy to mitigate climate change and develop clean energy , it would fall too far behind to matter at all

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