Bloomberg New Energy Finance - Week In Review

This Week In Review was sent on Tuesday 21 October.

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Green cars and green bonds expand presence online

Sustainability became more accessible online over the past week as Tesla began accepting orders for its Model S Electric Car in China through Alibaba’s Tmall.com and SolarCity offered $200m of green bonds directly to investors through its website.

Tesla began deliveries of its Model S car in the world’s largest market in April. The automaker is seeking to cut down the time required to ramp up its sales by selling directly through the Web rather than setting up a network of dealerships across the country. “Tmall offers us an opportunity to reach out to general customers,” said Tesla China spokeswoman Peggy Yang. Besides Tesla, Buick, Chevrolet, Geely Automobile Holdings and Shanghai Volkswagen also have official sites on Tmall.com.

In the case of SolarCity, investors can purchase bonds in increments of $1,000 with rates from 2%, for debt that matures in one year, to 4% for seven years. The rates are lower than SolarCity’s earlier bond offerings that were sold through traditional debt markets. The company raised $201.5m in July, with a 2022 maturity date and a 4.03% interest rate. In April it sold $70.2m of debt at 4.59%. The offer thus gives the company a cheaper source of capital. “People in 50 states can invest and make money in this sector,” chief executive officer Lyndon Rive said in an interview. 

Meanwhile, the green bond market is surging, with $9.6bn issued in the last quarter bring the year-to-date total to $32.6bn, which is already more than double the volume issued in 2013. Will the market hit $40bn in 2014? The Q4 2014 Green Bonds Market Outlook – the first quarterly green bonds outlook – provides some insights. Bloomberg New Energy Finance includes only self-labelled corporate green bonds, labelled sovereign/supranational and state/municipal bonds, in addition to project bonds and asset-backed securities backed by green projects. It excludes less-explicitly labelled debt issued by companies and associated with environmental opportunities.

Sticking to the world of bonds, the biggest issue for solar farms in Europe was downgraded last week because Italy changed its renewable energy policies. The class A2 notes of Andromeda Finance, a SunPower project company, were lowered to B, five levels below investment-grade, from BB and given a negative outlook, Fitch Ratings said in a statement. “Lower wholesale market prices and a revised market price forecast further contribute to the downgrade,” it said. “The negative outlook continues to reflect further uncertainties with respect to the operating and regulatory environment of solar photovoltaic plants in Italy.” The Italian parliament in August approved a measure that retroactively lowers the rates paid for power from solar farms. Andromeda owns two power plants in Montalto di Castro with a total capacity of 51.2MW.

In India, draft rules were announced to auction 1GW of solar capacity in the south Indian state of Andhra Pradesh. A quarter of the capacity will be required to use locally made panels and cells. By 2019, the central government expects to install 15,000MW, more the five times the current national capacity and about triple what it committed to in 2012. Companies will be able to bid for as much as 250MW of capacity, with each project capped at 50MW, according to the rules. State-run power trader NTPC Vidyut Vyapar Nigam, or NVVN, will run the auction and sign 25-year power purchase agreements with the winners.

Meanwhile, US solar company SunEdison announced that it was in talks with a Chinese company to invest as much as $2bn to build a polysilicon plant in China. The plant will have “the lowest cost” in the industry if it goes ahead in China, SunEdison president Ahmad Chatila said in an interview with Bloomberg News. The cash cost for making the commodity used in solar panels will be less than $6 a kilogram, about $2 below the next lowest competitor, he said. The company is also considering setting up a plant in Saudi Arabia.

SunEdison also signed an agreement with JIC Capital, the fund management unit of China Jianyin Investment, to set up a new energy fund with a total investment of $220m. The fund will invest to build about 1GW of solar power plants in China over three years.

Another exciting development of the week came on the technological front. An 8MW test machine of MHI Vestas – a joint venture of Mitsubishi Heavy and Vestas – set a record for power produced by a single wind turbine in a day. The prototype at Osterild, northern Denmark, generated 192,000kWh “during steady wind conditions” over a 24-hour period from 6 to 7 October, the company said in an e-mailed statement. That is theoretically the maximum a turbine rated 8MW could generate in a day. The JV company is trying to make inroads into an offshore wind turbine market dominated by Siemens, which took 83% of European sales last year.

On another front, Alstom and engineering company DCNS agreed to work together to develop and bring to market floating wind-turbine technology. The companies plan to produce an initial 6MW floating turbine by 2017 prior to installing pilot and then commercial facilities, they said in a joint statement.

The financing news of the week came from Philippines, where Energy Development Corporation secured a $315m loan facility for its 150MW Burgos wind project in north Luzon. Denmark’s export credit agency guaranteed part of the loan’s dollar component. The International Finance Corporation arranged $207.5m in project financing to fund many of Jordan’s first solar parks in partnership with five lenders. 

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Cumulative total investment by development banks in clean energy dropped 11% on 2012 levels to $85bn

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Q&A of the week

Fewer tax credits won't destroy solar economics

The economics of solar systems in the US will be better in 2017, compared with today, even after a tax credit for renewable energy is scaled back, according to Enphase Energy, a provider of microinverters for photovoltaic panels. “The reduction of the ITC will not destroy the solar market in the US,” Chief Financial Officer Kris Sennesael said, referring to the investment tax credit. 

The federal tax credit is currently 30% of the qualified costs of a solar system. After 2016, the ITC will drop to 10%. In the US residential solar sector, Enphase has 45% of the market share for inverters that convert the direct current produced by PV panels into alternating current that is routed to the grid. 

Enphase’s microinverters are designed to be wired to a single panel. In traditional configurations, solar farms connect multiple panels to one, large inverter. Enphase says their microinverter product is more efficient. 

Sennesael spoke with Clean Energy & Carbon Brief about the US’s “hot” solar market, which he said is still far from reaching its peak. 

Q: Just to get to know Enphase a bit better: Can you say who your biggest customers are at the moment?
A: Eighty-five percent of [our] revenue is [from business] in the US; 15% is outside of the US. If I look from a segment point of view, 85% is in the residential space, 15% is outside. As a result of that, the US residential business is our sweet spot. Our largest customer is Vivint Solar, which a couple of weeks ago had a successful IPO. In addition to Vivint Solar, we have probably six or seven out of the top 10 players in the US residential market.

Q: So what’s your strategy for increasing your customer base?
A: We have an aggressive plan to grow our business outside of the US, as well as grow our business outside of residential. We target to get more than…

This is an excerpt from the Clean Energy & Carbon Brief published weekly. To subscribe to the Clean Energy & Carbon Brief, click here.

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