Bloomberg New Energy Finance - Week In Review

This Week In Review was sent on Tuesday 13 May.

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The Week in Clean Energy

CLEAN ENERGY

Offshore wind gains traction, while solar prospects brighten up for Africa

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CARBON

EU carbon permits advanced a third week on light trading

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GAS

Israeli gas may be exported as Egyptian LNG

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POWER

British Gas owner stops owning big gas

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POPULAR INSIGHT NOTES

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NEX vs AMEX Oil, Nasdaq, S&P 500 and MSCI AC World

NYSE BNEF Global Clean Energy Indexes

CLEAN ENERGY

Offshore wind gains traction, while solar prospects brighten up for Africa

From windy seas to sunny African markets, renewable energy developers last week looked at breaking new ground for projects.  

France announced last week that GDF Suez and its partners won a contract for two 500MW wind projects off the country’s northwestern coast, beating a group led by EDF. The nation’s Energy Ministry said GDF and partners EDP Renovaveis, Neoen Marine and Areva will build installations near Le Treport on the Channel coast south of Calais and between the Noirmoutier and Yeu islands on the Atlantic coast north of La Rochelle.

France – a nation without any operating sea-based wind farms – is looking to boost its offshore and onshore capacity, as the country scales back nuclear energy. 

However, Bloomberg New Energy Finance’s 28 April 2014 note French wind – bridging the gap in support finds the country is likely to miss its 2020 installation targets. The country envisions 19GW of onshore capacity and 6GW of offshore capacity by the end of the decade. Based on Bloomberg New Energy Finance’s current forecast, France will fall short of its onshore target. Delays make it likely that only around 1GW of offshore will be commissioned in time. The French government has stalled development to wait for costs in the sector to come down.

In other waters, the US Energy Department said last week it will award as much as USD 47m each to developers planning modest-sized offshore wind projects off the coasts of Oregon, Virginia and New Jersey. 

The projects have a total of 67MW of capacity and are expected to be connected to the grid by 2017, the agency said in a statement on its website. The companies will use new technologies that may make offshore wind more economical. The cost of power from sea-based turbines is more than that for systems on land, one of the reasons there are no commercial wind farms in US waters – yet.

Deepwater Wind is developing the 30MW WindFloat Pacific project off the Oregon coast. A Dominion Resources unit is planning a 12MW wind farm off Virginia Beach. Fisherman’s Energy plans to install five 5MW turbines about three miles off the coast of Atlantic City, New Jersey. The three companies will receive the funds over four years. They were selected from seven demonstration projects that each won USD 4m in backing from the Energy Department in 2012. 

Elsewhere, SkyPower, a Canadian renewables developer, and Saudi retailer Fawaz Abdulaziz Alhokair & Co won support from Nigeria to build 3,000MW of solar parks.

They will partner with federal and Delta State governments to complete the projects in five years, Toronto-based Skypower said in a statement. Shareholders, and development and commercial banks, will provide the USD 5bn needed. FAS Energy will work with authorities to plan, finance and build projects that start providing power to the national grid next year. 

Bloomberg New Energy Finance believes there are reasons to be optimistic about the prospects for utility-scale PV in Africa, leaving aside South Africa, which is already a fast moving market. Most African countries are sunny, and have rapidly growing economies. The demand for power is rising with continued economic growth and the electrification of rural areas. Meanwhile, grid-connected power is relatively expensive on average. 

Still, Bloomberg New Energy Finance finds in its 28 January 2014 note, Is PV ready to light up Africa, that system costs there can be quite high compared to the global average for non-tracking, utility-scale PV systems. This probably reflects the need for one-off designs and the additional costs for experienced companies to build in remote and sometimes politically fragile locations.

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CARBON

EU carbon permits advanced a third week on light trading

Carbon allowances advanced 1.1% during a week of light trading.

European Union Allowances (EUAs) for December 2014, the benchmark contract, finished Friday’s session on London’s ICE Futures Europe exchange at EUR 5.30/t, compared with EUR 5.24/t at the close of the previous week.

Front-year EUAs were trading as high as EUR 5.41/t on Tuesday afternoon. Only 11.9Mt of December 2014 EUAs exchanged hands that day, compared with the 15-day moving average of 16.9Mt. EUA market activity was relatively light on most days as traders may still have been away from their desks due to a UK public holiday on 5 May.

UN Certified Emission Reduction credits (CERs) for December 2014 lost EUR 0.03/t last week to end at EUR 0.12/t. 

German power for delivery in 2015 ended the week 0.7% down at EUR 34.50/MWh.

GAS

Israeli gas may be exported as Egyptian LNG

US-based Noble Energy, the largest shareholder (36%) in Israel’s Tamar gas field, has signed a letter of intent with Spain’s Union Fenosa to supply up to 2.5Tcf of natural gas over the next 15 years (averages to 456MMcfd) to the Damietta LNG facility on Egypt’s Mediterranean coast. Tamar production averaged 750MMcfd over the past year, but has current capacity of 1Bcfd and design capacity of 1.6Bcfd. This deal dwarfs the export agreements that Israel has so far reached with Jordan and the Palestinian Authority. 

Notably, the Noble-Union Fenosa deal has not been approved by either the Israeli or Egyptian governments, but it could mark a thaw in the energy relations between the two countries that have deteriorated since the political upheaval brought on by the Arab spring. 

Prior to the ousting of President Mubarak in 2011, Israel was an importer of gas from Egypt through pipelines crossing the Sinai. However, export volumes from Egypt have dried up due to increased domestic demand, supply interruptions and repeated attacks on the pipeline linking Egypt with Israel. The Noble-Union Fenosa deal envisages sending gas via the same route but in the opposite direction. Noble is currently studying plans for a harder-to-sabotage sub-sea pipeline from Tamar directly to the Egyptian coast.

 

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POWER

British Gas owner stops owning big gas

UK utility Centrica announced its intention to sell three gas power plants representing the bulk of its fossil-fuel fired capacity, in a statement from the management on 8 May. It also lowered its earnings outlook for 2014, as mild weather conditions reduced energy bills. 

The planned sale of combined cycle gas turbines, or CCGTs (Langage, Killingholme and South Humber) totalling 2.7GW comes as soft power demand and competition from cheaper coal-fired generation and renewables increasingly causes gas to sit idle. This is reflected by Centrica’s overall gas plant load factor, which was just 23% over the first four months of this year. The UK capacity market is designed to improve the economics of gas-fired generation by offering a capacity payment. However, it does not provide short-term relief as first payments under this mechanism will only start in the winter of 2018. 

The announcement follows the earlier decommissioning of Roosecote CCGT (229MW) and the mothballing of King’s Lynn CCGT (340MW) in 2012. Current plans will leave Centrica with 650MW of CCGT capacity in the UK, down from about 3.9GW at the start of 2012. The remaining plants  (Peterborough, Barry and Glanford Brigg) however are adapted to serve as flexible peaking plants and currently all receive payments under National Grid’s ‘Short-Term Operating Reserve’, generating a steady revenue stream. Centrica also believes that the plants could qualify to participate in the capacity market. 

EU ETS and global carbon price (EUR/tCO2e)

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