Bloomberg New Energy Finance - Week In Review

This Week In Review was sent on Tuesday 19 August.


Last week saw President Enrique Pena Nieto sign legislation to open formally Mexico’s state-controlled energy industry to private investment. These laws complete the steps to end the monopoly on energy production held by state-owned Pemex since 1938, and form the framework under which the energy sector will operate. The government hopes to attract some $23.5bn in investment over the next three years thanks to the new rules, said energy minister Pedro Joaquin Coldwell on 14 August.

Mexico has already seen clean energy financing ramp up this year, reaching $1.3bn in H1 2014 compared with $1.6bn in the whole of 2013, according research from Bloomberg New Energy Finance. Both Mexico and Central America are highly exposed to expensive oil- and diesel-based generation, with these sources making up 20% of installed power capacity in the former and 42% in the latter.

However, these countries’ abundant wind, solar, geothermal and hydro resources, together with a need for new, more economical power capacity, are spurring investment in clean energy. Mexico and Central America are likely to install just over 1GW of wind installations this year, beating 2012′s record of 757MW, with potentially another 1.3GW in each of 2015 and 2016.

Acquiring financing for renewables can be a challenge; but many countries in the region are implementing policy changes to smooth the process, as Bloomberg New Energy Finance identified during the 2013 Climatescope project which assessed the renewables investment climate in Latin America and the Caribbean. As part of Mexico’s recent changes to its energy sector, its new power market structure, which will include private generation and a wholesale market, will not be operational until February 2016. But the proposed clean energy certificates are expected to have rules as early as October this year.

Elsewhere in Latin America, Brazilian national development bank BNDES announced on 12 August the local content rules for solar equipment, in preparation for the country’s reverse auction on 31 October. As this is the first auction with a solar carve-out, it could be the first time when PV capacity is contracted under the scheme. Project developers will need to adhere to the content requirements if they wish to obtain financing from BNDES – the only source of low-cost debt. Creating an industry to meet Brazil’s requirements should be feasible, according to a recent Bloomberg New Energy Finance report, and the rules appear comparable to those in other emerging markets such as India and South Africa.

The news this week was not as positive for tidal stream and wave power, after Bloomberg New Energy Finance cuts its forecasts for their deployment to 2020 by 11% and 72% respectively. The main reason is that developing these technologies is taking longer – and costing more – than expected. This is true of both wave and tidal stream, although companies active in tidal still have realistic hopes of seeing several multi-MW arrays built and deployed before 2020.

Several wave players including Wavebob and Ocean Power Technologies have shut down or cancelled projects due to a lack of funding. Meanwhile tidal developers are continuing to scale up and test devices backed by major shareholders such as Siemens and Andritz Hydro. UK turbine maker Tidal Energy said on 14 August it plans to start looking for GBP 50m ($83m) next year for its first commercial-scale project. The company is working with Eco2 to raise funds to build the 10MW tidal power facility in west Wales, with the aim of starting to generate power in 2018.

About 248MW of PV was installed in Italy in H1 2014, according to estimates from Terna, obtained by Bloomberg New Energy Finance

About 248MW of PV was installed in Italy in H1 2014, according to estimates from Terna, obtained by Bloomberg New Energy Finance
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Q&A of the week

Ocean thermal ‘not far behind tidal’: Lockheed

One of the US’s largest security and aerospace companies says a method of generating electricity from the temperature gradient in sea water, known as ocean thermal electricity conversion, is ‘ready to take the step to larger-scale plants and projects’.

Lockheed Martin said last year that it is working with Reignwood Group to develop a 10MW OTEC plant off the coast of southern China, to supply power to a ‘green resort’ Reignwood wants to build. US Secretary of State John Kerry was photographed with the two companies after the signing of that agreement in Beijing.

OTEC technology, which makes use of the temperature gap between surface and deeper water in tropical countries, is seen in the renewable energy sector as fledgling even compared to two other forms of marine energy, tidal stream and wave power. The first megawatt-scale tidal stream devices are now generating electricity off the coast of the UK, while wave is seeing intensive testing of demonstration devices.

Dan Heller, vice-president of new ventures for Lockheed Martin’s mission systems and training business, explained why his company has decided to invest in OTEC and also in the other marine technologies.

Q: Lockheed is involved with Reignwood in developing a 10MW OTEC project in China. What are the likely milestones ahead for that project?

A: The initial system engineering, design, site evaluation and supply base identification work we are currently performing will continue for the remainder of 2014. Detailed design, pre-construction and permitting activities are targeted to start in 2015, with construction activities occurring in 2016-17. The timing of plant commissioning is dependent on the final site, permitting and construction scheduling.

Q: OTEC is a promising technology with potentially wide adoption in tropical countries, particularly islands. However, I see it as probably five years behind wave and 7-10 years behind tidal stream in terms of proving the technology and its cost-effectiveness. What’s your view?

A: While a large-scale, commercial OTEC plant has not yet been built, a number of operating OTEC plants, both sea-based and land-based, have been successfully built and tested at scales in the hundreds of kilowatts. Our perspective is…

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