Earth and Industry » Policy & Economy

European Subsidy Reductions Could Slow Solar Industry Boom

Silvio Marcacci — Mon, 06 Feb 2012 12:01:05 +0000

Solar power has been one of renewable energy’s biggest success stories, especially in Europe. But a combination of austerity measures by cash-strapped governments and the industry’s own success are creating cloudy skies on the clean energy horizon.

New grid-connected global photovoltaic (PV) capacity nearly doubled in 2011, from 16.6 gigawatts (GW) in 2010 to 27.7 GW (with almost 21 GW in Europe), according to the European Photovoltaic Industry Association. 2011’s boom pushed total installed capacity to 67.35 GW.

Favorable government feed-in-tariff (FIT) programs fueled this solar boom by guaranteeing above-market rates to solar power producers. But ironically, the FIT programs worked too well and by exceeding their goals, have become too expensive to maintain. This quandary is most explicitly seen in Europe’s biggest solar market – Germany.

Germany

At the end of 2011, Germany had the most cumulative installed solar capacity in the world, with 24.7 GW. New installations reached a record 7.5 GW last year and solar output reached 18 billion kilowatt-hours, but the record jump was largely attributed to prices falling ahead of planned FIT reductions, made every six months. Solar panel prices have fallen 50 percent since 2007, and as prices fall, government officials have begun to debate how much they should scale back subsidies.

Germany’s economy minister has proposed legislation to limit new FIT-supported installations to 1 GW per year, accelerate planned subsidy cuts to an every-month basis rather than twice a year, and phase subsides out completely for some facilities by 2017. Unsurprisingly, the CEO of German manufacturer Bosch said “should we do that, then photovoltaic is dead is Germany.”

However, the harsh proposal has been countered by a more moderate proposal by the country’s environment minister. The alternate plan would cap new subsidized PV installations at 5 GW per year, and seems to have a better chance at passage. While Germany is the biggest market scaling back solar subsidies, it is not the only European country doing so.

United Kingdom, Spain, Greece

The United Kingdom is expected to announce plans this week that would reduce subsidies at routine intervals to curb new solar installations through a trigger mechanism once installations reach a predetermined level. The UK’s plan has exceeded all expectations and cost estimates – 284 MW of installed capacity were expected by April 2013, but 780 MW had been installed as of January 2012.

Conditions are even worse in Spain and Greece, two of the hardest-hit economies in the Eurozone. Spain, home to the world’s highest unemployment rate, passed a decree last week to “temporarily suspend” subsidies for all new solar installations. The move is expected to save 160 million Euros in 2012, but could have a severe impact on employment.

Spain first cut its renewable subsidy by 35 percent in 2008, a move that cost 20,000 jobs, and this suspension is expected to cut just as many jobs. Spain had the fourth-most installed solar in the world at the end of 2011, with 4.2 GW, and the government once estimated renewables would create 300,000 jobs by 2020.

Greece, the epicenter of the Eurozone economic crisis, has also targeted solar subsidies as a way to trim spending. Installed capacity more than doubled in 2011, with 350 MW of new capacity and 550 MW cumulative installed solar.

But last week the government drastically cut FIT subsidies, saying it can’t pay the current rates and had licensed enough new capacity to meet its renewable energy targets. All new solar power plants that go online starting in February would be reduced, with those generating more than 100 kilowatts facing an initial 12.5 percent subsidy cut with additional reductions every six months until August 2014.

Grid parity?

Fortunately though, the end of generous subsidies may not spell the end of renewables. Manufacturing costs have fallen fast, and the CEO of Suntech Power, the world’s biggest solar panel manufacturer, recently predicted solar will be as cheap as fossil fuels, saying “we believe that by 2015, there will be around 50 percent of countries where it reaches grid parity.”

China, France Join Hunt for U.S. Shale Oil and Gas

Timothy Hurst — Wed, 04 Jan 2012 09:41:03 +0000

Taking advantage of low barriers to entry and even lower natural gas prices, two large foreign-owned oil and gas companies announced plans to invest billions of dollars to develop shale resources in the United States.

