Bloomberg New Energy Finance - Week In Review

This Week In Review was sent on Tuesday 4 November.

Clean energy versus fossil fuel debate continues as polls open in the US

Americans are today heading to the polls to cast their ballot for candidates running in the country’s mid-term election. The outcome, some pundits say, could be a brutal blow for Democrats, who are battling to control the Senate. The results may also have ripple effects for renewable energy in several states.

As Bloomberg New Energy Finance points out in its Analyst Reaction: US REC market cheat sheet: are RECs above the ballot?, there are several states of particular interest: Florida, Pennsylvania, Massachusetts, California and New York.

For instance, in Florida, former Governor Charlie Crist (D) is in a tight gubernatorial race against incumbent Rick Scott (R). Crist, who in the past supported developing a Renewable Portfolio Standard (RPS) for Florida, has made improving the solar industry one of his touchstone campaign pledges. In Pennsylvania’s gubernatorial race, candidate Tom Wolf (D), who is leading in polls over Tom Corbett (R), has pledged to bring Pennsylvania into the Regional Greenhouse Gas Initiative (a cap-and-trade scheme with Northeast and Mid-Atlantic states).

At the national level, legislation to extend the federal Production Tax Credit (PTC) for wind generation is expected to become serious after the elections, when the ‘lame duck’ session begins, according to Bloomberg New Energy Finance. A bill introduced in the House in September – HR 5559, entitled ‘Bridge to a Clean Energy Future Act of 2014’ – would extend the PTC, but the act is sure to be watered down as it filters through committees.

Looking forward, it remains unclear whether the EPA’s Clean Power Plan will incentivise states to start or strengthen Renewable Portfolio Standards. At the very least, however, it does appear that renewables will play an important role in reducing states’ "adjusted" emissions rates.

Bloomberg New Energy Finance is offering a post-election webinar on 5 November.  Contact Noemi Glickman at nglickman@bloomberg.net for more details.

Last week, on the opposite side of the world, the first main component of Australian Prime Minister Tony Abbott government’s Direct Action Plan – the Emissions Reduction Fund – cleared its critical hurdle in the Australian Senate. Bloomberg New Energy Finance’s Analyst Reaction: Australia’s flawed Emissions Reduction Fund passes the Senate details the modifications to the scheme, their likely effect and our expectations for the policy in operation. 

The plan would offer a reward to those that voluntarily cut carbon emissions. The 31–29 vote in Australia’s Senate was a victory for Abbott. The bill to enact the Direct Action plan will now return to the House of Representatives, where Abbott has the needed votes, and which appears certain to agree to the Senate's amendments.

The passage of the controversial Emissions Reduction Fund (ERF) through the Senate was secured after a deal was struck between the government, the Palmer United Party and independent Senator Nick Xenophon. The changes negotiated by the PUP and Senator Xenaphon address some shortcomings in the ERF, which is essentially a government-funded reverse auction procurement mechanism. Yet, the fundamental flaws, which will hamper the policy in operation, remain.

For instance, the government’s budget is unlikely to be sufficient, and, among other things, Bloomberg New Energy Finance finds that the procurement mechanism encourages participants’ bids to deviate from the fundamental cost of the abatement activity.

Finally, in Brazil last week, solar-power developers including Solatio Energia and Rio Energy won contracts to deliver 1,048MW of capacity in the country’s first energy auction with a specific category for photovoltaic projects.

Solar developers agreed to sell electricity at an average price of 215.12 reais ($87) a megawatt-hour, after starting at a maximum price of 262 reais. In Brazil’s energy auctions, the government sets a ceiling price and developers bid down the price at which they are willing to sell power. The lowest bids win contracts.

Wind is usually the big winner in Brazil's power tender auctions, as Bloomberg New Energy Finance noted in last month’s Analyst Reaction: Brazil solar preps for a big November debut.  The government's carve-out for solar in this round opened the gates for competition among solar developers. Time will tell if the prices they offered support viable projects. They put Brazil on a trend toward the cheapest solar contract prices without subsidies in the world.

There are only 80 public hydrogen refueling stations in the world

There are only 80 public hydrogen refueling stations in the world

Q&A of the week

Novartis says climate may fuel the spread of diseases

Global warming could mean more work for pharmaceutical companies as tropical diseases may become more prevalent with rising temperatures and changing climatic patterns, according to Novartis.

At the same time, some potential climate change effects – including extreme weather events and rising sea levels – may impact operations and the supply chain, increasing costs, the Basel, Switzerland-based drugmaker said.

Novartis, which is Europe’s largest drugmaker by sales, said its investors are becoming more interested in details on the performance of its operations and supply chain, as well as the company’s climate change strategy. The drugmaker is targeting a 15% absolute reduction of greenhouse gases by 2015, compared with 2008 levels.

‘We recognise the need to include a range of approaches in our climate change strategy. Our primary goal is energy-efficient operations, but efficiency improvements can only go so far,’ Dr Markus Lehni, global head of environment and energy for Novartis Group, told Bloomberg New Energy Finance.

Novartis is considering establishing renewable energy targets and has been investing in cleaner sources of electricity already. Globally in 2013, Novartis Group companies used renewable energy for 905TJ, or 7.7%, of total energy usage, the company said on its website.

Q: Currently, what are your energy efficiency goals?

A: Novartis has a target to improve energy efficiency (energy usage normalised by sales) by 15% by 2015, based on 2010. In 2013, we achieved an 11.4% improvement versus 2010, meaning we are on track to achieve the 2015 [target]. We are currently formulating long-term energy efficiency targets through 2020. As a result of an initial energy audit, our major sites developed and maintain a list of energy saving opportunities, and report energy, cost and greenhouse gas savings from projects that are implemented. Our business divisions also have targets to reduce their energy use by 15% between 2009 and 2015. As of 2013, collectively they had already achieved a 14% reduction.

Q: Do the normal day-to-day operations of pharmaceutical companies present unique challenges when it comes to cutting energy use?

A: Stringent quality requirements associated with pharmaceutical manufacturing do present a unique challenge for reducing energy usage. For example…

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