A Billion-dollar Green Bond Whets French Railway Operator’s Appetite
French railway operator SNCF Reseau raised 1 billion euros ($1.1 billion) last week by issuing its second green bond. The bonds have a 17-year maturity and will pay a coupon of 1.875% annually. “Thanks to a significant amount of eligible investments—between 1.5 and 1.8 billion euros per year—we wish to issue at least one green bond every year,” SNCF Reseau head Patrick Jeantet said. The capital raised by SNCF will be used to finance sustainable modernization and new project development. In China, GCL-Poly Energy Holdings, the world’s largest solar wafer maker, said it was planning to issue 1.75 billion yuan ($254 million) in green bonds to finance construction of eight solar farms totaling 291 megawatts in capacity. Haitong Securities will serve as the lead underwriter of its bonds that will be listed on the Shenzhen Stock Exchange.
Green bonds activity in the first quarter has been dominated by sovereign issues and by corporations. The biggest bond, of $7.6 billion, was from the French government. Details of issuance in the first quarter, as well as projections from Bloomberg New Energy Finance, can be seen in the Green Bonds Monthly – March 2017. S&P Global, meanwhile, said it is working on a new way of ranking bonds based on their impact on the environment, hoping that greener securities will command a premium to traditional ones once there are metrics to justify it. The company best known for its credit ratings will introduce a green scoring system next month. “Investors want to go beyond that binary classification of green and not green – to how green,” said Michael Wilkins, managing director of S&P’s infrastructure ratings.
Utilities are chalking out plans to be a part of the ongoing transformation of energy systems. In the U.S., they are opting to own their own solar farms instead of striking decades-long deals to buy just the power. NextEra Energy and Dominion Resources are among utility-owners that may build as much as 1 gigawatt of solar farms in regulated markets this year. “It’s a natural transition for us,” said Carmine Tilghman, senior director of energy supply at Arizona utility Tucson Electric Power. “The customer base wants us to move toward” clean energy.
NTPC, India’s largest power generator, is seeking to buy the federal government’s stake in hydro-power producer SJVN to boost its share of non-fossil fuel generation capacity, according to people with knowledge of the development. India’s 64.5% share in the hydro-power generator is valued at about 87.2 billion rupees ($1.3 billion), according to Bloomberg calculations. The purchase will help state-run NTPC meet its goal of reducing the share of its generation capacity that relies on fossil fuels to 70% by 2032 from about 97% now. It will also help the central government raise funds and narrow its fiscal deficit.
The development of coal power plants, the traditional mainstay of large utilities, has slowed down. Greenpeace, the Sierra Club and CoalSwarm found global pre-construction planning fell 48% and new construction starts dropped 62% in 2016 compared with 2015, according to a report published last week titled “Boom and Bust 2017: Tracking The Global Coal Plant Pipeline.” China’s clampdown on new coal projects and a reluctance by backers to provide funds in India are mainly responsible for the drop in the pipeline, it said. The world’s biggest solar panel maker, JinkoSolar Holding, plans to bid to develop as many as 2 gigawatts of solar farms outside of China. The company is interested in projects in Latin America, Central and Western Africa, South and Southeast Asia and Middle East, Vice President Qian Jing said. The move will broaden revenue sources for the solar manufacturer facing falling panel prices.
Shunfeng International Clean Energy – which bought out Germany’s S.A.G. Solarstrom and Suniva of the U.S. – said it would have a shortfall of 2.4 billion yuan ($348 million) in 2016, wiping out the 58 million yuan of earnings it reported the year before, according to a statement to the Hong Kong Stock Exchange. The scale of the loss is bigger than the 923 million yuan it had said in January that it expected. The company’s final annual results are due in late March. Hanwha Q Cells, a South Korean solar manufacturer, and Kalyon Enerji won a Turkish government auction to build and operate a $1.3 billion solar farm in central Turkey. The two companies bid 6.99 cents per kilowatt-hour in the March 20 auction, the Turkish ministry of energy and natural resources said on its website.
In Austria, the Federal Association of Electromobility, or BEOe, said it would lift the number of plugs it maintains for electric cars to 2,000 from 1,300 currently. The BEOe is composed of regional Austrian utilities including EVN, Wien Energie and Kelag Netz. “Our goal is to build 5,000 Austria-wide by 2020,” said Austrian Transport Minister Joerg Leichtfried, whose ministry has aided the network. The number of registered electric cars in Austria cracked 10,000 earlier this month. The Ministry of the Environment expects that figure to rise to at least 16,000 by next year. The government is offering subsidies of 10,000 euros ($10,790) to businesses installing fast-charging stations and 4,000 euros to consumers purchasing electric vehicles.
A second nationwide charging network operated by Smatrics is not a part of the BEOe initiative. Smatrics, owned by Siemens and Verbund, operates 380 high-speed plugs powered exclusively from the Alpine country’s hydropower reserves, according to its website. South Korea said it would provide subsidies this year of up to 5 million won ($4,500) each to install more than 9,500 electric vehicle chargers nationwide. In the storage sector, a unit of Macquarie Group tapped CIT Group to finance part of a $200 million portfolio of energy-storage systems it is developing in California, marking the largest battery project to get bank financing. Scientists and wind industry experts in Denmark gained government approval to build and test offshore wind turbines that will rise higher than the Eiffel Tower. The masts will soar as high as 330 meters (360 yards), said Rasmus Bjoern, the spokesman for Denmark’s Energy, Utilities and Climate Ministry.