Sinopec, China's second-largest oil company inked a $2.5 billion deal with Oklahoma-based Devon Energy to invest in five new shale development areas ranging from Ohio south to Alabama. In another deal, France's Total Group is investing $2.3 billion in a joint venture with Chesapeake Energy and EnerVest on an Ohio oil and gas project.

The two deals have a similar structure and purpose. The foreign companies are paying a majority of the development costs plus cash up front for a minority stake. The reason? Total and Sinopec want to learn a thing or two about advanced drilling techniques.

In the Sinopec-Devon deal, Sinopec is taking a one-third share in the five oil projects it is developing with Devon Energy but will pay $900 million in cash and 80 percent of the development costs, or up to $1.6 billion, reports The Financial Times. The additional costs born by Sinopec are being paid to Devon in exchange for transferring some of the technical knowledge used in shale gas development, namely horizontal drilling and hydraulic fracturing.

Total’s deal has a similar structure with the French company taking 25 percent of the joint venture with Chesapeake and EnerVest in Ohio’s Utica formation. Total will pay $700 million in cash and 60 percent of its partners’ future development costs—up to $1.63 billion.

The French government, which has a 5 percent minority stake in Total (down from a peak of 30 percent), has outlawed hydraulic fracturing in France.

The two new foreign-led ventures are not the first big shale plays by foreign companies in the U.S. Rather they are emblematic of a growing trend of foreign investment in American natural resources. According to figures published by The Pittsburgh Tribune-Review, $24.5 billion of the total $39.9 billion in gas and oil field deals in the first three quarters of 2012 came from foreign investors.

There are no legal requirements preventing foreign-owned companies—whether they are privately-held or nationally-owned—from developing oil and gas resources on American soil or in its coastal waters, only that they be registered in the United States through the State Department. With natural gas prices lower in the U.S. than just about anywhere else in the world, foreign companies are clamoring for a piece of the action.

And they are clamoring successfully.

Back in July, Sinopec Group vice president Zhang Yaocang told Reuters that the company wanted "to enter the shale gas area in Canada and America" within two to three years.

But with the announcement of the deal with Devon Energy, that timeline just got a lot shorter.

Photo credit: Qyd via Wikimedia Commons

Does China’s Rare Earth’s Monopoly Imperil Clean Energy?

Silvio Marcacci — Wed, 28 Dec 2011 19:08:55 +0000

The minerals known as rare earths are likely the most important, but least understood factor in our transition to a low-carbon, clean-energy future. They’re essential ingredients to just about every source of renewable energy and nearly every consumer electronic device we use today.

But China dominates worldwide rare earth supplies and production, and their monopoly could corner the world economy. energyNOW! chief correspondent Tyler Suiters explores how U.S. dependence on China’s rare earths could affect our energy future and high-tech lifestyles. The full video is available below:

Americans are used to seeing the words “Made in China” on most things we buy, but could they soon also read “Mined in China?” The nation controls 97 percent of global production of the elements we rely upon in every aspect of modern life. Consider the technologies requiring rare earths: computers, smart phones, military jets, rocket systems, electric cars, wind turbines, energy-efficient light bulbs, and flat-screen televisions, to name a few.

China’s claim on the rare earths market began in the 1980’s. Premier Deng Xioping famously quipped “the Middle East has oil, but China has rare earths,” and the country ramped up mining efforts. This drove production costs down so sharply that rare earth mining became unprofitable in other countries, including the U.S., which had led global production since the 1960s. It also boosted China’s economy.

“They were very effectively using their control over the rare earth industry to force high-tech manufacturing into China,” said John Burba, CTO of Molycorp, operator of the only active rare earths mine in America. “I could look and see how fast it was leaving the United States.”

Molycorp hopes to counter China’s rare earths monopoly through its Mountain Pass mine in California. Until the 1980s, Mountain Pass was the single top producing rare earths mine in the world. Plunging commodity prices and a series of environmental accidents forced it to close.

