Bloomberg New Energy Finance - Week In Review

This Week In Review was sent on Tuesday 14 October.

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Japan utilities fight back against renewables influx, as UK solar feels pinch

In Japan, the flood of approved feed-in tariff applications has prompted half the electricity utilities to implement broad measures to slow down renewable energy project development. On 1 October, four more regional utilities said they would stop signing contracts to buy renewable energy from mega solar power plants, citing grid access limitations. The move follows a similar announcement from Kyushu Electric Power the preceding week. 

The country saw installation of solar capacity rocket up 183% between end-2011 and 2013 thanks to its generous feed-in tariff. The incentive was implemented after the country’s 48 nuclear reactors were shut down following the Fukushima Daiichi disaster in 2011. 

The government has approved plans for some 72GW of renewable energy projects since July 2012 and developers may well be rushing to reach commissioning before the subsidy rates change. The utilities may be relieved to hear that half of the capacity approved for the feed-in tariff will not be completed, according to Bloomberg New Energy Finance’s H2 2014 Japan Power & Gas Market Outlook, published on 8 October. 

Nonetheless, renewable capacity (excluding hydro plants over 50MW) will reach 84GW by 2020 compared with 34GW in 2013, based on our analysis. In addition, power companies are likely to boost gas and coal capacity on the back of uncertainty around nuclear restarts and aging oil plants. 

In Europe, confidence in the UK energy efficiency industry strengthened in Q2 2014, according to the latest Energy Efficiency Trends Survey. Despite the temporary dip in confidence in Q1, market optimism is expected to continue to increase this quarter. On the consumer side, just under three-quarters of the respondents implemented an energy efficiency project in Q2, with lighting technologies seeing the highest uptake. 

In the UK, the government confirmed on 2 October the final budget for the first round to allocate Contracts for Difference (CfDs), which begins on 14 October. The additional budget should allow for more offshore wind capacity, according to Bloomberg New Energy Finance analysis. The government also announced that new solar projects over 5MW will be excluded from the Renewables Obligation from Q2 2015. The move was anticipated given the government’s wish to cool down the UK solar market. 

Developers are likely to rush to be covered by the Renewables Obligation rather than compete for CfDs against lower-cost onshore wind projects. Our forecasts suggest the UK will see some 2.5-3GW of utility-scale PV built between Q4 2014 and Q1 2015. 

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China's onshore cumulative off-warranty wind capacity set to increase by more than 300% between 2014 and 2022

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Q&A of the week

Where we stop is coal, TerraForm says

TerraForm Power is “uniquely positioned as a pure play today in solar,” yet it’s
looking to also own and operate energy assets powered by “wind, hydro and even gas,” according to the company’s president. “For us, where we stop is coal,” said Carlos Domenech, president of TerraForm. 

TerraForm is currently the only vehicle known as a yieldco that is 100% solar. In July this year, SunEdison spun off 524MW of solar farms in the US, Canada, the UK and Chile to create Terra-Form. Domenech said St. Peters, Missouri-based SunEdison, which currently owns 64% of TerraForm, will decrease its stake over time. “It will be a great thing that it declines because it means the vehicle is growing well beyond the capabilities of SunEdison,” he said. 

Meanwhile, SunEdison is continuing to expand its business outside North America. Jose Perez, president of SunEdison for EMEA and LatAm, said his company is interested in competing to receive contracts-for-difference, or CfDs, the UK’s new means for supporting large-scale renewable projects. “We’re very much ready to bid on the CfDs,” he said. 

The UK will this year hold its first competitive auction for clean energy. The alternative support programme granting renewable energy obligations will continue to be available until 2017, except for large solar projects. 

Q: José, why is SunEdison interested in the UK market now?
Jose Perez: Two or three years ago we looked at the UK market. At the time, we didn’t see the right opportunity, but we came in pretty hard last year. In 2013, we started our development process. Up to now, we have close to 200MW [of capacity]. We see long-term opportunities around CfDs, residential and distributed generation.

Q: The UK isn’t the sunniest place on Earth, so are you most attracted by the country’s renewable policies? 
JP: I think one of the things we most value about the UK market is the…

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