In France, presidential candidate Marine Le Pen said she opposes all wind power in France because turbines are ugly and harm the health of nearby residents. Meanwhile, Electricite de France, the nuclear-energy giant facing falling revenue at home, is studying at least 1.1 gigawatts of clean-power projects in the Middle East to tap growing demand in the region. EDF is considering projects in Saudi Arabia and the United Arab Emirates, said Antoine Cahuzac, head of renewable energies at the utility. EDF is joining a group led by Abu Dhabi Future Energy Company to build an 800-megawatt solar plant in Dubai, it announced last week. The deployment of solar continues to expand worldwide: Wartsila, a Finnish industrial-engine maker, agreed to develop a 15-megawatt solar farm in the West African nation Burkina Faso.
Q&A of the Week
World’s Largest Battery to Recover Cost ‘Over 10 Years’
Using batteries to absorb excess solar energy generated in California’s day, and release it again during the peak evening hours, is “very important” and a big part of San Diego Gas & Electric Co.’s road map, Caroline Winn, chief operations officer at SDG&E, told BNEF. “The sweet spot for energy storage” is providing power at peak times of the day, she said in a telephone interview. The subsidiary of Sempra Energy, which supplies gas and electricity to millions of customers in southern California, owns and operates the world’s largest lithium-ion battery storage facility — a 30-megawatt project installed and maintained by AES Corp. The capital cost of the installation will be recovered through customers’ bills over ten years, which is the guaranteed lifetime of the battery without any degradation, said Winn.
The battery will help the utility deal with the increasing penetration of intermittent solar power on its grid system. SDG&E currently sources 43 percent of the electricity it delivers from renewable resources and also serves 100,000 customers that have rooftop solar. SDG&E is also testing the performance of a 2-megawatt vanadium redox flow battery on its grid to see how it helps integrate renewables into the network, particularly because the “beauty” of this battery is that it “has a longer lifespan than lithium-ion”, said Winn. The utility will weigh the benefits of technologies such as these as costs continue to fall, she said. Gas-powered peaker plants will also be crucial, in order to sustain the grid during intermittent solar output and provide reliability of supply, said Winn.
From next year, residential customers in California will transition onto time-of-use electricity tariffs. This could change the 24-hour pattern of electricity consumption as customers become savvy about saving on their energy bills, and use smart appliances to adapt to different price points, Winn said.
Q: In February, SDG&E installed the world’s largest lithium-ion battery storage facility to date — a 30MW project built in Escondido, California, in partnership with AES. Can you talk about the profitability and how long it will take to repay initial investment?
A: The cost is confidential, but generally the cost of utility-owned energy storage
projects are recovered from customers. AES has guaranteed the energy and capacity for 10 years. They will maintain the installation and ensure there is no battery degradation over that time. We expect it to last even longer, as long as we understand the operations and the cycling of the battery. But in terms of recovery, [the costs will be recovered] over ten years, which is the book life of the asset.
Q: Where are the best revenue opportunities for lithium-ion batteries?
A: Today we have around 100MW of energy storage connected to the grid [and] it’s really around energy and capacity. It’s providing that peak power at peak times — the role of the battery is to soak up renewable energy during the day and provide it for four hours in the evening as the system ramps up. That’s where we see the sweet spot for energy storage.
Q: To meet California’s policy mandate, SDG&E will install 330MW of energy storage by 2030. What is your planned rollout for this capacity?
A: We have over 100MW of energy storage connected to our grid today. Of the first 165MW that need to be brought online by 2020 to meet the PUC [California Public Utility Commission] mandate, we have procured 65MW to date. We do this through a competitive solicitation for least-cost, best-fit applications. Legislation was created last
year to give us the authorization to do even more energy storage [which brings the company to its 333MW by 2030 business target, which it will absolutely be able to meet. Energy storage] in California is very important given our renewable portfolio standards. Strategically we’re investigating different technologies, not just lithiumion. We just installed a redox flow battery on our system. Over the next decade or so, technologies will advance, price points will fall and, as the state continues to add more renewable energy, energy storage will continue to progress. In California, the ability to store excess solar energy in the middle of the day and use it in the peak hours, from 4pm to 9pm, is very important. So energy storage is a big part of our roadmap.
Q: How long before batteries achieve organic growth beyond policy mandate in California?
A: Policy mandate helps us ensure we have a regulatory commission that will approve the expenditures to utilize this technology, so it is important they go hand in hand. But beyond that, we believe that with the amount of renewable energy, not just from the 43
percent we procure, but also our 100,000 customers that have installed rooftop solar, energy storage is a very important piece of the puzzle, as well as our natural gas peakers, which will provide more reliability for more hours of the day.