Through a revamped approach that favors computer control and automation, Molycorp says it can safely produce 40,000 tons of rare earths a year by 2013 – equal to all U.S. demand. “A facility of this size in China would probably require 3,000 to 4,000 people,” said Mark Smith, Molycorp CEO. “We’ll have 300 or 400.”

Meeting that demand is critical to the burgeoning clean tech economy, which consumes 20 percent of the world’s rare earths. They coat the inside of compact fluorescent light bulbs, go into the magnets that turn electric vehicle batteries, and power the electrical generators inside wind turbines. For context, some of the biggest turbines can each use two tons of rare earths.

If production can’t be increased, another solution may be to find replacements. Companies with a big stake in renewables are actively looking for rare earth substitutes. General Electric says it has developed a higher-performance wind turbine magnetizer coil, completely free of rare earths, and Toyota is working on an EV motor that doesn’t need rare earths at all. But, both are still in the experimental phase and not yet market-ready.

So while breaking up the rare earths monopoly has environmental consequences, it also represents an economic imperative – and the window is closing. “The big danger is that China totally controls the production of all devices containing rare earths,” said Jack Lifton, of Technology Metals Research. “If we haven’t made any significant moves by 2015, we will simply no longer be a nation with any hope of doing so.”

China Most Likely Country to Fund Renewables

Gavin Hudson — Wed, 21 Dec 2011 16:51:00 +0000

A recent Bloomberg survey of key energy decision-makers concluded that China shows more government support than any other country for funding renewable energy. It also shows equally high support for transformational clean technologies, like smart grids and electric cars. With the right government backing, China could address its own energy security issues with technology to spare for export.

The graphs charting China's economic growth and energy demand mirror one another: each resembles the left side of a mountain with no peak in sight. By the IEA's reckoning, China's electricity demand alone will nearly triple by 2035. On the surface, this may come across as resoundingly bad news to environmentalists. However, China's industrial cloud has a strong green lining. And unlike the Olympics, China's not just using green paint this time.

This year, Bloomberg Businessweek Research Services in partnership with ABB surveyed energy professionals, government officials and CFOs about the future of energy, the opportunities and the barriers. Among the results of this 2011 Energy Survey, China emerged as the strongest government supporter of clean energy technologies.

China's renewable energy: Readers may remember that China's wind power capacity surpassed the United States in 2010, and continues to grow. The National Development and Reform Commission estimates that China, the world leader in wind, could generate as much as 1 TW of wind energy by 2050. Similarly, this year China bumped its four-year targets for solar generation up by 50%, and the shear volume of solar panel production from the People's Republic had US solar manufacturers suddenly in a panic.

Where will the greenbacks for China's green energy growth come from? The Bloomberg survey shows that nearly 90% of Chinese energy decision-makers believe that the government should fund renewable energy growth. That makes China far and away the most enthusiastic about government support of renewables. By contrast, fewer than 40% of Americans surveyed think it's the government's role to fund clean energy. In the ongoing war of words between China and the US over climate change and energy security, those numbers speak volumes.

Smart grids: China will likely soon also be the world's biggest smart grid market. Last year alone, it invested 3.7 billion US dollars in modernizing its electricity grid, and the so-called "12th Five-Year Plan" calls for wide installation of smart meters, IT software and other components of a smart grid over the next few years. The 2011 Energy Survey reflects the same strong government support of smart grids as for renewable energy. All of the decision-makers surveyed agreed that updating China's is either somewhat important or very important. Moreover, as with renewable energy, over 90% believe that continued investment in China's smart grid will come from the government.

Electric vehicles: With a smart grid with vehicle to grid technology in place, electric vehicles (EVs) also become a convenient way to store and provide energy to the grid. China's planning to have one million EVs on the road by 2014. To support these electric cars, it's building 400 electric vehicle charging stations by 2016. According to the 2011 Energy Survey, over 80% of Chinese decision-makers believe that the Chinese government should support the EV infrastructure, a full ten percent more than the next leading country and a great deal more than the USA, where fewer than 40% agree with government support for EVs. To this tune, the Chinese government is investing 100 billion Yuan (15 bn USD) in alternative fuel vehicles over the next ten years.

The 2011 Energy Survey is still open for participation for members of the public to give their input on the future of energy and compare their views with those of energy market decision-makers. Take the survey. You can also view a detailed list of the survey's conclusions and watch related videos. For a summary of the conclusions, see this infographic.

Photo credit: Jeremy Levine Design under a Creative Commons license.

EU Set to Charge International Airlines for Carbon Emissions

The Guardian — Wed, 21 Dec 2011 13:15:27 +0000

by Fiona Harvey, guardian.co.uk

Europe's most senior court is expected to rule on Wednesday that airlines based outside the continent should have to pay for their carbon emissions on flights to or from EU member states, in a crucial test of climate change regulation.

At stake are millions of tonnes in carbon dioxide emissions from airplanes, as airlines at present have little or no incentive to cut their greenhouse gases.

The signs are that the EU will be cleared to impose a system of carbon trading on all passenger flights taking off or landing in member states. In a preliminary ruling in October, the court backed the EU's plans. But whatever the 13 judges in Luxembourg decide on Wednesday, it is unlikely to be the end of the story as the long-running legal battle will open up on new fronts.

Already legislators in the US are attempting to make it illegal for their airlines to comply with EU rules on carbon, and it is understood that China is issuing similar guidance, in a serious escalation of hostilities.

The hard-fought battle pits the US and Chinese governments as well as numerous international airlines against EU legislators, who have insisted that airlines must pay for their share of the potential damage from climate change. The US and Chinese governments have threatened a trade war over the issue, and airlines have protested that if the EU rules are allowed to go ahead, they will be landed with billions of dollars of new costs in the next few years.

But the amount is likely to be small, according to analysts. Research carried out this year by the analyst company Thomson Reuters Point Carbon put the probable total cost to all airlines at about €1.1bn next year, but that was based on a carbon price of €12 per tonne – whereas prices have plunged to just over half of that in recent weeks. As a result, the true cost is likely to be much lower.

"The battle has been extraordinarily fierce, given the real implications of emissions trading, which are not really that big," said Andreas Arvanitakis, associate director of Point Carbon. "It's a minute incremental cost compared to the costs of jet fuel. This is certainly not a game-changer for aviation."

Airlines will also be treated equally on each route, in order to make competition between them fair.

On 6 October, an advocate general – a senior legal adviser appointed by the Court of Justice of the European Union – issued a formal recommendation to the court supporting the legality of the EU law. The 13-judge grand chamber has been deliberating the case since the advocate general's opinion was released.

Arvanitakis warned that if the judges ruled against the EU, it would be a "serious blow to political support" for the EU's emissions trading system. "If this entire sector is taken out, it would open the window for doubters within the EU to ask where this is going," he said.

Under the EU's proposals, all airlines operating flights taking off or landing in member states would be subjected to its emissions trading scheme – the system introduced in 2005 by which carbon-intensive industries are issued with permits to produce carbon dioxide. Cleaner companies can trade these permits with laggards, giving them an increasing incentive to cut carbon.

The US, China and numerous airlines argue that the system is in effect a tax on aviation, which would be banned by longstanding international agreement. However, the EU counters that the system is not a tax but represents fair regulation in order to tackle climate change. Airlines based within the EU will already be subject to the carbon trading rules from next year.

As a result of the system, passenger ticket prices are likely be pushed up, though some airlines may choose to absorb some of the costs.

Carbon prices within the European Union have fallen sharply as the euro crisis has taken hold, and are now close to their record lows.

Airlines also argue that the International Civil Aviation Organization (ICAO) is preparing its own system of carbon trading, which could be operating from 2013. However, EU officials are doubtful that this would come up to the same standards as its scheme and could be open to manipulation by the airlines. Campaigners said the move to have ICAO bring in a scheme was merely a delaying tactic, and pointed out that ICAO has been talking about such a scheme for more than five years, without any concrete result as yet, with no guarantee of a future outcome.

Bill Hemmings, program manager at Brussels-based campaigning group Transport and Environment, said: "Let's allow the judges to decide whether it is legal or not [for the EU to draw aviation within emissions trading], but it is certainly not unfair. All airlines are being treated equally when they come into and leave Europe and that is fair."

He said studies of the cumulative effect of civil aviation since its inception showed it was responsible for about 4.9% of carbon and equivalents in the atmosphere. As that amount is growing, while emissions must be cut to avoid dangerous global warming, aviation would be an increasing part of the problem, he said.

The EU is also looking at ways to regulate the carbon output of international shipping. Proposals to curb greenhouse gas emissions from aviation and shipping have been under discussion since the negotiations leading up to the Kyoto protocol in 1997, and in recent years have focused on a levy on shipping. But that proposal was knocked back yet again at this month's UN climate negotiations in Durban, South Africa.

Emissions from international aviation and maritime transport are excluded from the Kyoto protocol and the 2009 Copenhagen accord, and there is no guarantee they will be included in any new international climate agreement to come into force from 2020. If aviation is included in the EU emissions trading scheme, it will be the first time carbon emissions from the sector have been regulated.

Published via the Guardian News Feed plugin for WordPress.

Photo credit: Some rights reserved by ZeePack

U.S.-China Trade War Could Undermine Solar Industry

LiveOAK Staff — Fri, 16 Dec 2011 12:51:44 +0000

The following is a guest editorial by Robert D. Hansen, president and CEO of Dow Corning, and Stephanie A. Burns, Dow Corning chairman.

The trade case brought against Chinese solar manufacturers by U.S. solar-panel producer SolarWorld and six other domestic equipment makers could undermine the solar industry’s significant progress at the very moment it is poised for success.

With a largely jobless recovery here at home and a Chinese economy that is “cooling down,” a trade war over solar module production threatens both nations’ economies and the global viability of the solar industry overall.

Currently, the U.S. Department of Commerce is investigating whether or not it should impose preliminary tariffs in the case – this is occurring against the backdrop of a growing chorus of political rhetoric. Meanwhile, China’s Commerce Ministry is not standing idle—they are gearing up for action. It appears they are serious about initiating their own measures in anticipation of the U.S. advocating for trade remedies to be put in place.

At a time of economic dislocation and discontent, it is tempting to politicize trade disputes. But no nation or industry “wins” when these disputes escalate—and the unintended consequences of such an escalation will most likely outweigh the larger, negative impact on this important relationship with our largest trading partner.

The pending case raises concerns, but resolving this issue through an adversarial confrontation will impede both countries’ abilities to benefit from a growing solar market both in the U.S. and abroad. Such benefits are only possible through lower prices catalyzed by healthy competition between global manufacturers. Countries around the world realize the economic contributions the solar industry can provide, and are supporting new technologies and markets. This is not news. But to be clear: Competition and incentives need to be fair for all industry players.

Our companies, Dow Corning Corporation and Hemlock Semiconductor Group are among the world’s leading suppliers of polysilicon and other key solar materials that power solar innovation. Together, our common goal is to contribute to and support a thriving solar industry. Our recent U.S. investments of more than $5 billion back up that statement. We are expanding research, development and manufacturing capacity for materials such as polysilicon to help meet growing global demand. Our investments have made positive contributions toward getting the economy back on track – creating thousands of high paying jobs in economically hard-hit states like Michigan and Tennessee.

Further, our business analyses indicate that now is the time for America’s solar industry to take off. The amount of new solar wattage installed in the U.S. has been growing more than 70 percent per year since 2008. Last year alone, the solar industry created approximately 100,000 jobs, an increase of nearly 7 percent.

As the solar industry continues to mature, the steep decline in solar panel prices have made solar energy affordable, delivering significant benefits for consumers while encouraging the development of large-scale photovoltaic projects. These installations, from residential rooftops to utility-scale solar farms are helping the economy and the environment.

Continued investments made by domestic and foreign solar companies will allow solar to play an increasingly pivotal role in our country’s energy mix. And, as the solar industry continues to grow and achieve economies of scale, it will further drive job creation in communities around the country, up and down the value chain from manufacturing to installation.

The world wants and needs growing, sustainable and environmentally beneficial sources of energy. To that end, a growing U.S. solar market is good business for everyone – for our companies and dozens of other domestic manufacturers; for distributors, developers, and installers; and for households, small businesses and other enterprises.

In a down economy, the numbers help tell the tale: A recent Forbes story notes that the U.S. was a $5.6 billion gross exporter in solar-related products in 2010 – exporting $1.9 billion more than it imported – including net exports of approximately $400 million to China.

The solar industry is ready for its moment in the sun: Here at home, we hope fairness prevails so that the investigatory process proceeds without acrimony, political overzealousness or protectionism; at stake are U.S. jobs, U.S. exports, and U.S. consumer benefits for a strategically important U.S industry.

Photo credit: U.S. Department of Energy

Colorado OKs Toughest Fracking Fluid Rules in U.S.

Timothy Hurst — Wed, 14 Dec 2011 08:50:42 +0000

After hearing more than 11 hours of testimony in a meeting last week, Colorado regulators Tuesday approved tough new rules governing chemicals used in the controversial process of hydraulic fracturing. Also known as "fracking," hydraulic fracturing is a process whereby a slurry of water, sand and chemicals are pumped into a well at very high pressure to force natural gas out of shale rock formations. The new rules require companies to publicly disclose the chemicals—and their concentrations—found in the fracking fluid.

Meeting all day on Tuesday with environmental groups, industry representatives and other stakeholders, the nine-member Colorado Oil and Gas Conservation Commission unanimously approved the new rules which will take effect in April 2012.

Building upon a set of rules passed by Colorado regulators in 2008 mandating disclosure of fracking chemicals to state regulators and health professionals upon request, the amended rules adopted Tuesday require operators to publish the hazardous and non-hazardous chemicals used to hydraulically fracture a well, as well as the concentrations of each chemical, to a disclosure website within 60 days of hydraulically fracturing a well.

Colorado Gov. John Hickenlooper commended the various parties for coming together on the disclosure rule. “These new rules give Colorado the fairest and most transparent set of fracking regulations in the country and will likely serve as a model for other states,” Hickenlooper said.

The Democrat and former geologist, Hickenlooper, has been very public about his support of hydraulic fracturing, as long as it is done in a safe and responsible manner.

"We believe oil and gas development can thrive while also meeting our high standards for protection of public health, water and the environment,” Hickenlooper said.

The oil and gas industry also supported the new framework agreed upon Tuesday.

"Colorado now has the strongest hydraulic fracturing rule in the country," said Tisha Schuller, president and CEO of the Colorado Oil and Gas Association.

"But more importantly," Schuller added, "we have gained a model process to bring together industry, environmental advocates, and regulators to ensure energy development continues in keeping with protecting the environmental resources of our state.”

The regulations are similar to those passed in Wyoming and Texas but go a step further, requiring companies to disclose the concentrations of chemicals in addition to the chemicals themselves. Eleven states have adopted or are in the process of drafting rules governing the disclosure of fracking fluids. But each state is a bit different.

Under the new Colorado rules, drillers can claim a trade secret, but they must file a form ensuring trade secret claims meet the appropriate definition, and sign an affidavit that chemicals cited qualify for trade secret protection. Even then, drillers have to publicly disclose the ingredient's chemical family. And at any time, regulators and medical professionals can obtain trade secret information upon request.

The new rule gets past what has been the biggest sticking point for fracking operators, the issue of proprietary secrecy, by striking a balance that recognizes and protects industry trade secrets so operators can maintain their competitive edge.

The actual chemical make-up of fracking fluid changes from one location to the next, based on the given area's geological characteristics. Those geologically-determined differences in the fracking fluid compounds are what drillers say they are trying to keep secret, not the harmful chemicals that have sometimes been associated with fracking operations.